The Sao Francisco Mine is a shear hosted lode gold deposit. It is epigenetic, structurally controlled, and composed of narrow, 1 to 5 cm wide, quartz veins containing free gold. The veins and vein systems and stockworks both parallel and crosscut the bedding planes and appear to represent separate but closely related ineralizing events.

The local rocks at the Sao Francisco Mine have been subjected to low-grade metamorphism. They consist of fine to coarsegrained meta-arenites (metamorphic sandstones), with locally reddish-coloured metapelites (metamorphic mudstones) and occasionally metaconglomerates (old pebble beds) of the Fortuna Formation, the basal unit of the Aguapeí Group. The metaconglomerates are composed of quartz pebbles and grains set in a siliceous sandy matrix. Primary sedimentary structures such as cross-bedding, graded bedding, and ripple marks are commonly observed.

Mineralization is enclosed by a hydrothermal alteration zone (“HAZ”). The HAZ occurs as a regular steeply dipping tabular zone; the depth of the HAZ has yet to be defined by drilling. Alteration associated with mineralization in the HAZ consists of silicification and occasional sericite and chlorite.

The gold occurs as free gold and frequently as coarse nuggets measuring several millimeters in diameter with the quartz, as laminations along the fracture planes, and within limonite boxwork after pyrite and arsenopyrite.

Mining at the Sao Francisco Mine is carried out by contractors using a combination of hydraulic excavators, front end loaders, and 35 t haulage trucks with typical pit support equipment to sustain the operation. The pit is accessed via a standard access road or ramp 15 m wide at a minus 10% grade which provides access to the benches. Benches are 10 m high, with alternating 4.3 and 10 m wide safety berms.

Production drilling is carried out with 5.5 inch diameter holes and patterns for waste and ore of 6 x 4 m and 3.5 x 4.5 m, respectively. Standard bench height is 10 m, with one meter of sub-grade drilling for floor control.

The Sao Francisco Mine is an open-pit operation that is designed to send a steady feed of crushed gravity leach ore (“CGO”), on a daily basis, to the gravity circuit while lower grade material that was the run-of-mine dump leach ore (“DLO”) is now being stockpiled and will be run through the plant at the end of the mine life.

The Sao Francisco Mine’s mineral processing system consists of a gravity concentration circuit combined with a multi-lift, heap leach operation. During 2011, the two categories of lower grade material were stockpiled separately. Sub-marginal grade is material between 0.15 g/t Au to 0.25 g/t Au, low grade is material between 0.25 g/t Au to 0.40 g/t Au. CGO or high grade is material above 0.40 g/t Au. The CGO is processed by crushing and gravity concentration, followed by heap leaching of the tailings product from the circuit.

The crushing circuit consists of three stages of crushing and has been designed to generate a product of 30% passing less than 3.5 mm to feed the gravity circuit. The remaining 70% is directed to the leach pads with the gravity tails. Low grade ore and sub marginal grade material ore is being stockpiled and will be processed at the end of the mine life, if economic, by treating as CGO. At the heap leach area, CGO is stacked using trucks and track dozers. The leach pad is a multi-lift, single-use type pad. The basic components of the leach pad include a compacted earth foundation (a compacted soil sub-base), a 1.5 mm thick geomembrane liner, a cushion layer of material on top of the geo-membrane, and a series of perforated plastic drainpipes, which are placed on top of the geo-membrane, under the cushion layer during stacking, to collect leach solutions. Following stacking of the CGO, the ore is irrigated with leach solution and the resulting gold-bearing solutions are collected in a pregnant solution pond prior to further processing for recovery of gold.

A carbon Adsorption/Desorption/Recovery (“ADR”) facility is used for gold recovery. The ADR facility includes a train of five, cascade-type, open-top up-flow carbon adsorption columns, a carbon desorption system, a carbon acid wash circuit, a precious metals recovery circuit that utilizes electro-winning, and a complete smelting system for gold production.

Gravity plant concentrates and the loaded cathode material from the carbon recovery plant are combined and smelted to produce a gold doré product.