The Guanaceví silver-gold district comprises classic, high-grade silver-gold, epithermal vein deposits, characterized by low sulphidation mineralization and adularia-sericite alteration. The Santa Cruz mine property, which forms part of the main portion of the Guanaceví Mines Project, covers about a 3.0 km strike length of the Santa Cruz fault/vein system. The Santa Cruz vein itself has been traced for 5 km along trend, and averages approximately 3.0 m in width. High-grade mineralization in the system is not continuous but occurs in steeply northwest-raking shoots up to 200 m in strike length. A secondary mineralized vein is located subparallel and subjacent to the Santa Cruz vein, in the footwall, and while less continuous is economically significant in the Porvenir Dos and North Porvenir portions of the Project. The Santa Cruz vein is similar in many respects to other veins in the Guanaceví district, except that it is the only one to lie on the west side of the horst of Guanaceví Formation and associated facies, and it dips west instead of east. In the Porvenir Dos area and the Deep Santa Cruz mine workings, a low angle rhyolite crystal-lapilli tuff and andesitic contact occurs high in the hanging wall of the Santa Cruz vein indicating a fault contact with Guanaceví Formation, which obviously cuts the contact. The Santa Cruz vein is a silver-rich structure with lesser amounts of gold, lead and zinc. Mineralization has averaged 500 g/t silver and 1 g/t gold over 3 m true width. The minerals encountered are argentiteacanthite, limited gold, galena, sphalerite, pyrite and manganese oxides. Gangue minerals noted are barite, rhodonite, rhodochrosite, calcite, fluorite and quartz. Mineralization exhibits evidence of episodic hydrothermal events which generated finely banded textures. The higher grade mineralization in the district is commonly associated with multiple phases of banding and brecciation. The first phase, deposition of white quartz, white calcite and pyrite in stockwork structures, often exhibits horse-tail structures bifurcating both in the horizontal and vertical sense to form imbricate pods. The second phase deposited semi translucent quartz with argentite, scarce gold, and oxides of manganese (2%) and rare lead and zinc sulfide (4%), the latter particularly in the lower part of the hydrothermal system. The second phase was accompanied by the deposition of barite, thodonite, rhodochrosite, fluorite and calcite. This second phase comprises multiple pulses of mineralization expressed in the vein structures as bands of massive, banded or brecciated quartz. Massive and massive-to-banded quartz are commonly associated with carbonate which is predominantly manganoan calcite and calcitic rhodochrosite. Rhodonite is much less abundant than carbonates but is not uncommon. In the Porvenir Dos area and in the deeper portion of North Porvenir, a footwall-hosted vein lies in the footwall of the Santa Cruz vein structure. In both areas, this footwall vein is either within Guanaceví Formation footwall rocks or is at the structural contact between the Guanaceví Formation and the Lower Volcanic Sequence andesite. It is banded to brecciated quartz plus carbonate and contains local scatterings (<1%) of sulfides (pyrite>sphalerite>galena>chalcopyrite) and rare pods (<50 cm) of sulfides. At the north end of North Porvenir, the footwall vein attains a true width of over 7 m with silver grades of approximately 400 g/t in some areas. In Porvenir Dos, the footwall vein is narrower than the Santa Cruz vein and is overall a lower-grade vein, although one high grade intercept (uncapped) has been recorded in drillhole PD 36-3, at 2,548 g/t silver over 1.25 m.

Since 2013 long-hole stoping was introduced into the operations at Guanacevi. Over the last 2 years the Guanacevi mine has transitioned from an operation dominated by conventional cut and fill mining to one dominated by long hole stope methods.

The long-hole method increases production heights from typically 1.8m to up to 17m and at a reduced cost. Dilution and hanging wall failure is controlled using cemented 11m long fortifying cable bolts. Mining dilution has been estimated by Endeavour Silver Corp. (EDR) as variable with a minimum of 0.4m of over break dilution and a minimum operational width of 2.2m. Additional dilution is derived from the footwall especially in sill development, from occasional hanging wall failure and from re-mucking of floor fill. In general, dilution is estimated at being between 15% and 32%, while unrecoverable ore is estimated at approximately 5%. The dilution material in almost all cases is mineralized.

Cut-and-fill stope cuts are generally 15m long and 1.5 - 1.8m high, and long hole stopes are 15m long and 20m high (20m between levels measured floor to floor). Access to the stoping areas is provided by a series of primary and secondary ramps located in the footwall. The ramps have grades from minus 15% to plus 12%, with plus or minus 12% as standard. The crosscuts are 4 m by 4 m for the primary ramps and 3.5 m by 3.5 m for the secondary ramps.

In the upper parts of the mine, stope access is by short (10m to 40m) crosscuts from the ramp to the vein/stope. These crosscuts are generally 3.5m by 3.5m in cross-section and are usually driven down at minus 18% to intersect with the stope. As the stope advances up-dip on the vein, the back is taken down in these crosscuts to maintain access until the crosscut reaches a maximum inclination of 15%.

Jackleg drills are used to mine in the stopes. Back cuts are taken 2m to 2.5m high via vertical up-hole drilling or by breasting. The broken material is mucked out using scoop trams (2 yard or 3.5 yard depending on vein width). Waste fill from mine development is placed in the stope by the same scoop trams to within 2 m to 2.5 m of the back. When the vein is less than minimum mining width, the footwall is slashed to provide adequate width. This slashing is done during the fill cycle and the slashed material remains in the stope as fill.

Sill development that have high-grade ore in the floor are candidates for installing a concrete pillar. The sill is filled with one meter of cemented rock fill when stoping begins which allows for recovery of the sill pillar. The cemented rock fill consists of development waste mixed with 5% by weight ordinary Portland cement which is placed over a 5mm steel welded mesh on the sill floor. The cemented rock fill is mixed in a muck bay adjacent to the stope by the same scooptrams that place it into the stope. The cemented rock fill is placed into the sill starting at the entrance so that the scooptram is driving on top of the fresh fill to provide compaction.

The current four operating areas are all located on the regionally extensive Santa Cruz Vein structure. The vein is a high-grade silver-gold, epithermal vein deposit, characterized by low sulphidation geochemistry and adularia-sericite alteration. The Santa Cruz vein is the host of the silver and gold mineralization. It is oriented northwest and occurs principally within the Guanaceví Formation, with a preferred strike of N45°W and dips of between 50° and 55° to the southwest.

The footwall is generally unaltered andesite that has rock quality determinations (RQD) ranging from 80 to 100. This is competent ground that only occasionally requires additional support such as 6-foot spilt-set bolts or shotcrete.

The vein is a classic quartz vein that varies from 1 to 5m wide, with an average width of approximately 3m. The footwall contact is defined by a clear change of rock type from vein material to unaltered andesite. The hanging wall contact is typically defined by a clear structural boundary between the vein and the hanging wall rocks, with the contact usually defined as the Santa Cruz fault, a normal fault characterized by striations and fault gouge. The gouge material is typically white clay that can range from 5mm up to 2m in thickness. The vein is generally self-supporting over the entire width and requires no mechanical supports. When vein widths increase beyond 5m, some local support in the form of split-set bolts and welded wire mesh may be required. In some areas, post-mineral movement of the fault has caused some fracturing along the vein.

Rock conditions in the Milache, El Curso Central and El Porvenir areas are generally very good as described above, however, in the Santa Cruz Sur and El Curso Sur areas more difficult ground conditions can be encountered. In Santa Cruz Sur the vein and surrounding rock (both footwall and hanging wall) are impacted by cross cutting high angle faults and fracture sets which cause fracturing of the vein material and poor rock quality conditions in many areas. Generally, the ramp, cross cuts and sills in this area require installation of welded mesh and rock bolts with several areas requiring shotcrete also.

The El Curso Sur area has the fault with strongly argillically altered material or gauge fill in the hanging-wall of the vein which causes significant stability issues in the extraction of the vein. The installation of cable bolts in the hanging wall is required in these situations to stabilize the hanging wall and ensure safe working conditions as well as control dilution in the long-hole stoping method employed here.

In both the El Curso Sur and Santa Cruz Sur areas the plan is to move to an Avoca open stoping methodology of extraction which requires backfilling stopes and provides more security and safety as the area of open stope or ¨span¨ is reduced significantly reducing stress in the surrounding rock. It also removes the need to retain crown pillars between levels.

Crushing: ore bins, conventional crushing with a 30"x42" jaw crusher, 24”x36” jaw crusher, a 4-foot secondary cone and 3-foot tertiary cone crushers, a 5’x10’ vibrating screen (-½” to -5/8”).

Grinding: 5 ball mills, a 10.5’x12’ Hardinge, two 7’x7.5’ Denver, a 5’x 6’ Fimsa ball mill and an Allis-Chalmers 5’x4’.

The primary crushing circuit consist of the following process. Trucks loaded with ore from the mine arrive at the plant and are first weighed at the truck scale to keep track of the ore tonnage entering the plant. The trucks then dump the ore into the feed hopper of the primary crusher. The primary crusher is a jaw crusher with a capacity to process 400 tons per hour and crushes the material to 4". The ore is stacked by a conveyor stacker in the patio area of the primary crusher. Material is then transported by truck to the coarse ore bins at the front end of the tertiary crushing stage.

The tertiary crushing circuit consist of the following process. Material from the coarse ore bins is fed by apron feeder to the conveyor belts carrying the mineral to a screen for classification by size. The fine ore, - 1/2", is fed directly to the fine ore bins. The mineral that does not pass the screen size is sent to the tertiary crushers. During 2015 the area was remodeled to increase production capacity. The upgrades include:
• Symons 4’ crusher. Receives the larger mineral 4" or less.
• Telsmith 4’ crusher. Receives material larger than 4". This also has the option of receiving a little finer product, 1½" or finer.
• Telsmith 3’ crusher. Receives smaller fragments, 1" to ½".
• New FL Smith 20' x 6’ screen.

The tertiary crushing circuit is a closed circuit meaning that the ore will be returned to the crushers as many imes as necessary until it is reduced to a size of -1/2". The final crushed material is stored in the fine ore bins to await further processing.

The Guanaceví processing plant consists of the following circuits:

- Cyanidation and counter-current decantation (CCD) circuit: 16 leach tanks in two series (12 tanks of 20’x20’ and 4 tanks of 30’x30’).

- Merrill-Crowe circuit with 2 leaf clarifiers and one de-aeration tower.

- Refinery: two gas fired furnaces.

- Filtration: two filter presses, each with 131 plates of size 2,000x2,000 mm.

- Filters for dry tailings, and final disposal of dry tails.

Material from the fine ore bins (material -1/2") is transported to the mills through conveyors. Sodium cyanide in solution is added to begin the extraction kinetics of the silver and gold particles. Inside the ball mills the direct impact from the steel balls and the abrasive grinding of the steel balls on the ore combined with the action of the cyanide solution begin to leach the silver and gold from the ore.

Pulp leaving the mills has a 70-75% solid density, this ........