The Guanajuato Mining District is a world-class, high-grade, silver-gold, epithermal vein system with low sulfidation and adularia-sericite alteration. It is historically a well-known, studied, and documented mining district.

El Cubo mineralization is typical of the classic high-grade silver-gold, banded epithermal vein deposits with low sulfidation mineralization characterized by adularia-sericite-silica alteration. Silver occurs in dark sulfide-rich bands within the veins with little mineralization but significant alteration minerals in the surrounding wall rocks. Significant silver and gold bearing metallic minerals include argentite or acanthite (Ag 2 S), electrum (native Au/Ag), ruby silver sulfosalt minerals, such as pyrargyrite (Ag 3 SbS 3 ) and polybasite [(Ag/Cu) 6 (Sb,As) 2 S 7 ][Ag 9 CuS 4 ]), naumannite (Ag 2 S), native silver (Ag), native gold (Au), and aguilarite (Ag 4 SeS). Other metallic minerals include pyrite (FeS 2 ), galena (PbS), sphalerite (ZnS), and chalcopyrite (CuFeS 2 ). The silver sulfosalts are commonly found at depth while native silver is generally supergene and found in oxidized areas. As typical of these type systems, galena, sphalerite, and chalcopyrite are found deeper in the vein zones.

The silver rich veins, such as Villalpando, contain quartz, adularia, pyrite, argentite (acanthite), naumannite, and native gold. Gold rich veins, such as San Nicolas, contain quartz, pyrite, minor chalcopyrite and sphalerite, electrum, and aguilarite.

There is significant mineralogical zonation in the vein system. The upper levels are argentite (acanthite) + adularia + pyrite + electrum + calcite + quartz and the lower levels are chalcopyrite + galena + sphalerite + adularia + quartz + argentite (acanthite).

The gold:silver ratio in the more gold-rich veins typically ranges from 1:15 to 1:30. The gold:silver ratio in the silver rich veins typically ranges from 1:60 to 1:150, and sometimes higher. The overall gold:silver ratio to date is 1:64. Metal zoning appears to be related, at least in part, to elevation. Ranges for gold:silver ratios at El Cubo vary from 1:10 to 1:20 in the upper mine levels, from 1:40 to 1:50 in the middle mine levels, and 1:100 to 1:150 at depth. These ratios could be of some importance in evaluating outcropping vein occurrences.

Low-sulfidation epithermal deposits in Mexico, such as El Cubo and El Pinguico, commonly have a well-defined, sub- horizontal zone where the hydrothermal fluids deposited gold and silver mineralization. Regionally, ore horizon thickness ranges from at least 300 m to greater than 500 m. High-grade ore occurs where the hydrothermal fluids boiled. Below the higher-grade silver gold mineralization, silver and gold values decrease but base metal values increase.

Above the boiling zone, veins sometimes disappear or can be reflected into something as simple as a calcite vein with barely anomalous silver values or a fracture with argillic to phyllic alteration. This commonly occurs when the geologic unit above the “boiling zone” host rock is unreactive due to its chemical or structural characteristics.

Phyllic alteration, as sericite and silicification, forms as haloes surrounding and adjacent to the silver-gold veins. Banding is due to periodic boiling events related to pressure releases during faulting of the brittle silicified host rocks. Amethyst is locally common, and calcite is commonly a late stage mineral.

Typical of this style of mineralization, economic concentrations of silver and gold occur in ore shoots distributed vertically and laterally between barren or weakly mineralized portions of the veins. Bonanza grades may occur at the site of vein intersections, such as the nearly perpendicular San Nicolas-Villalpando vein intersection. Other vein intersections of various named splays along the principal Villalpando vein also host bonanza silver-gold mineralization. Movement along the strike or dip direction of veins during the hydrothermal episodes causes wide sigmoidal breccia zones typified by pinch and swell mineralization.

At the Pinguico Mine the major vein consists of both silver and gold in crumbling sugary to white crystalline quartz and calcite veins, within brecciated rhyolitic rock, and as a replacement in the altered rhyolite. Mineralization consists of native gold and silver, polybasite, pyrargyrite, tetrahedrite, marcasite, sphalerite, galena, pyrite, and chalcopyrite.

Guanajuato Silver (Company) plans to operate the combined El Cubo and El Pinguico properties to provide feed to the El Cubo Mill.

Mechanized cut-and-fill stoping using small LHD (load-haul-dump) machines and handheld jackleg drills is the proposed method for the initial production from the underground operation. This method does allow for some degree of resuing to eliminate or minimize the amount of waste dilution and to provide fill for the stopes. Other methods, such as long hole stoping or stull stoping(tumbe sobre levante), may be considered in the future.

El Cubo was last in operation in 2019. Existing mining infrastructure at El Cubo consists of electrical connection to the grid, surface buildings for offices, shops and warehousing, haulage levels, and shafts. The shafts are not planned for hoisting in the re-start of El Cubo but will be used as routes for piping, ventilation, and electrical cables. All haulage from the mine is planned for the Santa Cecilia and Dolores declines, using trackless equipment.

Mechanized cut-and-fill stoping with some resuing is planned for production. Long hole open stoping will be considered, if significant wide-vein blocks are identified.

It is proposed to commence production by continuing the fill cycle of visually verified half-mined 21 715 and 1850 cutand-fill stopes. As the nearby Dolores-Villalpando, San Eusebio, and La Loca areas become available, they will come into production before more distant stopes are mined.

Rehabilitation of the mine haulage tunnels from the main Dolores access portal to the 1850 and 2175 and Cebolletas stopes is also complete, and the Company is focussing its mining efforts on these stopes which exist within the main Villalpando vein structure, (the “Villalpando Stopes”). The Company intends to focus its El Cubo mining efforts for the next 12-18 months on the Villalpando vein structure and veins in the Santa Cecilia area. The Company's engineers believe that the Villalpando Stopes could consistently provide up to 15,000 tonnes of mineralised material per month. The Company decided to initially focus on the Villalpando stopes for several reason; they are readily available, with infrastructure consisting of 4x4m wide access and ramps. Crews have cleaned these access routes, installed new lighting and ventilation services, and have cleared and re-established emergency exit routes from within the mine. In 2022, the Company is adding veins in the Santa Cecilia area as an active mining area and commenced mining broken material of the old workings from Level 0 to Level 4 of the 14 existing levels.

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The Company completed the refurbishment of the El Cubo mill in September 2021, with crushing and grinding of mill feed from El Cubo commencing on October 8, 2021, after GSilver had accumulated over 20,000 tonnes of stockpiled material in the El Cubo storage yard.

The completed $3.5 million in planned upgrades at the El Cubo floatation processing plant included cleaning and refurbishing the ball mills, including replacing the ball mill liners, and completing mechanical inspections throughout the plant. A used secondary crusher, a Symons 4.25ft Standard in excellent condition, and a new tertiary crusher, also a Symons 4.25ft Standard, were both craned into the plant, installed, and commissioned by September 2021. Installation of additional pumps upgraded lubricating systems and a complete electrical re-wiring were also completed with over 8 km of wires being installed.

The plant is capable of handling approximately 1500 tonnes per day, or over 500,000 tonnes per yea ........