Karen,

Originally, you were planning to raise production by Q3 to 850 tpd by supplementing the Santa Juana ore (before the ramp completion) with ore in “other areas.” However, since it was discovered that the veins are only 1/2 meter in width (as opposed to 1 meter width necessary for economic viability), you have abandoned that plan to expand until the San Mateo ramp is completed (hopefully in Q4). We are delaying supplementing ore from a couple of areas (Chicago, San Juanes) for now, yes. Mining them right now would involve dilution we find unacceptable because they would involve higher costs for the same output, which isn’t consistent with reaching a positive cash flow as soon as possible. We have therefore chosen to delay the ramp to 850 until we can do so without diminishing the grade. We will likely need the San Mateo ramp completed to achieve this result.

1. Furthermore, “does this vein width ‘shortfall’ raise serious questions about the overall economic viability of the Valardena mine? Also, in what part of the mine were these veins located?The areas are noted above--Chicago/San Juanes. The narrower veins affect only two out of 37 named veins at Velardeña. We’re not saying they cannot be mined economically – just that we are not planning to mine them right now.

2. Are there any other developed areas where ore can currently be economically processed (as a substitute for those rejected veins)? There’s a tradeoff between operating with higher dilution and seeking the cash flow positive state quickly – we are focused on the latter and believe a lower throughput with higher grade/less dilution will get us there faster.

3. You and Jeff talked about cutting expenses in order to reach the goal of becoming “cash flow positive” as quickly as possible.

(Jeff mentioned something about reducing the work day from 3 shifts/day down to 2 shifts/day., and perhaps even operating just the oxide mill without the sulfide mill.)

Please shed more light on these cost-cutting measures.You are correct. We are testing to find the ‘optimal’ combination of what ores come from where and are put through which processing facility, all with the goal of reaching cash flow positive state as soon as possible.

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Silverbull50