approximately twelve months to start the commercial production The Company continues to work through one environmental matter involving eventual selenium
discharges into the Cauxa River in Asturias, Spain. The Cauxa River flows past the El Valle Mine
operated by the Company’s Spanish subsidiary, Orovalle, as well as other industrial properties owned
by third parties. Selenium is a naturally occurring element that is found in rocks, land and water and
thus is also naturally found in certain food supplies. The results of scientific studies conducted by the
Company have confirmed the Company’s belief that past and prevailing levels of selenium in waterways
impacted by the Orovalle operations do not constitute a health or environmental risk.
Spanish Water Authority has taken the position that the levels of selenium in the river flowing past El
Valle Mine exceed the levels permitted by applicable regulations as a result of discharges attributed to
Orovalle which may not be in compliance with certain of Orovalle’s permits (the “SE Discharge Matter”).
In recent years, Orovalle has received approximately $1.1 million in fines relating to these matters and
may face further additional fines or other sanctions, including the revocation or suspension of certain
permits, in the future. Orovalle is appealing the outstanding fines, approximately $0.7 million, and the
enforcement of certain fines has been suspended pending the related criminal matter. A judge of the
criminal court of Grado Municipality, in the region of Asturias, has conducted an investigation into the
potential commission by Orovalle of a reckless crime under the Spanish penal code relating to the SE
Discharge Matter. After six years of investigation, during the third quarter of fiscal 2020 the Grado’s
Court issued the order to commence an oral trial to address the SE Discharge Matter in a criminal court
of Oviedo (the capital of Asturias). A date for the commencement of the oral trial has not been set as of
the date hereof. In connection with the pending oral trial, the Court set a requirement on Orovalle to
provide a bond in the amount of €7 million as warranty for contingent liabilities, subject to the outcome
of the oral trial. Orovalle has appealed the bond taking the position that past and prevailing levels of
selenium in waterways impacted by Orovalle did not cause any damage to the environment. The appeal
is in progress as of date hereof. With respect to the oral trial, Orovalle has filed its preliminary statement
of defence asking for the acquittal on the basis that, among other things, there is absence of a
committed criminal offence. If Orovalle is ultimately found responsible, monetary penalties, amongst
other sanctions, may be applied. These sanctions could have a material impact on the Company.
Orovalle will defend itself vigorously in this matter Certain former employees of EMIPA affected by the restructuring process during the second quarter of
fiscal 2020 (the “Former Employees”) decided not to accept the dismissal terms provided for under
applicable employment laws in Bolivia. In respect of these Former Employees, the Company proceeded
to deposit into a judicial account the compensation benefits to which the aforementioned employees
were entitled within the period established by law and according to the terms defined by the local
regulation. As a result of filings by the Former Employees under the labour administrative resolution
process to dispute EMIPA’s dismissal process, the Santa Cruz Departmental Labor Authority notified
EMIPA in July 2020 by way of “reinstatement resolutions” directing that the 78 Former Employee should
be reinstated to their original job positions with the payment of the wages accrued since their dismissal.
EMIPA subsequently filed an appeal to dispute the ”reinstatement resolutions” on the basis that the
dismissal process conducted by EMIPA during the restructuring process is in compliance with
applicable employment laws. The result of the administrative appeal was positive for EMIPA, therefore
Former Employees filed a final appeal known as the “Hierarchical Resource” with the Ministry of Labor
at La Paz (national administrative level), the last step of the labor administrative resolution process.
Subject to the outcome of the Hierarchical Resource, either party may seek a further determination of
the matter through a judiciary or constitutional process.