Natural geothermal convection abounds within the Taupo Volcanic Zone (TVZ) of New Zealand's Central North Island. In many locations the highly porous eruptive products that blanket the landscape have been altered by the throughput of hydrothermal fluids and the consequent deposition of silica. We detail a numerical model that considers the evolution of a geothermal plume in the presence of silica deposition/dissolution that controls an evolving permeability distribution. Precipitation of silica occurs according to a gradient reaction regime, in which the dissolved silica concentration is controlled by the temperature dependent silica solubility. Over a period of 120 kyr, continuous geothermal circulation leads to the development of a low permeability cap-zone, approximately 200 m thick, above the main geothermal upflow zone. The cap-zone encourages lateral flow of rising fluids, increasing the area across which geothermal expression is observed. It also has an insulating effect on fluids below the cap, causing increases in temperature, enthalpy, and the reservoir potential of the field. A second model is constructed to consider the specific scenario of fault rupture through the impermeable cap-zone. Coseismic increases in permeability along the fault plane produce vigorous, renewed flow through the center of the geothermal field, temporarily reducing lateral flows. However, resealing of near surface permeability is rapid, and the restoration of lateral flows and recovery of the geothermal reservoir occurs within ∼10 kyr. These effects are discussed in the context of two TVZ geothermal fields: the extinct Ohakuri field, and Te Kopia, which is situated on a major active normal fault. Copyright 2012 by the American Geophysical Union.