PCFLOW3D - a three-dimensional mathematical model that was developed at the Chair of Fluid Mechanics of the Faculty of Civil and Geodetic Engineering, University of Ljubljana, was used for hydrodynamic and Hg transport simulations in Lake Velenje. The model is fully non-linear and computes three velocity components, water elevation and pressure. Transport-dispersion equations for salinity and heat (and/or any pollutant) are further used to compute the distributions of these parameters. The results show that the major sources of mercury in Lake Velenje are lake inflows. The hydrodynamic simulations revealed that ground and/or surface water inflow and outflow do not have much influence on water cycling in the lake basin. Wind and ambient temperature seem to have the greatest influence on water movement in the lake. Mercury transport simulations performed by PCFLOW3D show good agreement with the measured distribution of different Hg and MeHg forms in Lake Velenje. Verification of water flow was done by isotope tracers δ18O and δ2H and measurements of different Hg and MeHg forms. Distribution of different Hg species and forms and isotopic composition in water of Lake Velenje is described in Part 1.