Silvercorp to Acquire BYP Gold-Lead-Zinc Mine in Hunan Province, China
VANCOUVER, BRITISH COLUMBIA--(Marketwire - Nov. 8, 2010) - Silvercorp Metals Inc. (TSX:SVM)(NYSE:SVM) ("Silvercorp" or the "Company") is pleased to announce that it has signed a share purchase agreement and a Sino-Foreign cooperative joint venture contract to acquire a 70% equity interest in Yunxiang Mining Co. Ltd. ("Yunxiang"), a local private mining company in Hunan Province. Yunxiang's primary asset is the BYP Gold-Lead-Zinc ("Au-Pb-Zn") Mine, located 220 km southwest, or a 3 hour drive, from Changsha, Hunan's capital city. The cost of the share purchase and the Joint Venture capital investment is approximately US$33 million for Silvercorp.
The BYP mine has a mining permit covering 3.67 km2, a safety production permit, and a 400 tonne per day ("t/d") floatation mill. The mine and mill has been in production since 2006 and has mined and processed about 300,000 tonnes of "lower grade" lead-zinc mineralization near the surface. No other historical mining and milling activity occurred within the mining permit area. Currently the mill is not in operation as the tailings pond is full. A new tailings facility is under construction and is expected to be completed in five months. The mine and mill are easily accessed by paved road and are serviced by the national power grid. Over 4,100 meters (m) of underground development is completed, including four declines totaling 767m and 2,010m of exploration drifts.
A geological report on the property was completed by the Chinese government geological team in 1992. Based on 36,151m of diamond drilling in 105 holes, the report defined 5.44 million tonnes of gold mineral resources grading 2.76 grams per tonne (g/t) Au, containing 482,000 ounces of in situ gold, and 3.12 million tonnes of "higher grade" lead and zinc mineral resources grading 2.45% Pb and 5.26% Zn. A qualified person has not done sufficient work to classify the historical estimates as current mineral resources, and Silvercorp is not treating the historical estimates as current mineral resources and the historical estimate should not be relied upon.
Geologically, the project area is underlain by Devonian limestone, mudstone, and sandstone units that were intruded by Mesozoic granites within the prominent Central Hunan gold-tin-lead-zinc-antimony polymetallic belt. Gold mineralization up to 41m in true thickness as defined by surface drill holes occurs in the sandstone while lead and zinc mineralization zones up to 53m in true thickness are hosted in the limestones. Gold mineralization is mainly related to fine quartz veining and disseminated pyrite developed along joints and fractures in sandstones. Lead and zinc is usually very fine-grained and is associated with silicification and pyrite in limestone. Gold, lead and zinc mineralization zones appears from surface to a depth of about 350m based on the deepest drill holes. As drilling to date has been widely spaced (100m to 400m between holes) it is possible that additional mineralization will be proven through future extensive exploration of underground tunneling and closely spaced diamond drilling, as the recent underground tunnels have intercepted several new gold and lead-zinc mineralization zones.
At present, gold mineralization is accessible by underground tunnels at the 252m elevation, about 100m from surface. As part of the due diligence review, extensive gold mineralization defined by previous drilling has been confirmed by Silvercorp geologists who carried out a systematic channel sampling program in four newly developed underground tunnels that cross-cut through the #3 gold ore (see table below). Underground Channel samples by Silvercorp Tunnel Tunnel cross-cut interval (meters) Gold grade (g/t) CM 16-17 33 2.79 CM17 72 5.75 including 15.08 g/t over 12 meters CM17-18 90 4.83 including 14.13 g/t over 9 meters CM18 99 2.42 including 7.67 g/t over 6 meters
Silvercorp has used a metallurgical laboratory in Changsha City to conduct metallurgical tests on gold and lead-zinc mineralization from the BYP mine. The preliminary test results and previous production records show that gold can be recovered at about 90% recovery rate by conventional floatation to produce a gold-sulfide concentrate. Lead and zinc can also be recovered by conventional floatation with 80% lead and 90% zinc recoveries. Within 200 km there are one gold and seven lead and zinc smelters with ample capacity ready to take these concentrates.
Once the transaction is completed, Silvercorp, through Yunxiang, intends to utilize the existing 400 t/d floatation mill to mine and process the gold mineralizations starting from fiscal 2012. Concurrently, Silvercorp will expand the mining and milling capacity to 1,000 t/d gold mineralization for fiscal 2013 then to 2,000 t/d (1,000 t/d gold mineralization and 1,000 t/d lead-zinc mineralization) by fiscal 2014. Silvercorp will carry out an extensive exploration program to upgrade and expand the current resources. Silvercorp will also complete a NI 43-101 report on the project and engage a Chinese engineering firm to design a full plan for mining development. A feasibility study has not been completed and there is no certainty the proposed operation will be economically viable.
This acquisition marks another significant step for Silvercorp's growth in China, allowing Silvercorp to establish a third production base in a prominent polymetallic belt with a mixed production of precious and base metals. The acquisition fits Silvercorp's strategy of acquiring precious metal projects that can generate healthy cash flows before the project is fully explored and developed, so that further resource expansion and production growth can be financed by internal cash flow. This will also enable Silvercorp to further establish its reputation as an efficient producer and enhance its ability to consolidate other producing mines and exploration projects in the region.
This acquisition is subject to approvals by necessary regulatory agents, including Chinese military clearance. This transaction is expected to be closed before March 31, 2011.
Myles Gao, P. Geo, is the Qualified Person on the project as defined under National Instrument 43-101. He has verified the information and has reviewed and approved the contents of this news release.
About Silvercorp Metals Inc.
Silvercorp Metals Inc. is engaged in the acquisition, exploration, development and mining of high-grade silver-related mineral properties in China and Canada. Silvercorp is the largest primary silver producer in China through the operation of the four silver-lead-zinc mines at the Ying Mining Camp in the Henan Province of China. The company is applying for a mining permit for its GC silver-lead-zinc mine in the Guangdong Province to establish the second production base. In Canada, Silvercorp is in preparation of applying for a Small Mine permit for the Silvertip high grade silver-lea-zinc mine project in northern British Columbia to provide further platform for growth and geographic diversification. The Company's shares are traded on the New York Stock Exchange and Toronto Stock Exchange and are included as a component of the S&P/TSX Composite and the S&P/TSX Global Mining Indexes.
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