Silvercorp Metals 70% subsidiary to acquire LM mine
2007-11-01 10:05 ET - News Release
Mr. Rui Feng reports
SILVERCORP ACQUIRES LM SILVER-LEAD MINE NEAR THE YING SILVER PROJECT, HENAN PROVINCE, CHINA
Silvercorp Metals Inc.'s 70-per-cent-owned joint venture company, Henan Huawei Mining Co. Ltd., has signed an agreement to acquire 100 per cent of the operating LM silver-lead mine, which has a mining permit of 3.07 square kilometres in area and is located just southeast of the Ying silver project. The acquisition is carried out by acquiring the private Chinese company holding the LM mining permits for approximately $3.25-million. It is expected that the acquisition will be financed by cash flow from Huawei's HPG mine and the LM mine mining operations.
The acquisition of the LM mine advances Silvercorp's strategy to consolidate the fragmented primary silver sector in China, starting from its foothold in Henan province by expanding the Ying silver camp. The current Chinese national government mandate for the mining industry is to encourage the consolidation within a mining district of small mining operations and companies into larger, well-organized operations in order to improve safety and environmental practices and for better usage of resources.
Silvercorp's Chinese subsidiary company, Henan Found Mining Co. Ltd., has emerged as the largest silver-lead-zinc mining company and one of the largest taxpayers in Luoyang City, Henan province, China. The Ying mine, being the best operated mine in Luoning county, is favoured by local governments to be the consolidator. The local governmental authorities have designated Henan Found as the sole consolidator of the TLP silver-lead mine, where significant amounts of silver and lead have reportedly been produced. Negotiations are currently under way with the shareholders of the TLP mine to acquire a 100-per-cent interest. The TLP mine, which is located on the east boundary of the Ying project area, is currently shut down by the local government due to its poor record of safety and environmental practices.
The LM mining permit area is underlain by a highly metamorphosed basement of Archean-aged mafic to felsic gneisses, similar to the Ying and HPG project areas. At least eight mineralized vein structures have been identified and mapped in the LM area to date. The veins range from 300 to 1,000 metres in striking length and 0.2 to 5.0 m in true thickness. Main metallic minerals are massive and disseminated galena, native silver, and freibergite.
The mining and exploration operations at LM started in 2005 and currently produce 300 tonnes of ores per day which are processed using custom mills. A total of 19 adits -- approximately 15,000 m of exploration and production tunnels -- were developed on different veins and on different levels. As the previous operator is only interested in mining any oreshoots found along the veins, no resource was estimated. Its current mining activities have been focused on the high-grade oreshoots of veins LM2 (about 1,000 m long) and LM8 (about 800 m long). Silvercorp's geologists made visits to the mine, mapped the tunnels and collected check samples. Assay results of the check samples are listed in the attached table.
Some of the significant intercepts are:
1.0 m true width grading 2,841 grams per tonne (g/t) silver (Ag), 12.87 per cent lead (Pb) and 3.78 per cent zinc (Zn) at 900 m elevation on the LM2 vein; 1.2 m true width grading 4,336 g/t Ag, 4.91 per cent Pb and 0.37 per cent Zn at 846 m elevation on the LM2 vein; 1.5 m true width grading 2,032 g/t Ag, 1.39 per cent Pb and 0.11 per cent Zn at 924 m elevation on the LM8 vein; 3.0 m true width grading 1,113 g/t Ag, 5.69 per cent Pb and 0.71 per cent Zn at 851 m elevation on the LM8 vein; 0.6 m true width grading 2,349 g/t Ag, 8.52 per cent Pb and 0.26 per cent Zn at 845 m elevation on the LM3 vein.
Ag equiv- Eleva- True alent Vein tion width Ag Pb Zn (g/t) No. Tunnel (m) (m) (g/t) (%) (%) (i)
LM2 PD900-LM2-920-NYM 920 0.70 183 0.80 0.39 235 PD900-LM2-920-NYM 920 0.70 125 0.21 0.35 150 PD900-LM2-920-NYM 920 1.40 154 0.51 0.37 193 PD900-LM2-920-NYM 920 0.50 284 0.57 0.26 320 PD900-LM2-920-NYM 920 0.30 4140 22.59 1.40 5160 PD900-LM2-920-NYM 920 0.45 539 1.42 0.26 611 PD900-LM2-920-NYM 920 0.30 4860 16.41 1.30 5614 PD900-LM2-915-NYM 915 0.85 610 3.48 0.28 770 PD900-LM2-915-NYM 915 0.80 348 4.78 0.26 562 PD900-LM2-915-NYM 915 0.50 84 0.75 0.46 137 PD900-LM2-915-NYM 915 1.10 111 0.28 123 PD900-LM2-915-NYM 915 0.70 95 0.28 0.75 142 PD900-LM2-915-NYM 915 0.30 126 0.25 0.22 147 PD900-XJ2-LM2-920-NYM 907 1.45 1005 4.96 1.38 1280 PD900-LM2-900-NYM 900 0.78 58 9.65 0.24 477 PD900-LM2-900-NYM 900 1.00 2841 12.87 3.78 3564 PD900-LM2-900-NYM 900 1.30 104 1.33 0.30 174 PD900-LM2-900-NYM 900 0.30 2233 24.05 0.13 3254 PD900-LM2-900-NYM 900 0.70 1056 10.07 0.30 1495 PD900-LM2-900-NYM 900 1.40 264 4.94 0.13 479 PD900-LM2-900-NYM 900 0.55 270 5.74 0.18 521 PD900-LM2-900-NYM 900 0.15 3996 18.58 0.33 4796 PD900-LM2-900-NYM 900 0.40 2404 12.69 0.30 2954 PD900-LM2-900-NYM 900 0.50 1711 27.59 0.96 2921 PD855-LM2-880-NYM 882 0.60 134 0.99 0.18 184 PD855-LM2-880-NYM 882 1.50 537 4.64 0.39 751 PD855-LM2-880-NYM 882 1.10 146 1.19 0.30 210 PD855-LM2-880-NYM 882 1.00 1085 5.56 0.17 1328 PD855-LM2-880-NYM 882 0.55 72 0.28 85 PD855-LM2-880-NYM-TJ2 882 1.00 1564 31.57 0.54 2922 PD855-LM2-860-NYM 861 1.50 80 0.28 0.28 105 PD855-LM2-860-NYM 861 1.20 713 3.63 0.26 879 PD855-LM2-860-NYM 861 0.65 24 3.21 0.22 170 PD855-LM2-860-NYM 861 0.85 800 2.59 0.30 924 PD855-LM2-860-SYM 861 0.90 81 0.49 0.09 106 PD838-LM2-845-NYM 845 0.90 227 1.09 0.44 294 PD838-LM2-845-NYM 845 1.40 113 0.42 0.30 145 PD838-LM2-845-NYM 845 1.00 268 0.42 0.20 295 PD838-LM2-845-NYM 845 1.20 4336 4.91 0.37 4561 PD838-LM2-830-NYM 830 1.00 3407 11.23 0.56 3907 PD838-LM2-830-NYM 830 0.50 713 1.85 0.31 806 PD838-LM2-830-NYM 830 0.70 181 0.14 187 PD838-LM2-830-NYM 830 1.00 153 0.92 0.30 206 PD838-LM2-830-NYM 830 1.70 165 0.60 0.18 198 LM3 PD900-LM3-900-NYM 915 0.90 132 1.52 0.44 217 PD900-LM3-900-SYM 900 0.20 224 22.32 0.33 1182 PD855-LM3-880-SYM 880 0.70 12 0.14 0.21 28 PD855-XJ1 870 0.65 470 24.47 0.57 1530 PD855-LM3-860-SYM 861 0.40 1327 27.55 0.61 2518 PD855-LM3-860-SYM 861 1.00 30 1.18 80 PD838-LM3-845-NYM 845 1.20 315 0.85 0.30 365 PD838-LM3-845-NYM 845 0.60 2349 8.52 0.26 2721 PD838-LM3-845-NYM 845 0.80 60 1.65 130 PD838-LM3-845-NYM 845 0.20 991 6.99 1.18 1342 PD838-LM3-845-NYM 845 0.40 636 14.68 0.70 1289 PD838-LM3-830-NYM 830 0.95 346 0.28 358 LM4 PD900-LM4-920-SYM 920 0.30 252 0.38 0.41 287 PD900-LM4-920-SYM 920 0.40 448 2.66 0.52 585 LM7 XPD924-LM7-924-NEYM 924 9.50 263 2.54 0.11 375 LM8 XPD924-LM8-924-NWYM 924 1.50 2032 1.39 0.11 2096 XPD924-LM8-924-NWYM 924 1.10 322 0.72 0.06 355 XPD924-LM8-924-NWYM 924 0.50 2344 0.97 0.08 2388 XPD924-LM8-924-NWYM 924 0.60 124 0.63 0.16 159 XPD891-LM8-891-NWYM 891 0.50 174 0.21 0.06 185 XPD891-LM8-891-NWYM 891 0.30 1134 0.63 0.05 1162 XPD891-LM8-891-NWYM 891 0.65 386 0.47 0.08 409 XPD891-LM8-891-NWYM 891 0.80 261 0.54 0.05 286 XPD891-LM8-891-NWYM 891 0.70 220 0.22 0.05 231 XPD860-LM8-860-SEYM 860 0.60 1570 6.36 0.43 1859 XPD860-LM8-860-NWYM 860 0.50 747 3.71 0.11 909 XPD924-LM8-924-NWYM 851 3.00 1113 5.69 0.77 1390
Silver equivalent grade is calculated on the basis of $6.5 (U.S.) per ounce Ag, 40 U.S. cents per pound for Pb and 45 U.S. cents per pound for Zn. Copper grade is not included in the calculation.
After taking over the LM mine operation in early November, 2007, Silvercorp will carry out systematic underground drilling and tunnelling programs, including sinking several decline and short shafts, on all eight veins to define the resource while continuing current mining activities. Ore produced from the LM will be processed in Silvercorp's new 1,000-tonne-per-day mill about 14 km northwest of the LM mine. The exploration and mine development will focus on better-explored LM2, LM3 and LM8 veins.
The acquisition of the HPG property remains subject to regulatory approvals.
Quality control
Rock samples were collected by channel sampling the face of the undercut drifts. The channels were usually cut 10 centimetres in width and five cm in depth producing a sample weighing approximately two kilograms to 10 kg for each 0.10 to 1.00 m interval depending on the thickness of mineralization.
The company maintains a quality control program to ensure best practice in sampling and analysis of the tunnel samples. The samples are shipped directly in security-sealed bags to analytical lab of No. 6 Team of Henan Non-Ferrous Metals Geological and Mineral Resources Bureau in Luoyang located 120 km by road northeast of the LM mine.
The sample preparation consists of drying, crushing and splitting of the sample to 150 grams, then the sample is pulverized to 200 mesh. Ag, Pb and Zn were analyzed by a three-hour hot aqua regia digestion on 30-gram samples with an AA finish.
Myles Gao, PGeo, is the qualified person on the project under National Instrument 43-101.
We seek Safe Harbor.
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