Silvercorp Metals Inc. (“Silvercorp” or the “Company”) (TSX:SVM)
(NYSE American:SVM) is pleased to report the results of an updated
National Instrument (“NI”) 43-101 Technical Report with an
effective date of June 30, 2018 (Mineral Resources and Mineral
Reserves effective December 31, 2017), prepared by AMC Mining
Consultants (Canada) Ltd. (“AMC”) on the Gaocheng silver-zinc-lead
property in Guangdong Province, People’s Republic of China (the
“Gaocheng NI 43-101 Technical Report”).
The four authors of the Gaocheng NI 43-101
Technical Report all qualify as independent Qualified Persons. Two
of the authors visited the Gaocheng Property in January 2018. AMC
examined all aspects of the project, including drill core,
underground workings, processing plant and surface infrastructure.
The Gaocheng NI 43-101 Technical Report, with an effective date of
30 June 2018, will be made available for review on the SEDAR system
and on the Company’s website at www.silvercorp.ca in due
course.
The Mineral Resource estimates for the Gaocheng
property were prepared by Mr. Shiping Yin, Resource Geologist of
Silvercorp using MicromineTM, and were verified by Ms. Dinara
Nussipakynova, P.Geo. of AMC using DatamineTM software, who takes
responsibility for those estimates.
The Mineral Reserve estimates for the Gaocheng
property were prepared by the Silvercorp Gaocheng mining
engineering team and were verified by Mr. H. A. Smith, P.Eng. of
AMC, who takes responsibility for those estimates.
Highlights of the Gaocheng NI 43-101
Technical Report
Mineral Reserves of 3.56 million tonnes in the
Proven and Probable categories grading 96 grams per tonne (g/t)
silver (Ag), 1.4% lead (Pb), and 3.1% zinc (Zn), containing 11
million ounces silver, 112 million pounds lead, and 240 million
pounds zinc.
From the start of operations at Gaocheng in 2014
through to December 31, 2017, 987,000 tonnes have been mined at
average head grades of 98 g/t silver, 1.5% lead and 2.7% zinc.
Based on Proven and Probable Reserves only, the
GC mine is a viable operation with a projected Life of Mine (LOM)
of 12 years through to 2030, with an average annual production rate
of approximately 300,000 tonnes, and with average silver equivalent
grades of the order of 335 g/t for the first eight years and then
240 g/t for the remainder of the mine life. GC also has the
potential to extend the LOM beyond 2030, via conversion of existing
Mineral Resources to Mineral Reserves, and further exploration and
development.
Based on the LOM production forecast and the
metal price and other assumptions shown under ‘Economic Analysis’
below, a base case pre-tax NPV at 8% discount rate of $160M is
projected ($120M post-tax). Over the LOM, 45% of the net revenue is
projected to come from zinc, 35% from silver and 20% from lead.
As part of an economic sensitivity assessment,
metal prices more in line with those current at the time of writing
of this Technical Report (silver – $16.75/troy ounce,
lead – $1.14/lb, zinc – $1.45/lb) indicate a pre-tax NPV at 8%
discount rate of $176M ($132M post-tax). For this scenario, 49% of
the net revenue is projected to come from zinc, 29% from silver and
22% from lead.
In comparison with the Mineral Reserve estimate
in the previous Technical Report (effective date January 23, 2012
and pre-operations), there is a 264% increase in Proven Mineral
Reserve tonnes and a 56% decrease in Probable Mineral Reserve
tonnes, with a decrease in Mineral Reserve total tonnes of 25%
(1,186,000 t).
Mineral Resources at December 31, 2017 total 6.4
million tonnes (inclusive of Mineral Reserves) in the Measured and
Indicated categories grading 96 g/t Ag, 1.3% Pb, and 2.9% Zn,
containing approximately 20 million ounces silver, 181 million
pounds lead, and 412 million pounds zinc.
Measured and Indicated tonnes have decreased by
16%, which is due to a combination of mining depletion and change
in classification method. Inferred Mineral tonnes have
decreased by 6%. In the Measured plus Indicated category,
grades have decreased for silver by 21% and for zinc by 6%.
The lead grade remains unchanged. In the Inferred category,
grades have decreased for silver, lead, and zinc by 13%, 16% and 2%
respectively.
The results of the underground drilling program
at GC show that vein structures are still open at depth.
2018 Mineral Resource and Mineral
Reserve Summary
The previous independent Mineral Resource and
Mineral Reserve estimates on the property were at December 31, 2011
(Technical Report effective date January 23, 2012). Silvercorp
completed its first phase of diamond drilling on the Gaocheng
property in 2008. Systematic drilling commenced on the property in
2011 and continued through to 2017. All Silvercorp drilling was
completed as NQ-sized core. Drillhole collars were surveyed using a
total station and down hole surveys were completed every 50 m
downhole. Core recoveries varied between 41.7% and 100% averaging
96.9%.
Mineral Resources:
The Mineral Resource estimates for the Gaocheng
property were prepared by Mr Shiping Yin, Resource Geologist of
Silvercorp, and were reviewed by independent Qualified Person, Ms.
Dinara Nussipakynova, P.Geo of AMC who takes responsibility for the
estimates. As a result of a recommendation in the 2012 Technical
Report, the December 2017 Resources were estimated using a block
modelling approach, with MicromineTM software. Interpolation was
carried out using inverse distance cubed (ID3) for all the veins.
Estimates were made for a total of 89 mineralized vein structures
for the Gaocheng property.
The Mineral Resources are reported above a
cut-off of 100 g/t silver equivalent (AgEq). Cut-off grades are
based on in situ values in AgEq terms in grams per tonne (after
application of mining recovery and payable values) and incorporate
all mining and processing costs provided by Silvercorp and reviewed
by AMC.
The estimated Mineral Resources and metal
content for the property as of December 31, 2017 are detailed in
Table 1 below.
Table 1 Gaocheng Property - Measured &
Indicated, and Inferred Mineral Resources(Inclusive of
Mineral Reserves)
Resource classification |
Tonnes (Mt) |
Ag (g/t) |
Pb (%) |
Zn (%) |
Contained metal |
Ag (koz) |
Pb (Mlbs) |
Zn (Mlbs) |
Measured |
2.735 |
101 |
1.4 |
3.2 |
8,840 |
84 |
195 |
Indicated |
3.638 |
92 |
1.2 |
2.7 |
10,818 |
98 |
217 |
Measured and Indicated |
6.374 |
96 |
1.3 |
2.9 |
19,658 |
181 |
412 |
Inferred |
7.481 |
107 |
1.2 |
2.6 |
25,662 |
196 |
429 |
Notes: CIM Definition standards (2014) were used for reporting
the Mineral ResourcesMineral Resource are reported at a cut-off
grade of 100 g/t AgEq.The equivalency formula is Ag
g/t+44.6*Pb%+43.5*Zn% using prices of $19/oz Ag, $1.00/lb Pb and
$1.25/lb Zn and estimated recoveries of 77% Ag, 86% Pb, and 83%
Zn.Drilling results up to December 31, 2017.Mineral Resources that
are not Mineral Reserves do not have demonstrated economic
viability.The numbers may not compute exactly due to
rounding.Source: Silvercorp, reproduced as a check by AMC Mining
Consultants (Canada) Ltd.
Mineral Reserves
The Mineral Reserve estimates for the Gaocheng
property were prepared by Silvercorp under the guidance of
independent Qualified Person, Mr. H. A. Smith, P.Eng, who takes QP
responsibility for those estimates. The assumption has been made
that current stoping practices will continue to be employed at the
Gaocheng property, namely predominantly shrinkage stoping but also
with a relatively small amount of cut and fill resuing, using
hand-held drills and hand-mucking within stopes, and loading to
mine cars by rocker-shovel or by hand. Minimum mining widths of
1.0 m for shrinkage and 0.5 m for resuing are
assumed.
Average dilution beyond planned mining widths
has been estimated at 13%, while assumed mining recovery factors
are 92% for shrinkage stopes and 95% for resuing stopes.
The Gaocheng NI 43-101 Technical Report defines
Mineral Reserves of 3.56 million tonnes in the Proven and Probable
categories grading 96 g/t Ag, 1.4% Pb, and 3.1% Zn, containing 11
million ounces silver, 112 million pounds lead, and 240 million
pounds zinc. Mineral Reserve tonnes are noted to be 56% of Mineral
Resource (Measured plus Indicated) tonnes. Silver, lead and zinc
Mineral Reserve grades are 100%, 110% and 104% respectively of the
corresponding Measured plus Indicated Mineral Resource grades.
Metal content conversions for silver, lead and zinc from Measured
plus Indicated Mineral Resources to Proven plus Probable Mineral
Reserves are 56%, 62% and 58% respectively.
Table 2 Gaocheng Property - Mineral
Reserves
Reserve classification |
Tonnes (Mt) |
Ag (g/t) |
Pb (%) |
Zn (%) |
Contained metal |
Ag (koz) |
Pb (Mlbs) |
Zn (Mlbs) |
Proven |
1.691 |
96 |
1.4 |
3.2 |
5,219 |
53 |
120 |
Probable |
1.873 |
97 |
1.4 |
2.9 |
5,841 |
58 |
121 |
Proven and Probable |
3.564 |
96 |
1.4 |
3.1 |
11,000 |
112 |
240 |
Notes to Mineral Reserve Statement:Full breakeven cut-off
grades: Shrinkage = 180 g/t AgEq: Resuing = 245 g/t AgEq.Marginal
material cut-off grade: 145 g/t AgEq.Dilution (zero grade) assumed
as 0.1 m on each wall of a shrinkage stope and 0.05 m on each wall
of a resuing stope.Mining recovery factors assumed as 95% for
resuing and 92% for shrinkage.Metal prices: Silver US$19/troy oz,
lead US$1.00/lb, zinc US$1.25/lb.Processing recovery factors: Ag –
77%, Pb - 86%, Zn – 83%.Effective date December 31, 2017.Exchange
rate assumed is RMB 6.50: US$1.00.Rounding of some figures may lead
to minor discrepancies in totals.
Table 3 Mineral Reserve Cut-off Grades and
Key Estimation Parameters
Item |
Gaocheng Mine |
Foreign exchange rate (RMB:US$) |
6.5 |
6.5 |
|
Shrinkage |
Resuing |
Operating costs |
|
|
Mining cost (includes development & exploration) ($/t) |
37.37 |
63.56 |
Milling cost ($/t) |
15.69 |
15.69 |
G&A and product selling cost ($/t) |
7.41 |
7.41 |
Sustaining capital ($/t) |
3.63 |
3.63 |
Mineral Resources tax ($/t) |
3.21 |
3.21 |
Total operating costs (US$/t) |
67.31 |
93.50 |
Mining recovery (%) |
92 |
95 |
Mill recoveries |
|
|
Ag (%) |
77 |
77 |
Pb (%) |
86 |
86 |
Zn (%) |
83 |
83 |
Breakeven COG (AgEq g/t) |
180 |
245 |
Metal price assumptions: Ag $19/oz; Pb $1.00/lb; Zn
$1.25/lb.
Economic analysis
Although Silvercorp is a producing issuer and,
therefore, does not require an economic analysis for the purposes
of the Gaocheng NI 43-101 Technical Report, AMC considered it
reasonable to include a summary-level analysis to illustrate the
potential economic impact relative to the latest Mineral Reserve
estimation and to the associated production schedule.
The Gaocheng mine has been in commercial
production for four years. From FY 2019 onwards, a 12-year LOM is
envisaged for the resource as currently understood, with average
silver equivalent grades projected to be of the order of 335 g/t
for the first eight years and then to fall to an average of 240 g/t
for the remainder of the mine life. Operating and capital costs are
anticipated to be reasonable. For the summary economic assessment,
AMC has largely used FY 2019 budget cost projections, and the same
metal prices as in the Mineral Reserve estimation, namely:
Silver
US$19.0/oz
Lead
US$1.00/lb
Zinc US$1.25/lb
A provision for government fees and mineral
resource taxes at 5% of net revenue is made in the summary economic
analysis, together with an exchange rate assumption of 1US$ =
6.50RMB.
Based on the LOM production profile and the
metal price and other assumptions shown above, a base case NPV at
8% discount rate of $160M (pre-tax), $120M (post-tax) is
projected.
Qualified Persons
D. B. Nussipakynova, P.Geo., H. A. Smith,
P.Eng., A. Riles, MAIG and P. R. Stephenson, P.Geo. of AMC Mining
Consultants (Canada) Ltd. are Qualified Persons as defined by
National Instrument 43-101. D. B. Nussipakynova, H. A. Smith, P. R.
Stephenson and A. Riles have reviewed and consented to this press
release and believe it fairly and accurately represents the
information in the Technical Report that supports the
disclosure.
About Silvercorp
Silvercorp is a low-cost silver-producing
Canadian mining company with multiple mines in China. The Company’s
vision is to deliver shareholder value by focusing on the
acquisition of under developed projects with resource potential and
the ability to grow organically. For more information, please
visit our website at www.silvercorp.ca.
For further information
Lorne WaldmanSenior Vice PresidentSilvercorp
Metals Inc.
Phone: (604) 669-9397Toll Free: 1(888)
224-1881Email: investor@silvercorp.ca Website:
www.silvercorp.ca
CAUTIONARY DISCLAIMER - FORWARD LOOKING
STATEMENTS
Certain of the statements and information in
this press release constitute “forward-looking statements” within
the meaning of the United States Private Securities Litigation
Reform Act of 1995 and “forward-looking information” within the
meaning of applicable Canadian provincial securities laws. Any
statements or information that express or involve discussions with
respect to predictions, expectations, beliefs, plans, projections,
objectives, assumptions or future events or performance (often, but
not always, using words or phrases such as “expects”, “is
expected”, “anticipates”, “believes”, “plans”, “projects”,
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“potential” or variations thereof or stating that certain actions,
events or results “may”, “could”, “would”, “might” or “will” be
taken, occur or be achieved, or the negative of any of these terms
and similar expressions) are not statements of historical fact and
may be forward-looking statements or information.
Forward-looking statements or information relate to, among other
things: the price of silver and other metals; the accuracy of
mineral resource and mineral reserve estimates at the Company’s
Gaocheng property; the sufficiency of the Company’s capital to
finance the Company’s operations; estimates of the Company’s
revenues and capital expenditures; estimated production from the
Company’s Gaocheng mine; timing of receipt of permits and
regulatory approvals; availability of funds from production to
finance the Company’s operations; and access to and availability of
funding for future construction, use of proceeds from any financing
and development of the Company’s properties.
Forward-looking statements or information are
subject to a variety of known and unknown risks, uncertainties and
other factors that could cause actual events or results to differ
from those reflected in the forward-looking statements or
information, including, without limitation, risks relating to:
fluctuating commodity prices; calculation of resources, reserves
and mineralization and precious and base metal recovery;
interpretations and assumptions of mineral resource and mineral
reserve estimates; exploration and development programs;
feasibility and engineering reports; permits and licenses; title to
properties; property interests; joint venture partners;
acquisition of commercially mineable mineral rights; financing;
recent market events and conditions; economic factors affecting the
Company; timing, estimated amount, capital and operating
expenditures and economic returns of future production; integration
of future acquisitions into the Company’s existing
operations; competition; operations and political
conditions; regulatory environment in China and Canada;
environmental risks; foreign exchange rate fluctuations; insurance;
risks and hazards of mining operations; key personnel; conflicts of
interest; dependence on management; internal control over financial
reporting as per the requirements of the Sarbanes-Oxley Act; and
bringing actions and enforcing judgments under U.S. securities
laws.
This list is not exhaustive of the factors that
may affect any of the Company’s forward-looking statements or
information. Forward-looking statements or information are
statements about the future and are inherently uncertain, and
actual achievements of the Company or other future events or
conditions may differ materially from those reflected in the
forward-looking statements or information due to a variety of
risks, uncertainties and other factors, including, without
limitation, those referred to in the Company’s Annual Information
Form for the year ended March 31, 2018 under the heading “Risk
Factors”. Although the Company has attempted to identify
important factors that could cause actual results to differ
materially, there may be other factors that cause results not to be
as anticipated, estimated, described or intended.
Accordingly, readers should not place undue reliance on
forward-looking statements or information.
The Company’s forward-looking statements and
information are based on the assumptions, beliefs, expectations and
opinions of management as of the date of this press release, and
other than as required by applicable securities laws, the Company
does not assume any obligation to update forward-looking statements
and information if circumstances or management’s assumptions,
beliefs, expectations or opinions should change, or changes in any
other events affecting such statements or information. For the
reasons set forth above, investors should not place undue reliance
on forward-looking statements and information.
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