VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - April 21, 2006) - Silvercorp Metals Inc. ("Silvercorp") (TSX:SVM) is pleased to report that a new National Instrument ("NI") 43-101 Technical Update Report on the Ying Project (the "Update Report") dated April 18, 2006 has been completed and is available for review on the SEDAR system. The Update Report is in the nature of a preliminary assessment of the Ying Mine, based on the Measured and Indicated Resource in place as at April 2005, and covers the development and exploration work completed to date that has enabled the Ying Mine to commence production.
An update of the Resource on the Ying Project resulting from the extensive work done in the last year is expected to be completed in May, 2006.
The Update Report is authored by Chris Broili, C.P. Geo., L.P. Geo., and Jasman W. Yee, P.Eng., both independent Qualified Persons, and Cathy Shuk Yim Fong, P.Eng., a Qualified Person and V.P. Corporate Development for Silvercorp. Development of the Ying Project is carried out through Silvercorp's 77.5% subsidiary, Henan Found Mining Co. Ltd. ("Found"), a Sino-foreign joint venture company which holds 100% of the Ying Project and operates under a 30-year business license.
The following summarizes the Update Report:
Recent work on the Ying Property has defined a high-grade Silver-Lead-Zinc underground mineral Resource in veins averaging 0.42 meters (m) thick. The Resource was established by channel sampling of new underground tunnels, and underground drilling. Mineralization is hosted in a set of quartz-carbonate veins crosscutting Precambrian age mafic and felsic gneisses.
The Update Report is based on the Resource estimate calculated a year ago in Chris Broili's April 18, 2005 NI 43-101 Technical Report. (the "2005 Report"), where five veins on the Ying property were reported to have a Measured and Indicated Resource of 420,453 tonnes averaging 0.42 m wide with an average grade of 1,393 gram/tonne ("g/t") silver ("Ag"), 32.76% lead ("Pb"), 9.99% zinc ("Zn"). The contained metals for the Measured and Indicated Resource are 18.8 million ounces of Ag, 137,730 tonnes of Pb, and 42,004 tonnes of Zn. The Inferred Resource is 495,205 tonnes also averaging 0.42 m wide, with a grade of 1,539 g/t Ag, 35.01% Pb, 9.56% Zn. This Inferred Resource contains 24.5 million ounces of Ag, 173,394 tonnes of Pb, and 47,323 tonnes of Zn. Of the 28,957m of tunnels completed since August 2004, about 14,000m are mining development tunnels. As a result, within 2 months of Found receiving the mining permit, preliminary production could start from over 20 initial stopes that have been developed at the 518m elevation ("L") and 480m L for S14 and S6 veins, 490m L and 460m L for S2 and S2E veins, 534m L, 570m L, 610m L, and 640m L for S16W, S16W1, and S16E veins, 600m L for S7 vein, 570m L and 640m L for S8 vein.
The custom milling during 2005 of 40,711 tonnes of diluted by-product ore extracted from exploration and development tunnels indicates that Ag, Pb, and Zn metals can be easily recovered from Ying Project ore. The Pb-Ag and Zn concentrate produced satisfies smelter requirements. Milling tests have also confirmed the economic viability of using off-site flotation mills to treat diluted ore.
Concentrate sale contracts have been signed with several lead and zinc smelters on terms of delivery at mine site against cash advanced. The payable prices for lead and silver metal in lead-silver concentrate are 76% and 75% of spot prices, respectively, quoted on the Shanghai Metal Exchange ("SME") on the delivery date. The payable price for zinc metal in zinc concentrate is 70% of the SME spot price. China levies a 13% value-added tax (VAT) on sales of lead, zinc, silver, copper and other metal products, and the quoted prices for silver, lead and zinc on the Shanghai Metal Exchange are about 13% above World prices due to the Chinese government levying a 13% Value-added Tax on metal imports.
Three shafts, now each equipped with hoists, are being sunk and are expected to reach the intended depth of 210m L by the end of 2006. The shafts are designed to be 3.8m in finished diameter. Each shaft will be equipped with a cage guarded by four steel cables. Each Shaft is capable of handling 150,000 tonnes of material per annum (based on 300 days/year).
Ten shrinkage stopes are currently being extracted at the Ying Mine and it is anticipated that an additional 12 to 15 stopes will be under extraction in 6 months to reach a phase one mining capacity of 600 tonne per day ("tpd"). As a minimum of 5 portal accesses to 13 mineralized veins in which high grade ore shoots have been delineated, the Company expects that in time it can reach its production goal, without incurring substantial capital cost. The first 3 years of production is planned to come mainly through horizontal portals and thereafter, shafts will be used.
Based only on the Measured + Indicated Resources in Chris Broili's 2005 Report and using a 100% dilution factor and 90% recovery rate for the high grade resources, the Mineable, Measured + Indicated Resources are calculated to be 756,815 tonnes grading 696 g/t (22.3 oz/t) Ag, 16.36% Pb and 4.99% Zn. Based on a mining rate of 140,000 tonnes for 2006/2007 fiscal year and 200,000 tonnes per year thereafter, the above resource will last for four year's mine production. An updated Resource estimate based on the extensive exploration and development work completed from April 1 2005 to March 31, 2006 is being prepared and is expected to be available by the end of May 2006. Mine production is anticipated to be extended with increased mineral resources.
Construction of a 600 tpd mill is underway about 17 km from the Ying Property and is expected to be completed by the end of March 2007. During the first year of production, Found will continue to use custom mills to process ore. Starting from April 1, 2007 Found's own 600 tpd flotation mill is expected to be in production, producing Pb-Ag and Zn concentrate.
Based on net metal prices of US$7.5/oz Ag, US$0.34/lb Pb, and US$0.71 lb Zn and assuming a total production cost of US$48.2 per tonne of ore for the first year and US$41.6 per tonne of ore thereafter, and using recovery rates of 95% for Pb, 90% for Ag, and 75% for Zn, Silvercorp's share (77.5%) of projected net profit is anticipated to be US$30.06 million for the 1st year, US$43.6 million for the 2nd year, and US$37.06 million for the 3rd and 4th years, respectively. The capital payback period is projected to be zero as all the capital expenditures are projected to be financed from 1st year cash flow. For foreign invested companies such as Found, income is tax free for the first 2 years, taxable at 15% for the 3rd to 5th years and 30% thereafter.
If Pb and Zn revenue is used to cover production cost, then unit Ag production cost adjusted for Pb and Zn credit is projected to be negative US$6.3 to negative US$6.5 per ounce. If Pb and Zn are treated as free credits and only Ag revenue is used to cover the production cost, then the unit Ag production cost is projected to be US$1.99 to $1.79 per ounce.
Myles Gao, P.Geo, is the Companys Qualified Person on the project under NI 43-101.
SILVERCORP METALS INC.
Statements in this press release other than purely historical information, including statements relating to the Company's future plans and objectives or expected results, constitute forward-looking statements. Forward-looking statements are based on numerous assumptions and are subject to all of the risks and uncertainties inherent in the Company's business, including risks inherent in mineral exploration and development. As a result, actual results may vary materially from those described in the forward-looking statements. Production and revenue projections are based not on mineral reserves but on mineral resources which do not have demonstrated economic viability.
FOR FURTHER INFORMATION PLEASE CONTACT:
Silvercorp Metals Inc.
Chairman & CEO
Silvercorp Metals Inc.
VP Corporate Development
(604) 669-9387 (FAX)