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Silvercorp Metals Inc
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Silvercorp releases NI 43-101 report for Ying

2020-08-31 17:21 ET - News Release

Mr. Lon Shaver reports

SILVERCORP REPORTS 18% INCREASE IN MEASURED AND INDICATED SILVER RESOURCES AND 4% INCREASE IN PROVEN AND PROBABLE SILVER RESERVES, ON TOP OF 21 MILLION OUNCES OF SILVER PRODUCED BETWEEN JUNE 2016 AND DECEMBER 2019 AT THE YING SILVER-LEAD-ZINC MINING DISTRICT

Silvercorp Metals Inc. has released the results of an updated National Instrument 43-101 technical report with an effective date of July 31, 2020 (mineral resources and mineral reserves effective Dec. 31, 2019), prepared by AMC Mining Consultants (Canada) Ltd. and covering the SGX, HZG, HPG, TLP, LME and LMW underground mines on the Ying silver-lead-zinc property in Henan province, China.

The authors of the Ying 2020 technical report all qualify as independent qualified persons (QPs). Three of the authors have visited the Ying property (latest visit in July, 2016), with plans for a more recent visit postponed because of the COVID-19 pandemic. The QPs have examined all aspects of the project, including drill core, underground workings, processing plant and surface infrastructure. The Ying 2020 technical report, with an effective date of July 31, 2020, will be made available for review on SEDAR and on the company's website in due course.

Highlights of the Ying 2020 technical report:

  • Estimated mineral resources are 20.1 million tonnes (inclusive of mineral reserves) in the measured and indicated categories grading 234 grams per tonne silver (Ag), 0.15 g/t gold (Au), 3.64 per cent lead (Pb) and 1.28 per cent zinc (Zn), containing 151 million ounces silver, 98,000 oz gold, 732,000 tonnes lead and 257,000 tonnes zinc;
  • In comparison with the 2017 technical report (mineral resources effective date of June 30, 2016), measured and indicated resource tonnes have increased by 23 per cent, and contained metal has increased by 18 per cent for silver, 16 per cent for lead, 20 per cent for zinc and 109 per cent for gold.
  • In comparison with the 2017 technical report, inferred resource tonnes have increased by 78 per cent, and contained metal has increased by 42 per cent for silver, 38 per cent for lead, 32 per cent for zinc and 450 per cent for gold.
  • Estimated mineral reserves are 12.0 million tonnes in the proven and probable categories grading 257 g/t silver, 0.13 g/t gold, 3.81 per cent lead and 1.41 per cent zinc, containing 99 million oz silver, 50,000 oz gold, 456,000 tonnes lead and 169,000 tonnes zinc.
  • In comparison with the 2017 technical report (mineral reserves effective date of June 30, 2016), the changes in total contained Ying mineral reserves for silver, gold, lead and zinc are 4 per cent, 85 per cent, minus 1 per cent and 8 per cent, respectively. These mineral reserves are on top of 21 million ounces of silver produced between July, 2016, and December, 2019.
  • Based on proven and probable mineral reserves only, the Ying mine complex is a viable operation with a projected life of mine (LOM) through to 2040, assuming an average annual production rate of approximately six million ounces of silver between fiscal 2021 and fiscal 2027, five million ounces between 2028 and 2033, four million ounces between 2034 and 2036, and 2.5 million ounces between 2037 and 2040. There is also the potential to extend the LOM beyond 2040 through further exploration and development, particularly in areas with identified inferred resources.
  • The results of the 2017 to 2020 underground drilling program on the Ying property show that most of the major mineralized vein structures are still open at depth and laterally.
  • Based on the LOM production forecast and the metal price and other assumptions shown under the economic analysis section herein, a base-case, pretax NPV (net present value) of $954-million (U.S.) at a 5-per-cent discount rate is projected ($713-million (U.S.) posttax). Over the LOM, 62 per cent of the net revenue is projected to come from silver, 29 per cent from lead, 6 per cent from zinc and 2 per cent from gold.

Mineral resources

The mineral resource estimates for the SGX, HPG, LMW and LME deposits were carried out by independent qualified person Rod Webster, MAusIMM, MAIG, of AMC, who takes responsibility for these estimates.

The mineral resource estimates for the TLP, HZG and DCG deposits were carried out by independent qualified person Simeon Robinson, PGeo, of AMC, who takes responsibility for these estimates.

The December, 2019, mineral resources were estimated using a block modelling approach and Datamine's dynamic anisotropy application (1). Except for DCG, all grade estimation was completed using ordinary kriging. DCG was estimated using inverse distance squared.

Resource estimates were made for a total of 311 mineralized vein structures for the six active Ying mines and for the DCG project that also is located on the Ying property.

Additional geological sections in the Ying 2020 technical report were prepared by independent qualified person Dr. Adrienne Ross, PGeo, of AMC, who takes responsibility for those sections.

The mineral resources are reported above cut-offs after applying a minimum practical extraction width of 0.3 metre. Diluted grades were estimated for blocks with mineralization widths less than 0.3 m by adding a waste envelope with zero grade. Cut-off grades are based on in situ values in silver equivalent (AgEq) terms in grams per tonne and incorporate mining, processing and shipping costs, and metallurgical recoveries and payable values, provided by Silvercorp for each mine and reviewed by the QPs. AgEq formulas by mine are shown in the table notes.

The estimated mineral resources and metal content for the Ying property as of Dec. 31, 2019, are detailed in the attached mineral resource table.

(1) Dynamic anisotropy reorients the search ellipsoid for each estimated block based on the local orientation of the mineralization.

                                              YING MINING DISTRICT 
                MINERAL RESOURCES AND METAL CONTENT FOR SILVER, LEAD, ZINC AND GOLD AS OF DEC. 31, 2019
                                         (INCLUSIVE OF MINERAL RESERVES)
 
Mine     Resource category       Tonnes        Au        Ag        Pb        Zn    Metal contained in mineral resources
                                    (Mt)     (g/t)     (g/t)       (%)       (%)       Au        Ag        Pb        Zn 
                                                                                     (koz)     (Moz)      (kt)      (kt)

SGX      Measured                  3.29         -       313      6.19      3.12         -     33.08     203.6     102.5
         Indicated                 3.48         -       257      5.04      2.53         -     28.77     175.5      88.1
         Measured + indicated      6.77         -       284      5.60      2.82         -     61.86     379.1     190.6
         Inferred                  4.33         -       237      4.84      1.99         -     33.00     209.8      86.1
-----    --------------------     -----      ----       ---      ----      ----     -----     -----     -----     -----
HZG      Measured                  0.49         -       342      1.09      0.25         -      5.43       5.4       1.2
         Indicated                 0.60         -       274      0.70      0.15         -      5.29       4.2       0.9
         Measured + indicated      1.09         -       305      0.87      0.20         -     10.72       9.5       2.1
         Inferred                  0.97         -       250      0.78      0.18         -      7.77       7.5       1.7
-----    --------------------     -----      ----       ---      ----      ----     -----     -----     -----     -----
HPG      Measured                  0.88      1.17        93      3.74      1.43      33.3      2.64      33.1      12.6
         Indicated                 1.50      1.35        67      3.02      1.30      64.9      3.22      45.2      19.5
         Measured + indicated      2.38      1.28        77      3.29      1.35      98.2      5.87      78.3      32.1
         Inferred                  3.20      2.05        84      2.65      1.04     211.2      8.65      84.9      33.2
-----    --------------------     -----      ----       ---      ----      ----     -----     -----     -----     -----
LME      Measured                  0.49         -       348      1.72      0.38         -      5.47       8.4       1.8
         Indicated                 1.18         -       282      1.62      0.44         -     10.69      19.1       5.1
         Measured + indicated      1.67         -       301      1.65      0.42         -     16.16      27.5       7.0
         Inferred                  1.79         -       222      1.73      0.39         -     12.75      30.9       6.9
-----    --------------------     -----      ----       ---      ----      ----     -----     -----     -----     -----
LMW      Measured                  0.74         -       330      3.13      0.28         -      7.87      23.2       2.1
         Indicated                 1.97         -       259      2.33      0.29         -     16.41      45.9       5.8
         Measured + indicated      2.71         -       278      2.55      0.29         -     24.29      69.1       7.9
         Inferred                  2.41         -       248      2.85      0.39         -     19.22      68.6       9.5
-----    --------------------     -----      ----       ---      ----      ----     -----     -----     -----     -----
TLP      Measured                  2.51         -       208      3.44      0.33         -     16.79      86.5       8.3
         Indicated                 2.92         -       165      2.74      0.32         -     15.48      79.9       9.2
         Measured + indicated      5.43         -       185      3.06      0.32         -     32.27     166.4      17.5
         Inferred                  5.48         -       157      2.64      0.25         -     27.70     144.7      13.7
-----    --------------------     -----      ----       ---      ----      ----     -----     -----     -----     -----
DCG      Measured                     -         -         -         -         -                   -         -         -
         Indicated                 0.06      0.09        59      3.78      0.15       0.2      0.12       2.3       0.1
         Measured + indicated      0.06      0.09        59      3.78      0.15       0.2      0.12       2.3       0.1
         Inferred                  0.40      0.24        61      4.69      0.15       3.2      0.79      18.9       0.6
-----    --------------------     -----      ----       ---      ----      ----     -----     -----     -----     -----
Total    Measured                  8.41      0.12       264      4.28      1.53      33.3     71.29     360.2     128.6
         Indicated                11.71      0.17       212      3.18      1.10      65.1     79.98     372.1     128.7
         Measured + indicated     20.12      0.15       234      3.64      1.28      98.4    151.26     732.3     257.3
         Inferred                 18.58      0.36       184      3.04      0.82     214.4    109.87     565.3     151.8
-----    --------------------     -----      ----       ---      ----      ----     -----     -----     -----     -----

Notes:

  • Measured and indicated mineral resources are inclusive of mineral resources from which mineral reserves are estimated;
  • Metal prices: gold: $1,250 (U.S.) per troy ounce, silver: $18 (U.S.) per troy oz, lead: 95 U.S. cents per pound and zinc: $1.10 (U.S.) per lb;
  • Exchange rate: 6.90 renminbi to $1 (U.S.);
  • Mineral resource reported five metres below surface;
  • Veins factored to minimum extraction width of 0.3 m after estimation;
  • Cut-off grades: SGX: 145 g/t AgEq; HZG: 130 g/t AgEq; HPG: 140 g/t AgEq; LME: 120 g/t AgEq; LMW: 155 g/t AgEq; TLP: 130 g/t AgEq; and DCG: 135 g/t AgEq;
  • Silver equivalent formulas by mine:
    • SGX equals 35.63 times Pb per cent plus 22.45 times Zn per cent plus Ag g/t;
    • HZG equals 34.6 times Pb per cent plus Ag g/t;
    • HPG equals 36.84 times Pb per cent plus 23.61 times Zn per cent plus 62.87 times Au g/t plus Ag g/t;
    • LME equals 34.17 times Pb per cent plus 11.92 times Zn per cent plus Ag g/t;
    • TLP equals 34.19 times Pb per cent plus Ag g/t;
    • LMW equals 35.06 times Pb per cent plus Ag g/t;
    • DCG equals 36.84 times Pb per cent plus 23.61 times Zn plus 62.87 times Au g/t plus Ag g/t;
  • Exclusive of mine production to Dec. 31, 2019;
  • Rounding of some figures may lead to minor discrepancies in totals.

A comparison of mineral resource estimates between June 30, 2016, and Dec. 31, 2019, indicates the following:

  • Measured and indicated tonnes have increased by 23 per cent over all while the inferred tonnes have increased by 78 per cent.
  • Measured and indicated grades have decreased over all by between minus 2 per cent and minus 6 per cent. Inferred grades decreased between minus 20 per cent and minus 26 per cent over all (both comparisons excluding gold as it is a very minor contributor).
  • The net result in the measured and indicated categories has been an increase in the contained silver of 18 per cent and an increase in the contained lead of 16 per cent. The increase in zinc content was 20 per cent.
  • The net result in the inferred category has been an increase in the contained silver of 42 per cent and a significant increase in both the contained lead and zinc, with increases of 38 per cent and 32 per cent, respectively.

Reasons for the differences in grade, tonnes and contained metal include mineral resource additions and conversion to higher categories arising from drilling and level development, different cut-off grades, and depletion due to mining. Additional channel and drill hole samples also became available between the two estimates to extend the mineral resources along strike and downdip, and allowed changed interpretation of the veins, given the greater degree of geological understanding.

Mineral reserves

The mineral reserve estimation is based on the assumption that current stoping practices will continue to be predominant at the Ying property, namely cut-and-fill resuing and shrinkage stoping, using hand-held drills and hand mucking within stopes, and loading to mine cars by rocker shovel or by hand. The largely subvertical veins, generally competent ground, reasonably regular vein width and hand-mining techniques using short rounds allow a significant degree of selectivity and control in the stoping process. Minimum mining widths of 0.5 m for resuing and 1.0 m for shrinkage are assumed. The qualified person has observed the mining methods at the Ying property and considers the minimum extraction and mining width assumptions to be reasonable. Minimum dilution assumptions are 0.10 m of total overbreak for a resuing cut and 0.2 m of total overbreak for a shrinkage stope.

Mining dilution and recovery factors vary somewhat from mine to mine and with mining method. Average Ying dilution factors have been estimated as 15 per cent for resuing and 18 per cent for shrinkage, while assumed mining recovery factors are 95 per cent for resuing stopes and 92 per cent for shrinkage stopes.

For the total tonnage estimated as Ying mineral reserves, 49.7 per cent is associated with resuing and 50.3 per cent with shrinkage.

The estimated mineral reserves and metal content for the Ying property as of Dec. 31, 2019, are detailed in the attached mineral reserve table.

                    YING PROPERTY MINERAL RESERVE ESTIMATES AND METAL CONTENT AT DEC. 31, 2019
 
Mine   Reserve category               Mt      Au      Ag       Pb       Zn       Metal contained in mineral reserves
                                            (g/t)   (g/t)      (%)      (%)   Au (koz)   Ag (Moz)    Pb (kt)    Zn (kt)

SGX    Proven                       2.48             298     5.86     2.80                 23.73      145.2       69.4
       Probable                     2.71             259     5.05     2.35                 22.57      137.0       63.9
       Total proven and probable    5.19             277     5.43     2.57                 46.30      282.1      133.3
HZG    Proven                       0.30             356     0.98     0.24                  3.42        2.9        0.7
       Probable                     0.32             306     0.66     0.12                  3.13        2.1        0.4
       Total proven and probable    0.62             330     0.82     0.18                  6.54        5.0        1.1
HPG    Proven                       0.48    1.05      88     3.66     1.52         16       1.34       17.4        7.2
       Probable                     0.76    1.38      62     3.07     1.37         34       1.53       23.4       10.5
       Total proven and probable    1.24    1.25      72     3.29     1.43         50       2.88       40.8       17.7
LME    Proven                       0.36             352     1.65     0.37                  4.05        5.9        1.3
       Probable                     0.89             287     1.57     0.40                  8.18       13.9        3.5
       Total proven and probable    1.24             306     1.59     0.39                 12.23       19.8        4.8
TLP    Proven                       1.25             241     3.47     0.34                  9.71       43.5        4.2
       Probable                     1.10             216     2.60     0.32                  7.62       28.5        3.5
       Total proven and probable    2.35             230     3.07     0.33                 17.34       72.0        7.7
LMW    Proven                       0.42             347     3.30     0.28                  4.73       14.0        1.2
       Probable                     0.93             303     2.44     0.30                  9.00       22.6        2.8
       Total proven and probable    1.35             317     2.71     0.29                 13.73       36.6        4.0
Ying   Proven                       5.29    0.09     276     4.33     1.59         16      46.99      228.9       84.0
mine   Probable                     6.70    0.16     241     3.39     1.26         34      52.02      227.5       84.5
       Total proven and probable   11.99    0.13     257     3.81     1.41         50      99.01      456.4      168.6

Notes to mineral reserve statement:

  • Cut-off grades (Ag/Eq g/t): SGX: 235 resuing and 205 shrinkage; HZG: 240 resuing and 210 shrinkage; HPG: 235 resuing and 210 shrinkage; LME: 210 resuing and 180 shrinkage; TLP: 240 resuing and 215 shrinkage; and LMW: 260 resuing and 235 shrinkage;
  • Stope marginal cut-off grades (AgEq g/t): SGX: 215 resuing and 180 shrinkage; HZG: 220 resuing and 195 shrinkage; HPG: 215 resuing and 190 shrinkage; LME: 180 resuing and 150 shrinkage; TLP: 220 resuing and 195 shrinkage; and LMW: 230 resuing and 205 shrinkage;
  • Development ore cut-off grades (AgEq g/t): SGX: 145; HZG: 150; HPG: 145; LME: 120; TLP: 150; and LMW: 165;
  • Unplanned dilution (zero grade) assumed as 0.05 metre on each wall of a resuing stope and 0.10 m on each wall of a shrinkage stope;
  • Mining recovery factors assumed as 95 per cent for resuing and 92 per cent for shrinkage;
  • Metal prices: gold: $1,250 (U.S.) per troy oz, silver: $18 (U.S.) per troy oz, lead: 95 U.S. cents per lb and zinc: $1.10 (U.S.) per lb;
  • Processing recovery factors: SGX: 96.5 per cent Ag, 97.8 per cent Pb and 64.2 per cent Zn; HZG: 96.8 per cent Ag and 95.2 per cent Pb; HPG: 90.7 per cent Au, 90.2 per cent Ag, 94.4 per cent Pb and 63.1 per cent Zn; LME: 96.9 per cent Ag, 94.1 per cent Pb and 34.2 per cent Zn; TLP: 93.4 per cent Ag and 90.7 per cent Pb; and LMW: 96.6 per cent Ag and 96.3 per cent Pb;
  • Payables: Au: 81 per cent; Ag: 90.0 per cent; Pb: 87.5 per cent; and Zn: 72.5 per cent;
  • Exclusive of mine production to Dec. 31, 2019;
  • Exchange rate assumed is 6.90 renminbi to $1 (U.S.);
  • Rounding of some figures may lead to minor discrepancies in totals.

The sensitivity of the Ying mineral reserves to variation in cut-off grade (COG) has been tested by applying a 20-per-cent increase in COG to mineral reserves at each of the Ying mines. The lowest sensitivities are seen at SGX and LME with, for the entire Ying property, an approximately 8.8-per-cent reduction in AgEq ounces for a 20-per-cent COG increase, demonstrating relatively low overall COG sensitivity.

Total Ying mineral reserve tonnes are approximately 60 per cent of mineral resource (measured plus indicated) tonnes. Silver, lead and zinc mineral reserve grades are 110 per cent, 105 per cent and 110 per cent, respectively, of the corresponding measured plus indicated mineral resource grades. Metal conversion percentages for silver, lead and zinc are 65 per cent, 62 per cent and 66 per cent, respectively.

Some significant aspects of a comparison of mineral reserve estimates between June 30, 2016 (previous technical report), and Dec. 31, 2019 (Ying 2020 technical report), are the following:

  • 3-per-cent decrease in total (proven plus probable) Ying mineral reserve tonnes;
  • Increase in total Ying mineral reserve silver, lead and zinc grades of 7 per cent, 2 per cent and 11 per cent, respectively;
  • Increase in total Ying mineral reserve metal content for silver and zinc of 4 per cent and 8 per cent, respectively; 1 per cent decrease in total lead content;
  • SGX continues being the leading contributor to the total Ying mineral reserves, accounting for 43 per cent of tonnes, 47 per cent of silver, 62 per cent of lead and 79 per cent of zinc, compared with respective values of 45 per cent, 48 per cent, 60 per cent and 83 per cent in 2016;
  • 63-per-cent increase in total mineral reserve tonnes at HPG, with corresponding increases in silver, lead and zinc content of 23 per cent, 50 per cent and 103 per cent, respectively; gold mineral reserves also increased from 27,000 oz to 50,000 oz at HPG;
  • 31-per-cent increase in total mineral reserve tonnes at LME, with corresponding increases in silver, lead and zinc content of 35 per cent, 5 per cent and 20 per cent, respectively;
  • 34-per-cent decrease in total mineral reserve tonnes at LMW, with corresponding decreases in silver, lead and zinc content of 17 per cent, 35 per cent and 31 per cent, respectively;
  • 4-per-cent increase in total mineral reserve tonnes at HZG, with corresponding increases in silver and zinc content of 12 per cent and 10 per cent, respectively; 2-per-cent decrease in total lead content;
  • 5-per-cent decrease in total mineral reserve tonnes at TLP, but with increases in both silver and zinc content of 11 per cent; 7-per-cent decrease in total lead content.

The Ying mine complex is a viable operation with a projected LOM through to 2040 based on only proven and probable mineral reserves and assuming an average annual production rate of approximately six million ounces of silver between fiscal 2021 and fiscal 2027, five million ounces between 2028 and 2033, four million ounces between 2034 and 2036, and 2.5 million ounces between 2037 and 2040. The potential exists for an extended LOM through further exploration and development, particularly in areas with identified inferred resources.

Economic analysis

Although Ying is a producing property and therefore does not require an economic analysis for the purposes of the Ying 2020 technical report, the qualified persons considered it reasonable to undertake a summary-level analysis to illustrate the potential economic impact relative to the latest mineral reserve estimations and to the associated production schedules.

The following metal prices and exchange rate were used for the economic analysis: gold: $1,400 (U.S.) per oz, silver: $20 (U.S.) per oz, lead: 95 U.S. cents per lb and zinc: $1.10 (U.S.) per lb; and exchange rate: $1 (U.S.) equals 6.9 renminbi. Average costs used were: mining: $61.34 per tonne; milling: $10.23 per tonne: shipping: $3.92 per tonne; mineral resources tax: $6.86 per tonne; general and administrative: $8.30 per tonne: government fees and other taxes: $2.78 per tonne; and sustaining and growth capital: $16.95 per tonne.

Based on the LOM production forecast through to 2040 and the metal price and other assumptions shown herein, a base-case pretax NPV of $954-million (U.S.) at a 5-per-cent discount rate is projected ($713-million (U.S.) posttax). Over the LOM, 62 per cent of the net revenue is projected to come from silver, 29 per cent from lead, 6 per cent from zinc and 2 per cent from gold.

Qualified persons

H. Smith, PEng, A. Ross, PGeo, and S. Robinson, PGeo, of AMC Mining Consultants (Canada) Ltd.; R. Webster, MAusIMM, MAIG, and R. Chesher, FAusIMM, of AMC Consultants Pty. Ltd.; and A. Riles, MAusIMM, MAIG, of Riles Integrated Resource Management Pty. Ltd. are qualified persons as defined by National Instrument 43-101. The qualified persons 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 Metals Inc.

Silvercorp is a profitable Canadian mining company producing silver, lead and zinc metals in concentrates from mines in China. The company's goal is to continuously create healthy returns to shareholders through efficient management, organic growth and the acquisition of profitable projects. Silvercorp balances profitability, social and environmental relationships, employees' well-being, and sustainable development.

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