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Silvercorp Metals Inc
Symbol SVM
Shares Issued 175,349,046
Close 2021-01-20 C$ 7.77
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Silvercorp wins auction on Zonghe exploration rights

2021-01-21 07:25 ET - News Release

Mr. Lon Shaver reports

SILVERCORP WON AUCTION TO ACQUIRE THE ZHONGHE SILVER PROJECT IN LUONING COUNTY, HENAN PROVINCE, CHINA

Silvercorp Metals Inc.'s subsidiary, Henan Found Mining Co. Ltd., has won an on-line auction to acquire the exploration rights to the Zhonghe silver project from the Henan provincial government. The auction was held on Dec. 17, 2020, and, following a public comment period, the company received confirmation of its successful bid. The Zhonghe project covers an area of 4.96 square kilometres approximately 50 km (75 km by road) northeast of Silvercorp's Ying mining district, also located in Luoning county.

Silver-lead-zinc mineralization at the Zhonghe project is similar to that found at the SGX mine in the Ying mining district (that is, massive galena lenses in structural veins). Highlights of selected drill intercepts include:

  • Hole ZK2602 intercepted 3.55 metres from 145.53 m grading 876 grams per tonne silver, 25.25 per cent lead and 15.39 per cent zinc.
  • Hole ZK806 intercepted 1.95 m from 513.95 m, grading 1,592 g/t Ag, 12.33 per cent Pb and 3.45 per cent Zn.
  • Hole ZK804 intercepted 1.71 m from 275.54 m, grading 955 g/t Ag, 14.30 per cent Pb and 10.82 per cent Zn.
  • Hole ZK1104 intercepted 1.36 m from 283.16 m, grading 1,383 g/t Ag, 29.92 per cent Pb and 5.08 per cent Zn.
  • Hole ZK4204 intercepted 1.63 m from 570.98 m, grading 1,446 g/t Ag, 1.39 per cent Pb and 4.0 per cent Zn.

The company will utilize Henan Found's existing management team at the Ying mining district to manage the future development of Zhonghe. As the largest taxpayer in Luoning county, Henan Found has established a good working relationship with the Luoning government, has an excellent reputation within the local community, and intends to bring in the local government and community as 8-per-cent-to-10-per-cent partners on the project. The company expects full support from the local government and community in the future, converting the exploration right to a mining licence and developing operations at the Zhonghe project.

The Zhonghe project

The exploration right comprising the Zhonghe project is located in Dongshong township of Luoning county and covers an area of 4.9 square kilometres, being approximately 1.1 km wide (east-west) by 4.9 km long (north-south). From March, 2016, to August, 2019, the Department of Natural Resources of Henan Province completed 3,213 cubic metres of trenching and 36,091 m of diamond drilling in 54 diamond drill holes that defined silver-lead-zinc vein structures extending over 4.9 km long, and from surface at 640 m elevation down to minus 450 m elevation, dipping to the west at an average of 70 degrees.

Based on the drill grid spacing of 175 m to 223 m along strike and 162 m to 272 m downdip, mineral resources for silver, lead and zinc estimated using Chinese standards (not National Instrument 43-101 compliant) were calculated by the No. 1 institute of geological and mineral resource survey in Henan province in 2019, and published on the auction website.

                  23 DRILL HOLES INTERCEPTED SIGNIFICANT SILVER GRADES

Hole ID         From          To     Interval        True width          Ag        Pb        Zn
                 (m)         (m)          (m)               (m)       (g/t)       (%)       (%)

ZK006         614.75      618.21         3.46              1.84      475.25      7.85      6.21
ZK1104        283.16      284.52         1.36              0.91    1,383.00     29.92      5.08
ZK1206        278.20      280.10         1.90              1.17      287.00      9.83      4.90
ZK1604        331.93      333.08         1.15              0.57      228.00     21.66     17.53
ZK2006        407.93      409.56         1.63              0.83      395.00      0.31      0.59
ZK2204        308.22      311.06         2.84              1.33      223.77      3.80      8.36
ZK2602        145.53      149.08         3.55              1.88      875.68     25.35     15.39
ZK2606        430.50      431.79         1.29              0.58      304.00      3.05      2.72
ZK2701         25.68       26.50         0.82              0.45      385.00      0.56      2.45
ZK2702        404.20      405.81         1.61              0.60      376.00      0.68      0.85
ZK2702        693.25      694.84         1.59              0.93      475.00      3.41      6.28
ZK2703        475.98      477.38         1.40              0.93      239.00      2.07      4.51
ZK306         334.69      336.76         2.07              1.67      264.00      0.63      6.20
ZK3102         82.03       83.97         1.94              0.60      342.00      3.19      1.52
ZK3204        426.53      429.34         2.81              1.77      202.00      4.21      2.31
ZK3904        470.30      472.19         1.89              0.66      231.00      1.70      2.25
ZK3906        736.98      737.88         0.90              0.26      405.00      0.65      0.76
ZK404         188.57      189.77         1.20              0.84      822.00      2.12     10.15
ZK4204        570.98      572.61         1.63              0.86    1,446.00      1.39      4.00
ZK4306        545.46      547.20         1.74              0.58      400.00      0.23      1.90
ZK4308        771.60      773.14         1.54              0.51      354.00      1.14      2.88
ZK804         275.54      277.25         1.71              1.27      955.00     14.30     10.82
ZK806         513.95      515.90         1.95              1.29    1,592.00     12.33      3.45

Auction results and payment details

The reserve price for the Zhonghe project exploration permit was 485 million renminbi per the auction notice posted by the Department of Natural Resource of Henan Province. The final winning bid submitted by the company was 495 million renminbi, or approximately $76-million (U.S.).

The company will enter into a mineral rights transfer contract with the Department of Natural Resources of Henan province and will make a first payment of approximately $15.2-million (U.S.), once the project area is cleared by the authorities as a non-military area. The first payment represents 20 per cent of the purchase price.

The remaining 80 per cent of the purchase price is due only in the event the exploration right is converted into a mining licence and shall be paid annually over the duration of the mining licence.

When the exploration right is converted to a mining licence, no additional mineral rights transfer payments will be required to be paid (according to Article 16 of the interim measures for the administration of fee collection of the transfer of mining rights by government).

Future exploration and development plans

Based on China's regulations on issuing mining licences, one requirement is that this project will need to be advanced to exploration stage, that is, at least 50 per cent of the resource estimates shall be defined by a drilling grid averaging no greater than 75 m by 75 m. For 50 per cent of the area of mineralization (four km long by one km wide) at the Zhonghe project to reach a drilling grid of 75 m by 75 m from its current stage, it is estimated 200,000 m in 350 holes will need to be drilled. The company plans to initiate a drilling campaign in the first quarter of 2021 that will be completed by 2022.

Guoliang Ma, PGeo, manager of exploration and resource of the company, is the qualified person for Silvercorp under NI 43-101 and has reviewed and given consent to the technical information contained in this news release.

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.

We seek Safe Harbor.

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