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Silvercorp Won Auction To Acquire the Zhonghe Silver Project in Luoning County, Henan Province, China

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Silvercorp Metals Inc. (TSX:SVM) (NYSE American: SVM) announces that its subsidiary, Henan Found Mining Co. Ltd. won an online auction to acquire the exploration rights to the Zhonghe Silver Project from the Henan provincial government. The auction was held on December 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 (i.e., 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 ton silver,25.25% lead, and 15.39% zinc;
  • Hole ZK806 intercepted 1.95 m from 513.95 m, grading 1,592 g/t Ag, 12.33% Pb and 3.45% Zn;
  • Hole ZK804 intercepted 1.71 m from 275.54 m, grading 955 g/t Ag, 14.30% Pb and 10.82% Zn.
  • Hole ZK1104 intercepted 1.36 m from 283.16 m, grading 1,383 g/t Ag, 29.92% Pb, and 5.08% Zn; and
  • Hole ZK4204 intercepted 1.63 m from 570.98 m, grading 1,446 g/t Ag, 1.39% Pb, and 4.0% 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% – 10% 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 license 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 km², 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 m³ 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 down dip, mineral resources for silver, lead and zinc estimated using Chinese standards (not NI 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.

 

 

Twenty-three drill holes intercepted significant silver grades listed in the table below.

 

Hole ID From
(m)
To
(m)
Interval
(m)
True
Width

(m)
Ag
(g/t)
Pb
(%)
Zn
(%)
ZK006 614.75 618.21 3.46 1.84 475.25 7.85 6.21
ZK1104 283.16 284.52 1.36 0.91 1383.00 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 1446.00 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 1592.00 12.33 3.45

 

Auction Results and Payment Details

 

  • The reserve price for the Zhonghe Project Exploration Permit was RMB 485 million per the auction notice posted by the Department of Natural Resource of Henan Province. The final winning bid submitted by the Company was RMB 495 million, or approximately US$76 million.
  • 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 US$15.2 million, once the project area is cleared by the authorities as a non-military area. The first payment represents 20% of the purchase price.
  • The remaining 80% of the purchase price is due only in the event the exploration right is converted into a mining license and shall be paid annually over the duration of the mining license.
  • When the exploration right is converted to a mining license, 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 licenses, one requirement is that this project will need to be advanced to “exploration stage”, that is, at least 50% of the resource estimates shall be defined by a drilling grid averaging no greater than 75 m by 75 m. For 50% of the area of mineralization (4 km long by 1 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, P. Geo., 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

 

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’ wellbeing, and sustainable development.

 

Posted January 21, 2021

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