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

Rhea-AI Summary

Silvercorp Metals announces its subsidiary, Henan Found Mining Co. Ltd., won an online auction for exploration rights to the Zhonghe Silver Project, located northeast of its Ying Mining District. The acquisition cost approximately US$76 million, with a first payment of US$15.2 million due upon clearance as a non-military area. Notable drill intercepts at Zhonghe include significant silver, lead, and zinc grades. The company plans to initiate drilling in Q1 2021 to advance resource estimates to meet mining license requirements.

Positive

• Acquisition of Zhonghe Project aligns with existing operations at Ying Mining District.
• High drill intercept grades indicate potential for significant mineral resources.
• Strong local government relations may facilitate project development and community support.

Negative

• The substantial upfront payment of US$15.2 million may strain short-term cash flow.
• The requirement to drill 200,000 m in 350 holes to advance to mining license stage could delay future operations.

VANCOUVER, British Columbia, Jan. 21, 2021 (GLOBE NEWSWIRE) -- Silvercorp Metals Inc. ("Silvercorp” or the “Company”) (TSX/NYSE American: SVM) announces that its subsidiary, Henan Found Mining Co. Ltd. (“Henan Found”), won an online auction to acquire the exploration rights to the Zhonghe Silver Project (the “Zhonghe 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 (“km”) 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 (“m”) from 145.53 m grading 876 grams per ton (“g/t”) silver (“Ag”), 25.25% lead (“Pb”), and 15.39% zinc (“Zn”);
• 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. For more information, please visit our website at www.silvercorp.ca.

For further information

Lon Shaver
Vice President
Silvercorp Metals Inc.

Phone: (604) 669-9397
Toll Free: 1 (888) 224-1881
Email: investor@silvercorp.ca
Website: www.silvercorp.ca

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CAUTIONARY NOTE TO US INVESTORS

This news release has been prepared in accordance with the requirements of NI 43‐101 and the Canadian Institute of Mining, Metallurgy and Petroleum Definition Standards, which differ from the requirements of U.S. Securities laws. NI 43‐101 is a rule developed by the Canadian Securities Administrators that establishes standards for all public disclosure an issuer makes of scientific and technical information concerning mineral projects.

FAQ

What is the Zhonghe Silver Project acquisition cost for Silvercorp (SVM)?

The acquisition cost for the Zhonghe Silver Project was approximately US$76 million.

What significant minerals were found at the Zhonghe Project in the drilling results?

Drill results at Zhonghe Project showed high grades of silver, lead, and zinc.

When does Silvercorp plan to start drilling at the Zhonghe Project?

Silvercorp plans to initiate its drilling campaign in the first quarter of 2021.

What are the requirements for converting exploration rights to a mining license at Zhonghe (SVM)?

To convert the exploration right to a mining license, at least 50% of resource estimates must be defined by a drilling grid averaging no greater than 75 m by 75 m.