Silvercorp will build new mill for its Ying silver mining camp in China

After a spending spree this year during which Silvercorp Metals (SVM-T) acquired three new properties within 15 km of its Ying silver camp, the company has started to build a 2,000 tonne-per-day mill and tailings dam.

The new $6 million mill in China’s Henan province will be adjacent to its existing 1,000-tonne-per day mill that was completed in March. The new mill will be completed by November 2008.

The Vancouver-based company has been producing silver-lead-zinc ore from its Ying project for more than a year.

Silvercorp started exploring at Ying in August 2004 and has completed over 63 km of tunnel, drifts, declines, raises and shafts, as well as more than 78 km of underground and surface drilling.

The main deposit at Ying is the SGX zone, which contains high- and low-grade silver-lead-zinc resources.

Work on the Ying property has also defined silver-lead-zinc-gold at the HPG zone and silver-lead-copper-gold at the HZG zone.

Silver-lead-zinc-gold mineralization in the HPG and Ying Project areas has been known and mined on and off for at least the last several hundred years. The Chinese government started systematically prospecting and exploring the area only in 1956.

Silvercorp holds a land package of 76.16 sq. km consisting of 5 mining permits, 8 exploration permits and 4 operating mines.

In December, Silvercorp, through a joint-venture partner in China, acquired 100% of the TLP silver-lead mine. The TLP mine, 9.5 km east of Ying’s SGX mine, operates under a mining permit covering 3.3 sq. km.

In November, another one of Silvercorp’s joint-venture partners in China acquired 100% of the operating LM silver-lead mine, southeast of the Ying project. The LM mine has a mining permit encompassing 3.07 sq. km.

Earlier this year, Silvercorp set up a joint venture company in January to explore and develop the Haopinggou, or HPG, gold-silver-lead property.

The HPG property is made up of two adjacent mining licenses surrounded by one exploration permit of roughly 6.4 sq. km within the Ying silver project area, and a 200-tonne per day flotation mill and associated facilities.

Overall it’s been a pretty good year for Silvercorp. In September, the company released an updated National Instrument 43-101 technical report indicating that the measured and indicated resources and the inferred resource for the Ying project had increased by about 30% and 26% respectively from the previous resource estimate.

This was largely because the new estimate was based on 18 veins at SGX, four more veins than in the earlier report, and two new areas, HPG and HXG, which added 8 veins and 4 veins respectively.

The new estimate revealed measured and indicated high-grade resources at SGX at 1 million tonnes of 1,232 grams silver per tonne, 21.3% lead and 7.57% zinc. The low-grade estimate was 799,100 tonnes grading 227 grams silver, 3.71% lead and 4.04% zinc.

The HPG zone registered 201,890 measured and indicated tonnes grading 76 grams silver, 2.15 grams gold per tonne, 3.95% lead, and 0.38% zinc. The HZG zone recorded 248,480 tonnes of 598 grams silver, 1.76% lead, and 0.78% copper indicated resources.

As for silver prices, they remain fairly strong. According to the CPM Group’s Silver Yearbook 2007, the average price of silver in 2006 was US$11.61, up 58% from US$7.35 in 2005. In fact, prices have roughly tripled since 1989, the report states, “after languishing between US$3.50 and US$5.50 for much of the time from 1989 until the end of 2003.”

In the first three months of this year, the price of silver averaged US$13.34. Today’s spot price: US$14.69. Whether it will regain its former peak of US$48.70 attained in early 1980, however, is anyone’s guess.

The Ying and HPG projects are about 240 km west-southwest of Zhengzhou, the 7-million-strong capital city of Henan province, and 80 km west of Luoyang, a smaller Chinese city of 1.4 million people.

Mineralization occurs as multiple quartz-ankerite veins in north-northeast-trending fault-fissure zones. The individual veins are long but narrow typically a kilometer long, but between 40 cm and 1 metre in width.

The Ying mill site is in the central part of the project, about 15 km by paved road from the Guxian reservoir. The project’s main exploration development camp, the SGX camp, is reached by a 30-minute ferry ride across the reservoir.

Major power grids are adjacent to the property and a power line extends to the SGX Area.

Silvercorp completed its existing mill on the property in March to process the project’s much more abundant lower grade ores.

In the first three months of operation, the mill averaged ore head grades of 5.8% lead, 3.6% zinc and 438 grams per tonne silver.

The concentrates are transported via truck to custom smelters 70 to 190 km from the site. A new smelter, partly owned by Silvercorp, is being built about 40 km by road from the Guxian mill site.

At mid-day, shares of Silvercorp on the Toronto Stock Exchange were up 24, or 2.71%, to $9.45 apiece on a trading volume of 371,079.