Silvercorp Gains On TLP-LM Prefeasibility

VANCOUVER — China’s largest primary- silver producer, Silvercorp Metals (SVM-T, SVMFF-O), now has a five-year mine plan for its recently acquired and already operating TLP-LM silver-lead project. It released details in a prefeasibility study outlining a production schedule starting in 2009 and ending in 2013.

News of the prefeasibility study helped lift Silvercorp’s share price 25¢ to close at $2.67.

Located 240 km southwest of the city of Zhenzhou in China’s Henan province, TLP and LM, separate but adjacent mines, are about 15 km east of Silvercorp’s flagship Ying mine. Ying brought in net silver-lead-zinc sales of nearly $100 million for Silvercorp in 2008.

Since acquiring majority stakes in the TLP and LM mines in late 2007, Silvercorp has moved the projects forward quickly. Not only did it get both past-producers up and running within three months, but by the end of summer 2008, Silvercorp also expanded and upgraded over 20 km of underground workings and drilled about 26,000 metres to map 25 major galena-rich veins and the same number of lesser ones.

That program has resulted in Silvercorp’s first resource estimate and a prefeasibility study for TLP-LM.

TLP contains about 4.2 million measured and indicated tonnes grading 129 grams silver per tonne and 2.32% lead. LM, smaller but higher-grade, comes in at around 360,000 measured and indicated tonnes grading 255 grams silver and 2.11% lead.

Over five years, Silvercorp plans on mining a total of about 1.6 million tonnes grading 212 grams silver and 2.67% lead at TLP and an additional 270,000 tonnes grading 316 grams silver and 2.14% lead at LM.

Setting the price of silver and lead at average prices of US$9.50 per oz. and US60¢ per lb., respectively, Silvercorp expects its share of net profits to come in at about US$26 million over five years. It forecasts payback within a year and a half and capital expenditures just shy of US$9 million.

Including a lead credit, Silvercorp predicts production costs of US$3.41 per oz. silver at TLP and US$2.72 per oz. silver at LM. In the quarter ending Sept. 30, Silvercorp milled 29,000 tonnes grading 140.3 grams silver and 2% lead as part of limited test production at the TLP mine.

Total sales, including Ying, during the quarter were $20.1 million. Silver represented about half of those sales, while lead contributed $8.7 million, zinc $1 million, and gold $300,000.

Although Silvercorp achieved record production during that quarter, lower metal prices, Olympicrelated power rationing and lower head grades drove down net income from about $17 million in the same quarter a year previous to around $5 million.

In 2009, Silvercorp says it will reign in production costs by focusing on higher-grade ores at both TLP-LM and Ying and deferring some capital spending.

Silvercorp has 152 million shares outstanding and a 52-week trading range between $1.19 and $10.65.

It owns a 77.5% stake in the TLP mine and a 70% stake in LM. Henan Non-Ferrous Geological & Mineral Resources holds the rest of TLP and Luoning Huatai Mining Development has the other 30% of LM.