Silvercorp Metals’ 77.5%-owned subsidiary Henan Found Mining Co has signed a share purchase agreement to acquire SX Gold Mining Company, a Luoyang City government controlled company. SX Gold operates the XHP silver-gold-lead-zinc mine which includes a 14sqkm mining permit and a 500-tonne-per-day flotation/CIL mill.1

The share purchase agreement was signed after Henan Found won a public tendering process arranged by the Luoyang City government to sell SX Gold. SX Gold also owns the HGDG gold exploration permit of 4.45sqkm and owns a 51% interest in the PLS gold exploration permit covering 3sqkm.

The XHP project is about 120km southwest of Silvercorp’s Ying mine, a three-hour drive from both Luoyang City and the Ying mine, and 6km northwest of the XBG mine that was acquired in August 2011.

The total acquisition consideration payable by Henan Found for SX Gold is about US$22.75 million. A payment of $19.6 million has already been made, with the balance due upon completion of the share transaction and the transfer of the mining and exploration permits to Henan Found.

Over the last two years, SX Gold has focused on mining oxidized gold ore near surface. The oxidized ores were treated by the 500 tonne per day CIL circuit to recover gold only. Last year, a flotation circuit was installed to recover lead-silver concentrate from the partially oxidized silver-gold-lead-zinc ores after gold is recovered through the CIL circuit. Mill recoveries were reported as 75% for gold, 70% for silver and 60% for lead.

During 2011, SX Gold records show about 50,000 tonnes of less oxidized silver-gold-lead-zinc ores were mined from Vein K13 at the 577 metre, 540 metre and 500 metre levels through main access tunnel PD1 at XHP East. The ores were stockpiled as the CIL circuit could not recover gold from these less oxidized ores, whereas, the existing flotation circuit can only recover silver-gold-lead to concentrate and a second floatation circuit is required to recover zinc to zinc concentrate.

Silvercorp intends to resume mining activities at the XHP mine to stockpile ores pending installation of a second flotation circuit to enable the mill to generate a gold-silver-lead concentrate and a zinc concentrate. The mill upgrade is expected to be completed and in operation by February 2012.

Silvercorp will also carry out an exploration program immediately, including tunnelling and surface and underground diamond drilling, with a goal of defining NI43-101-compliant mineral resources. The program is expected to be self-funded through cash-flow from mine operations.

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