Silvercorp Metals acquires interest in Yunxiang Mining For US$33 Million
Silvercorp Metals (TSX: SVM, NYSE: SVM), a silver exploration company based in Vancouver, British Columbia, said today that it agreed to acquire a 70% interest in Yunxiang Mining, a private mining company in Hunan Province, China, for US$33 million.
Yunxiang's primary asset is the BYP Gold-Lead-Zinc Mine, located 220 km southwest from Changsha, Hunan's capital city.
The BYP mine has a mining permit covering 3.67 square kilometres, a safety production permit, as well as a 400 tonne per day (t/d) floatation mill. The mine and mill has been in production since 2006 and has mined and processed about 0.3 million tonnes of lead-zinc mineralization.
The mine and mill are easily accessed by paved road and are serviced by the national power grid. Over 4,100 square meters of underground development is completed, including four declines totalling 767m and 2,010m of exploration drifts.
As part of the due diligence review, a sampling program was conducted by Silvercorp in four newly developed underground tunnels. The program was conducted at intervals ranging from 33m to 99m and returned average grades ranging from 2.42 g/t to 5.75 g/t.
Preliminary metallurgical test results on gold and lead-zinc mineralization and previous production records show that gold can be recovered at about 90% recovery rate by conventional floatation. Lead and zinc can also be recovered by conventional floatation with 80% lead and 90% zinc recoveries. Within 200 km, there are one gold and seven lead and zinc smelters with enough capacity to process these concentrates.
Once the deal is completed, Silvercorp and Yunxiang intends to use the 400 t/d floatation mill to mine and process the gold mineralizations starting from fiscal 2012.
At the same time, Silvercorp will expand the mining and milling capacity to 1,000 t/d gold mineralization for fiscal 2013 then to 1,000 t/d gold mineralization and 1,000 t/d lead-zinc mineralization by fiscal 2014.
The acquisition is still subject to approvals of regulatory bodies, including getting clearance from the Chinese military. This transaction is expected to close before March 31, 2011.
Silvercorp Metals traded higher by almost 7% on Monday to close at $12.72.
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