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Silver Mines LtdANNUAL INFORMATION FORM
FOR THE YEAR ENDED MARCH 31, 2021
DATED AS AT JUNE 22, 2021
SILVERCORP METALS INC.
Suite 1750 - 1066 West Hastings Street
Vancouver, BC, Canada V6E 3X1
Tel: (604) 669-9397
Fax: (604) 669-9387
Email: investor@silvercorp.ca
Website: www.silvercorp.ca
TABLE OF CONTENTS
GENERAL .......................................................................................................................... 3
Date of Information ....................................................................................................................... 3
Forward Looking Statements ...................................................................................................... 3
Cautionary Note to U.S. Investors Concerning Preparation of Mineral Resource
and Mineral Reserve Estimates ................................................................................................. 4
Currency ........................................................................................................................................ 5
CORPORATE STRUCTURE ............................................................................................. 6
Names, Address and Incorporation ........................................................................................... 6
Intercorporate Relationships ....................................................................................................... 7
GENERAL DEVELOPMENT OF THE BUSINESS ........................................................... 8
Business of Silvercorp ................................................................................................................. 8
Three Year History ...................................................................................................................... 8
DESCRIPTION OF THE BUSINESS ............................................................................... 14
General ........................................................................................................................................ 14
Corporate Governance, Safety, Environment and Social Responsibility ........................... 17
Chinese Mining Law ................................................................................................................... 18
Risk Factors ................................................................................................................................ 22
MINERAL PROPERTIES ................................................................................................ 35
Ying Mining District, Henan Province, China ......................................................................... 35
GC Mine ....................................................................................................................................... 62
DIVIDENDS AND DISTRIBUTIONS ................................................................................ 74
DESCRIPTION OF CAPITAL STRUCTURE .................................................................. 74
MARKET FOR SECURITIES .......................................................................................... 75
ESCROWED SECURITIES ............................................................................................. 76
DIRECTORS AND OFFICERS ........................................................................................ 76
AUDIT COMMITTEE........................................................................................................ 79
PROMOTERS .................................................................................................................. 80
LEGAL PROCEEDINGS AND REGULATORY ACTIONS ............................................. 80
INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS ....... 80
TRANSFER AGENTS AND REGISTRARS .................................................................... 81
MATERIAL CONTRACTS ............................................................................................... 81
INTERESTS OF EXPERTS ............................................................................................. 81
ADDITIONAL INFORMATION ........................................................................................ 82
2
GENERAL
Date of Information
All information in this Annual Information Form (“AIF”) is as of March 31, 2021, unless otherwise indicated.
Forward Looking Statements
Certain statements and information in this AIF for Silvercorp Metals Inc. (“Silvercorp” or the “Company”)
constitute “forward-looking statements” within the meaning of the United States Private Securities
Litigation Reform Act of 1995 and “forward-looking information” within the meaning of applicable Canadian
provincial securities laws. All statements and information concerning mineral resource and mineral
reserve estimates may also be deemed to constitute “forward-looking statements” to the extent that they
involve estimates of the mineralization that will be encountered if the property is developed. Any
statements or information that express or involve discussions with respect to predictions, expectations,
beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always,
using words or phrases such as “expects”, “is expected”, “anticipates”, “believes”, “plans”, “projects”,
“estimates”, “assumes”, “intends”, “strategies”, “targets”, “goals”, “forecasts”, “objectives”, “budgets”,
“schedules”, “potential” or variations thereof or stating that certain actions, events or results “may”, “could”,
“would”, “might” or “will” be taken, occur or be achieved, or the negative of any of these terms and similar
expressions) are not statements of historical fact and may be forward-looking statements or information.
Forward-looking statements or information relate to, among other things: the price of silver, lead, zinc and
other metals; the accuracy of mineral resource and mineral reserve estimates at the Company’s material
properties; estimated production from the Company’s mines in the Ying Mining District (defined herein) and
from the GC Mine; availability of funds from production to finance the Company’s operations; access to and
availability of funding for future construction and development of the Company’s properties or for
acquisitions; and other forecasts and predictions with respect to the Company and its properties.
Forward-looking statements are based on the opinions, assumptions, factors and estimates of
management considered reasonable at the date the statements are made. The opinions, assumptions,
factors and estimates which may prove to be incorrect, include, but are not limited to: the specific
assumptions set forth in this AIF, or incorporated by reference herein; the expectations and beliefs of
management; that prices for minerals, particularly silver, gold, lead and zinc remain consistent with the
Company's expectations; that there are no significant disruptions affecting operations, including labour
disruptions, supply disruptions, power disruptions, security disruptions, damage to or loss of equipment,
whether due to flooding, political changes, title issues, intervention by local communities, environmental
concerns, pandemics (including COVID-19) or otherwise; that operations, development and exploration at
the Company's projects proceed on a basis consistent with expectations and the Company does not
change its development and exploration plans and forecasts; that prices for key mining supplies, including
labour costs and consumables remain consistent with the Company's current expectations; that plant,
equipment and processes will operate as anticipated; that there are no material variations in the current
tax and regulatory environment or the tax positions taken by the Company; that the Company will maintain
access to surface rights; that the Company will be able to obtain and maintain government approvals,
permits and licenses in connection with its current and planned operations, development and exploration
activities; that the Company is able to meet current and future obligations; and that the Company can
access adequate financing, appropriate equipment and sufficient labour, all at acceptable rates.
Forward-looking statements or information are subject to a variety of known and unknown risks,
uncertainties and other factors that could cause actual events or results to differ from those reflected in the
forward-looking statements or information, including, without limitation, risks relating to the matters
described in this AIF under Item 4.4 Risk Factors under the following headings: COVID-19; fluctuating
commodity prices; recent market events and condition; estimation of mineral resources, reserves and
3
mineralization and metal recovery; interpretations and assumptions of mineral resource and mineral
reserve estimates; exploration and development programs; economic factors affecting the Company;
timing, estimated amount, capital and operating expenditures and economic returns of future production;
integration of future acquisitions into existing operations; permits and licences for mining and exploration in
China; title to properties; non-controlling interest shareholders; acquisition of commercially mineable
mineral rights; financing; competition; operations and political conditions; regulatory environment in China;
regulatory environment in Mexico; environmental risks; dependence on management and key personnel;
foreign exchange rate fluctuations; insurance; risks and hazards of mining operations; conflicts of interest;
internal control over financial reporting as per the requirements of the Sarbanes-Oxley Act; outcome of
current or future litigation or regulatory actions; bringing actions and enforcing judgments under U.S.
securities laws; cyber-security risks; the Company’s investment in New Pacific Metals Corp; and the
Company's investment in Whitehorse Gold Corp.
This list of risk factors described in this AIF the Company's other disclosure documents are not exhaustive
of the factors that may affect any of the Company’s forward-looking statements or information. Forward-
looking statements or information are statements about the future and are inherently uncertain, and actual
achievements of the Company or other future events or conditions may differ materially from those reflected
in the forward-looking statements or information due to a variety of risks, uncertainties and other factors,
including, without limitation, those referred to in this AIF under the heading “Risk Factors” and elsewhere.
Although the Company has attempted to identify important factors that could cause actual results to differ
materially, there may be other factors that cause results not to be as anticipated, estimated, described or
intended. Accordingly, readers should not place undue reliance on forward-looking statements or
information.
The Company’s forward-looking statements and information are based on the assumptions, beliefs,
expectations and opinions of management as of the date of this AIF, and other than as required by
applicable securities laws, the Company does not assume any obligation to update forward-looking
statements and information if circumstances or management’s assumptions, beliefs, expectations or
opinions should change, or changes in any other events affecting such statements or information. For the
reasons set forth above, investors should not place undue reliance on forward-looking statements and
information.
Cautionary Note to U.S. Investors Concerning Preparation of Mineral Resource and Mineral
Reserve Estimates
This AIF has been prepared in accordance with the requirements of the securities laws in effect in Canada,
which differ from the requirements of the United States Securities and Exchange Commission’s (the “SEC”).
The terms “mineral resources”, “measured mineral resources”, “indicated mineral resources” and “inferred
mineral resources” used in this AIF are in reference to the mining terms defined in the Canadian Institute
of Mining, Metallurgy and Petroleum Standards (the “CIM Standards”), which definitions have been adopted
by National Instrument 43-101 Standards of Disclosure for Mineral Projects (“NI 43-101”). Accordingly,
information contained in this AIF providing descriptions of the Company’s mineral deposits in accordance
with NI 43-101 may not be comparable to similar information made public by other public companies subject
to the technical disclosure requirements of the SEC.
Readers are cautioned not to assume that all or any part of mineral resources will ever be converted into
reserves. Pursuant to CIM Standards, "inferred mineral resources" are that part of a mineral resource for
which quantity and grade or quality are estimated on the basis of limited geological evidence and sampling.
Such geological evidence is sufficient to imply but not verify geological and grade or quality continuity. An
inferred mineral resource has a lower level of confidence than that applying to an indicated mineral resource
and must not be converted to a mineral reserve. However, it is reasonably expected that the majority of
inferred mineral resources could be upgraded to indicated mineral resources with continued exploration.
Under Canadian rules, estimates of inferred mineral resources may not form the basis of feasibility or pre-
feasibility studies, except in rare cases. Investors are cautioned not to assume that all or any part of an
inferred mineral resource is economically or legally mineable.
4
Canadian standards, including the CIM Standards and NI 43-101, differ significantly from standards in the
SEC’s Industry Guide 7 (“Guide 7”) under the United States Securities Act of 1933, as amended. Effective
February 25, 2019, the SEC adopted new mining disclosure rules under subpart 1300 of Regulation S-K of
the United States Securities Act of 1933, as amended (the "SEC Modernization Rules"), with compliance
required for the first fiscal year beginning on or after January 1, 2021. The SEC Modernization Rules
replace the historical property disclosure requirements included in Guide 7. As a result of the adoption of
the SEC Modernization Rules, the SEC now recognizes estimates of "measured mineral resources",
"indicated mineral resources" and "inferred mineral resources". In addition, the SEC has amended its
definitions of "proven mineral reserves" and "probable mineral reserves" to be substantially similar to
corresponding definitions under the CIM Standards. During the period leading up to the compliance date
of the SEC Modernization Rules, information regarding mineral resources or reserves contained or
referenced in this AIF may not be comparable to similar information made public by companies that report
according to U.S. standards. While the SEC Modernization Rules are purported to be "substantially similar"
to the CIM Standards, readers are cautioned that there are differences between the SEC Modernization
Rules and the CIM Standards. Accordingly, there is no assurance any mineral reserves or mineral
resources that the Company may report as "proven mineral reserves", "probable mineral reserves",
"measured mineral resources", "indicated mineral resources" and "inferred mineral resources" under NI 43-
101 would be the same had the Company prepared the reserve or resource estimates under the standards
adopted under the SEC Modernization Rules.
Currency
All sums of money which are referred to herein are expressed in lawful money of the United States, unless
otherwise specified. The symbol “CAD$” denotes lawful money of Canada and “RMB” denotes lawful
money of the People’s Republic of China. The following table sets forth, for each of the periods indicated,
the year-end exchange rate, the average closing rate and the high and low closing exchange rates for one
Canadian dollar expressed in U.S. dollar, as quoted by the Bank of Canada:
Year Ended March 31,
2021
2020
2019
High ..............
0.8029 0.7710
0.7967
Low ...............
0.7034 0.6898
0.7330
Average ........
0.7575 0.7514
0.7625
Period End
0.7952 0.7049
0.7483
The exchange rate for one Canadian dollar expressed in U.S. dollar based upon the daily average
exchange rate on June 21, 2021 provided by the Bank of Canada was $0.8080.
The following table sets forth, for each of the periods indicated, the year-end exchange rate, the average
closing rate and the high and low closing exchange rates for one Canadian dollar expressed in Chinese
Renminbi (“RMB”), as quoted by the Bank of Canada:
5
Year Ended March 31,
2021
2020
2019
High ..............
5.2854 5.4142
5.3648
Low ...............
4.9950 4.8591
4.8662
Average ........
5.1285 5.2330
5.1149
Period End
5.2110 4.9950
5.0226
The exchange rate for one Canadian dollar expressed in RMB, based upon the daily average exchange
rate on June 21, 2021 provided by the Bank of Canada, was RMB 5.2247.
CORPORATE STRUCTURE
Names, Address and Incorporation
Silvercorp was formed as Spokane Resources Ltd. pursuant to an amalgamation of Julia Resources
Corporation and MacNeill International Industries Inc. under the Company Act (British Columbia) on
October 31, 1991. By a special resolution dated October 5, 2000, Spokane Resources Ltd. consolidated
its share capital on a ten for one basis and altered its Memorandum and Articles of Incorporation by
changing its name to “SKN Resources Ltd.” At the Company’s Annual and Special General Meeting held
October 20, 2004, the shareholders approved an increase to the Company’s authorized capital to an
unlimited number of common shares (each, a “Common Share”) and adopted new Articles consistent with
the transition to the Business Corporations Act (British Columbia) and passed a special resolution to change
the Company’s name. On May 2, 2005, the Company filed a Notice of Alteration with the British Columbia
Registrar of Companies changing its name from “SKN Resources Ltd.” to “Silvercorp Metals Inc.” The head
office, principal address and registered and records office of the Company is located at 1750 – 1066 West
Hastings Street, Vancouver, British Columbia, V6E 3X1. The Company’s shares are listed for trading on
the Toronto Stock Exchange (the “TSX”) and the NYSE American, both under the symbol “SVM”. The
Company is a reporting issuer in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec,
New Brunswick, Nova Scotia, Prince Edward Island, and Newfoundland and Labrador.
6
Intercorporate Relationships
The corporate structure of the Company and its subsidiaries with mineral property interests as at the date
of this AIF are as follows:
43.75%
New Infini Silver Inc.
(BC, Canada)
SILVERCORP METALS INC.
(BC, Canada)
100%
Fortune Mining Limited
(British Virgin Islands (“BVI”))
100%
100%
100%
100%
100%
Infini Metals Inc.
(BVI)
Victor Mining
Ltd. (BVI)
Victor
Resources
Ltd. (BVI)
Fortune
Copper
Limited (BVI)
Yangtze
Mining Ltd.
(BVI)
100%
100%
77.5%
80%
100%
100%
Infini
Resources
(Asia) Co. Ltd.
(Hong Kong)
Golden Land
(Asia) Ltd.
(Hong Kong)
Henan Found
Mining Co. Ltd.
(China)
Henan
Huawei
Mining Co.
Ltd. (China)
Wonder
Success
Limited
(Hong Kong)
Yangtze
Mining (H.K.)
Limited
(Hong Kong)
100%
Fortune Gold
Mining
Limited (BVI)
100%
Fortune Gold
100%
Mining (H.K.)
Limited
(Hong Kong)
75%
25%
100%
100%
70%
95%
100%
Infini Resources,
S.A. de C.V.
(Mexico)
100%
La Yesca Project
SGX Mine
TLP Mine
HZG Mine
LMW Mine
DCG Mine
HPG Mine
LME Mine
Xinshao Yun
%
Xiang Mining
Co. Ltd.
(China)
%
Guangdong
Found Mining
Co. Ltd.
(China)
%%
4%
Silvercorp
Metals
(China) Inc.
(China)
100%
100%
%%
BYP Mine
GC Mine
The Company is the sole shareholder of Fortune Mining Limited (“Fortune”) which was incorporated under
the laws of BVI on August 23, 2002 to be the holding company of several other subsidiaries which are
parties to agreements relating to mineral properties in China. Fortune owns 100% of the following material
subsidiary companies:
7
(a)
(b)
(c)
Victor Mining Ltd. (“Victor Mining”) was incorporated on October 23, 2003 under the laws of BVI
and continued into Barbados on August 27, 2009 and back to the BVI on March 18, 2016. Victor
Mining is a party to a cooperative agreement under which it has earned a 77.5% interest in Henan
Found Mining Co. Ltd. (“Henan Found”), the Chinese company holding, among other assets: (i) the
Ying silver, lead and zinc project (“SGX Mine”); (ii) the project in Tieluping (“TLP Mine”); (iii) the
project in Hou Zhang Gou and Po Cai Gou (“HZG Mine”); (iv) the project in Longmen East (“LME
Mine”); and (v) the project in Dong Cao Gou (“DCG Mine”), each in Henan Province.
Victor Resources Ltd. (“Victor Resources”) was incorporated on May 30, 2003, under the laws of
the BVI and is a party to a cooperative agreement under which it earned an 80% interest in Henan
Huawei Mining Co. Ltd. (“Henan Huawei”), the Chinese company holding the beneficial interests
in: (i) the project in Haopinggou (“HPG Mine”); and (ii) the project in Longmen East (“LME Mine”).
Yangtze Mining Ltd. (“Yangtze Mining”) was incorporated on February 11, 2002, under the laws of
the BVI. It holds a 100% interest in Yangtze Mining (H.K.) Ltd. (“Yangtze Mining HK”). Yangtze
Mining HK holds a 95% interest in Guangdong Found Mining Co. Ltd. (“Guangdong Found”), a
company incorporated on October 26, 2008 under the laws of the People’s Republic of China, that
holds a 100% interest in the silver, lead and zinc exploration permits on the project in Gaocheng
(the “GC Mine” or “Gaocheng”) in Guangdong Province. In October 2018, Silvercorp Metals
(China) Inc., a wholly-owned subsidiary of the Company, acquired an additional 4% interest in
Guangdong Found, and as a result, the Company now beneficially owns a 99% interest in
Guangdong Found.
(d)
Fortune Copper Limited was incorporated on August 23, 2002, under the laws of the BVI. It holds
a 100% interest in Wonder Success Limited, a Hong Kong company which has a 70% equity
interest in Xinshao Yun Xiang Mining Co. Ltd. (“Yunxiang”), which owns the BYP gold, lead, and
zinc mine in Hunan Province (the “BYP Mine”).
The Company also holds a 43.75% interest in New Infini Silver Inc. (“New Infini”), which was incorporated
on October 13, 2020, under the laws of the Province of British Columbia. New Infini holds a 100% interest
in the La Yesca silver project (the “La Yesca Project”).
The Company’s operations in China are largely conducted through equity joint ventures, over which the
Company has control. See “Item 4 General Description of Business, 4.2 Chinese Mining Law”.
GENERAL DEVELOPMENT OF THE BUSINESS
Business of Silvercorp
Silvercorp is a profitable Canadian mining company producing silver, lead and zinc metals in concentrates
from mines in China through the operation of the silver-lead-zinc mines in the Ying Mining District in Henan
Province and the GC Mine in Guangdong Province. The Ying Mining District consists of several mines,
including the SGX Mine, HZG Mine, TLP Mine, HPG Mine, LMW Mine, LME Mine, and DCG Mine. 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 relations, employees’ wellbeing, and sustainable development.
Three Year History
Silvercorp has been acquiring, exploring, developing, and operating, mineral properties in China since
2003. Production at the SGX Mine at the Ying Mining District commenced on April 1, 2006, and since that
time, several of the Company’s other properties at the Ying Mining District in Henan Province, China have
commenced production. In addition, the Company commenced production at the GC Mine in July 2014.
8
(a)
Fiscal 2021 (year ended March 31, 2021)
For the year ended March 31, 2021 (“Fiscal 2021”), on a consolidated basis, the Company mined 964,925
tonnes of ore, an increase of 9% or 79,095 tonnes of ore, compared to 885,830 tonnes in the year ended
March 31, 2020. For Fiscal 2021, the Company had revenue of $192.1 million up 21% compared to $158.8
million in the prior year, and cash flow from operations of $85.9 million up 11% or $8.7 million compared to
$77.2 million in the prior year. For Fiscal 2021, net income attributable to equity holders of the Company
was $46.4 million, or $0.27 per share.
On July 20, 2020, Silvercorp reported its first underground drill hole at the DCG Mine at the Ying Mining
District. In 2006, Silvercorp acquired the DCG exploration permit, which is adjacent to the north of the TLP
Mine. It covers an area of 19.77 km2. A series of drill programs between 2006 and 2011 of 25 drill holes
comprised of 9,026 m focused on obvious lead-zinc veins. A maiden resource estimate that complies with
Chinese government requirements, but not NI 43-101, was completed in 2014, and Silvercorp successfully
converted the exploration permit to a mining permit in 2015. Information regarding the DCG Mine, including
a resource estimate, is contained in the 2020 NI 43-101 technical report for the Ying Mining District prepared
by AMC Mining Consultants (Canada) Ltd. (“AMC”). In late 2018, the Company decided to develop the
DCG Mine and bring it into production.
On August 31, 2020, Silvercorp reported the results of an updated NI 43-101 technical report on the Ying
Mining District with an effective date of July 31, 2020 prepared by AMC. The Company reported an 18%
increase in measured and indicated silver resources and 4% increase in proven and probable silver
reserves, on top of 21 million ounces of silver produced between June 2016 and December 2019 at the
Ying Mining District.
On November 30, 2020, Silvercorp filed a final short form base shelf prospectus with the securities
regulators in each province of Canada, except for the Province of Quebec, and a corresponding shelf
registration statement on Form F-10 with the SEC. The prospectus and registration statement allows the
Company to offer up to US$200 million of Common Shares, preferred shares, debt securities, warrants,
subscription receipts or any combination thereof (“Securities”) during the 25 month period that the shelf
prospectus is effective. The specific terms of any offering of Securities, including the use of proceeds from
any offering, will be set forth in a shelf prospectus supplement. Silvercorp filed the shelf prospectus and
corresponding registration statement in order to provide the Company with greater financial flexibility going
forward. A copy of the final short form base shelf prospectus can be found on SEDAR at www.sedar.com
and a copy of the registration statement can be found on EDGAR at www.sec.gov.
On December 16, 2020, Silvercorp announced the publication of its inaugural sustainability report, prepared
in accordance with the Global Reporting Initiative (GRI) Standards: Core Option. The report provides
information on the Company's governance, safety, environmental, and social performance.
On April 28, 2021, Silvercorp announced the receipt of three exploration permits of 48.8 km2 in area,
covering depth extensions of three mining permits, SGX, HPG, and TLP-LME-LMW, at the Ying Mining
District.
9
La Yesca Project
In December 2020, the Company and its subsidiary, New Infini, entered into a framework agreement with
various arm’s length vendors (the “Vendors”), whereby New Infini agreed to acquire a 100% interest in the
La Yesca Project through the indirect purchase of all of the issued and outstanding shares of Infini
Resources, S.A. de C.V., a Mexican company which owns the La Yesca Project. The La Yesca Project is
a silver-polymetallic, epithermal-type project located approximately 100 km (185 m by road) northwest of
Guadalajara, the second-largest city in Mexico. The concessions comprising the La Yesca Project cover
an area of approximately 47.7 km2. In total, 7,649 m from 25 drill holes have previously been completed,
all of which intersected mineralization.
In January 2021, New Infini completed a private placement and raised $4.0 million by issuing 8,000,000
shares of New Infini at $0.50 per share. The Company purchased an additional 3,000,000 shares for $1.5
million. As at March 31, 2021, New Infini had a total of 48,000,000 shares issued and outstanding, of which
the Company owned 21,000,000 shares or 43.75%, the Vendors owned 18,600,000 shares or 38.75%, and
the management and investors owned 8,400,000 shares or 17.5%.
Based on New Infini’s share structure, board composition and other related facts, the Company concluded
that the Company has control over New Infini and accordingly, consolidates New Infini’s results from the
date of the acquisition.
Zhonghe Silver Project
On December 17, 2020, the Company, through its subsidiary, 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 Zhonghe Project covers an area of 4.96 km2, approximately 50 km (75 km by road) northeast of the
Company’s Ying Mining District, also located in Luoning County. The final winning bid submitted by the
Company was approximately $76.0 million (RMB¥495.0 million) (the “Purchase Price”).
Based on the current regulations, 20% of the Purchase Price, approximately $15.2 million, is required to be
paid upon the execution of a formal mineral rights transfer contract (the “Transfer Contract”) with the
Department of Natural Resources of Henan Province. The balance of the Purchase Price is due only if the
exploration rights to the Zhonghe Project are converted into a mining license and shall be paid annually
over the duration of the term of the mining license.
The execution of the Transfer Contract is pending the national security clearance by the relevant Chinese
authorities.
Whitehorse Gold
Whitehorse Gold Corp. (“Whitehorse Gold”) is a Canadian public company listed on the TSX Venture
Exchange (the “TSX-V”) under the symbol “WHG”.
On July 22, 2020, New Pacific Metals Corp. (“New Pacific Metals”) announced the spin-out by way of a
plan of arrangement (the “Arrangement”) of its then wholly owned subsidiary, Whitehorse Gold, which owns
100% owned of the Skukum Gold Project (formerly “Tagish Lake Gold Project”) located in Yukon, Canada.
Upon completion of the Arrangement on November 18, 2020, New Pacific Metals and Whitehorse Gold
became two separate entities, and New Pacific Metals distributed all of the Whitehorse Gold common
shares to its shareholders, including to Silvercorp, on a pro rata basis. As a result, on November 18, 2020,
10
Silvercorp received a total of 5,740,285 Whitehorse Gold shares distributed under the Arrangement. In
connection with the Arrangement, Whitehorse Gold conducted a non-brokered private placement financing,
pursuant to which the Company acquired an additional 5,774,000 Whitehorse Gold common shares. As at
March 31, 2021, the Company owned 11,514,285 common shares of Whitehorse Gold, representing
26.99% of the issued and outstanding Whitehorse Gold shares.
On May 14, 2021, Whitehorse Gold closed concurrent private placement offerings for aggregate gross
proceeds of CAD$15,264,590. The Company participated in the offering and acquired an additional
4,000,000 units, each unit consisting of one common share in the capital of Whitehorse Gold and one
common share purchase warrant. Following closing, Silvercorp owned an aggregate of 15,514,286
Whitehorse Gold common shares, representing 29.50% of the issued and outstanding shares of Whitehorse
Gold on a non-diluted basis. Assuming conversion of 4,000,000 warrants, Silvercorp would own 19,514,286
Whitehorse Gold common shares, representing a 34.48% of the issued and outstanding Whitehorse Gold
shares on a partially-diluted basis.
Guyana Goldfields
On April 26, 2020, the Company entered into a definitive agreement with Guyana Goldfields Inc. (“Guyana
Goldfields”), subsequently amended on May 16, 2020 (collectively, the “Arrangement Agreement”) to
acquire all of the issued and outstanding shares of Guyana Goldfields. On June 10, 2020, Guyana
Goldfields terminated the Arrangement Agreement and paid the Company a break fee of $6.5 million.
(b)
Fiscal 2020 (Year ended March 31, 2020)
For the year ended March 31, 2020 (“Fiscal 2020”), on a consolidated basis, the Company mined 885,830
tonnes of ore, a decrease of 2% or 20,964 tonnes, compared to 906,794 tonnes in the year ended March
31, 2019. For Fiscal 2020, the Company had revenue of $158.8 million and cash flow from operations of
$77.2 million. For Fiscal 2020, net income attributable to equity holders of the Company was $34.3 million,
or $0.20 per share.
Silvercorp’s operations in China are usually suspended for two weeks for the Chinese New Year holiday.
During the 2020 holiday season, the Company’s operations in China were shut down for an additional
month due to COVID-19, as reported in the Company’s news releases dated January 29, February 18, and
March 12, 2020. The operations were ramped up to full capacity in March 2020 with no employee infections.
The Company’s operations are in compliance with government measures implemented to prevent the
spread of the virus. Despite the extended shutdown during the three months ended March 31, 2020 (“Q4
Fiscal 2020”), the Company was able to surpass its production guidance for Fiscal 2020.
(c)
Fiscal 2019 (Year ended March 31, 2019)
For the year ended March 31, 2019 (“Fiscal 2019”), on a consolidated basis, the Company mined 906,794
tonnes of ore, an increase of 5% or 46,870 tonnes, compared to 859,924 tonnes in the year ended March
31, 2018. For Fiscal 2019, the Company had sales of $170.5 million, a gross profit margin of 49%, and
cash flow from operations of $67.8 million. For Fiscal 2019, net income attributable to equity holders of the
Company was $39.7 million, or $0.23 per share.
(d)
Production
The following table summarizes the total metal sales in the past three years.
11
2021
6,315
4.7
67,118
27,914
Year Ended March 31
2020
6,257
3.3
65,344
25,401
2019
6,390
3.5
64,788
22,716
Silver (‘000s ounces)
Gold (‘000s ounces)
Lead (‘000s pounds)
Zinc (‘000s pounds)
Ying Mining District
The Ying Mining District consists of several mines, including the SGX, HZG, TLP, HPG, LMW, LME and
DCG Mines, and is the Company’s primary source of production.
In Fiscal 2021, total ore mined at the Ying Mining District was 650,025 tonnes, up 9%, compared to 598,197
tonnes in Fiscal 2020. Correspondingly, ore milled in Fiscal 2021 increased to 651,402 tonnes, up 8%,
compared to 601,605 tonnes in the prior year. Average head grades were 290 g/t for silver, 4.3% for lead,
and 0.8% for zinc, compared to 309 g/t for silver, 4.6% for lead and 0.9% for zinc in the prior year. The
Company continues to achieve improvements in dilution control using its “Enterprise Blog” to assist in
managing daily operations.
In Fiscal 2021, the Ying Mining District sold approximately 5.6 million ounces of silver, 3,500 ounces of
gold, 56.7 million pounds of lead, and 7.0 million pounds of zinc, compared to 5.6 million ounces of silver,
3,300 ounces of gold, 54.5 million pounds of lead, and 7.3 million pounds of zinc in the prior year.
The total mining cost and cash mining cost1 at the Ying Mining District were $95.27 and $69.56 per tonne,
respectively, in Fiscal 2021, compared to $90.61 and $63.00 per tonne, respectively, in Fiscal 2020. The
total milling cost and cash milling cost1 at the Ying Mining District in Fiscal 2021 were $11.52 and $9.69 per
tonne, down 4% and 5%, respectively, compared to $12.03 and $10.16 per tonne in Fiscal 2020.
Correspondingly, the cash production cost1 per tonne of ore processed in Fiscal 2021 at the Ying Mining
District was $83.01, up 8% compared to $77.08 in the prior year.
The cash cost1 per ounce of silver, net of by-product credits, at the Ying Mining District in Fiscal 2021, was
negative $0.39, compared to negative $1.18 in the prior year. The all-in sustaining cost1 per ounce of silver,
net of by-product credits, at the Ying Mining District in Fiscal 2021, was $6.09 compared to $5.49 in the
prior year. The increase was mainly due to the increase of per tonne cash production, offset by an increase
of $0.16 in by-product per ounce of silver. Revenue from lead and zinc was $48.7 million, up $0.5 million,
compared to $48.2 million in Fiscal 2020.
GC Mine
In Fiscal 2021, the total ore mined at the GC Mine was 314,900 tonnes, up 9%, compared to 287,633
tonnes in Fiscal 2020, while ore milled increased by 9% to 316,179 tonnes from 290,610 tonnes in the prior
year.
1 Non-IFRS measure. Please refer to the reconciliation in section 12 of the MD&A for the corresponding period.
12
Average head grades were 85 g/t for silver, 1.7% for lead, and 3.4% for zinc in Fiscal 2021, compared to
97 g/t for silver, 1.9% for lead, and 3.3% for zinc in the prior year.
In Fiscal 2021, the GC Mine sold 705 thousand ounces of silver, 10.4 million pounds of lead, and 20.9
million pounds of zinc, compared to 699 thousand ounces of silver, 10.9 million pounds of lead, and 18.1
million pounds of zinc in Fiscal 2020.
The total mining and cash mining cost1 at the GC Mine in Fiscal 2021 were $47.68 and $38.56 per tonne,
respectively, a slight increase of 3% and 1%, respectively, compared to $46.40 and $38.06 per tonne in
Fiscal 2020. The total milling and cash milling cost1 at the GC Mine in Fiscal 2021 were $14.25 and $12.88
per tonne, down 8% and 7%, respectively, compared to $15.52 and $13.85 per tonne in Fiscal 2020.
Correspondingly, the cash production cost1 per tonne of ore processed at the GC Mine in Fiscal 2021
decreased slightly to $51.44 from $51.91 in the prior year.
The cash cost1 per ounce of silver, net of by-product credits, at the GC Mine in Fiscal 2021, was negative
$11.48, compared to negative $7.65 in the prior year. The all-in sustaining cost1 per ounce of silver, net of
by-product credits, at the GC Mine in Fiscal 2021, was $nil compared to $0.77 in the prior year. The
improvement was mainly due to an increase of $5.47 in by-product credits per ounce of silver, offset by an
increase of 7% in all-in sustaining production cost per tonne of ore processed.
BYP Mine
The BYP Mine was placed on care and maintenance in August 2014 due to the required capital upgrades
to sustain ongoing production and the market environment. In Fiscal 2021, the Company sold all remaining
gold concentrate inventories, containing approximately 1,200 ounces of gold, that had been produced by
the mine before it was placed on care and maintenance.
The Company is carrying out activities to apply for a new mining license, but the process has taken longer
than expected. No guarantee can be given that the new mining licenses for the BYP Mine will be issued, or
if they are issued, that they will be issued under reasonable operational and/or financial terms, or in a timely
manner, or that the Company will be in a position to comply with all conditions that are imposed.
Capitalized Exploration and Development Expenditures
Ying Mining District
In Fiscal 2021, a total of 208,904 m or $6.9 million worth of diamond drilling were completed at the Ying
Mining District (Fiscal 2020 – 85,643 m or $2.5 million), of which a total of 150,324 m or $3.2 million worth
of underground diamond drilling were expensed as part of mining costs (Fiscal 2020 – 85,643 m or $2.5
million) and a total of 58,580 m or $3.7 million worth of surface drilling were capitalized (Fiscal 2020 – nil).
In addition, approximately 22,918 m or $6.7 million worth of preparation tunnelling were completed and
expensed as mining preparation costs (Fiscal 2020 – 19,088 m or $5.7 million) at the Ying Mining District,
and approximately 73,350 m or $27.4 million worth of horizontal tunnels, raises and declines were
completed and capitalized (Fiscal 2020 – 70,240 m or $23.9 million).
GC Mine
In Fiscal 2021, approximately 45,996 m or $1.8 million worth of underground diamond drilling (Fiscal 2020
– 22,513 m or $1.0 million) and 11,719 m or $2.2 million worth of tunnelling (Fiscal 2020 – 19,315 m or $4.6
million) were completed and expensed as mining preparation costs at the GC Mine. In addition,
approximately 11,871 m or $3.9 million worth of tunnels, raises, ramps, and declines were completed and
capitalized (Fiscal 2020 – 3,327 m or $2.4 million).
13
DESCRIPTION OF THE BUSINESS
General
Silvercorp’s principal products and its sources of sales are silver-bearing lead and zinc concentrates. At
present, Silvercorp sells all its products to local smelters or companies in the mineral products trading
business.
For each of the Company’s two most recently completed fiscal years, revenues for each category of
products that accounted for 10% or more of total consolidated revenues are as follows:
In 000s’US$
Silver (Ag)
Lead (Pb)
Zinc (Zn)
Years ended March 31,
2021
111,191
50,464
21,793
2020
84,872
51,966
15,780
Additional information is provided in the Company’s financial statements and management’s discussion
and analysis for its most recently completed fiscal year.
The mining industry is intensely competitive and the Company competes with many companies possessing
similar or greater financial and technical resources. The Company’s competitive position is largely reliant
upon its ability to maintain a high margin operation, resulting from relatively high grade resources, and lower
production costs in China compared to the costs of other producers outside China. The Company’s
competitive advantage also results from the quality of its concentrates and its proximity to local smelters.
In Fiscal 2021, ore processed and silver and lead production at the Ying Mining District were in line with
the annual guidance, while zinc production was 1% below 7.0 million pounds, the low end of the annual
guidance. The all-in sustaining production cost per tonne of ore processed was 1% below the low end of
the annual guidance, while the per tonne cash production cost was 1% above $82.5, the high end of the
annual guidance.
In Fiscal 2020, silver and zinc production at the Ying Mining District surpassed its annual guidance by 2%
and 16%, respectively, while lead production was in line with its annual guidance. The higher silver
production was mainly due to the increase in head grades, offset by lower ore production achieved and the
higher zinc production was mainly due to the improvement in recovery rates. Silver and lead head grades
increased to 309 g/t for silver and 4.6% for lead from the guidance of 290 g/t and 4.3%, respectively. The
cash production cost per tonne of ore processed was 1% below its annual guidance while the all-in
sustaining production cost was 2% over its annual guidance.
In Fiscal 2021, silver, lead and zinc production at the GC Mine were all above the high end of the annual
guidance by 2%, 1% and 13%, respectively, as the ore processed was 2% above the high end of the annual
guidance and the zinc head grade was better than the forecast. The per tonne cash production cost and
all-in sustaining production cost were 1% and 6%, respectively, below the low end of the annual guidance.
In Fiscal 2020, silver, lead and zinc production at the GC Mine surpassed its annual guidance by 16%, 23%
and 18%, respectively, mainly due to an increase of 8% in ore production and an improvement in head
grades. Per tonne cash production cost and all-in sustaining production cost were 8% and 10% lower than
its annual guidance.
As at March 31, 2021, the Company had 965 employees at Henan Found, 268 at Guangdong Found, 4 at
Hunan Yunxiang, 31 at Silvercorp Metals (China) Inc., and 21 at the Vancouver corporate office.
14
Fiscal 2022 Outlook
Production
For the year ended March 31, 2022 (“Fiscal 2022”), the Company expects to produce approximately
960,000 to 1,010,000 tonnes of ore, which is anticipated to yield approximately 6.4 million to 6.7 million
ounces of silver, 65.7 million to 68.9 million pounds of lead, and 26.9 million to 28.5 million pounds of zinc.
Fiscal 2022 production guidance represents an anticipated increase of approximately 3% in silver
production, 7% to 10% in zinc production, and similar levels in lead production compared to the Fiscal 2021
annual guidance.
In Fiscal 2022, at the Ying Mining District, production is expected to be 670,000 to 700,000 tonnes of ore
with grades of 284 g/t silver, 4.2% lead and 0.9% zinc, with expected metal production of 5.7 million to 5.9
million ounces of silver, 57.2 million to 59.8 million pounds of lead, and 7.8 million to 8.1 million pounds of
zinc. The cash production cost is expected to be $87.1 to $91.7 per tonne of ore. The all-in sustaining cost
is forecasted to be $134.2 to $141.2 per tonne of ore.
In Fiscal 2022, the GC Mine plans to mine and process 290,000 to 310,000 tonnes of ore averaging 86 g/t
silver, 1.5% lead and 3.6% zinc with expected metal production of 0.6 million to 0.7 million ounces of silver,
8.5 million to 9.1 million pounds of lead, and 19.1 million to 20.4 million pounds of zinc. The cash production
cost is expected to be $55.7 to $59.6 per tonne of ore. The all-in sustaining cost at GC Mine is expected
to be $81.3 to 85.6 per tonne of ore.
Capital Expenditures Budget
In Fiscal 2022, the total capital expenditures at the Ying Mining District and the GC Mine are estimated at
$38.2 million, including plans to: (i) complete 6,600 m of ramp development tunnelling at estimated
capitalized expenditures of $5.6 million; (ii) complete 62,500 m of exploration and other development
tunnelling at estimated capitalized expenditures of $21.8 million; (iii) complete 50,000 m of surface diamond
drilling at estimated capitalized expenditures of $3.5 million, and (iv) spend $7.3 million on equipment and
facilities. The Company also plans to complete and expense 33,600 m of mining preparation tunnelling
and 206,900 m of underground diamond drilling.
Other Development Plans
In Fiscal 2022, the Company plans to commence a Phase I 10,000 m drilling program at the La Yesca
Project at an estimated cost of $3.3 million. The Company has applied for the necessary drilling permits
from the respective Mexican government agencies and is awaiting approval.
The Company plans to initiate an extensive drilling campaign at the Zhonghe Project. The Company will
formalize the plan and provide an update on the cost estimates with respect to the Zhonghe Project once
the mineral rights transfer contract is executed.
The Company is in the process of applying for permits to build a third tailings facility near the existing tailings
facilities at the Ying Mining District. The Company is also considering plans to expand the current milling
capacity or build a new mill for future production expansion at the Ying Mining District. There is potential
to consolidate mineral properties near the Ying Mining District, and to process ore from Zhonghe Project
during its development stage.
Growth by Exploration and Acquisition
The Company continues to pursue future growth opportunities by carrying out exploration programs within
existing permit areas at its projects. For example, on May 28, 2020, the Company announced a drill
program targeting gold mineralization at the LMW, LME and TLP mines.
15
In Fiscal 2021, the Company commenced extensive drilling programs at the Ying Mining District with two
main objectives: i) re-examining areas with existing development and access to potentially define additional
resources and reserves, which led to a reduction of 17,010 M or $5.0 million worth of exploration and
development tunneling in Fiscal 2021, and ii) testing areas which may have been overlooked for potential
gold mineralization for different alteration styles from the typical silver-lead zones.
In addition, the Company continues to evaluate the acquisition of exploration, development and production
assets, or the acquisition of or merger with other entities. The Company regularly engages in discussions
with respect to such possible opportunities. At any time, discussions and activities may be in progress on
a number of initiatives, each at different stages of advancement. Although the Company may from time to
time be a party to a number of letters of intent with respect to certain opportunities and other acquisitions,
the Company currently does not have any binding agreements or binding commitments to enter into any
such transactions. There is no assurance that any potential transaction will be successfully completed.
Specialized Skill and Knowledge
A majority of aspects of our business require specialized skills and knowledge, certain of which are in high
demand and in limited supply. Such skills and knowledge include the areas of permitting, engineering,
geology, metallurgy, logistical planning, implementation of exploration programs, mine construction and
development, mine operation, as well as legal compliance, finance and accounting. We have highly
qualified management personnel and staff, an active recruitment program, and believe that persons having
the necessary skills are generally available. We have found that we can locate and retain competent
employees and consultants in such fields. We do not anticipate having significant difficulty in recruiting
other personnel as needed. Training programs are in place for workers that are recruited locally.
Competitive Conditions
The silver exploration and mining business is a competitive business. We compete with numerous other
companies and individuals in the search for and the acquisition of quality properties, mineral claims,
permits, concessions and other mineral interests, as well as recruiting and retaining qualified employees.
Business Cycles
The mining business is subject to mineral price and investment climate cycles. The marketability of minerals
is also affected by worldwide economic and demand cycles. It is difficult to assess if the current commodity
prices are long-term trends, and there is uncertainty as to the recovery, or otherwise, of the world economy.
If global economic conditions weaken and commodity prices decline as a consequence, a continuing period
of lower prices could significantly affect the economic potential of the Company's projects.
International Operations
Our principal operations and assets are located in China. Our operations are exposed to various levels of
political, economic and other risks and uncertainties. These risks and uncertainties include, but are not
limited to, government regulations (or changes to such regulations) with respect to restrictions on
production, export controls, income taxes, royalties, excise and other taxes, expropriation of property,
repatriation of profits, environmental legislation, land use, water use, local ownership requirements and
land claims of local people, regional and national instability and security, mine safety, and sanctions. The
effect of these factors cannot be accurately predicted. See Item 4.3 Chinese Mining Law and 4.4 Risk
Factors below.
16
Economic Dependence
The Company's business is not substantially dependent on any contract such as a contract to see the major
part of its products or services or to purchase the major part of its requirements for goods, services or raw
materials, or on any franchise, license or other agreement to use a patent, formula, trade secret, process
or trade name upon which its business depends.
Bankruptcy and Similar Procedures
There is no bankruptcy, receivership or similar proceedings against the Company, nor is the Company
aware of any such pending or threatened proceedings. There have not been any voluntary bankruptcy,
receivership or similar proceedings by the Company within the three most recently completed financial
years or currently proposed for the current financial year.
Corporate Governance, Safety, Environment and Social Responsibility
The Company is committed to the principles of sustainable development and conducting our activities in an
environmentally and socially responsible manner. Our core environmental, social, governance (“ESG”)
values are: caring for the environment in which we operate; contributing to the long-term development of
our host communities; ensuring safe and secure workplaces for our employees; and contributing to the
welfare of our employees, local communities, and governments; and operating transparently.
Our inaugural sustainability report (the “Sustainability Report”) released on December 16, 2020 is available
on our website at www.silvercorp.ca, and the Company plans to release an updated Fiscal 2021 sustainable
report in the second quarter of Fiscal 2022.
(a)
Governance
Our Board oversees the direction and strategy of the business and the affairs of the Company. As at March
31, 2021 and the date of this AIF, the Board is comprised of five directors, four of which are independent.
The Board’s wealth of experience allows it to effectively oversee the development of corporate strategies
and the key risks of the business, provide management with long-term direction, consider and approve
major decisions, oversee the business generally and evaluate corporate performance. The Corporate
Governance Committee, appointed by the Board, oversee the effective functioning of the Board and the
implementation of governance best practices.
We believe that good corporate governance is essential to the effective performance of the Company and
plays a significant role in protecting the interests of all stakeholders, while helping to maximize value.
(b)
Health, Safety, and Environment
The Company prioritizes environmental protection, as well as ensuring a safe workplace for all employees
and contractors at all of our sites. These corporate philosophies tie directly into the emphasis on efficient
process design and management across all aspects of the operation. Significant, ongoing efforts are made
to identify and minimize risks, as well as streamline the collection, monitoring and reporting of data. An
information technology application that was developed in-house in 2014, the “Enterprise-Blog”, is an
instrumental tool used to ensure all mandatory procedures are being performed. In addition, an on-line, real
time, monitoring and GPS system was established to further the Company’s goal of creating an “intelligent
mine”.
The Company has remained focused on sustainable development since its inception and is dedicated to
fulfilling its environmental goals and responsibilities for the communities where it operates. Silvercorp is
committed to building green mines and employing the latest design, construction and management
practices to ensure our mining environment undergoes timely rehabilitation. The SGX and HZG mines
received the Chinese “National Green Mine” certification in 2015, and the Company’s TLP, LME, LMW, and
17
HPG mines at the Ying Mining District and the GC Mine received the Chinese “Green Mine” certification in
Fiscal 2021.
As part of our objective to minimize the impact our operations have on the environment, the Company
strives to reduce its energy and water consumption, and to minimize greenhouse gas emissions and the
negative impact on water quality.
The Company is deeply committed to protecting the health, safety and well-being of our employees,
contractors, suppliers, and communities where we operate. The Company believes that operating safe
mines and building a culture of safety are directly related to our operational success and the ability to create
long-term value for all our stakeholders. Training for new workers and ongoing training programs are a
priority and Silvercorp continuously reviews and refines all standard procedures at our facilities to identify
any potential risks associated with each step of the operation.
Moreover, in response to health risks associated with the spread of COVID-19, the Company implemented
a number of health and safety measures designed to protect employees and local communities at its
operations and no cases were reported among the Company’s employees.
(c)
Social Responsibility and Economic Value
The Company is committed to creating sustainable value in the communities where our people work and
live. Guided by research conducted by our local offices, the Company participates in, and contributes to
numerous community programs that typically center on education and health, nutrition, environmental
awareness, local infrastructure and fostering additional economic activity. In addition to the taxes and fees
paid to various levels of government in China, in Fiscal 2021, the Company:
• promoted community health and poverty reduction in the local community, with an emphasis on
children and seniors, with periodic visits and subsidies;
• donated $0.1 million to institutions in scholarship or education assistance programs to support
children’s education at the local and national levels; and
• donated $0.2 million to the local community and government as part of the Company’s effort to help
improve local infrastructure and environmental protection.
Chinese Mining Law
Currently, all of the Company’s material properties are located in China. Under the laws of China, mineral
resources are owned by the state, and until 1997, state-owned enterprises have been the principal force in
the development of mineral resources.
A new Mineral Resources Law became effective on January 1, 1997, and two regulations were promulgated
on February 12, 1998, and later amended in July 2014. The new law provided for equal legal status for
domestic enterprises and enterprises with foreign investment, security and transferability of mineral titles
as well as the exclusivity of mining rights. The right to explore and exploit minerals is granted by way of
exploration and mining rights. The holder of an exploration right has priority in obtaining the mining right to
mineral resources within the exploration area provided the holder meets the conditions and requirements
specified in the law. The Company’s interests in mineral properties are held though joint venture companies
established under and governed by the laws of China. The Company’s joint venture partners in China
include state-sector entities and, like other state-sector entities, their actions and priorities may be dictated
by government policies instead of purely commercial considerations.
The Mineral Resources Law is subject to further revisions and in February 2020, the Ministry of Natural
Resources (“MNR”) submitted the revised draft (“Revised Draft”) to the State Council for approval. Although
the Revised Draft has not been formally promulgated, a substantial part of the Revised Draft was effectively
18
brought into effect by the Opinions on Promoting the Reform of Mineral Resources Management (Trial)
(“Opinions”) issued by MNR on December 7, 2019 (effective on January 9, 2020). It is expected that the
Revised Draft will have a positive impact on the Chinese mining industry. Firstly, the term of the exploration
licence granted upon the first registration is increased to five years from the original three years, which is
extendible for two five-year periods (which is increased from the previous two years). Secondly, a
competitive assignment system is established for mining rights. Mining rights can only be assigned by
governments through public bidding, auction or listing, unless in very limited circumstances such as the
projects are related to rare earth and radioactive minerals, or key construction projects approved by the
State Council, where mining rights can be granted by written transfer agreement between the government
and the applicants. Thirdly, the registration for the assignment of the exploration rights and mining rights to
the same mineral resources used to be completed at different levels of government authorities. However,
now the assignment of the exploration rights and mining rights are registered at the same level of
government – fourteen minerals that are strategically important to the state are governed by MNR, while
silver, lead, zinc and other resources are governed by provincial or lower-level governments.
Additionally, companies with a foreign ownership component operating in China may be required to work
within a framework which is different from that imposed on domestic Chinese companies. The Chinese
government currently allows foreign investment in certain mining projects under central government
guidelines. According to the 2020 Edition of the Special Administrative Measures for Access of Foreign
Investment (“Negative List”) effective July 23, 2020, as long as the mineral resources are not “tungsten,
rare earth and radioactive minerals” in the Negative List, foreign investors can engage in the mining
activities in China, either directly or indirectly.
On January 1, 2020, the Regulation for Implementing the Foreign Investment Law (“FIL") came into force
in China. FIL and supporting regulations and policies were amended to further open up China and provide
foreign-invested enterprises (“FIEs”) "national treatment". Under FIL, FIEs are treated equal to domestic
enterprises in many important respects, including the reduction of previous approval and filing procedures.
FIL replaces existing laws on foreign investment passed in China between 1979 and 1990, namely the Law
on Sino-Foreign Contractual Joint Ventures (“CJV Law”).
Key Impact of FIL on Existing FIEs
Corporate Governance
For existing FIEs, they can retain their corporate structure etc. unchanged for five years starting from the
effectiveness of the FIL, i.e., January 1, 2020. Upon the expiration of the five-year transition period (the
“Transition Period”), all FIEs are governed by PRC Company Law.
Upon the expiration of the Transition Period, the highest authority will be transferred from the Board of
Directors to the shareholders. The decision-making authority specified in the original Articles of Association
of the entity will change such that decisions on significant matters are to be made by the shareholders. The
shareholders have the right to elect and dismiss directors, and have broad decision-making power over a
company's management. Resolutions on major matters require more than ⅔ of the voting rights of the
shareholders. If there is a special agreement on the veto power of the Chinese joint venture party or the
FIE in the original Articles of Association of the entity, a supplementary term can be signed to remove or
retain such agreement. Under CJV Law, terms of operations were stipulated to be 30 years in a company’s
articles of association. Under FIL, this 30 year period can be amended to be a longer term.
The below table shows the key differences on corporate structure and governance under the CJV Law and
FIL.
Highest authority
Board of Directors or Joint Management
Committee
Shareholders
CJV Law
FIL (PRC Company Law)
19
Powers and duties of
highest authority
All major decisions, such as amendments
to the Articles of Association, increase
and decrease of
registered capital,
merger or spin-off, assets, mortgage and
dissolution
More detailed than those under CJV Law
Voting rules for major
issues
Unanimous consent of all directors or
members of
the Joint Management
Committee present at the meeting
Favourable votes of shareholders holding
⅔ or more of the voting rights
Number of directors
No less than 3 directors or members of
the Joint Management Committee
3-13 directors
executive director
for a Board or one
Quorum
⅔ or more of all directors or members of
the Joint Management Committee
As determined by shareholders
Term of director
No more than 3 years (can be re-
elected)
No more than 3 years (can be re-
elected)
Legal representative
Chairman of the Board or the director of
the Joint Management Committee
Chairman of the Board, executive
director or general manager
Foreign investment ratio Generally, no less than 25%. There are
some restrictions applied
No restrictions – unless otherwise
specified in the Negative List
Distribution of profits
In proportion to the contribution of the
registered capital
In proportion to the paid-in contribution
to the registered capital unless otherwise
agreed by the shareholders
Equity Transfer
Under CJV Law, a shareholder needs to obtain consents of all other shareholders if it intends to transfer its
shares in the joint venture regardless of whether it is an internal transfer (i.e., transfer to another shareholder
if there are more than two shareholders) or it is an external transfer. In contrast, FIL offers more flexible
transfer mechanisms – there are no consent requirement if it is an internal transfer. In cases of external
transfers, consents of more than half of the other shareholders are required and if any other shareholder
refuses the transfer but refuses to buy such shares to be transferred, then such shareholder shall be
deemed having agreed with the proposed transfer. The FIL also allows the shareholders to agree on
different share transfer mechanisms, which gives more flexibility to shareholders on transfer of shares.
Under FIL, FIEs can participate in government procurement, issue shares, corporate bonds and other forms
of financing to the public in accordance with applicable laws. Capital gains within China by FIEs can be
freely remitted in RMB or any other foreign currency. In addition to accepting supervision and inspection
by applicable regulatory authorities, no organization or individual may illegally restrict the currency, amount,
and frequency of remittances.
Foreign Investment Policy and COVID Pandemic
The Chinese government has remained committed to implementing FIL and providing support for FIEs
during the COVID pandemic. In February to April 2020, the Ministry of Commerce (“MOFCOM”) and the
National Development and Reform Commission (“NDRC”) issued a comprehensive array of regulations
urging local governments to provide special assistance to FIEs, such as expedited licensing approvals, and
other methods to help FIEs restore normal production and operation.
20
National Security Review for Foreign Investment and Retaliation against other Jurisdictions’ Discriminatory
Measures
Nevertheless, China has further developed the national security review for foreign investment and
established a formal legal basis for retaliation against other jurisdictions’ discriminatory measures. These
measures leave great discretion in the hands of the government, and therefore, whether they will constitute
a serious obstacle for foreign investors will depend on how they are applied in practice.
Under the FIL, it is reiterated that security review may be conducted for any foreign investment that affects
or may affect the national security of China. On December 19, 2020, MOFCOM and NDRC jointly
promulgated the Measures for National Security Review of Foreign Investment (“Measures”), taking effect
on January 18, 2021. The Measures cover a wide range of industry sectors, from defence and technology
involving foreign investment, to critical agricultural production, energy and resources, cultural products and
financial services where a foreign investor gains actual control of an investment target. The term "actual
control" is defined quite broadly and includes the following situations: if foreign investors own more than 50
percent of the shares; if foreign investors owns less than 50 percent of the shares, but have sufficient voting
rights to exert a material influence over the shareholders’ vote and resolutions of the board of directors; or
if foreign investors have a significant impact on the target’s business decisions-making, human resources,
finance or technologies, etc. Further, foreign investors are subject to national security review not only for
investing in new projects or acquiring equity or assets, but also for any other types of investment such as
nominal shareholders, trust, multiple-layer investments, lease, control by agreement or offshore
transactions. Regarding any transaction falling under the Measures, a foreign investor will have to file a
notification with the review task force headed by NDRC and MOFCOM. After their review, the foreign
investment may be approved, directly prohibited or granted conditional approval.
On September 19, 2020, MOFCOM initially announced the Provisions on the Unreliable Entity List, aiming
to punish firms, organizations or individuals that damage national security. Companies that are on the list
could be banned from trade and investing in China and face hefty fines or entry restrictions on their
employees. On January 9, 2021, MOFCOM further issued the Rules on Counteracting Unjustified Extra-
Territorial Application of Foreign Legislation and Other Measures. A Chinese person or organization that
is prohibited or restricted by foreign legislation from engaging in normal economic, trade and related
activities with a third State or region or its persons or organizations, must report the situation to the
commerce department within 30 days. The commerce department along with other relevant central
departments (working mechanism) will then assess a case for its potential violation of international law,
impact on China’s sovereignty and national security, and impact on Chinese persons or organizations. After
assessment, the working mechanism may confirm that there exists unjustified extra-territorial application of
foreign legislation/measures and decide that the State Council shall issue a prohibition order.
Civil Code
The National People’s Congress passed the Civil Code of PRC, which took effect from January 1, 2021
(“Civil Code”). The Civil Code is an amalgamation of the existing civil and tort related laws and regulations,
covering various matters such as private property, contracts, personal privacy, marriage and family,
inheritance, and torts. While the Civil Code does not fundamentally or substantially change the civil law
regime or the administrative system that affect FIEs, certain specific changes may have impacts on them
in relation to their business, legal or compliance models and practices, in the areas such as contracts,
secured transactions and civil litigation.
Resources Tax
Mining companies are required to pay several fees and taxes, including but not limited to resources tax for
developing taxable resources in China. With the Resources Tax Law coming into effect from September 1,
2020 to replace the old regulations, there is no significant change on the tax burden of mining companies.
Generally, silver, lead and zinc are taxable resources, calculated based on the prices of resources. The
basic range of tax rates is 2-6% for silver, and 2-10% for lead/zinc. Within this range, provincial governments
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may stipulate actual rates. Each province also has the power to formulate tax exemption or reduction
policies under the Resources Tax Law.
Land Reclamation and Environmental Restoration
Mining companies are regulated to rehabilitate the affected land and to restore biodiversity offset areas
around the mines. Before mining activities begin, mining companies shall submit a rehabilitation plan when
applying for construction land or mining rights. The existing mining right holders have the same obligation
to submit such rehabilitation plan to original approving authorities. On July 16, 2019, MNR revised several
regulations, including Geological Environment Protection Provisions of Mines and Measures for the
Implementation of the Regulation on Land Reclamation. It is required that the fees for land rehabilitation
or reclamation shall be included in the restoration fund established by the mining company. A company has
more freedom to use the restoration fund, compared with the previous security bond requirement required
to be submitted to the government authorities. In the meantime, the government has strengthened
enforcement on the supervision and inspection of the restoration of the mine’s geological environment.
Non-compliance with the environment restoration obligations may cause fines, rejection of extension of
permits, inclusion into the blacklist on the Credit China website, and public interest lawsuits.
Risk Factors
An investment in the Common Shares of the Company involves a significant degree of risk and ought to be
considered a highly speculative investment. The following risk factors, as well as risks not currently known
to the Company, could materially adversely affect the Company’s future business, operations and financial
condition and could cause them to differ materially from the estimates described in the forward-looking
statements and information relating to the Company.
COVID-19
The Company's business, operations and financial condition could be materially adversely affected by the
outbreak of pandemics or other health crises, such as the outbreak of COVID-19 that was designated as a
pandemic by the World Health Organization on March 11, 2020. The international response to the spread
of COVID-19 has led to significant restrictions on travel, temporary business closures, quarantines, global
stock market volatility, and a general reduction in consumer activity. Such public health crises can result in
operating, supply chain and project development delays and disruptions, global stock market and financial
market volatility, declining trade and market sentiment, reduced movement of people and labour shortages,
and travel and shipping disruption and shutdowns, including as a result of government regulation and
prevention measures, or a fear of any of the foregoing, all of which could affect commodity prices, interest
rates, credit risk and inflation. In addition, the current COVID-19 pandemic, and any future emergence and
spread of similar pathogens could have an adverse impact on global economic conditions which may
adversely impact the Company's operations, and the operations of suppliers, contractors and service
providers.
The Company may experience business interruptions, including suspended (whether government
mandated or otherwise) or reduced operations relating to COVID-19 and other such events outside of the
Company's control, which could have a material adverse impact on its business, operations and operating
results, financial condition and liquidity.
As at the date of this AIF, the duration of the business disruptions and related financial impact of COVID-
19 cannot be reasonably estimated. It is unknown whether and how the Company may be affected if the
pandemic persists for an extended period of time.
The Company's exposure to such public health crises also includes risks to employee health and safety.
Should an employee, contractor, community member or visitor become infected with a serious illness that
has the potential to spread rapidly, this could place the Company's workforce at risk.
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Fluctuating commodity prices
The Company’s sales price for silver is fixed against the Shanghai White Platinum & Silver Exchange as
quoted at www.ex-silver.com; lead and zinc are fixed against the Shanghai Metals Exchange as quoted at
www.shmet.com; and gold is fixed against the Shanghai Gold Exchange as quoted at www.sge.com.cn.
The Company’s revenues, if any, are expected to be in large part derived from the mining and sale of silver,
lead, zinc, and gold contained in metal concentrates. The prices of those commodities have fluctuated
widely, particularly in recent years, and are affected by numerous factors beyond the Company’s control
including international and regional economic and political conditions; emerging risks relating to the spread
of COVID-19; expectations of inflation; currency exchange fluctuations; interest rates; global or regional
supply and demand for jewellery and industrial products containing silver and other metals; sale of silver
and other metals by central banks and other holders, speculators and producers of silver and other metals;
availability and costs of metal substitutes; and increased production due to new mine developments and
improved mining and production methods. The effects of these factors on the price of base and precious
metals, and therefore the viability of the Company’s exploration projects and mining operations, cannot be
accurately predicted and thus the price of base and precious metals may have a significant influence on
the market price of the Company’s shares and the value of its projects.
If silver and other metal prices were to decline significantly for an extended period of time, the Company
may be unable to continue operations, develop its projects, or fulfil obligations under agreements with the
Company’s joint venture partners or under its permits or licenses.
Recent market events and condition
Over the past several years market events and conditions, including disruptions in the Canadian, United
States and international credit markets and other financial systems, along with the uncertainty of the
Canadian, United States and global economic conditions which have been heightened due to risks relating
to the spread of COVID-19, and the prior decline in precious metal prices, could, among other things,
impede access to capital or increase the cost of capital, which would have an adverse effect on the
Company’s ability to fund its working capital and other capital requirements.
Over the past several years, worldwide securities markets, particularly those in the United States and
Canada, have experienced a high level of price and volume volatility. Of note, the share prices of natural
resource companies have in the past experienced an extraordinary decline in value and in the number of
buyers willing to purchase such securities. In addition, significantly higher redemptions by holders of mutual
funds have forced many of such funds (including those holding the Company’s securities) to sell such
securities with little consideration to the price received.
Therefore, there can be no assurance that significant fluctuations in the trading price of the Company’s
Common Shares will not occur, or that such fluctuations will not materially adversely impact the Company’s
ability to raise equity funding without significant dilution to its existing shareholders, or at all.
Estimation of Mineral Resources, Mineral Reserves, mineralization, and metal recovery
There is a degree of uncertainty attributable to the estimation of Mineral Resources, Mineral Reserves,
mineralization and corresponding grades being mined or dedicated to future production. Until Mineral
Resources, Mineral Reserves or mineralization are actually mined and processed, the quantity of metals
and grades must be considered as estimates only. Any material change in quantity of Mineral Resources,
Mineral Reserves, mineralization, or grade may affect the economic viability of the Company’s projects. In
addition, there can be no assurance that precious or other metal recoveries in small-scale laboratory tests
will be duplicated in larger scale tests or during production.
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Interpretations and assumptions of Mineral Resource and Mineral Reserve estimates
Unless otherwise indicated, Mineral Resource and Mineral Reserve estimates presented in this AIF and in
the Company’s other filings with securities regulatory authorities, press releases and other public
statements that may be made from time to time are based upon estimates made by the Company’s
personnel and independent geologists/mining engineers. These estimates are imprecise and depend upon
geologic interpretation and statistical inferences drawn from drilling and sampling analysis, which may prove
to be unreliable. The Mineral Resource and Mineral Reserve estimates contained in this AIF have been
determined based on assumed future prices, cut-off grades, operating costs and other estimates that may
prove to be inaccurate. There can be no assurance that these estimates will be accurate, that Mineral
Reserve, Mineral Resource or other mineralization figures will be accurate, or that the mineralization could
be mined or processed profitably. The interpretation of drill results, the geology, grade and continuity of the
Company’s mineral deposits contains inherent uncertainty. Any material reductions in estimates of
mineralization, or of the Company’s ability to extract this mineralization, could have a material adverse
effect on its results of operations or financial condition.
Exploration and development programs
The long-term operation of the Company’s business and its profitability is dependent, in part, on the cost
and success of its exploration and development programs. Mineral exploration and development involve a
high degree of risk and few properties that are explored are ultimately developed into producing mines.
There can be no assurance that the Company’s mineral exploration and development programs will result
in any discoveries of bodies of commercial mineralization. There can also be no assurance that even if
commercial quantities of mineralization are discovered that a mineral property will be brought into
commercial production. Development of the Company’s mineral properties will follow only upon obtaining
satisfactory exploration results. Discovery of mineral deposits is dependent upon a number of factors,
including the technical skill of the exploration personnel involved. The commercial viability of a mineral
deposit once discovered is also dependent upon a number of factors, some of which are the particular
attributes of the deposit (such as size, grade and proximity to infrastructure), metals prices and government
regulations, including regulations relating to royalties, allowable production, importing and exporting of
minerals, and environmental protection. Most of the above factors are beyond the control of the Company.
As a result, there can be no assurance that the Company’s exploration and development programs will
yield reserves to replace or expand current resources. Unsuccessful exploration or development programs
could have a material adverse effect on the Company’s operations and profitability.
Economic factors affecting the Company
Many industries, including the mining industry, are impacted by market conditions. Some of the key impacts
of the recent financial market turmoil include risks relating to COVID-19, contraction in credit markets
resulting in a widening of credit risk, devaluations and high volatility in global equity, commodity, foreign
exchange and precious metals markets, and a lack of market liquidity. A continued or worsened slowdown
in the financial markets or other economic conditions, including but not limited to, consumer spending,
employment rates, business conditions, inflation, fuel and energy costs, consumer debt levels, lack of
available credit, the state of the financial markets, interest rates, and tax rates may adversely affect the
Company’s growth and profitability. Specifically: the volatility of silver, lead, zinc and gold prices may impact
the Company’s revenues, profits, losses and cash flow; volatile energy prices, commodity and consumable
prices and currency exchange rates would impact the Company’s production costs; and the devaluation
and volatility of global stock markets may impact the valuation of the Company’s equity and other securities.
These factors could have a material adverse effect on the Company’s financial condition and results of
operations.
Timing, estimated amount, capital and operating expenditures and economic returns of future
production
There are no assurances if and when a particular mineral property of the Company can enter into
production. The amount of future production is based on the estimates prepared by or for the Company.
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The capital and operating costs to take the Company’s projects into production or maintain or increase
production levels may be significantly higher than anticipated. Capital and operating costs of production
and economic returns are based on estimates prepared by or for the Company and may differ significantly
from their actual values. There can be no assurance that the Company’s actual capital and operating costs
will not be higher than currently anticipated. In addition, the construction and development of mines and
infrastructure are complex. Resources invested in construction and development may yield outcomes that
may differ significantly from those anticipated by the Company.
Integration of future acquisitions into existing operations
The Company may make select future acquisitions. If the Company does make acquisitions, any positive
effect on the Company’s results will depend on a variety of factors, including, but not limited to: integrating
the operations of an acquired business or property in a timely and efficient manner; maintaining the
Company’s financial and strategic focus while integrating the acquired business or property; implementing
uniform standards, controls, procedures and policies at the acquired business, as appropriate; and to the
extent that the Company makes an acquisition outside of markets in which it has previously operated,
conducting and managing operations in a new operating environment.
Acquiring additional businesses or properties could place pressure on the Company’s cash reserves if such
acquisitions involve cash consideration or if such acquisitions involve share consideration existing
shareholders may experience dilution.
The integration of the Company’s existing operations with any acquired business may require significant
expenditures of time, attention and funds. Achievement of the benefits expected from consolidation may
require the Company to incur significant costs in connection with, among other things, implementing
financial and planning systems. The Company may not be able to integrate the operations of a recently
acquired business or restructure the Company’s previously existing business operations without
encountering difficulties and delays. In addition, this integration may require significant attention from the
Company’s management team, which may detract attention from the Company’s day-to-day operations.
Over the short-term, difficulties associated with integration could have a material adverse effect on the
Company’s business, operating results, financial condition and the price of the Company’s Common
Shares. In addition, the acquisition of mineral properties may subject the Company to unforeseen liabilities,
including environmental liabilities, which could have a material adverse effect on the Company. There can
be no assurance that any future acquisitions will be successfully integrated into the Company’s existing
operations.
Permits and licenses for mining and exploration in China
All Mineral Resources and Mineral Reserves of the Company’s subsidiaries are owned by their respective
joint venture entities in China. Mineral exploration and mining activities in China may only be conducted by
entities that have obtained or renewed exploration or mining permits and licenses, and other certificates in
accordance with the relevant mining laws and regulations. These permits and license are also subject to
annual inspection by government authorities. Failure to pass the annual inspections may result in penalties.
No guarantee can be given that the necessary exploration and mining permits and licenses will be issued
to the Company or, if they are issued, that they will be renewed, or if renewed under reasonable operational
and/or financial terms, or in a timely manner, or that the Company will be in a position to comply with all
conditions that are imposed. Please see “Table 1, Mining licenses”, on page 36 for information on the
current status of mining licences at the Ying Project.
Nearly all mining projects require government approvals and permits relating to environmental, social, land
and water usage, community, and other matters, including those discussed in Sections 20 of the respective
NI 43-101 Technical Reports on the Company’s material properties (see the Ying Report and the GC Report
respectively). Some of the permits or certificates that are subject to renewal in the next three years at the
GC Mine, not otherwise discussed in the GC Report include:
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Permit
Expiry Date
Approving Authority
Safety Production Permit
September 03, 2023
Dry Stacking and Filling Safety Production
Permit
September 03, 2023
Pollutant Discharge Permit
August 30, 2025
Bureau of Safety Production and Inspection
of Yunfu City, Guangdong Province
Bureau of Safety Production and Inspection
of Yunfu City, Guangdong Province
Environment Protection Administration of
Yunfu, Guangdong Province
There can be no certainty that approvals necessary to develop and operate mines on the Company’s
properties will be granted or renewed in a timely and/or economical manner, or at all.
Title to properties
The validity of mining or exploration titles or claims or rights, which constitute most of our property holdings,
can be uncertain and may be contested. Our properties may be subject to prior unregistered liens,
agreements or transfers, indigenous land claims, or undetected title defects. In some cases, we do not own
or hold rights to the mineral concessions we mine. We have not conducted surveys of all the claims in which
we hold direct or indirect interests and therefore, the precise area and location of such claims may be in
doubt. No assurance can be given that applicable governments will not revoke or significantly alter the
conditions of the applicable exploration and mining titles or claims, or that such exploration and mining titles
or claims will not be challenged or impugned by third parties.
We may be unable to operate our properties as expected, or to enforce our rights to our properties. Any
defects in title to our properties, or the revocation of our rights to mine, could have a material adverse effect
on our operations and financial condition.
We operate in countries with developing mining laws, and changes in such laws could materially impact
our rights or interests to our properties. We are also subject to expropriation risk, including the risk of
expropriation or extinguishment of property rights based on a perceived lack of development or
advancement. Expropriation, extinguishment of rights and any other such similar governmental actions
would likely have a material adverse effect on our operations and profitability.
In the jurisdictions in which we operate, legal rights applicable to mining concessions are different and
separate from legal rights applicable to surface lands. Accordingly, title holders of mining concessions in
many jurisdictions must agree with surface land owners on compensation in respect of mining activities
conducted on such land. We do not hold title to all of the surface lands at many of our operations and rely
on contracts or other similar rights to conduct surface activities.
Non-controlling interest shareholders
The Company’s interests in various projects may, in certain circumstances, become subject to the risks
normally associated with the conduct of non-controlling interest shareholders. The existence or occurrence
of one or more of the following events could have a material adverse impact on the Company’s profitability
or the viability of its interests held with non-controlling interest shareholders, which could have a material
adverse impact on the Company’s business prospects, results of operations and financial conditions: (i)
disagreements with non-controlling interest shareholders on how to conduct exploration; (ii) inability of non-
controlling interest shareholders to meet their obligations to the applicable entity or third parties; and (iii)
disputes or litigation between shareholders regarding budgets, development activities, reporting
requirements and other matters.
Acquisition of commercially mineable mineral rights
Most exploration projects do not result in the discovery of commercially mineable ore deposits and no
assurance can be given that any particular level of recovery of Mineral Reserves will be realized or that any
identified mineral deposit will ever qualify as a commercially mineable (or viable) ore body which can be
legally and economically exploited.
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The Company’s future growth and productivity will depend, in part, on its ability to identify and acquire
additional mineral rights, and on the costs and results of continued exploration and development programs.
Mineral exploration is highly speculative in nature and is frequently non-productive. Substantial
expenditures are required to: establish mineral reserves through drilling and metallurgical and other testing
techniques; determine metal content and metallurgical recovery processes to extract metal from the ore;
and construct, renovate or expand mining and processing facilities.
In addition, if the Company discovers a mineral deposit, it would likely take at least several years from the
initial phases of exploration until production is possible. During this time, the economic feasibility of
production may change.
The Company’s success at completing any acquisitions will depend on a number of factors, including, but
not limited to: identifying acquisitions that fit the Company’s business strategy; negotiating acceptable terms
with the seller of the business or property to be acquired; and obtaining approval from regulatory authorities
in the jurisdictions of the business or property to be acquired. As a result of these uncertainties, there can
be no assurance that the Company will successfully acquire additional mineral rights.
Financing
The Company has limited financial resources. If more of the Company’s exploration programs are
successful in establishing ore of commercial tonnage and grade, additional funds will be required for the
development of the ore body and to place it in commercial production. Therefore, the Company’s ability to
continue its exploration and development activities, if any, will depend in part on the Company’s ability to
obtain suitable financing.
The Company intends to fund its plan of operations from working capital, proceeds of production, external
financing, strategic alliances, sale of property interests and other financing alternatives. The sources of
external financing that the Company may use for these purposes include project or bank financing, or public
or private offerings of equity or debt. One source of future funds presently available to the Company is
through the sale of equity capital. There is no assurance this source of financing will continue to be available
as required or on suitable terms, or at all. If it is available, future equity financings may result in substantial
dilution to shareholders. Another alternative for the financing of further exploration would be the offering
by the Company of an interest in the properties to be earned by another party or parties carrying out further
exploration or development thereof. There can be no assurance the Company will be able to conclude any
such agreements, on favourable terms or at all. The failure to obtain financing could have a material
adverse effect on the Company’s growth strategy and results of operations and financial condition.
Competition
The mining industry in general is intensely competitive and there is no assurance that a ready market will
exist for the sale of ore, or concentrate, by the Company. Marketability of natural resources which may be
discovered by the Company will be affected by numerous factors beyond the control of the Company, such
as market fluctuations, the proximity and capacity of natural resource markets and processing equipment,
government regulations including regulations relating to prices, royalties, land tenure, land use, importing
and exporting of minerals and environmental protection. The exact effect of such factors cannot be
predicted but they may result in the Company not receiving an adequate return on its capital.
The Company may be at a competitive disadvantage in acquiring additional mining properties because it
must compete with other individuals and companies, many of which have greater financial resources,
operational experience and technical capabilities than the Company. The Company may also encounter
increasing competition from other mining companies in its efforts to hire experienced mining professionals.
Competition for exploration resources at all levels is currently very intense, particularly affecting the
availability of manpower. Increased competition could adversely affect the Company’s ability to attract
necessary capital funding or acquire suitable producing properties or prospects for mineral exploration in
the future.
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Operations and political conditions
All the Company’s material operations are located in China. These operations are subject to the risks
normally associated with conducting business in China, which has different regulatory and legal standards
than North America. Some of these risks are more prevalent in countries which are less developed or have
emerging economies, including uncertain political and economic environments, as well as risks of civil
disturbances or other risks which may limit or disrupt a project, restrict the movement of funds or result in
the deprivation of contractual rights or the taking of property by nationalization or expropriation without fair
compensation, risk of adverse changes in laws or policies, increases in foreign taxation or royalty
obligations, license fees, permit fees, delays in obtaining or the inability to obtain necessary governmental
permits, limitations on ownership and repatriation of earnings, and foreign exchange controls and currency
devaluations.
In addition, the Company may face import and export regulations, including export restrictions,
disadvantages of competing against companies from countries that are not subject to similar laws,
restrictions on the ability to pay dividends offshore, and risk of loss due to disease and other potential
endemic health issues. Although the Company is not currently experiencing any significant or extraordinary
problems in China arising from such risks, there can be no assurance that such problems will not arise in
the future. The Company currently does not carry political risk insurance coverage.
The Company’s interests in its mineral properties are held through joint venture companies established
under and governed by the laws of China. The Company’s joint venture partners in China include state-
sector entities and, like other state-sector entities, their actions and priorities may be dictated by
government policies instead of purely commercial considerations. Additionally, companies with a foreign
ownership component operating in China may be required to work within a framework which is different
from that imposed on domestic Chinese companies. The Chinese government currently allows foreign
investment in certain mining projects under central government guidelines. There can be no assurance
that these guidelines will not change in the future. See Item 4.3 Chinese Mining Law above.
Regulatory environment in China
The Company’s principal operations are in China. The laws of China differ significantly from those of
Canada and all such laws are subject to change. Mining is subject to potential risks and liabilities associated
with pollution of the environment and disposal of waste products occurring as a result of mineral exploration
and production.
Failure to comply with applicable laws and regulations may result in enforcement actions and may also
include corrective measures requiring capital expenditures, installation of additional equipment or remedial
actions. Parties engaged in mining operations may be required to compensate those suffering loss or
damage by reason of mining activities and may have civil or criminal fines or penalties imposed for violations
of applicable laws and regulations.
China's legislation is undergoing a relatively fast transformation with some old laws superseded by newly
enacted laws. New laws and regulations, amendments to existing laws and regulations, administrative
interpretation of existing laws and regulations, or more stringent enforcement of existing laws and
regulations could create risks or uncertainty for investors in mineral projects or have a material adverse
impact on future cash flow, results of operations and the financial condition of the Company.
In addition, China has further strengthened its national security review of foreign investment. The Measures
will continue to create an additional layer of uncertainty with respect to foreign investment. Investment
plans, timetables, terms and conditions for closing for investment must take into account the timing and
contingency of obtaining approval from the national security review process. See Item 4.3 Chinese Mining
Law above.
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Regulatory environment in Mexico
The La Yesca Project is located in Mexico and is subject to extensive laws and regulations governing
various matters including, but not limited to, exploration, development, production, price controls, exports,
taxes, mining royalties, environmental matters, labor standards, expropriation of property, maintenance of
mining claims, land use, land claims of local and indigenous people, water use, waste disposal, power
generation, protection and remediation of the environment, reclamation, historic and cultural resource
preservation, mine safety, occupational health, and the management and use of toxic substances and
explosives, including handling, storage and transportation of hazardous substances.
Such laws and regulations may require the Company to obtain licenses, permits and consents from various
governmental authorities and indigenous groups. Failure to comply with applicable laws and regulations,
including licensing and permitting requirements, may result in civil or criminal fines, penalties or
enforcement actions, including orders issued by regulatory or judicial authorities enjoining or curtailing
operations, requiring corrective measures, requiring the installation of additional equipment, requiring
remedial actions or imposing additional local or foreign parties as joint venture partners, any of which could
result in significant expenditures or loss of income by the Company. The Company may also be required
to compensate private parties suffering loss or damage by reason of a breach of such laws, regulations,
licensing requirements or permitting requirements.
The Company’s income and its mining, exploration and development projects, could be adversely affected
by amendments to such laws and regulations, by future laws and regulations, by more stringent
enforcement of current laws and regulations, by changes in the policies of Mexico, Canada and other
applicable jurisdictions affecting investment, mining and repatriation of financial assets, by shifts in political
attitudes in Mexico and by exchange controls and currency fluctuations. The effect, if any, of these factors
cannot be accurately predicted. Further, there can be no assurance that the Company will be able to obtain
or maintain all necessary licenses and permits that may be required to carry out exploration, development
and mining operations at the La Yesca Project.
The costs of discovering, evaluating, planning, designing, developing, constructing, operating and closing
the Company’s mining, exploration and development activities and operations in compliance with such laws
and regulations are significant. It is possible that the costs and delays associated with compliance with such
laws and regulations, and new taxes, could become such that the Company would not proceed with mining,
exploration and development at one or more of its properties. Moreover, it is possible that future regulatory
developments, such as increasingly strict environmental protection laws, regulations and enforcement
policies thereunder, and claims for damages to property and persons resulting from the Company’s mining,
exploration and development projects could result in substantial costs and liabilities for the Company, such
that the Company would halt or not proceed with mining, exploration and development at one or more of
its properties.
Environmental risks
The Company’s activities are subject to extensive laws and regulations governing environmental protection
and employee health and safety, including environmental laws and regulations in China. These laws
address emissions into the air, discharges into water, management of waste, management of hazardous
substances, protection of natural resources, antiquities and endangered species, and reclamation of lands
disturbed by mining operations. The Company’s Chinese subsidiaries are required to have been issued
environmental permits and safety production permits with various expiration dates. These permits are also
subject to annual inspection by government authorities. Failure to pass the annual inspections may result
in penalties. No guarantee can be given that the necessary permits will be issued to the Company or, if
they are issued, that they will be renewed, or if renewed under reasonable operational and/or financial
terms, or in a timely manner, or that the Company will be in a position to comply with all conditions that are
imposed.
Nearly all mining projects require government approval and permits relating to environmental, social, land
and water usage, community matters, and other matters, including those discussed in Sections 20 of the
29
respective NI 43-101 Technical Reports on the Company’s material properties (see the Ying Report and
the GC Report respectively, each as defined below).
There are also laws and regulations prescribing reclamation activities on some mining properties.
Environmental legislation in many countries, including China, is evolving and the trend has been toward
stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent
environmental assessments of proposed projects and increasing responsibility for companies and their
officers, directors and employees. Compliance with environmental laws and regulations may require
significant capital outlays on behalf of the Company and may cause material changes or delays in the
Company’s intended activities. There can be no assurance that the Company has been or will be at all
times in complete compliance with current and future environmental, and health and safety laws, and the
status of permits will not materially adversely affect the Company’s business, results of operations or
financial condition. It is possible that future changes in these laws or regulations could have a significant
adverse impact on some portion of the Company’s business, causing the Company to re-evaluate those
activities at that time. The Company’s compliance with environmental laws and regulations entail uncertain
costs.
Dependence on management and key personnel
The executive director and the China operational management team all have extensive experience in the
mineral resources industry in China. Most of the non-executive directors also have extensive experience in
mining and/or exploration (or as advisors to companies in the field). The Company’s success depends to
a significant extent upon its ability to retain, attract and train key management personnel, both in Canada
and in China.
The Company depends on the services of a number of key personnel, including the Chief Executive Officer,
Chief Financial Officer, and the China operational management team, the loss of any one of whom could
have an adverse effect on the Company’s operations.
The Company’s ability to manage growth effectively will require it to continue to implement and improve
management systems and to recruit and train new employees. The Company cannot be assured that it will
be successful in attracting and retaining skilled and experienced personnel.
Foreign exchange rate fluctuations
The Company reports its financial statements in US dollars. The functional currency of the head office,
Canadian subsidiaries and all intermediate holding companies is the Canadian dollar while the functional
currency of all Chinese subsidiaries is Chinese Renminbi. The Company is exposed to foreign exchange
risk when the Company undertakes transactions and holds assets and liabilities in currencies other than its
functional currencies. The fluctuation of the exchange rate between the reporting currency and its functional
currencies may materially and adversely affect the Company’s financial position.
Insurance
The Company’s mining activities are subject to the risks normally inherent in the industry, including, but not
limited, to environmental hazards, flooding, fire, periodic or seasonal hazardous climate and weather
conditions, unexpected rock formations, industrial accidents and metallurgical and other processing
problems. These risks could result in damage to, or destruction of, mineral properties, production facilities
or other properties; personal injury; environmental damage; delays in mining; increased production costs;
monetary losses; and possible legal liability. The Company may become subject to liability which it cannot
insure or may elect not to insure due to high premium costs or other reasons. Where considered practical
to do so, the Company maintains insurance against risks in the operation of its business in amounts which
the Company believes to be reasonable. Such insurance, however, contains exclusions and limitations on
coverage. The Company cannot provide any assurance that such insurance will continue to be available,
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be available at economically acceptable premiums or be adequate to cover any resulting liability. In some
cases, coverage is not available or considered too expensive relative to the perceived risk.
Risks and hazards of mining operations
Mining is inherently dangerous and the Company’s operations are subject to a number of risks and hazards
including, without limitation: environmental hazards; discharge of pollutants or hazardous chemicals;
industrial accidents; failure of processing and mining equipment; labour disputes; supply problems and
delays; encountering unusual or unexpected geologic formations or other geological or grade problems;
encountering unanticipated ground or water conditions; cave-ins, pit wall failures, flooding, rock bursts and
fire; periodic interruptions due to inclement or hazardous weather conditions; equipment breakdown; other
unanticipated difficulties or interruptions in development, construction or production; other acts of God or
unfavourable operating conditions; and health and safety risks associated with spread of COVID-19
pandemic, and any future emergence and spread of similar pathogens.
Such risks could result in damage to, or destruction of, mineral properties or processing facilities, personal
injury or death, loss of key employees, environmental damage, delays in mining, monetary losses and
possible legal liability. Satisfying such liabilities may be very costly and could have a material adverse
effect on the Company’s future cash flow, results of operations and financial condition.
Conflicts of interest
Conflicts of interest may arise as a result of the directors and officers of the Company also holding positions
as directors and/or officers of other companies. Some of those persons who are directors and officers of
the Company have and will continue to be engaged in the identification and evaluation of assets and
businesses and companies on their own behalf and on behalf of other companies, and situations may arise
where the directors and officers may be in direct competition with the Company. Conflicts, if any, will be
subject to the procedures and remedies under the Business Corporations Act (British Columbia).
Internal control over financial reporting as per the requirements of the Sarbanes-Oxley Act
Management of the Company is responsible for establishing and maintaining an adequate system of
internal control over financial reporting, and used the Internal Control – Integrated Framework (2013) issued
by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) to evaluate, with
the participation of the CEO and CFO, the effectiveness of internal controls. The Company’s internal control
over financial reporting includes:
• maintaining records, that in reasonable detail, accurately and fairly reflect our transactions and
dispositions of the assets of the Company;
• providing reasonable assurance that transactions are recorded as necessary for preparation of our
consolidated financial statements in accordance with generally accepted accounting principles;
• providing reasonable assurance that receipts and expenditures are made in accordance with
authorizations of management and the directors of the Company; and
• providing reasonable assurance that unauthorized acquisition, use or disposition of company
assets that could have a material effect on the Company’s consolidated financial statements would
be prevented or detected on a timely basis.
Based on this evaluation, management concluded that the Company’s internal control over financial
reporting based on the criteria set forth in Internal Control – Integrated Framework (2013) issued by COSO
was effective as of March 31, 2021 and provided a reasonable assurance of the reliability of the Company’s
financial reporting and preparation of the financial statements.
31
No matter how well a system of internal control over financial reporting is designed, any system has inherent
limitations. Even systems determined to be effective can provide only reasonable assurance of the
reliability of financial statement preparation and presentation. Also, controls may become inadequate in the
future because of changes in conditions or deterioration in the degree of compliance with the Company’s
policies and procedures.
The failure to achieve and maintain the adequacy of our internal control over financial reporting on a timely
basis could result in the loss of investor confidence in the reliability of the financial statements, which in turn
could harm the business and negatively impact the trading price of shares or market value of other
securities. In addition, any failure to implement required new or improved controls, or difficulties
encountered in their implementation, could harm the operating results or cause to fail to meet the reporting
obligations. There can be no assurance that the Company will be able to remediate material weaknesses,
if any, identified in future periods, or maintain all of the controls necessary for continued compliance, and
there can be no assurance that the Company will be able to retain sufficient skilled finance and accounting
personnel, especially in light of the increased demand for such personnel among publicly traded companies.
Future acquisitions of companies may provide the Company with challenges in implementing the required
processes, procedures and controls in the acquired operations. Acquired companies may not have
disclosure controls and procedures or internal control over financial reporting that are as thorough or
effective as those required by securities laws currently applicable to the Company.
Outcome of current or future litigation or regulatory actions
Due to the nature of its business, the Company may be subject to numerous regulatory investigations,
claims, lawsuits and other proceedings in the ordinary course of its business. The results of these legal
proceedings cannot be predicted with certainty due to the uncertainty inherent in litigation, including the
discovery of evidence process, the difficulty of predicting decisions of judges and juries and the possibility
that decisions may be reversed on appeal. There can be no assurances that these matters will not have a
material adverse effect on the Company’s business.
No assurance can be given with respect to the ultimate outcome of current or future litigation or regulatory
proceedings, and the amount of any damages awarded or penalties assessed in such a proceeding could
be substantial. In addition to monetary damages and penalties, the allegations made in connection with the
proceedings may have a material adverse effect on the reputation of the Company and may impact its
ability to conduct operations in the normal course.
Litigation and regulatory proceedings also require significant resources to be expended by the directors,
officers and employees of the Company and as a result, the diversion of such resources could materially
affect the ability of the Company to conduct its operations in the normal course of business. Significant fees
and expenses may be incurred by the Company in connection with the investigation and defense of litigation
and regulatory proceedings. The Company may also be obligated to indemnify certain directors, officers,
employees and experts for additional legal and other expenses pursuant to such proceedings, which
additional costs may be substantial and could have a negative effect on the Company’s future operating
results. The Company may be able to recover certain costs and expenses incurred in connection with such
matters from its insurer. However, there can be no assurance regarding when or if the insurer will reimburse
the Company for such costs and expenses.
Bringing actions and enforcing judgments under U.S. securities laws
Investors in the U.S. or in other jurisdictions outside of Canada may have difficulty bringing actions and
enforcing judgments against the Company, its directors, its executive officers and some of the experts
named in this AIF based on civil liabilities provisions of the federal securities laws, other laws in the U.S.
state(s) in or the equivalent laws of other jurisdictions of residence.
32
The Company’s investment in New Pacific Metals Corp.
The Company is a strategic investor in New Pacific Metals, a Canadian public company listed on the TSX
under the symbol “NUAG” and NYSE American under the symbol “NEWP”. As at March 31, 2021, the
Company owned 43,917,216 or 28.6% interest in New Pacific Metals. New Pacific Metals is an exploration
company currently in the business of acquiring and exploring mineral properties. Investments in junior
mining companies involve volatile share prices, liquidity risk, and may result in possible loss of principal.
New Pacific Metals has no revenue from operations and no ongoing mining operations of any kind.
Resource exploration and development is a speculative business and involves a high degree of risk,
including, among other things, unprofitable efforts resulting both from the failure to discover mineral
deposits and from finding mineral deposits which, though present, are insufficient in size and grade at the
then prevailing market conditions to return a profit from production. The marketability of natural resources
which may be acquired or discovered by New Pacific Metals will be affected by numerous factors beyond
the control of New Pacific. These factors include market fluctuations, the proximity and capacity of natural
resource markets, and government regulations, including regulations relating to prices, taxes, royalties,
land use, importing and exporting of minerals and environmental protection. The exact effect of these
factors cannot be accurately predicted, but the combination of these factors may result in the Company not
receiving an adequate return on invested capital or the possible loss of principal.
Substantial expenditures are required to establish ore reserves through drilling, metallurgical, and other
testing techniques, determine metal content and metallurgical recovery processes to extract metal from the
ore, and construct, renovate, or expand mining and processing facilities. No assurance can be given that
any level of recovery of ore reserves will be realized or that any identified mineral deposit, even if it is
established to contain an estimated resource, will ever qualify as a commercial mineable ore body, which
can be legally and economically exploited.
In addition to the high degree of risk associated with investing in junior exploration mining companies, the
Company’s investment in New Pacific Metals entails an additional risk by virtue of the fact that its projects
are located in Bolivia. Bolivia's history since the mid-1960s has been one of political and economic
instability under various governments. Since 2006, the government has frequently intervened in the
national economy and social structure, including periodically imposing various controls, the effects of which
have been to restrict the ability of both domestic and foreign companies to operate freely. Although
Silvercorp believes that the current conditions in Bolivia are relatively stable and conducive to conducting
business, New Pacific Metals’ current and future mineral exploration and mining activities in Bolivia are
exposed to various levels of political, economic, and other risks and uncertainties. These risks and
uncertainties include, but are not limited to, co-operatives and community blockades, terrorism, hostage
taking, military repression, extreme fluctuations in currency exchange rates, high rates of inflation, political
and labour unrest, the risks of war or civil unrest, expropriation and nationalization, renegotiation or
nullification of existing concessions, licenses, permits and contracts, illegal mining, changes in taxation
policies, restrictions on foreign exchange and repatriation, changing political conditions, currency controls,
and governmental regulations that favour or require the awarding of contracts to local contractors or require
foreign contractors to employ citizens of, or purchase supplies from, a particular jurisdiction. Given the
political instability and social unrest in Bolivia following the general elections held on October 20, 2019,
there is no assurance that New Pacific will be successful in obtaining ratification of the mining production
contract (“MPC”) it signed with Corporación Minera de Bolivia (COMIBOL) in a timely manner or at all, or
that they will be obtained on reasonable terms. New Pacific Metals cannot predict the government’s
positions on foreign investment, mining concessions, land tenure, environmental regulation, community
relations, or taxation. A change in government positions on these issues could adversely affect the
ratification of the MPC and New Pacific Metals’ business.
The Company’s investment in Whitehorse Gold Corp.
The Company is a strategic investor in Whitehorse Gold, a Canadian public company listed on the TSX-V
under the symbol “WHG”. As at March 31, 2021, the Company owned 11,514,285 Whitehorse Gold
common shares or 26.99% interest in Whitehorse Gold (29.50% after the 2021 private placements).
33
Whitehorse Gold is a junior exploration company currently in the business of acquiring and exploring
mineral properties. Investments in junior mining companies involve volatile share prices, liquidity risk, and
may result in possible loss of principal. Whitehorse Gold has no revenue from operations and no ongoing
mining operations of any kind.
Long-term operation of Whitehorse Gold’s business and its profitability are dependent, in part, on the cost
and success of its exploration and future development programs. Mineral exploration and development
involve a high degree of risk and historically few properties that are explored are ultimately developed into
producing mines. There is no assurance that Whitehorse Gold’s mineral exploration and future
development programs will result in any discoveries, expansions of mineral resources or the definition of
mineral reserves. There is also no assurance that, even if commercially viable quantities of mineral
resources or mineral reserves are discovered, a mineral property will be brought into commercial
production. Development of Whitehorse Gold’s mineral properties will only commence if it obtains
satisfactory exploration results. Discovery of mineral deposits is dependent upon a number of factors,
including the technical skill of the exploration geoscientists involved. The commercial viability of a mineral
deposit is also dependent upon a number of factors including: the particular attributes of the deposit such
as size, grade and proximity to infrastructure; metal prices; and government regulations including
regulations relating to royalties, allowable production, importing and exporting of minerals and
environmental protection. Most of the above factors are beyond the control of Whitehorse Gold.
Unsuccessful exploration or development programs could have a material adverse impact on Whitehorse
Gold’s operations and profitability.
In addition, Whitehorse Gold’s mineral projects are subject to a number of risks that may make it less
successful than anticipated, including, without limitation: (a) delays or higher than expected exploration
costs; (b) negative technical results and/or technical results that fail to deliver the required returns to render
the ongoing development of the Skukum Gold Project economic; (c) delays in receiving environmental
permits and/or social license from indigenous groups; (d) delays in receiving permits; (e) delays or higher
than expected costs in obtaining the necessary equipment or services to build and operate the Skukum
Gold Project; and (f) adverse mining conditions may delay and hamper the ability of Whitehorse Gold to
produce the expected quantities of minerals.
First Nation interests and rights as well as related consultation issues may impact Whitehorse Gold’s ability
to pursue exploration, development and mining at its properties. Whitehorse Gold intends to communicate
and consult with First Nations communities in order to foster a positive relationship with those groups but
there is no assurance that claims or other assertions of rights by First Nation communities or consultation
issues will not arise on or with respect to Whitehorse Gold’s properties or activities. Such claims and issues
could result in significant costs and delays or materially restrict Whitehorse Gold’s activities.
Cybersecurity Risks
The Company is subject to cybersecurity risks including unauthorized access to privileged information,
destroy data or disable, degrade or sabotage our systems, including through the introduction of computer
viruses. Although we take steps to secure our configurations and manage our information system, including
our computer systems, internet sites, emails and other telecommunications, and financial/geological data,
there can be no assurance that measures we take to ensure the integrity of our systems will provide
protection, especially because cyberattack techniques used change frequently or are not recognized until
successful. The Company has not experienced any material cybersecurity incident in the past, but there
can be no assurance that the Company would not experience in the future. If our systems are compromised,
do not operate properly or are disable, we could suffer financial loss, disruption of business, loss of geology
data which could affect our ability to conduct effective mine planning and accurate mineral resources
estimates, loss of financial data which could affect our ability to provide accurate and timely financial
reporting.
34
MINERAL PROPERTIES
The Company has interests in mineral properties located in China. As at March 31, 2021, these properties
were carried on the Company’s consolidated statements of financial position as assets with a book value
of approximately $x million. The book value consists of acquisition costs plus cumulative expenditures on
properties, net of amortization and impairment charges for which the Company has future development
plans.
For the purposes of NI 43-101, the following properties have been determined to be material to the
Company as of March 31, 2021: (a) the Ying Mining District, Henan Province, China (the “Ying Property”
or “Ying”); and (b) the GC Mine located in Guangdong Province, China.
Except as otherwise disclosed, Guoliang Ma, P. Geo., Manager of Exploration and Resource of the
Company, is the Qualified Person for Silvercorp under NI 43-101 who has reviewed and given consent to
the scientific and technical information contained in this AIF.
Ying Mining District, Henan Province, China
Current Technical Report
Except as otherwise stated, the information in this AIF is based on the latest technical report titled “NI 43-
101 Technical Report Update on the Ying Ag-Pb-Zn Property in Henan Province, People’s Republic of
China” (the “Ying Report”) dated effective July 31, 2020 and prepared by AMC Mining Consultants (Canada)
Ltd. (“AMC”) on October 9, 2020. AMC has previously prepared Technical Reports on the Property in 2017
(filed 24 February 2017, effective date 31 December 2016); 2014 (filed 5 September 2014, effective date
31 December 2013); 2012 (filed 15 June 2012, effective date 1 May 2012); and in 2013 (minor update to
2012 report, filed 6 May 2013, effective date 1 May 2012).
The authors of the Technical Report all qualify as independent Qualified Persons (QPs).
Portions of the following information are based on the assumptions, qualifications and procedures described
in the Ying Report, which are not fully described herein. The full text of the Ying Report which is available
for review on SEDAR at www.sedar.com is incorporated by reference in this AIF.
Project Description, Location and Access
The Property is situated in central China in western Henan Province near the town of Luoning. The term
“Ying District” is used to describe a 100 sq. km rectangular area bounded by latitude 34°07’N to 34°12’N
and longitude 111°14’E to 111°23’E. Within this district block, Silvercorp has three principal centres of
operation, within which six mining projects are located.
Silvercorp, through its wholly owned subsidiary Victor Mining Ltd, is party to a cooperative joint venture
agreement dated 12 April 2004 under which it earned a 77.5% interest in Henan Found Mining Co. Ltd
(Henan Found), the Chinese company holding (with other assets) the Ying silver, lead, and zinc project (the
Ying Project). In addition, Silvercorp, through its wholly owned subsidiary Victor Resources Ltd, is party to
a cooperative agreement dated 31 March 2006, under which it initially obtained a 60% interest in Henan
Huawei Mining Co. Ltd (Henan Huawei), the beneficiary owner of the project in Haopinggou (the HPG
Project) and the project in Longmen (the LME Project). Since that time, Silvercorp’s interest in Henan
Huawei has increased to 80%.
The Ying Property is covered by four major contiguous mining licenses. The total area of the four mining
licenses is 68.59 sq km. Table 1 lists their names, license numbers, areas and expiry dates. All Tables are
numbered relative to their position in the AIF.
35
Table 1
Mining licenses
Area and licence name
Mines
Mining licence #
Sq km
ML Expiry Date
Yuelianggou Lead-zinc-silver Mine
SGX and HZG
C4100002009093210038549
19.8301
Sept 2024
Haopinggou Lead-zinc-silver-gold Mine HPG
C4100002016043210141863
6.2257
29 Apr 2028
Tieluping-Longmen Silver-lead Mine
TLP, LME and LMW
C4100002016064210142239
22.7631
26 Feb 2041 *
Dongcaogou Gold-silver Mine
none
C4100002015064210138848
Total
Note: Mining license for TLP , LME and LMW extended since Ying Report date.
In addition, mining is only permitted between prescribed elevations as follows:
•
•
•
•
Yuelianggou Mining License – 1,060 m and 0 m elevations
Haopinggou Mining License - 955 m and the 365 m elevations
Tieluping-Longmen Mining License - 1,250 m and the 700 m elevations
Doncaogau Mining License - 1,087 m and the 605 m elevations
19.772
68.59
15 June 2025
Henan Found’s policy has been to initiate applications to the relevant government departments so that
exploration permits are reissued beneath the lower boundary of the mining permit areas in accordance with
the “Mineral Resources Law of the People’s Republic of China” and the integration policy of mineral
resource development issued by the Ministry of Land and Resources of China and the Henan Provincial
Government.
The existing mining licenses cover all the active exploration and mining areas discussed in this Technical
Report. Mining licenses are subject to mining-right usage fees (a fixed annual charge), mineral resource
compensation fees, and applicable mineral resource taxes. The renewal of mining licenses and extending
of mining depth and boundaries occur in the ordinary course of business as long as mineral resources exist,
are defined, the required documentation is submitted, and the applicable government resources taxes and
fees are paid. The mining licenses give the right to carry out full mining and mineral processing operations
in conjunction with safety and environmental certificates. The safety certificates for Silvercorp’s mining
activities have been issued by the Department of Safety, Production and Inspection of Henan Province.
Environmental certificates have been issued by the Department of Environmental Protection of Henan
Province.
Surface rights for mining purposes are not included in the licenses, but Silvercorp has acquired surface
rights for mining and milling activities by effecting payment of a purchase fee based on the appraised value
of the land. Subject to negotiation, some land use compensation fees may also be due to the local farmers
if their agricultural land is disturbed by exploratory work.
China has an established Mining Code that defines the mining rights guaranteed by the government of
China.
China has a 13% Value Added Tax (VAT) on sales of concentrates and on articles such as materials and
supplies. The VAT paid on materials purchased for mining is returned to Silvercorp as an incentive to mine
in China. There is no VAT on labour. In addition, Silvercorp also pays a VAT surtax, which amounts to
approximately 1.6% of sales, and mineral resources tax is currently levied at approximately 3% of sales.
The income tax rate is 25%.
There are no known or recognized environmental issues that might preclude or inhibit a mining operation
in this area. Some major land purchases may be required in the future for mine infrastructure purposes
(such as for additional processing plant requirements, waste disposal, offices and accommodations). There
are no significant factors and risks that may affect access, title, or the right or ability to perform work on the
Ying property that are known at this time.
36
History
Silver-lead-zinc mineralization in the Ying district has been known and intermittently mined for several
hundred years. The first systematic geological prospecting and exploration was initiated in 1956 by the
Chinese government. Detailed summaries of the district’s historical activities from 1956 to 2004, when
Silvercorp first acquired interests in the area, are described in previous NI 43-101 Technical Reports.
Silvercorp acquired an interest in the SGX Mine Project in 2004. Subsequently, Silvercorp acquired the
HZG, HPG, TLP, and LM mines (LME and LMW), all of which were previously held and operated by private
Chinese companies.
Geological Setting, Mineralization and Deposit Types
The Property is situated in the 300 km-long west-northwest trending Qinling orogenic belt, a major
structural belt formed by the collision of two large continental tectonic plates in Paleozoic time.
The northern continental plate, the North China Plate, covers all of Henan Province and most parts of North
China, while the southern plate, the Yangtze Plate, covers most part of South China. Rocks along the
orogenic belt between the two major tectonic plates are severely folded and faulted, offering optimal
structural conditions for the emplacement of a myriad of mineral deposits. Several operating silver-lead-
zinc mines, including those in the Ying Property, occur along this belt.
The Qinling orogenic belt is comprised largely of Proterozoic- to Paleozoic-age rock sequences consisting
of mafic to felsic volcanic rocks with variable amounts of interbedded clastic and carbonate sedimentary
rocks. The rocks are weakly metamorphosed to lower greenschist facies, with local areas of strongly
metamorphosed lower amphibolite facies. The basement of the belt is comprised of highly metamorphosed
Archean-age rocks of the North China plate, dominantly felsic to mafic gneisses with minor amphibolites,
intrusive gabbros and diabases. The metamorphosed Qinling belt sequence and the underlying Archean
basement rocks are intruded by mafic to felsic dikes and stocks of Proterozoic and Mesozoic ages. They
are overlain by non-metamorphosed sedimentary rock sequences of Mesozoic to Cenozoic age, primarily
marls and carbonaceous argillites, which are in turn overlain locally by sandstone-conglomerate
sequences.
The dominant structures in the Qinling orogenic belt are west-northwest trending folds and faults generated
during the collision of the two major tectonic plates in Paleozoic time. The faults consist of numerous thrusts
having a component of oblique movement with sets of conjugate shear structures trending either north-
west or north-east. These conjugate shear zones, which display features of brittle fracturing such as fault
gouge, brecciation and well-defined slickensides, are associated with all the important mineralization
recognized along the 300 km-long orogenic belt.
The Ying Property contains multiple mesothermal silver-lead-zinc-rich quartz-carbonate veins in steeply-
dipping fault-fissure zones which cut Archean gneiss and greenstone. To date, significant mineralization
has been defined or developed in at least 308 discrete vein structures, and many other smaller veins have
been found but not as yet well explored.
Structurally, the vein systems throughout the district are all somewhat similar in that they occur as sets of
veins of generally similar orientation enclosed by fault-fissure zones which trend most commonly northeast-
southwest, less commonly north-south, and rarely northwest-southeast. The structures extend for hundreds
to a few thousand metres along strike. They are often filled by altered andesite or diabase dikes together
with quartz-carbonate veins or as discrete zones of altered bedrock (mainly gneiss) associated with local
selvages of quartz-carbonate veinlets. From one-third to one-half of the structures exposed at the surface
are conspicuously mineralized as well as altered.
The vein systems consist of narrow, tabular or splayed veins, often occurring as sets of parallel and offset
veins. The veins thin and thicken abruptly along the structures in classic “pinch-and-swell” fashion with
37
widths varying from a few centimetres up to a few metres. “Swells” formed in structural dilatant zones along
the veins often forming mineralized “shoots”. At the SGX mine, these shoots range from 30 m to more than
60 m in vertical and horizontal dimensions over true vein widths of 0.4 m to 3.0 m. The vertical dimension
of the SGX shoots is commonly twice or more the horizontal dimension. Longitudinal sections constructed
along the veins indicate that many of the shoots have a steep, non-vertical rake.
The vein systems of the various mine areas in the district are also generally similar in mineralogy, with slight
differences between some of the separate mine areas and between the different vein systems within each
area. These differences have been attributed to district-scale mineral zonation at different levels of
exposure. This subtle zonation is thought to be perhaps analogous to the broad scale zonation patterns
observed in the Coeur d’Alene District (USA) and characteristic of many other significant mesothermal
silver-lead-zinc camps in the world (Broili et al. 2008, Broili et al. 2010).
Exploration
From 1 July 2016 to 31 December 2019 (the reporting period), Silvercorp conducted extensive exploration
programs on the Ying property that included exploration-development activities in the SGX mine area,
including two producing mines (SGX and HZG), the HPG mine area, the TLP and LM mine areas, including
three producing mines (TLP, LME, and LMW), and the DCG project. The past exploration activities,
including surface activities, have been detailed in previous Technical Reports prepared for the Ying
Property.
Other than drilling, the projects have been explored primarily by underground development and sampling.
The workings follow the vein structures along strike, on levels spaced approximately 40 m apart. Silvercorp
has found this method of underground exploration an effective and efficient way to define the geometry of
the mineralized structures, in part due to the discontinuous character of the high grade mineralization, but
also to the relatively inexpensive development costs.
Channel samples across the mineralized structures are collected across the back of drift tunnels and the
walls of crosscut tunnels at 5 m intervals, with the spacing of channel samples increasing to 15 or 25 m in
the non mineralized sections of the vein structures. Individual channels can consist of multiple chip samples,
cut across and bracketing the mineralization and including associated wall rocks across the tunnel. Assay
results of samples are documented on underground level maps and longitudinal sections.
The exploration tunneling and drilling programs were conducted during the reporting period to upgrade the
Indicated and Inferred Mineral Resources, to test the down-dip and along-strike extensions of the major
mineralized vein structures and their parallel subzones, and to explore new target areas. The programs
comprised 201,688 m of tunneling, including 120,801 m of drifting along mineralized structures and 52,712
m of cross cutting across mineralized structures. Drift and crosscut tunnels have been developed at 30 m
to 50 m intervals vertically to delineate higher category Mineral Resources. A total of 75,334 channel / chip
samples was collected from the six mine areas.
Drilling
Prior to Silvercorp obtaining the rights to the SGX mine in 2004, there was little drilling work completed on
the Ying Property. Drilling programs conducted by previous operators include a 10,736 m surface drilling
program in the TLP-LM area by the No. 6 Nonferrous Geological Exploration Team from 1991 to 1994 and
a test drilling program of two holes in the SGX area by the Henan Nonferrous Geological Exploration Bureau
in 2003.
Since acquiring the Ying projects, Silvercorp has initiated systematic drilling programs to test the strike and
down-dip extensions of the major mineralized vein structures and explore for new mineralized structures in
less-explored or unexplored areas in the Property.
38
Since 2004, Silvercorp has organized extensive underground diamond drilling programs each year in the
Ying Mining District with a total accumulated metreage of 1,082,840 m completed as of June 2016.
Drilling programs were continuously conducted over the Property from July 2016 to December 2019 (the
Reporting Period). Underground and surface drilling were carried out in mining areas to test the down-dip
extension of major mineralized vein structures, extend the Indicated and Measured Mineral Resources at
or above the current mining depth, and infill the Inferred Mineral Resource blocks defined in previous drilling
programs below the current mining depth. Most of the holes were designed as inclined holes to test multiple
vein structures and to ensure a good intersection angle. A total of 325,151 m in 1,090 diamond holes was
completed, including 13,236 m in 38 surface holes and 311,915 m in 1,052 underground holes drilled from
at or above the current mining elevations. Results of the diamond drilling program were the down-dip and
strike extension of most of the major mineralized veins and the discovery of a number of new mineralized
veins in the current mine areas.
Drilling results from the 2016 – 2019 drilling program in the Property are briefly summarized in Table 2.
These results have been incorporated into the mine databases and contribute to the current Mineral
Resource update for the seven deposits. There is no drilling for DCG during this period.
Table 2
Brief summary of the 2016-2019 drilling results
Mine
Area
SGX
HZG
HPG
LME
LMW
TLP
Holes
Completed
302
110
138
112
191
237
No of Mineralized
Intersections
(≧120g/t AgEq)
155
63
49
118
86
127
Average Grade of
Mineralized Intersections
(g/t AgEq)
520
394
350
396
439
494
Average True Width of
Mineralized Intersections
(m)
0.68
0.61
0.67
0.59
0.71
0.52
Detected Depth
(Elevation m)
861-143
335-879
938-39
411-941
1,097-322
153-1,114
Sampling and Analysis, and Data Verification
The numerous fault-fissure structures that cut the gneissic bedrock of the Ying Property are not
continuously mineralized. Veins occur intermittently along these structures, appearing and disappearing
along-strike and down-dip. Silvercorp’s exploration consists of horizontal tunneling along and across the
veins, in addition to driving raises or declines to access the veins at other levels. Core drilling is designed
to intersect the veins in other locations both laterally and vertically. Channel samples are collected from
underground tunnels and other workings, and core samples are collected from altered and mineralized drill
cores. The sample collection and preparation follow accepted industry practice.
Core Samples
NQ-sized drill cores (48 mm in diameter) are recovered from the mineralized zones. Drill core is logged,
photographed and sampled in detail at the surface core shack, with each mine having its own logging and
core-cutting facilities. Samples are delineated by lithology, mineralization, and alteration. Mineralized zones
are sampled together with wallrock samples that bracket the mineralization. Samples have a minimum
length of 20 cm and a maximum length of 2 m.
Chip / Channel Samples
Channel samples lines are marked by a geologist and collected as continuous chip samples from the roofs
of drift tunnels (perpendicular to the mineralized vein structure), and from the walls of crosscut tunnels
(which cross the mineralized vein structure). Samples have a minimum size of 20 cm and a maximum size
of 2 m. Drill and channel samples are numbered following protocols outlined by Silvercorp that generates
unique IDs. Samples bracket the vein in addition to sampling the vein itself.
39
Sampling, Analysis and Data Verification
Drill core samples are stored in securely sealed bags at the core logging facilities until shipment by courier
to one of the following three reputable commercial laboratories which are chosen based on capacity:
•
•
•
The Analytical Laboratory of Henan Nonferrous Exploration Institute (Zhengzhou Nonferrous
Laboratory) in Zhengzhou, Henan Province.
The Chengde Huakan 514 Geology and Mineral Testing and Research Institute (Chengde
Laboratory) in Chengde, Hebei Province.
The Analytical Laboratory of the Inner Mongolia Geological Exploration Bureau (Inner Mongolia
Laboratory) in Hohhot, Inner Mongolia.
The three external laboratories are accredited and certified as first-class laboratories by the Chinese
government. The procedures for sample preparation and quality management in these laboratories are
established in accordance with the official Chinese technical standard DZ/T 0130-2006 (The Specification
of Testing Quality Management for Geological Laboratories), which is a combination of the basic principles
and methodologies of ISO 9000:2000 and ISO/IEC 17025:1999.
Channel samples are analyzed on site at the Ying assay laboratory located at the mill complex in Luoning
County. A brief examination of the Ying Laboratory was made by the QPs in both 2013 and 2016, as outlined
in previous Technical Reports. The assay laboratory is officially accredited by the Quality and Technology
Monitoring Bureau of Henan Province and has been used to analyze both channel samples taken from
underground workings for Resource estimation purposes, and concentrate produced from the processing
plants. Most of the processes for the analysis of channel samples and concentrate are completed within
separate buildings, rooms, and instruments.
Silvercorp has established QA/QC procedures which cover the sample collection and processing at the
Ying Property. All drilling and channel sampling programs completed on the Property incorporate the
insertions of Certified Reference Materials (CRMs) and blanks into the sample stream on a batch by batch
basis. Duplicate field samples are also included in the drilling programs.
Silvercorp’s QA/QC programs and results prior to July 2016 have been described in previous Technical
Reports. The following discussion is based on the QP’s independent review of the drilling and channel
sampling QA/QC databases associated with the July 2016 to December 2019 programs, which comprises
1,088 drillholes and 75,334 channel samples.
Silvercorp monitors silver, lead, zinc, copper, and gold in drillhole sampling, and silver, lead, and zinc in
channel sampling programs. This is accomplished through the insertion of CRMs, blanks, and field duplicate
samples. In this report gold and copper values are not discussed in detail as they are not material
components of the Mineral Resource.
A summary of QA/QC samples included in the July 2016 – 2019 program is presented in Table 3. Table 4
summarizes the insertion rate of these QA/QC samples.
Table 3
Ying QA/QC samples by year1
Drill samples
Channel samples
Samples
CRMs
Blanks
Field duplicates
Samples
CRMs
Blanks
Field duplicates
Year
2016
2017
2018
2019
2,944
7,011
5,145
5,333
Total
20,433
111
214
154
146
625
112
214
153
146
625
112
214
153
144
623
8,537
18,117
17,515
23,105
67,274
248
406
474
603
253
48
3
0
1,731
304
0
0
0
0
0
Note: 1 Data from 1 July 2016 to 31 December 2019.
Source: Compiled by AMC.
40
Table 4
Ying QA/QC insertion rates1
Drill samples
Channel samples
Year
2016
2017
2018
2019
Samples
CRMs
Blanks
Field
duplicates
2,944
7,011
5,145
5,333
3.8%
3.1%
3.0%
2.7%
3.1%
3.8%
3.1%
3.0%
2.7%
3.1%
3.8%
3.1%
3.0%
2.7%
3.0%
Total
QA/QC
11.4%
9.2%
8.9%
8.2%
9.2%
Samples
CRMs
Blanks
Field
duplicates
Total
QA/QC
8,537
18,117
17,515
23,105
67,274
2.8%
2.5%
2.7%
2.6%
2.6%
3.0%
0.3%
0.0%
0.0%
0.5%
0.0%
0.0%
0.0%
0.0%
0.0%
5.6%
2.5%
2.7%
2.6%
3.0%
Overall
20,433
Note: 1 Data from 1 July 2016 to 31 December 2019.
Source: Compiled by AMC.
Mineral Processing and Metallurgical Testing
The lab scale mineral processing and metallurgical tests for the Ying Property deposits were done by three
laboratories in China:
•
•
•
Hunan Nonferrous Metal Research Institute (HNMRI) using SGX mineralization in 2005.
Tongling Nonferrous Metals Design Institute (TNMDI) using HZG mineralization in 2006.
Changsha Design and Research Institute (CDRI) using TLP mineralization in 1994.
The objectives of the lab mineral processing testwork were:
•
•
•
To maximize silver recovery to the lead concentrate.
To develop a process flow sheet with appropriate operating parameters as a basis for the industrial
scale implementation of lead, zinc, and silver recovery.
To determine the product quality characteristics relative to the relevant national standards.
The metallurgical testing consisted of mineralogical assessment, flotation tests, and specific gravity
measurements of the mineralized veins.
SGX is the main deposit and the HNMRI work is the most comprehensive; therefore, the lab test results
from HNMRI’s study (2005) on SGX mineralization were used for both mill Plant 1 (2005) and Plant 2 (2008)
design.
AMC is not aware of any subsequent external Design Institute metallurgical testwork having been carried
out, although continual on-site “plant-tuning” occurs.
Mineral Resource and Mineral Reserve Estimates
The Mineral Resource estimates for the SGX, HPG, LMW, and LME deposits were carried out by
independent QP Rod Webster, MAIG of AMC who takes responsibility for these estimates.
The Mineral Resource estimates for the TLP, HZG, and DCG deposits were carried out by independent QP
Simeon Robinson, P.Geo. of AMC who takes responsibility for these estimates.
The December 2019 Mineral Resources were estimated using a block modelling approach and the dynamic
anisotropy application within Datamine™ software. Except for DCG, all metal grades were estimated using
ordinary kriging. At DCG metal grades were estimated using inverse distance squared (ID2).
The Mineral Resources include material (approximately 30% of the total Mineral Resources) below the
lower elevation limit of Silvercorp’s current mining licenses. However, because of the nature of Chinese
regulations governing applications for new or extended mining licenses, the QPs for the Mineral resource
41
estimation are satisfied that there is no material risk of Silvercorp not being granted approval to extend the
lower depth limit of its licenses to develop these Mineral Resources as and when required.
Table 5 shows the Mineral Resources and metal content by mine for the Property as of 31 December 2019.
The Mineral Resources are reported above a COG based on in-situ values in silver equivalent (AgEq)
terms in grams per tonne. COGs incorporate mining, processing and G&A costs provided by Silvercorp for
each mine and reviewed by the QP for Mineral Reserves – see Table 6. The AgEq formula and cut-off
grade for each mine are shown in the footnotes of Table 5.
Table 5
Mineral Resources of the Ying Property as of 31 December 2019
Mine
Resource category
Tonnes
(Mt)
Au
(g/t)
Measured
Indicated
Measured + Indicated
Inferred
Measured
Indicated
Measured + Indicated
Inferred
Measured
Indicated
Measured + Indicated
Inferred
Measured
Indicated
Measured + Indicated
Inferred
Measured
Indicated
Measured + Indicated
Inferred
Measured
Indicated
Measured + Indicated
Inferred
Measured
Indicated
Measured + Indicated
Inferred
Measured
Indicated
Measured + Indicated
Inferred
3.29
3.48
6.77
4.33
0.49
0.60
1.09
0.97
0.88
1.50
2.38
3.20
0.49
1.18
1.67
1.79
0.74
1.97
2.71
2.41
2.51
2.92
5.43
5.48
-
0.06
0.06
0.40
8.41
11.71
20.12
18.58
-
-
-
-
-
-
-
-
1.17
1.35
1.28
2.05
-
-
-
-
-
-
-
-
-
-
-
-
-
0.09
0.09
0.24
0.12
0.17
0.15
0.36
Ag
(g/t)
313
257
284
237
342
274
305
250
93
67
77
84
348
282
301
222
330
259
278
248
208
165
185
157
-
59
59
61
264
212
234
184
Pb
(%)
6.19
5.04
5.60
4.84
1.09
0.70
0.87
0.78
3.74
3.02
3.29
2.65
1.72
1.62
1.65
1.73
3.13
2.33
2.55
2.85
3.44
2.74
3.06
2.64
-
3.78
3.78
4.69
4.28
3.18
3.64
3.04
Zn
(%)
3.12
2.53
2.82
1.99
0.25
0.15
0.20
0.18
1.43
1.30
1.35
1.04
0.38
0.44
0.42
0.39
0.28
0.29
0.29
0.39
0.33
0.32
0.32
0.25
-
0.15
0.15
0.15
1.53
1.10
1.28
0.82
Metal contained in Resource
Au
(koz)
-
-
-
-
-
-
-
-
33.3
64.9
98.2
211.2
-
-
-
-
-
-
-
-
-
-
-
-
0.2
0.2
3.2
33.3
65.1
98.4
214.4
Ag
(Moz)
33.08
28.77
61.86
33.00
5.43
5.29
10.72
7.77
2.64
3.22
5.87
8.65
5.47
10.69
16.16
12.75
7.87
16.41
24.29
19.22
16.79
15.48
32.27
27.70
-
0.12
0.12
0.79
71.29
79.98
151.26
109.87
Pb
(kt)
203.6
175.5
379.1
209.8
5.4
4.2
9.5
7.5
33.1
45.2
78.3
84.9
8.4
19.1
27.5
30.9
23.2
45.9
69.1
68.6
86.5
79.9
166.4
144.7
-
2.3
2.3
18.9
360.2
372.1
732.3
565.3
Zn
(kt)
102.5
88.1
190.6
86.1
1.2
0.9
2.1
1.7
12.6
19.5
32.1
33.2
1.8
5.1
7.0
6.9
2.1
5.8
7.9
9.5
8.3
9.2
17.5
13.7
-
0.1
0.1
0.6
128.6
128.7
257.3
151.8
Mineral Resources are reported according to the CIM Definition Standards (2014).
Measured and Indicated Mineral Resources are inclusive of estimated Mineral Reserves.
Metal prices: gold US$1,250/troy oz, silver US$18/troy oz, lead US$0.95/lb, zinc US$1.10/lb.
Exchange rate: RMB 6.90 : US$1.00.
Mineral Resource reported 5 m below surface.
Veins factored to a minimum extraction width of 0.3 m.
Cut-off grades: SGX 145 g/t AgEq; HZG 130 g/t AgEq; HPG 140 g/t AgEq; LME 120 g/t AgEq; LMW 155 g/t AgEq; TLP 130 g/t
AgEq; DCG 135 AgEq.
AgEq formulas by mine:
42
SGX
HZG
HPG
LME
LMW
TLP
DCG
Total
Notes:
•
•
•
•
•
•
•
•
SGX: AgEq =35.63*Pb%+22.45*Zn%+Ag g/t
HZG: AgEq =34.6*Pb%+Ag g/t
HPG: AgEq =36.84*Pb%+23.61*Zn%+62.87*Au g/t + Ag g/t
LME: AgEq =34.17*Pb%+11.92*Zn%+Ag g/t
LMW: AgEq=35.06*Pb%+Ag g/t
TLP: AgEq =34.19*Pb%+Ag g/t
DCG: AgEq =36.84*Pb% + 23.61*Zn + 62.87*Au g/t + Ag g/t
−
−
−
−
−
−
−
Exclusive of mine production to 31 December 2019.
Rounding of some figures may lead to minor discrepancies in totals.
•
•
Comparison of Mineral Resources, 30 June 2016 and 31 December 2019
A comparison of Mineral Resource estimates between 30 June 2016 and 31 December 2019 indicates the
following:
•
•
•
•
Measured plus Indicated tonnes have increased by 23% overall, while the Inferred tonnes have
increased by 78%.
Measured plus Indicated grades have decreased overall by between -2% and -6%. Inferred grades
decreased between -20% and -26% overall (both comparisons excluding gold as it is a very minor
contributor).
The net result in the Measured plus Indicated categories has been an increase in the contained silver
of 18% and an increase in the contained lead metal of 16%. The increase in zinc content was 20%.
The net result in the Inferred category has been an increase in the contained silver metal of 42% and
a significant increase in both the contained lead and zinc metal, with increases of 38% and 32%
respectively.
Reasons for the differences in grade, tonnes, and contained metal include Mineral Resource additions and
conversion to higher categories arising from drilling and level development, different COGs and depletion
due to mining. Additional channel and drillhole samples also became available between the two estimates
to extend the Mineral Resources along-strike and down-dip, and allowed changed interpretation of the
veins, given the greater degree of geological understanding.
Mineral Reserve Estimate
The Mineral Reserve estimates for the Property were prepared by Silvercorp under the guidance of
independent Qualified Person, Mr. H. A. Smith, P.Eng., who takes QP responsibility for those estimates.
The Mineral Reserve estimation is based on the assumption that current stoping practices will continue to
be predominant at the Ying property, namely cut and fill resuing and shrinkage stoping, using hand-held
drills (jacklegs) and hand-mucking within stopes, and loading to mine cars by rocker-shovel or by hand.
The largely sub-vertical veins, generally competent ground, reasonably regular vein width, and hand-mining
techniques using short rounds, allows a significant degree of selectivity and control in the stoping process.
Minimum mining widths of 0.5 m for resuing and 1.0 m for shrinkage are assumed. The QP has observed
the mining methods at the Ying property and considers the minimum extraction and mining width
assumptions to be reasonable. Minimum dilution assumptions are 0.10 m of total overbreak for a resuing
cut and 0.2 m of total overbreak for a shrinkage stope.
For the total tonnage estimated as Ying Mineral Reserves, 49.7% is associated with resuing and 50.3%
with shrinkage.
Cut-off Grades
Mineral Reserves have been estimated using breakeven cut-off values for shrinkage and resuing at each
site as appropriate. The cut-off grade basis is summarized below and in Table 6.
COG AgEq (g/t) = (operating cost + sustaining capital + mineral resources tax) / (Ag price x processing
recovery x payable).
43
In determining metal prices for use in the cut-off calculations, available consensus forecast information,
prices used in recent NI 43-101 reports, three-year trailing averages, and prices current as of March 2020
were referenced. The exchange rate used in the cut-off calculations was arrived at in similar fashion.
44
Table 6
Mineral Reserve cut-off grades and key estimation parameters
Item
Foreign exchange rate
(RMB:US$)
Operating costs (US$/t)
Mining cost
Shipping cost
Milling cost
G&A & product selling cost
Mineral Resources tax
Government fee & other tax
Sustaining Capital (mine
development, exploration
tunneling, PPE)
SGX
HZG
HPG
LME
TLP
LMW
6.90
6.90
6.90
6.90
6.90
6.90
6.90
6.90
6.90
6.90
6.90
6.90
Resuing
Shrinkage
Resuing
Shrinkage
Resuing
Shrinkage
Resuing
Shrinkage
Resuing
Shrinkage
Resuing
Shrinkage
73.63
4.05
10.23
8.30
3.47
2.78
57.55
4.05
10.23
8.30
2.99
2.78
60.36
5.14
10.23
8.30
3.51
2.78
45.19
5.14
10.23
8.30
3.05
2.78
66.30
3.82
10.23
8.30
3.23
2.78
54.39
3.82
10.23
8.30
2.88
2.78
70.04
3.34
10.23
8.30
3.12
2.78
53.78
3.34
10.23
8.30
2.64
2.78
63.52
3.99
10.23
8.30
3.41
2.78
51.79
3.99
10.23
8.30
3.06
2.78
82.27
3.43
10.23
8.30
3.81
2.78
70.28
3.43
10.23
8.30
3.45
2.78
16.72
16.72
30.09
30.09
16.38
16.38
9.42
9.42
24.85
24.85
20.11
20.11
Total operating costs
119.18
102.62
120.41
104.79
111.05
98.78
107.24
90.49
117.08
105.00
130.94
118.59
Mill recoveries
Au (%)
Ag (%)
Pb (%)
Zn (%)
Payables
Au (%)
Ag (%)
Pb (%)
Zn (%)
Full breakeven COG (AgEq g/t) =
(Total operating cost $/t)/($ value
per in situ gram after metallurgical
recovery & payable)
96.5
97.8
64.2
90.0
87.5
72.5
96.5
97.8
64.2
90.0
87.5
72.5
96.8
95.2
96.8
95.2
90.0
87.5
90.0
87.5
90.7
90.2
94.4
63.1
81.0
90.0
87.5
72.5
90.7
90.2
94.4
63.1
81.0
90.0
87.5
72.5
96.9
94.1
34.2
90.0
87.5
72.5
96.9
94.1
34.2
90.0
87.5
72.5
93.4
90.7
93.4
90.7
96.6
96.3
96.6
96.3
90.0
87.5
90.0
87.5
90.0
87.5
90.0
87.5
235
205
240
210
235
210
210
180
240
215
260
235
Notes:
•
•
•
•
Numbers may not compute exactly due to rounding.
Metal price assumptions: Au $1250/oz; Ag $18/oz; Pb $0.95/lb; Zn $1.10/lb.
No Zn value ascribed to ore from HZG, TLP, and LMW sites.
Operating costs from 2020 and 2021 fiscal years (actuals + FY2021 Q4 projection).
Lower COG values have been used for development ore, and for areas where, effectively, all development and drilling for a given stope is complete
and the decision is whether to mine the stope or not. These values are shown in Table 7.
45
Table 7
Development ore and stope marginal cut-off grades
Item
SGX
HZG
HPG
LME
TLP
LMW
Resuing
Shrinkage
Resuing
Shrinkage
Resuing
Shrinkage
Resuing
Shrinkage
Resuing
Shrinkage
Resuing
Shrinkage
Stope marginal
COG (AgEq g/t)
Development ore
COG (AgEq g/t)
215
180
220
190
215
190
180
150
220
195
230
205
145
140
145
120
150
165
Note: Costs, recoveries, payables, and metal price assumptions as per Table 6 above.
Dilution
Minimum mining widths are assumed as 0.5 m and 1.0 m, respectively, for resuing and shrinkage. For
resuing, a dilution factor has been applied to each true vein width up to a minimum extraction width of 0.5
m or to (vein width plus 0.1 m) where the true width is greater than 0.4 m. For shrinkage, a minimum
dilution factor of 0.2 m is added to the minimum vein width of 0.8 m. The QP notes that a key strategy
used at Ying for minimizing floor dilution is the placement of rubber mats and / or conveyor belting over
the waste fill floor in resuing stopes immediately before each resuing blast. This effectively serves as a
barrier between ore and waste.
The dilution calculation process used for the Mineral Reserves estimation assumes that the resulting
figures represent the overall tonnes and grade delivered to surface. There is a small degree of waste hand-
sorting, and therefore upgrading, that occurs underground, depending on the mine and mining method.
The QP considers that the resulting impact of this hand-sorting on the delivered product is not significant
enough to materially affect the dilution factors used in the estimation.
The QP notes that the projections for dilution in both resuing and shrinkage stopes assume a high degree
of process control in terms of design, drilling, and blasting, and that such control on an ongoing basis is
critical to achieving dilution targets.
Table 8 summarizes average dilution from the Mineral Reserve calculations for each of the Ying mines.
The QP considers that the current dilution estimation is reasonable considering the enhanced focus on
mining process control in recent years and the observed results from those efforts.
Table 8 Average dilution by mine and method
Mine
SGX
HZG
HPG
LME
TLP
LMW
Total Ying
Dilution %
Resuing
Shrinkage
15
18
18
16
14
13
15
19
20
19
17
18
14
18
Mining Recovery Factors
Mining recovery estimates used in the Mineral Reserve calculations are based on experience at each of
the Ying operations and for each mining method. For resuing stopes, 95% total recovery is assumed; for
shrinkage stopes, 92% total recovery is assumed. Minimal pillars are anticipated to remain between
adjacent mining blocks in the same vein, and partial recovery in sill pillars is allowed for in the respective
recovery factors.
Mineral Reserve Estimate
To convert Mineral Resources to Mineral Reserves, Silvercorp uses the following procedures:
46
•
•
•
•
•
Selection of Measured and Indicated Resource areas (potential stope blocks) for which the average
AgEq grade is greater than the mine cut-off AgEq grade.
Application of minimum extraction and mining width criteria and calculation of dilution at zero grade.
Estimation of Mineral Reserve potential by applying relevant mining loss factors.
Reconfirmation that diluted AgEq grade is greater than mine cut-off.
Confirmation as Mineral Reserves by considering any other significant cost factors such as
additional waste development required to gain access to the block in question.
Table 9 summarizes the Mineral Reserve estimates for each Ying mine and for the entire Ying operation.
44.1% of the Mineral Reserve tonnage is categorized as Proven and 55.9% is categorized as Probable.
Table 9
Ying Mines Mineral Reserve Estimates at 31 December 2019
Mine
SGX
Reserve
Category
Proven
Probable
Total Proven & Probable
HZG
Proven
Probable
Total Proven & Probable
HPG
Proven
Probable
Total Proven & Probable
LME
Proven
Probable
Total Proven & Probable
LMW
Proven
Probable
Total Proven & Probable
TLP
Proven
Probable
Total Proven & Probable
Ying
Mines
Proven
Probable
Mt
2.48
2.71
5.19
0.30
0.32
0.62
0.48
0.76
1.24
0.36
0.89
1.24
0.42
0.93
1.35
1.25
1.10
2.35
5.29
6.70
Total Proven & Probable
11.99
Au
(g/t)
Ag
(g/t)
298
259
277
356
306
330
88
62
72
352
287
306
347
303
317
241
216
230
276
241
257
1.05
1.38
1.25
0.09
0.16
0.13
Pb
(%)
5.86
5.05
5.43
0.98
0.66
0.82
3.66
3.07
3.29
1.65
1.57
1.59
3.30
2.44
2.71
3.47
2.60
3.07
4.33
3.39
3.81
Zn
(%)
2.80
2.35
2.57
0.24
0.12
0.18
1.52
1.37
1.43
0.37
0.40
0.39
0.28
0.30
0.29
0.34
0.32
0.33
1.59
1.26
1.41
Metal contained in Mineral Reserves
Au
(koz)
16
34
50
16
34
50
Ag
(Moz)
23.73
22.57
46.30
3.42
3.13
6.54
1.34
1.53
2.88
4.05
8.18
12.23
4.73
9.00
13.73
9.71
7.62
17.34
46.99
52.02
99.01
Pb
(kt)
145.2
137.0
282.1
2.9
2.1
5.0
17.4
23.4
40.8
5.9
13.9
19.8
14.0
22.6
36.6
43.5
28.5
72.0
Zn
(kt)
69.4
63.9
133.3
0.7
0.4
1.1
7.2
10.5
17.7
1.3
3.5
4.8
1.2
2.8
4.0
4.2
3.5
7.7
228.9
227.5
456.4
84.0
84.5
168.6
Notes to Mineral Reserve Statement:
•
Cut-off grades (AgEq g/t): SGX – 235 Resuing, 205 Shrinkage; HZG – 240 Resuing, 210 Shrinkage; HPG – 235 Resuing, 210
Shrinkage; LME – 210 Resuing, 180 Shrinkage; TLP – 240 Resuing, 215 Shrinkage; LMW – 260 Resuing, 235 Shrinkage.
Stope Marginal cut-off grades (AgEq g/t): SGX – 215 Resuing, 180 Shrinkage; HZG – 220 Resuing, 190 Shrinkage; HPG –
215 Resuing, 190 Shrinkage; LME – 180 Resuing, 150 Shrinkage; TLP – 220 Resuing, 195 Shrinkage; LMW – 230 Resuing,
205 Shrinkage.
Development Ore cut-off grades (AgEq g/t): SGX – 145; HZG – 140; HPG – 145; LME – 120; TLP – 150; LMW – 165.
Unplanned dilution (zero grade) assumed as 0.05m on each wall of a resuing stope and 0.10m on each wall of a shrinkage
stope.
Mining recovery factors assumed as 95% for resuing and 92% for shrinkage.
Metal prices: gold US$1,250/troy oz, silver US$18/troy oz, lead US$0.95/lb, zinc US$1.10/lb.
Processing recovery factors: SGX – 96.5% Ag, 97.8% Pb, 64.2% Zn; HZG – 96.8% Ag, 95.2% Pb; HPG – 90.7% Au, 90.2%
Ag, 94.4% Pb, 63.1% Zn; LME – 96.9% Ag, 94.1% Pb, 34.2% Zn; TLP – 93.4% Ag, 90.7% Pb; LMW – 96.6% Ag, 96.3% Pb.
Payables: Au – 81%; Ag – 90.0%; Pb – 87.5%; Zn – 72.5%.
Exclusive of mine production to 31 December 2019.
Exchange rate assumed is RMB 6.90 : US$1.00.
Rounding of some figures may lead to minor discrepancies in totals.
•
•
•
•
•
•
•
•
•
•
47
The QP notes that for TLP and LMW, silver and lead Mineral Reserve grades are approximately the same
as the average silver and lead mined grades over the FY2017 to FY2020 timeframe. For the combined
SGX, HZG, HPG, and LME mines, average silver and lead Mineral Reserve grades show an approximately
25% reduction compared to the average silver and lead mined grades over the FY2017 to FY2020 period,
whereas average zinc Mineral Reserve grades show an approximately 25% increase. This is consistent
with the mining plan generally moving to depth in these mining areas as the life-of-mine (LOM) progresses.
The QP also notes that the grade distribution of the Mineral Reserves and a continued focus on best mining
practices and minimizing dilution provide a continuing opportunity to mine at above-overall-average grades
in at least the early stages of the projected remaining LOM.
Table 10 below summarizes the total tonnage mined and total metals produced from the Ying Projects as
a whole between December 31, 2019, the date of the latest Mineral Reserve report, and March 31, 2021:
Table 10
Tonnage mined and metal produced since Ying Report date
Ore Mined (Mt)
Silver Produced (Moz)
Gold Produced (oz)
Lead Produced (t)
Zinc Produced (t)
Production, year
ended March 31,
2021
Production, three
months ended
March 31, 2020
Total Production since
latest Mineral Reserve
report
(December 31, 2019)
0.65
5.61
3,500
26,257
3,137
0.07
0.71
500
4,765
679
0.72
6.32
4,000
31,022
3,816
Note: Table 10 and the immediately preceding text that references it are subsequent to, and do not form part, of the Ying Report.
Mineral Reserves Sensitivity to Cut-off Grade
The sensitivity of the Ying Mineral Reserves to variation in COG has been tested by applying a 20%
increase in COG to Mineral Reserves at each of the Ying mines. The approximate percentage differences
in contained AgEq ounces for each of the Ying mines and for the property as a whole are shown in Table
11:
Table 11
Estimated Reduction in Contained AgEq Oz in Mineral Reserves for COG increase
COGs increased by 20%
Mine AgEq oz reduction
Ying total AgEq oz reduction
SGX
4.7%
of 20%
HZG
12.0%
HPG
21.0%
LME
9.4%
TLP
14.1%
LMW
11.4%
8.8%
The lowest sensitivities are seen at SGX and LME with, respectively, estimated 4.7% and 9.4% reductions
in contained AgEq ounces when the COG is increased by 20%. The highest reduction of 21.0% is noted at
HPG. For Ying as a whole, an approximately 8.8% reduction in AgEq ounces demonstrates relatively low
overall COG sensitivity.
Conversion of Mineral Resources to Reserves
Table 12 compares the respective sums of Measured plus Indicated Resources and Proven plus Probable
Reserves for each of the Ying mines and the entire Ying operation.
48
Table 12
Mineral Resources and Mineral Reserves comparison
Tonnes
(Mt)
Au
(g/t)
Pb (%)
Zn (%)
Au
(koz)
Mine1
SGX
Resource MS+ID
Reserve Prv+Prb
Conversion percentages
HZG
Resource MS+ID
Reserve Prv+Prb
Conversion percentages
HPG
Resource MS+ID
Reserve Prv+Prb
Conversion percentages
LME
Resource MS+ID
Reserve Prv+Prb
Conversion percentages
TLP
Resource MS+ID
Reserve Prv+Prb
Conversion percentages
LMW
Resource MS+ID
Reserve Prv+Prb
Conversion percentages
DCG1
Resource MS+ID
Reserve Prv+Prb
Conversion percentages
Total
Resource MS+ID
Reserve Prv+Prb
Conversion percentages
-
-
1.28
1.25
98%
-
-
-
Ag
(g/t)
284
277
98%
305
330
108%
77
72
5.60
5.43
97%
0.87
0.82
94%
3.29
3.29
2.82
2.57
91%
0.20
0.18
90%
1.35
1.43
94%
100%
106%
301
306
102%
185
230
1.65
1.59
96%
3.06
3.07
0.42
0.39
92%
0.32
0.33
124%
100%
101%
278
317
2.55
2.71
0.29
0.29
114%
106%
102%
-
-
98.2
49.9
51%
-
-
-
0.09
59
3.78
0.15
0.17
-
-
0.15
0.13
85%
-
-
234
257
-
-
3.64
3.81
-
-
1.28
1.41
110%
105%
110%
-
-
98.4
49.9
51%
Ag
(Moz)
61.86
46.30
75%
10.72
6.54
61%
5.87
2.88
49%
16.16
12.23
76%
32.27
17.34
54%
24.29
13.73
57%
0.12
-
-
Pb (kt)
Zn (kt)
379.1
282.1
74%
190.6
133.3
70%
9.5
5.0
53%
78.3
40.8
52%
27.5
19.8
72%
166.4
72.0
43%
69.1
36.6
53%
2.3
-
-
2.1
1.1
51%
32.1
17.7
55%
7.0
4.8
69%
17.5
7.7
44%
7.9
4.0
50%
0.1
-
-
151.26
732.3
99.01
456.4
65%
62%
257.3
168.6
66%
6.77
5.19
77%
1.09
0.62
56%
2.38
1.24
52%
1.67
1.24
75%
5.43
2.35
43%
2.71
1.35
50%
0.06
-
-
20.12
11.99
60%
Notes: Numbers may not compute exactly due to rounding.
MS+ID = Measured and Indicated Mineral Resources, Prv+Prb = Proven and Probable Mineral Reserves
1 DCG Project Measured and Indicated Resources included.
For the Property as a whole, total Mineral Reserve tonnes are approximately 60% of Mineral Resource
(Measured plus Indicated) tonnes. Silver, lead, and zinc Mineral Reserve grades are 110%, 105%, and
110% respectively of the corresponding Measured plus Indicated Mineral Resource grades. Metal
conversion percentages for silver, lead, and zinc are 65%, 62%, and 66% respectively.
With respect to the difference in tonnes and metal content between (Measured plus Indicated) Mineral
Resources and (Proven plus Probable) Mineral Reserves, the QP makes note that: a) Mineral Resource
COGs are approximately aligned with development ore cut-offs at each mine; and b) Mineral Resource
areas that are not yet part of the LOM plan are not eligible for inclusion as Mineral Reserves.
Comparison of Mineral Reserves, mid-2016 to end-2019
Table 13 shows Ying Mineral Reserves as of mid-2016 (previous Technical Report) and as of end 2019
(this Technical Report). The 2019 Mineral Reserves do not include ore mined since mid 2016.
49
Table 13
Change in Mineral Reserves, mid-2016 to end-2019
Mine
Category
Tonnes
(Mt)
Au
(g/t)
Ag
(g/t)
SGX 2016
Proven
Probable
Total Proven & Probable
SGX 2019
Proven
Probable
Total Proven & Probable
SGX %
Change
Proven
Probable
Total Proven & Probable
HZG 2016
Proven
Probable
Total Proven & Probable
HZG 2019
Proven
Probable
Total Proven & Probable
HZG %
Change
Proven
Probable
Total Proven & Probable
HPG 2016
Proven
Probable
Total Proven & Probable
HPG 2019
Proven
Probable
Total Proven & Probable
HPG %
Change
Proven
Probable
Total Proven & Probable
LME 2016
Proven
Probable
Total Proven & Probable
LME 2019
Proven
Probable
Total Proven & Probable
LME %
Change
Proven
Probable
Total Proven & Probable
TLP 2016
Proven
Probable
Total Proven & Probable
TLP 2019
Proven
Probable
Total Proven & Probable
Proven
2.32
3.18
5.50
2.48
2.71
5.19
7%
-15%
-6%
0.23
0.35
0.59
0.30
0.32
0.62
30%
-9%
4%
0.47
0.29
0.76
0.48
0.76
1.24
1%
163%
63%
0.20
0.75
0.95
0.36
0.89
1.24
81%
17%
31%
1.00
1.48
2.47
1.25
1.10
2.35
25%
272
248
258
298
259
277
9%
4%
7%
348
285
310
356
306
330
2%
7%
7%
88
108
95
88
62
72
0%
-42%
-24%
288
298
296
352
287
306
22%
-4%
3%
223
178
196
241
216
230
8%
1.10
1.15
1.12
1.05
1.38
1.25
-5%
20%
12%
Pb
(%)
5.25
4.86
5.02
5.86
5.05
5.43
12%
4%
8%
1.03
0.77
0.88
0.98
0.66
0.82
-5%
Zn
(%)
2.69
2.11
2.35
2.80
2.35
2.57
4%
12%
9%
0.20
0.15
0.17
0.24
0.12
0.18
18%
-14%
-20%
-7%
3.76
3.28
3.57
3.66
3.07
3.29
-3%
-6%
-8%
1.45
2.11
1.97
1.65
1.57
1.59
14%
4%
1.13
1.17
1.15
1.52
1.37
1.43
35%
17%
24%
0.27
0.46
0.42
0.37
0.40
0.39
34%
-26%
-14%
-19%
3.45
2.91
3.13
3.47
2.60
3.07
1%
-8%
0.26
0.29
0.28
0.34
0.32
0.33
29%
50
Metal contained in Mineral Reserves
Au
(koz)
16
11
27
16
34
50
-2%
212%
83%
Ag
(Moz)
20.28
25.4
45.68
23.73
22.57
46.30
17%
-11%
1%
2.60
3.23
5.83
3.42
3.13
6.54
31%
-3%
12%
1.31
1.02
2.33
1.34
1.53
2.88
3%
50%
23%
1.82
7.23
9.06
4.05
8.18
12.23
122%
13%
35%
7.15
8.45
15.60
9.71
7.62
17.34
36%
Pb
(kt)
121.6
154.6
276.2
145.2
137.0
282.1
19%
-11%
2%
2.4
2.7
5.1
2.9
2.1
5.0
22%
-23%
-2%
17.5
9.7
27.2
17.4
23.4
40.8
0%
143%
50%
2.9
15.9
18.8
5.9
13.9
19.8
107%
-13%
5%
34.4
43.1
77.5
43.5
28.5
72.0
26%
Zn
(kt)
62.2
67.1
129.3
69.4
63.9
133.3
12%
-5%
3%
0.5
0.5
1.0
0.7
0.4
1.1
50%
-27%
10%
5.3
3.5
8.7
7.2
10.5
17.7
38%
203%
103%
0.5
3.5
4.0
1.3
3.5
4.8
143%
1%
20%
2.6
4.3
6.9
4.2
3.5
7.7
61%
Mine
Category
Tonnes
(Mt)
Au
(g/t)
Ag
(g/t)
Pb
(%)
Zn
(%)
Metal contained in Mineral Reserves
Au
(koz)
Ag
(Moz)
Pb
(kt)
Zn
(kt)
TLP %
Change
Probable
-26%
21%
-11%
9%
-10%
-34%
-19%
Total Proven & Probable
LMW 2016
Proven
Probable
Total Proven & Probable
LMW 2019
Proven
Probable
Total Proven & Probable
LMW %
Change
Proven
Probable
Total Proven & Probable
Ying Total
2016
Proven
Probable
Total Proven & Probable
Ying Total
2019
Proven
Probable
Total Proven & Probable
Ying %
Change
Proven
Probable
Total Proven & Probable
-5%
0.46
1.57
2.04
0.42
0.93
1.35
-8%
-41%
-34%
4.67
7.63
12.30
5.29
6.70
11.99
13%
-12%
-3%
17%
316
234
252
347
303
317
10%
29%
25%
252
233
240
276
241
257
0.11
0.04
0.07
0.09
0.16
0.13
-14%
10%
292%
85%
4%
7%
-2%
3.29
2.61
2.76
3.30
2.44
2.71
0%
-6%
-2%
4.15
3.50
3.75
4.33
3.39
3.81
4%
-3%
2%
17%
0.25
0.29
0.28
0.28
0.30
0.29
12%
3%
4%
1.55
1.09
1.27
1.59
1.26
1.41
3%
16%
11%
16
11
27
16
34
50
-2%
212%
83%
11%
4.69
11.83
16.52
4.73
9.00
13.73
1%
-24%
-17%
37.85
57.16
95.02
46.99
52.02
99.01
24%
-9%
4%
-7%
15.2
41.0
56.2
14.0
22.6
36.6
-8%
-45%
-35%
194.0
267.0
461.0
228.9
227.5
456.4
18%
-15%
-1%
11%
1.1
4.6
5.8
1.2
2.8
4.0
3%
-40%
-31%
72.2
83.5
155.7
84.0
84.5
168.6
16%
1%
8%
Some significant aspects of the comparison are:
•
•
•
•
•
•
•
•
•
•
3% decrease in total (Proven + Probable) Ying Mineral Reserve tonnes.
Increase in total Ying Mineral Reserve silver, lead, and zinc grades of 7%, 2%, and 11%, respectively.
Increases in total Ying Mineral Reserve metal content for silver and zinc of 4% and 8% respectively;
1% decrease in total lead content.
SGX continues being the leading contributor to the total Ying Mineral Reserves, accounting for 43%
of tonnes, 47% of silver, 62% of lead, and 79% of zinc, compared to respective values of 45%, 48%,
60%, and 83% in 2016.
6% decrease in total Mineral Reserve tonnes at SGX, but slight increases in total metal content for
silver, lead and zinc of 1%, 2%, and 3% respectively.
63% increase in total Mineral Reserve tonnes at HPG, with corresponding increases in silver, lead
and zinc content of 23%, 50%, and 103% respectively. Gold Mineral Reserves also increased from
27 koz to 50 koz at HPG.
31% increase in total Mineral Reserve tonnes at LME, with corresponding increases in silver, lead
and zinc content of 35%, 5%, and 20%, respectively.
34% decrease in total Mineral Reserve tonnes at LMW, with corresponding decreases in silver, lead
and zinc content of 17%, 35%, and 31%, respectively.
4% increase in total Mineral Reserve tonnes at HZG, with corresponding increases in silver and zinc
content of 12% and 10% respectively; 2% decrease in total lead content.
5% decrease in total Mineral Reserve tonnes at TLP, but with increases in both silver and zinc content
of 11%; 7% decrease in total lead content.
51
Mining Operations
The Ying mine complex is a viable operation with a projected LOM through to 2040 based on Proven and
Probable Reserves. The potential exists for an extended LOM via further exploration and development,
particularly in areas of Inferred Resources.
Annual ore production is projected to be maintained between 655 kt and 687 kt through to and including
FY2031. From FY2032 to FY2036, ore production is projected to average about 600 ktpa, and then to drop
from 443 ktpa to 283 ktpa over the final four years, as operations at the SGX, HPG, LME, and LMW mines
wind down. The QP notes that the development and infrastructure required to allow production as projected
is either already in place, is in development, or has been planned. The ability to achieve projected
production will, to a large degree, be dependent on diligent planning and the consistent availability of
resources, particularly skilled manpower and, although there is a certain amount of risk associated with the
provision of key resources, the Ying mines performance in recent years lends support to a having a good
degree of confidence that production tonnage targets can be achieved.
Silver grades, particularly driven by SGX, are indicated to steadily decrease over the LOM. Through to and
including 2025, the silver grade is projected to average 307 g/t. Beyond 2025, the silver grade ranges
between 267 g/t and 203 g/t, but with the AgEq grade maintained in a fairly narrow range between 378 g/t
and 436 g/t. The full LOM average AgEq grade is projected at 454 g/t. The grade profile is consistent with
the mines developing more to depth, with a general decrease in Ag grades and a corresponding increase
in Pb and Zn grades.
The Ying mines safety is governed by Chinese statutory requirements and the QP acknowledges that, in
certain areas, those requirements are exceeded. The QP advises, however, that Silvercorp should continue
with a focus on safety improvement, including implementation of a policy where the more stringent of either
Chinese or Canadian safety standards are employed.
The generally good ground conditions, and the regularity and sub-vertical nature of the Ying district veins,
could provide an opportunity to effectively employ more bulk-mining methods such as longhole benching,
and still with reasonable dilution. The QP recognizes the technological change that would be required for
their implementation but recommends that Silvercorp investigate the application of such methods.
Processing and Recovery Operations
Silvercorp runs two processing plants, Plants 1 and 2, at the Property, with a total current design capacity
of about 2,800 tpd. The two plants are situated within 2 km of each other. Both were designed based on
the lab tests completed by HNMRI in 2005. Plant 1 (Xiayu Plant - originally 600 tpd, upgraded to 800 tpd)
has been in operation since March 2007. Plant 2 (Zhuangtou Plant) has been in production since December
2009, with an expansion from 1,000 tpd to 2,000 tpd completed in October 2011. Although current design
processing capacity is about 2,800 tpd, it is understood that the actual capacity could reach 3,000 – 3,200
tpd. However, current LOM planning requires that the plants operate up to around 2,000 tpd.
The overall processes of the two plants are similar and comprise crushing, grinding, flotation of lead and
zinc concentrates, and concentrate dewatering. Plant 1 currently produces only a lead / silver concentrate.
In the LOM plan, the majority of ore tonnes will be processed through Plant 2, with Plant 1 being used as a
backup to process low grade ore or development ore from LM, HZG, and part of TLP.
To optimize profitability, high grade lead concentrate from Plant 2 is blended with middle grade lead
concentrate from Plant 1.
SGX / HPG ores also contain high-grade, large-size galena lumps with characteristic specular silver grey
colour. These may be hand-sorted at the mine sites, crushed, and then shipped by dedicated trucks to
Plant 1. The lumps can be milled in a dedicated facility, and then sold directly, or mixed with flotation lead
concentrate for sale.
52
Both Plants 1 and 2 have exceeded target throughput levels. Lead and silver recovery targets are being
met, although zinc recovery is lower than design, attributed to low zinc feed grades.
After innovation and modification to both plants over the last few years, lead and silver recoveries have
increased significantly. Improvements have been consistently targeted on process system and other
facilities both in Plant 1 and Plant 2 to improve the metal recovery and reduce energy consumption.
Historically, higher-grade feed from SGX has enhanced plant performance but, with the proportion of SGX
ore decreasing, the challenge is to maintain similar metallurgical performance on lower grade feedstock.
From recent performance, it appears that recoveries are being maintained but concentrate grades are lower
than target, however, not to the extent where there is a major deterioration in smelter terms.
Infrastructure, Permitting and Compliance Activities
There are two tailings management facilities (TMF); TMF 1, adjacent to and serving Plant 1, and TMF 2,
adjacent to and serving Plant 2. TMF 2 was completed in July 2012 and put into service in April 2013. The
QP understands that site-specific risk assessment, such as for geotechnical risk, was originally carried out
by Henan Luoyang Yuxi Hydrological & Geological Reconnaissance Company, with more recent
assessments done by other organizations.
The TMFs were designed based on then current Mineral Resource / Mineral Reserve estimations and LOM
production projections. Subsequent resource expansion and increased production projections indicate that
the current tailings capacity will not be adequate for the full Ying LOM. Additional tailings capacity will thus
be required in the later period of the LOM production. There are several location options for the third TMF,
with assessment of those options still in the study stage. It is expected that there will be no problem to get
permission to build the third TMF once it becomes necessary.
Reclaimed water from the tailings storage ponds and overflows from the two concentrators is recycled to
minimize fresh water requirements. Zero discharge of the process water has been achieved at both TMFs
in no-rainfall seasons.
Each mine in the Ying Property has a number of rock waste dumps. Waste dump capacity at all mines is
enough for the anticipated LOM waste rock. Silvercorp is investing approximately $2.9 million (M) to
construct a 1 Mtpa aggregate plant to recycle and crush the waste rock from the Ying Mining District, and
then supply it to the local construction market. The plant is expected to be commissioned in October 2020,
and its profit, after capital recovery, will be shared between the local government, the local communities,
and employees.
Power for the Ying Property is drawn from Chinese National Grids with high-voltage lines to the different
mine camps and mill plants. At SGX, one 35 kV overhead line supplies main power for all production, and
two 10 kV lines act mainly as a standby source of power in case of disruption. In addition, two 1,500 kW
and one 1,200 kW diesel generators installed at one of the substations act as back-up power supply in the
event of a grid power outage.
Access to the SGX / HZG mine from Silvercorp’s mill office complex is via a 7 km paved road to the Hedong
wharf of the Guxian Reservoir, and then across the reservoir by boat to the mine site. Two large barges
carry up to five 45 t ore trucks from the SGX / HZG and HPG mines to the plants. The HPG mine can be
accessed either by boat or 12 km paved road, south-west of the main office complex. Ore from the TLP
and LM mines is hauled to the Silvercorp central mill using 30 and 45 t truck fleets. The TLP, LME, and
LMW mines are 15 km south-east of the main office complex and are accessed by paved road along the
Chongyang River.
Silvercorp has all the required permits for its operations on the Property. The existing mining permits cover
all the active mining areas and, in conjunction with safety and environmental certificates, give Silvercorp
the right to carry out full mining and mineral processing operations. Six safety certificates have been issued
53
by the Department of Safety Production and Inspection of Henan Province, covering the SGX mine,
Zhuangtou TMF, Shiwagou TMF, HPG mine, TLP mine, LMW mine, and LME mine. Five environmental
certificates have been issued by the Department of Environmental Protection of Henan Province, covering
the Yuelianggou project (SGX mine and 1,000 tpd mill plant), HPG mine, TLP mine, LMW mine, LME mine,
and the 2,000 tpd mill plant built in 2009. For each of these certificates, there are related mine development
/ utilization and soil / water conservation programs, and rehabilitation plan reports. Silvercorp has also
obtained approvals and certificates for wastewater discharge locations at the SGX mine, the HPG mine,
and the two TMFs. All certificates must be renewed periodically.
There are no cultural minority groups within the area surrounding the general project. The culture of the
broader Luoning County is predominantly Han Chinese. No records of cultural heritage sites exist within or
near the SGX, HZG, TLP, LME, LMW, and HPG project areas. The surrounding land near the SGX Mining
Area is used predominantly for agriculture. The mining area does not cover any natural conservation,
ecological forests or strict land control zones. Current area vegetation is mainly secondary, including farm
plantings. Larger wild mammals have not been found in the region. Small birds nesting and moving in the
woodland are observed occasionally. The surrounding villagers raise domestic animals, such as chickens,
ducks, pigs, sheep, and goats.
Capital and Operating Costs
Summary of Capital Costs
The main capital requirement at the Property is for mine development. Provision is also made for exploration
drilling and for sustaining surface facilities, plant expenditure, personal protective equipment, and
equipment in general. Specific processing plant capital requirements are projected to be minimal as plant
capacity has previously been expanded to meet the forecast mine production.
Projected LOM capital costs, by mine and for Ying as a whole, are summarized in Table 14. An exchange
rate of US$1 = 6.90 RMB is assumed.
54
Table 14
Projected Ying LOM Capex (US$M)
Cost item
SGX
Sustaining Capex
Exploration & mine development tunneling
Facilities, plant, and equipment
Investment Capex
Total SGX Capex
HZG
Sustaining Capex
Exploration & mine development tunneling
Facilities, plant, and equipment
Investment Capex
Total HZG Capex
HPG
Sustaining Capex
Exploration & mine development tunneling
Facilities, plant, and equipment
Investment Capex
Total HPG Capex
TLP
Sustaining Capex
Exploration & mine development tunneling
Facilities, plant, and equipment
Investment Capex
Total TLP Capex
LME
Sustaining Capex
Exploration & mine development tunneling
Facilities, plant, and equipment
Investment Capex
Total LME Capex
LMW
Sustaining Capex
Exploration & mine development tunneling
Facilities, plant, and equipment
Investment Capex
Total LMW Capex
Ying Total
Sustaining Capex
M
O
L
l
a
t
o
T
21.94
17.59
34.26
73.79
11.22
1.63
11.54
24.39
7.67
4.78
5.71
18.16
9.79
8.06
17.33
35.18
5.96
2.70
12.28
20.94
9.99
6.73
11.27
27.99
1
2
0
2
Y
F
2
2
0
2
Y
F
3
2
0
2
Y
F
4
2
0
2
Y
F
5
2
0
2
Y
F
6
2
0
2
Y
F
7
2
0
2
Y
F
8
2
0
2
Y
F
9
2
0
2
Y
F
0
3
0
2
Y
F
1
3
0
2
Y
F
2
3
0
2
Y
F
3
3
0
2
Y
F
4
3
0
2
Y
F
5
3
0
2
Y
F
6
3
0
2
Y
F
7
3
0
2
Y
F
8
3
0
2
Y
F
9
3
0
2
Y
F
0
4
0
2
Y
F
4.55
0.87
3.36
8.78
1.59
0.14
0.98
2.71
0.66
0.25
0.04
0.95
4.54
0.51
1.85
6.90
1.32
0.14
0.58
2.04
0.88
0.33
0.98
2.19
3.38
0.87
3.36
7.61
1.60
0.14
1.13
2.87
0.86
0.25
0.09
1.20
1.81
0.49
1.68
3.98
1.31
0.15
0.69
2.15
0.93
0.34
1.00
2.27
3.12
0.87
3.61
7.60
1.75
0.14
0.68
2.57
0.61
0.27
0.13
1.01
0.97
0.52
1.78
3.27
0.88
0.17
0.97
2.02
1.01
0.36
1.07
2.44
1.87
0.88
3.68
6.43
1.58
0.14
0.79
2.51
0.62
0.27
0.20
1.09
0.75
0.51
1.16
2.42
0.70
0.15
0.95
1.80
1.05
0.35
1.08
2.48
1.85
0.89
3.43
6.17
1.73
0.14
0.62
2.49
0.62
0.28
0.10
1.00
0.36
0.49
1.54
2.39
0.87
0.17
0.73
1.77
0.94
0.35
1.12
2.41
1.28
0.89
3.15
5.32
1.03
0.14
0.97
2.14
0.56
0.28
0.15
0.99
0.13
0.56
1.68
2.37
0.44
0.15
0.92
1.51
0.91
0.34
1.20
2.45
0.91
0.89
2.56
4.36
0.69
0.14
1.20
2.03
0.47
0.27
0.38
1.12
0.21
0.54
1.52
2.27
0.17
0.16
0.81
1.14
0.66
0.34
1.18
2.18
0.90
0.89
2.17
3.96
0.43
0.14
1.39
1.96
0.50
0.28
0.48
1.26
0.29
0.57
1.14
2.00
0.17
0.18
0.69
1.04
0.72
0.35
1.04
2.11
0.95
0.89
1.50
3.34
0.18
0.14
1.56
1.88
0.71
0.27
0.22
1.20
0.19
0.51
1.06
1.76
0.05
0.16
0.73
0.94
0.48
0.34
1.12
1.94
0.64
0.89
1.22
2.75
0.60
0.89
1.13
2.62
0.63
0.89
1.00
2.52
0.47
0.89
0.98
2.34
0.52
0.89
0.63
2.04
0.11
0.89
0.89
1.89
0.08
0.89
0.78
1.75
0.08
0.89
0.40
1.37
-
0.86
0.28
1.14
-
0.84
0.13
0.97
-
0.83
-
0.83
0.42
0.14
1.53
2.09
0.13
0.12
0.32
0.57
0.09
0.11
0.37
0.57
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
0.46
0.27
0.14
0.87
0.46
0.27
0.22
0.95
0.21
0.27
0.82
1.30
0.17
0.27
0.85
1.29
0.10
0.27
0.61
0.98
0.34
0.27
0.45
1.06
0.26
0.26
0.42
0.94
0.06
0.24
0.41
0.71
-
0.24
-
0.24
0.14
0.48
0.86
1.48
0.14
0.49
0.93
1.56
0.09
0.49
0.84
1.42
0.07
0.49
0.59
1.15
0.07
0.49
0.70
1.26
0.03
0.48
-
-
0.44
-
0.51
0.44
-
-
-
-
0.05
0.17
0.78
1.00
-
0.18
0.82
1.00
-
0.16
0.61
0.77
-
0.16
0.66
0.82
-
0.16
0.73
0.89
-
0.16
0.82
0.98
-
0.14
0.79
0.93
-
0.14
-
0.14
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
0.25
0.34
0.80
1.39
0.35
0.34
0.48
1.17
0.27
0.34
0.20
0.81
0.24
0.35
-
0.27
0.34
-
0.33
0.34
-
0.19
0.33
-
0.14
0.33
-
0.13
0.34
-
0.16
0.31
-
0.08
0.27
-
0.59
0.61
0.67
0.52
0.47
0.47
0.47
0.35
Exploration & mine development tunneling
Facilities, plant, and equipment
Investment Capex
Total Ying Capex
66.57
41.49
92.39
13.54
2.24
7.79
9.89
2.24
7.95
8.34
2.33
8.24
6.57
2.30
7.86
6.37
2.32
7.54
4.35
2.36
8.07
3.11
2.34
7.65
3.01
2.41
6.91
2.56
2.31
6.19
200.45
23.57
20.08
18.91
16.73
16.23
14.78
13.10
12.33
11.06
1.96
2.29
5.33
9.58
1.68
2.29
3.90
7.87
1.29
2.26
3.84
7.39
0.95
2.16
3.08
6.19
0.96
2.15
2.67
5.78
0.81
2.14
2.16
5.11
0.53
2.06
1.99
4.58
0.28
1.60
0.81
2.69
0.13
1.44
0.28
1.85
0.16
1.15
0.13
1.44
0.08
1.10
-
1.18
Notes: Numbers may not compute exactly due to rounding. Q4 FY2020 not included.
55
Summary of Operating Costs
Major operating cost categories are mining, shipping, milling, G&A, product selling, Mineral Resources tax, and government fees and other taxes. Silvercorp utilizes
contract labour for mining on a rate per tonne or a rate per metre basis. The contract includes all labour, all fixed and mobile equipment, materials, and consumables,
including fuel and explosives, which are purchased through the company. Ground support consumables such as timber and power to the portal areas are the
responsibility of the company. Shipping costs are for moving ore from each mine to the processing plant. Principal components of the milling costs are utilities
(power and water), consumables (grinding steel and reagents) and labour, each approximately one third of the total cost. G&A costs include an allowance for tailings
dam and other environmental costs. The major capital expenditure on the two tailings storage facilities has already been expended and ongoing costs associated
with progressively raising the dam are regarded as an operating cost. The provision for Mineral Resources tax is approximately 3% of sales. Table 15 summarizes
projected LOM operating costs, by mine, and for Ying as a whole. An exchange rate of US$1 = 6.90 RMB is assumed.
Table 15
Projected Ying LOM Opex (US$M)
Cost item
SGX
Mining
Shipping
Milling
G&A and product selling
Mineral Resources tax
Government fee and
other tax
Total
LOM
FY2021
FY2022
FY2023
FY2024
FY2025
FY2026
FY2027
FY2028
FY2029
FY2030
FY2031
FY2032
FY2033
FY2034
FY2035
FY2036
FY2037
FY2038
FY2039
FY2040
357.80
18.95
18.16
17.66
18.25
18.73
18.62
18.48
18.69
18.45
18.09
18.15
18.06
18.40
17.95
17.76
17.51
17.22
17.68
16.53
14.46
20.93
52.82
42.89
43.56
1.03
2.61
2.12
2.61
1.03
2.61
2.12
2.56
1.03
2.61
2.12
2.48
1.05
2.66
2.16
2.37
1.06
2.67
2.17
2.32
1.06
2.67
2.17
2.24
1.06
2.67
2.17
2.20
1.06
2.67
2.17
2.16
1.06
2.68
2.17
2.18
1.06
2.67
2.17
2.17
1.06
2.67
2.17
2.15
1.06
2.68
2.17
2.15
1.06
2.67
2.17
2.15
1.06
2.67
2.17
2.11
1.06
2.68
2.17
2.11
1.06
2.67
2.17
2.08
1.06
2.67
2.16
2.04
1.03
2.59
2.10
1.91
1.00
2.52
2.05
1.82
0.98
2.48
2.02
1.75
14.40
0.71
0.71
0.71
0.72
0.73
0.73
0.73
0.73
0.73
0.73
0.73
0.73
0.73
0.73
0.73
0.73
0.72
0.70
0.69
0.68
Total SGX Opex
532.40
28.03
27.19
26.61
27.21
27.68
27.49
27.31
27.48
27.27
26.89
26.93
26.85
27.18
26.69
26.51
26.22
25.87
26.01
24.61
22.37
HZG
Mining
Shipping
Milling
G&A and product selling
Mineral Resources tax
Government fee and
other tax
33.90
3.09
6.20
5.05
3.63
1.71
3.22
0.26
0.52
0.42
0.36
3.05
0.25
0.51
0.42
0.35
3.31
0.27
0.54
0.44
0.37
3.26
0.27
0.54
0.44
0.35
3.24
0.27
0.54
0.44
0.33
3.02
0.27
0.54
0.44
0.33
2.93
0.27
0.54
0.44
0.33
2.72
0.27
0.54
0.44
0.30
2.60
0.27
0.54
0.44
0.29
2.68
0.27
0.54
0.44
0.27
1.97
0.22
0.44
0.36
0.19
1.90
0.20
0.41
0.33
0.16
0.14
0.14
0.15
0.15
0.15
0.15
0.15
0.15
0.15
0.15
0.12
0.11
Total HZG Opex
53.58
4.92
4.72
5.08
5.01
4.97
4.75
4.66
4.42
4.29
4.35
3.30
3.11
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
HPG
Mining
Shipping
Milling
G&A and product selling
Mineral Resources tax
Government fee and
other tax
74.74
4.71
12.55
10.19
5.59
4.56
0.24
0.64
0.52
0.34
3.98
0.25
0.66
0.54
0.34
4.39
0.26
0.70
0.57
0.37
4.45
0.27
0.72
0.58
0.37
4.51
0.27
0.72
0.59
0.37
4.61
0.27
0.72
0.59
0.37
4.46
0.27
0.72
0.58
0.35
4.55
0.27
0.72
0.59
0.35
4.37
0.27
0.72
0.58
0.33
4.78
0.27
0.72
0.58
0.33
4.60
0.27
0.72
0.58
0.33
3.93
0.27
0.72
0.58
0.33
3.81
0.27
0.71
0.58
0.31
3.84
0.26
0.71
0.58
0.27
3.76
0.27
0.71
0.58
0.25
3.81
0.25
0.67
0.54
0.21
3.28
0.24
0.64
0.52
0.19
3.05
0.24
0.63
0.51
0.18
3.42
0.18
0.18
0.19
0.19
0.20
0.20
0.20
0.20
0.19
0.20
0.20
0.20
0.19
0.19
0.19
0.18
0.17
0.17
Total HPG Opex
111.20
6.48
5.95
6.48
6.58
6.66
6.76
6.58
6.68
6.46
6.88
6.70
6.03
5.87
5.85
5.76
5.66
5.04
4.78
TLP
Mining
Shipping
Milling
119.41
9.25
23.74
8.25
0.58
1.50
6.90
0.56
1.44
8.34
0.60
1.53
8.39
0.59
1.51
7.92
0.56
1.44
8.68
0.64
1.65
7.88
0.62
1.59
8.44
0.66
1.69
56
7.89
0.58
1.49
7.04
0.55
1.41
6.94
0.56
1.43
7.23
0.56
1.44
7.13
0.56
1.44
6.66
0.57
1.45
6.39
0.55
1.42
5.33
0.51
1.31
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Cost item
G&A and product selling
Mineral Resources tax
Government fee and
other tax
Total
LOM
19.26
12.20
FY2021
FY2022
FY2023
FY2024
FY2025
FY2026
FY2027
FY2028
FY2029
FY2030
FY2031
FY2032
FY2033
FY2034
FY2035
FY2036
FY2037
FY2038
FY2039
FY2040
1.21
0.76
1.17
0.78
1.24
0.84
1.23
0.87
1.17
0.79
1.34
0.91
1.29
0.85
1.37
0.87
1.21
0.78
1.14
0.69
1.16
0.73
1.17
0.73
1.17
0.73
1.18
0.71
1.15
0.64
1.06
0.52
6.45
0.41
0.39
0.42
0.41
0.39
0.45
0.43
0.46
0.41
0.38
0.39
0.39
0.39
0.39
0.39
0.35
Total TLP Opex
190.31
12.71
11.24
12.97
13.00
12.27
13.67
12.66
13.49
12.36
11.21
11.21
11.52
11.42
10.96
10.54
9.08
LME
Mining
Shipping
Milling
G&A and product selling
Mineral Resources tax
Government fee and
other tax
53.18
4.11
12.60
10.22
7.46
3.46
0.21
0.66
0.53
0.51
3.43
0.23
0.70
0.57
0.56
3.47
0.26
0.78
0.63
0.63
3.27
0.23
0.72
0.58
0.52
2.98
0.25
0.77
0.62
0.53
2.84
0.23
0.70
0.57
0.42
3.07
0.24
0.74
0.60
0.43
3.32
0.27
0.81
0.66
0.45
3.02
0.25
0.76
0.62
0.45
3.00
0.26
0.79
0.64
0.41
3.29
0.27
0.83
0.67
0.43
3.09
0.25
0.76
0.62
0.44
3.28
0.25
0.76
0.62
0.37
3.07
0.24
0.75
0.61
0.36
3.00
0.25
0.76
0.62
0.34
2.81
0.21
0.66
0.53
0.32
2.78
0.21
0.65
0.53
0.29
3.43
0.18
0.19
0.21
0.19
0.21
0.19
0.20
0.22
0.21
0.22
0.22
0.21
0.21
0.20
0.21
0.18
0.18
Total LME Opex
91.00
5.55
5.68
5.98
5.51
5.36
4.95
5.28
5.73
5.31
5.32
5.71
5.37
5.49
5.23
5.18
4.71
4.64
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
LMW
Mining
Shipping
Milling
G&A and product selling
Mineral Resources tax
Government fee and
other tax
89.35
4.57
13.68
11.11
9.03
5.03
0.22
0.66
0.54
0.45
4.96
0.23
0.69
0.56
0.48
5.14
0.24
0.72
0.59
0.53
5.02
0.24
0.71
0.57
0.53
4.52
0.24
0.71
0.57
0.52
4.39
0.23
0.69
0.56
0.50
4.43
0.23
0.69
0.56
0.50
4.81
0.24
0.71
0.58
0.51
4.56
0.23
0.69
0.56
0.48
4.13
0.23
0.70
0.57
0.48
4.49
0.23
0.70
0.57
0.48
4.62
0.23
0.68
0.56
0.46
4.51
0.24
0.70
0.57
0.47
4.35
0.23
0.70
0.57
0.46
4.75
0.23
0.69
0.56
0.44
4.22
0.23
0.68
0.55
0.41
4.09
0.22
0.67
0.54
0.38
4.26
0.24
0.70
0.57
0.37
3.71
0.21
0.64
0.52
0.32
3.36
0.18
0.55
0.44
0.26
3.72
0.18
0.19
0.20
0.19
0.19
0.19
0.19
0.19
0.19
0.19
0.19
0.19
0.19
0.19
0.19
0.18
0.18
0.19
0.17
0.15
Total LMW Opex
131.46
7.08
7.11
7.42
7.26
6.75
6.56
6.60
7.04
6.71
6.30
6.66
6.74
6.68
6.50
6.86
6.27
6.08
6.33
5.57
4.94
Ying Total
Mining
Shipping
Milling
G&A and product selling
Mineral Resources tax
Government fee and
other tax
728.38
43.47
40.48
42.31
42.64
41.90
42.16
41.25
42.53
40.89
39.72
39.44
38.83
37.13
35.87
35.66
33.68
27.37
24.99
20.24
17.82
46.66
121.59
98.72
81.47
2.54
6.59
5.34
5.03
2.55
6.61
5.38
5.07
2.66
6.88
5.59
5.22
2.65
6.86
5.56
5.01
2.65
6.85
5.56
4.86
2.70
6.97
5.67
4.77
2.69
6.95
5.64
4.66
2.77
7.14
5.81
4.64
2.66
6.88
5.58
4.51
2.64
6.83
5.54
4.35
2.61
6.79
5.51
4.31
2.57
6.69
5.43
4.27
2.38
6.28
5.11
4.03
2.36
6.28
5.11
3.91
2.36
6.26
5.08
3.78
2.26
5.99
4.85
3.54
1.73
4.63
3.75
2.90
1.51
3.92
3.18
2.46
1.21
3.16
2.57
2.14
1.16
3.03
2.46
2.01
33.13
1.80
1.80
1.88
1.85
1.87
1.91
1.90
1.95
1.88
1.87
1.85
1.83
1.71
1.70
1.71
1.62
1.25
1.06
0.86
0.83
Total Ying Opex
64.18
Notes: Numbers may not compute exactly due to rounding. Q4 FY2020 not included.
1,109.95
63.69
61.89
64.57
64.54
64.77
63.09
64.84
62.40
60.95
60.51
59.62
56.64
55.23
54.85
51.94
41.63
37.12
30.18
27.31
57
Smelter Contracts
Monthly sales contracts are in place for the lead concentrates with leading smelters, mostly located in
Henan province. Among them are Henan Yuguang Gold and Lead Smelting Co. Ltd, JiyuanWanyang
Smelting (Group) Co. Ltd, JiyuanJinli Smelting (Group) Co, Lingbao Xinling Smelting Co. Ltd, and Anyang
Minshan Smelting Co. Ltd. For the zinc concentrate, sales contracts are in place with Henan Yuguang Zinc
Industry Co. Ltd.
All contracts have freight and related expenses to be paid by the smelter customers.
The key elements of the smelter contracts are subject to change based on market conditions when the
contracts are renewed each month. Table 16 shows terms most commonly applied.
Table 16
Key elements of smelter contracts
Pb concentrate & direct smelting ore
Zn concentrate
% Pb
Deduction
RMB/t Pb
Minimum
quality
35
Ag (g/t)
500
%
payable
Au
(g/t)
1
% payable
%
Zn
40
>=60
1,800
>=5,000
92
>=20
87
>=45
55-60
1,900
4,500-5,000
91.5
15-20
86
50-55
2,000
4,000-4,500
91
10-15
85
40-45
Payment
scales
45-50
2,100
3,500-4,000
90.5
7-10
40-45
35-40
2,200
2,700
3,000-3,500
2,500-3,000
2,000-2,500
1,500-2,000
1,000-1,500
500-1,000
90
89.5
89
88.5
88
87.5
5-7
3-5
2-3
1-2
84
83
82
81
80
Deduction RMB/t Zn
Price =
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