U.S. Silver Corporation
TSX VENTURE : USA

U.S. Silver Corporation

November 28, 2008 08:15 ET

U.S. Silver Reports Third Quarter 2008 Financial Results & Executive Options Grant

TORONTO, ONTARIO--(Marketwire - Nov. 28, 2008) - U.S. Silver Corporation (TSX VENTURE:USA) ("U.S. Silver" or the "Company") is pleased to announce its consolidated financial results for the third quarter ended September 30, 2008. The consolidated financial statements and Management's Discussion and Analysis ("MD&A") have been filed on SEDAR and can be viewed under the Company's profile at www.sedar.com.

Highlights of Third Quarter 2008

- Revenues of $ 9,645,290

- Net loss of $ 94,143

- Production of approximately 518,000 oz of silver, up 78% vs. second quarter of 2008

- Increased daily production in second quarter to 806 tons, an increase of more than 169% compared to the average daily volume in third quarter of 2007

- Subsequent to the end of the quarter, the Company:

-- reduced manpower from 235 to 193 employees

-- terminated 50 contract employees

-- ceased all exploration drilling

-- eliminated capital expenditures except for the rehabilitation of the Galena shaft

Third Quarter 2008 Financial Results

The Company recorded revenues of $9.6 million for the three-month period ended September 30 2008 ("Q308") (vs. $4.64 million in the three month period ending September 30, 2007 ("Q307")). Net Loss after provision for taxes was $0.1 million and Comprehensive Loss was $4.6 million. Revenues for the period were higher than last year primarily due to somewhat higher metals prices, higher production volumes and revenue from maturing hedge contracts for lead by-products. The Company's focus on infrastructure improvements, employee training, and resource development has gradually increased production levels. However, further operational improvements will be dependent on improved silver, lead and copper prices, after the significant price declines of recent months.

Operating expenses for Q308 were $10.8 million (vs. $5.7 million for Q307). Increased expenses were due to an increase in production tonnage, higher staffing levels and increased costs for materials and supplies. Q308 operating expenses consisted primarily of $9.4 million in mining costs, $0.8 million in general and administrative expense and exploration costs of $0.5 million, which exploration costs were somewhat lower than those in Q307. The recent level of exploration costs can be expected to decline further as the Company focuses on controlling costs vs. further building its reserves and resources.

Depreciation expense for the period continues to be nominal because the major part is now reflected in the Cost of Mining. Within Cost of Mining, depreciation and depletion (see Note 5) was $0.3 million vs. $0.2 million in Q307, reflecting a somewhat larger investment in mining assets over the last year and a higher level of production.

The Net Loss in Q308, after a provision for tax recovery of $0.07 million, was $0.1 million vs. a Net Loss of $1.2 million in Q307. Other Comprehensive Loss for the period was $3.7 million (vs. $0.3 million in Q307), consisting of unrealized losses on cash flow hedge contracts on forecasted lead production, unrealized losses on available for sale investments and the effects of foreign exchange activities. Therefore, Comprehensive Loss was $4.8 million for the period versus a Comprehensive Loss of $0.9 million in Q307.

Based on the weighted average common shares outstanding of 214,940,827 the basic Net Loss per share was $0.00 and Comprehensive Loss per share was $0.02 vs. per share Net and Comprehensive Losses of $0.01 and $0.00 in Q307, respectively.

At the end of October, the Company initiated a program of cost cutting and rationalization of operations in response to the weak commodity markets. Almost all capital expenditures were suspended apart from work on the Galena shaft and the small repairs required on the Number 3 circuit inside the Galena mill. The Company has now focused all efforts on reducing the cost per oz of production by both cost reductions and increases in oz. produced. The result will be reduced growth in production volumes but improvements in the cost structure of the operation. Prior to the termination of most large capital expenditures, the Company invested $5.7 million during the third quarter in various capital improvements. All exploratory drilling has ceased as of October, 2008. The only capital expenditures will be the completion of the repairs to the Galena shaft, at a reduced rate.

The Company continues to operate two concentrators with the Coeur mill processing the silver-lead ores produced at the Galena mine. However, in an effort to improve operating efficiency and reduce operating costs, the Company is replacing the Coeur milling operation with the Number 3 circuit, which is a secondary milling line within the existing Galena mill, to process silver-lead ores. The Coeur mill operated at a rate of 169 tpd during the quarter and is expected to operate at a rate of approximately 475 tpd until December, 2008 when it will be shut down. The minimal capital expenditures needed to start the Number 3 circuit within the Galena Mill, are easily offset by the reduction in costs associated with the transportation of silver-lead ores as well as the rationalization of 2 separate mills into one mill complex with 2 circuits.

Development and exploration of the large silver-lead resource continued with mining activity on the 3000, 3700 and 5200 levels. Development drifting on the high-grade 175 Vein resource on the 5200 level began in mid-September. Exploration of the silver-lead ores during the quarter continued on the 2400, 3000, 3700, 4000, and 5200 levels of the Galena mine with most of the mentioned levels being explored or developed occurring in zones which were discovered since U.S. Silver acquired the mine.

The Company continues to process the silver-copper ores at the Galena mill with production coming from the 3400, 3700, 4000, 4600, and 4900 levels of the Galena mine. Development of new ore bodies has continued throughout the quarter with emphasis on newly discovered mineralization on the 2400 and 4600 levels, with additional development on the 4900 level. The 2400, 4600, and 4900 development projects are designed to utilize highly efficient mechanized mining equipment. The Galena mill operated at a rate of 618 tpd during the quarter and is expected to produce at a rate of approximately 650 tpd by early fourth quarter. Additionally, the Number 3 circuit in the Galena mill is currently in the process of being repaired and is expected to increase the total production capacity of the mill to approximately 900 tpd in December, 2008.



---------------------------------------------------------------------------
Production
Statistics Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 YTD
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Total
tonnage 19,234 18,852 27,107 35,724 42,791 51,607 130,122

Tons per day 300 299 444 558 669 806 678

Total
ounces Ag 302,188 265,547 283,423 291,203 416,972 518,058 1,226,233

Ounces per day 4,722 4,215 4,646 4,550 6,515 8,095 6,387

Total copper
production
- lbs 319,964 184,965 160,665 178,269 212,178 234,545 624,992

Total lead
production
- lbs N/A N/A 451,163 822,634 1,037,045 858,282 2,717,961

Estimated
cash costs $10.63 $12.62 $14.69 $12.10 $14.04 $12.67 $13.61
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Exploration diamond drilling and development of the recently discovered veins on the 2400 level continued during the quarter. Several veins containing silver-copper mineralization and additional veins containing silver-lead mineralization continue to be explored. Multiple ore-grade veins have been identified over a zone with greater than 800 feet of strike length. Exploration of these veins began in April, 2008 with additional exploration and development activities expected in 2009.

Development drifting on the 175 Vein on the 5200 level began late in the quarter with excellent results. During the quarter, approximately eighty feet of drift was completed on the vein. Grades seen during the quarter were approximately 10 opt silver and 12 percent lead, exceeding the resource grades of 9 opt silver and 8.6 percent lead. The 175 Vein is being carried in the inferred resource for the Galena mine but a portion of the resource will be upgraded to proven or probable reserve by the end of 2008 based on the development in progress.

At September 30, 2008, over 230 people were employed at the operation, as well as approximately 65 contractors. This number has shrunk to approximately 193 people through attrition and layoffs, including nearly all of the contractors subsequent to the end of the third quarter. However, the Company will continue to hire competent people as needed to achieve production improvements at the Galena mine complex.

The repair of the Galena Shaft, which began in late 2007, continues with excellent results. Sinking through one of the most difficult caved sections in Q308 has proceeded without interruption. The connection with the 2800 level was achieved in June 2008 and the connection with the 3000 level was completed in August. The Galena Shaft had a large section of the shaft (800 ft) collapse about 10 years ago resulting in the inability to use the shaft for its full length. Repair work on the Galena Shaft has been slowed as part of the previously announced strategic review. The repair has moved from a contractor working 2 shifts to an in-house group working a single shift per day with minimal overtime. The collapsed area should be fully repaired with a new deadline for completion at the end of the second quarter 2009. The repaired shaft will allow for hoisting of men, materials and rock and will significantly increase overall hoisting capacity at the mine. Additionally, access to a number of key silver-lead and silver-copper resources high in the mine will be enhanced once the Galena Shaft becomes fully functional. A further bonus of the completion of this shaft is the increased ventilation to a number of the deeper parts of the Galena mine which will help improve productivity as well as safety.

Finally, as announced in the Company's press release of November 3, 2008, Mr. Thomas Parker was recently appointed Interim Chief Executive Officer of the Company. The Company announces today that its Board of Directors have approved a grant of incentive stock options to Mr. Parker for the purchase of a total of 600,000 common shares, pursuant to the Company's share option Plan. The options are priced at $0.10 per share, expire five years from the date of issue, and are subject to the terms and conditions of the Plan, certain vesting provisions, and the policies of the TSX Venture Exchange.

ABOUT U.S. SILVER CORPORATION

U.S. Silver, through its wholly owned subsidiaries, owns and operates the Galena, Coeur, and Caladay silver-lead-copper mines in Shoshone County, Idaho, with the Galena mine being the second most prolific silver producer in U.S. history. Total silver production from U.S. Silver's mining complex has exceeded 210 million ounces of silver production since 1953. U.S. Silver controls a land package now totaling approximately 18,000 acres in the heart of the Coeur d'Alene Mining District. U.S. Silver is focused on expanding its production from existing operations as well as exploring and developing its extensive Silver Valley holdings.

Certain information in this press release may contain forward-looking statements. This information is based on current expectations that are subject to significant risks and uncertainties that are difficult to predict. Actual results might differ materially from results suggested in any forward-looking statements. The Company assumes no obligation to update the forward-looking statements, or to update the reasons why actual results could differ from those reflected in the forward looking-statements unless and until required by securities laws applicable to the Company. Additional information identifying risks and uncertainties is contained in filings by the Company with the Canadian securities regulators, which filings are available at www.sedar.com.

The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • U.S. Silver Corporation
    Tom Parker
    Interim Chief Executive Officer
    (208) 752-0400
    Website: www.us-silver.com