Arian Silver Corporation

August 29, 2013 02:00 ET

Arian Silver's MD&A and Results for the Three and Six Months Ended 30 June 2013



August 29, 2013

Arian Silver's MD&A and Results for the Three and Six Months Ended 30 June 2013

LONDON, ENGLAND--(Marketwired - Aug. 29, 2013) -


Arian Silver Corporation ("Arian" or the "Company") (TSX
VENTURE:AGQ)(AIM:AGQ)(FRANKFURT:I3A), a silver exploration, development and
production company with a focus on projects in the silver belt of Mexico, today
announced the release of its Management's Discussion and Analysis ("MD&A") and
unaudited Financial Statements ("Financials") for the three months and six months
ended 30 June 2013.

The MD&A and Financials are available at SEDAR at and on the
Company's website at These documents can also be obtained on
application to the Company. The following information has been extracted from the
MD&A and Financials. The financial information in this announcement does not
constitute full statutory accounts.

Arian's Chief Executive Officer, Jim Williams, commented today, "Today's results
come at a time of significant potential change for Arian. Arrangements to finance
the acquisition of the Company's own mill continue to progress, and I hope to be
able to provide a full update on this very soon."




                       Second Quarter 2013   Second Quarter 2012     Change
                                     $000s                 $000s      $000s
Revenue                                129                 2,104     (1,975)
Gross (loss)/profit                   (284)                 (138)      (146)
Net (loss)/profit for
 the period                           (947)               (1,133)       186

                              Six Months ended          Year ended
                                   30 Jun 2013         31 Dec 2012    Change
                                         $000s               $000s     $000s
Cash and cash equivalents                  635                 491       144
Total assets                            14,582              14,119       463


Trial production resumed in February 2013 at the Beneficiadora de Jales y
Minerales Juan Reyes SA de CV ("Juan Reyes") processing plant albeit on a small
scale. However, following the recent volatility in the silver price, an agreement
has been reached by mutual consent with the owner of Juan Reyes to cease
operations in June 2013. The decrease in revenues is due partly to the silver
price being significantly lower, but mainly due to the production being much less
than the equivalent quarter in 2012.

Cash balances at Q2 2013 were higher as further drawdowns on the Standby Equity
Distribution Agreement ("SEDA") facility have contributed to working capital and
other costs in the short-term.



                        Second Quarter 2013  Second Quarter 2012    Change
Head grade - Ag grams
 per tonne                              191                  181         6%
Tonnes mined                          4,628               26,268       (82%)
Tonnes milled                         3,221               28,903       (89%)
Silver concentrate
 tonnes produced                         43                  298       (86%)
Silver ounces produced                9,294               98,616       (91%)
Silver ounces per
 concentrate tonne
 produced                               216                  331       (35%)
Silver ounces sold                    9,058               93,112       (90%)
Silver concentrate
 tonnes sold                             37                  286       (87%)


Trial production ceased during the quarter at the Juan Reyes plant.


The preparation and exploring of mining blocks continued in order to verify the
continuity of mineralisation. Level 150 was dewatered and rehabilitated, and
sampling took place obtaining new accessible mining blocks that were included in
the resource estimate. The preparation and exploring of mining blocks continued
in order to verify the continuity of mineralisation.

Subsequent Events

The Company announced on 23rd August 2013 the positive advancement of
negotiations regarding future financing. The private placement debt financing of
US$15,585,000 (the "Private Placement") comprises a senior secured convertible
note (the "Note"), which would mature at a premium of 5% if not otherwise
converted, twelve months from its date of issuance and will bear interest at an
annual rate of 14% to be prepaid in full upon closing of the Private Placement.

It remains expected the Note will be convertible, in whole or in part, at the
option of the holder, at any time following the closing date and up to and
including the maturity date into fully paid and non-assessable common shares
("Common Shares") in the capital of the Company (collectively the "Note Shares")
at price of CAD$0.11 per Note Share (the "Conversion Price"). If at the time of
sending a conversion notice the Common Shares are then listed on the TSX Venture
Exchange ("TSXV"), not more than 96% in aggregate (including prior conversions,
if any) of the principal amount may be converted at the Conversion Price, and in
the event that all or any part of the remaining 4% is to be converted, it shall
be converted based on the last closing price of the Common Shares on the TSXV
immediately prior to the date of sending the applicable conversion notice. The
Note is expected to be secured on all or substantially all of the Company's and
its subsidiaries' assets.

In connection with the Private Placement, the subscriber will receive a 4%
arrangement fee from the gross proceeds. The TSXV has conditionally approved the
Private Placement, subject to the Company fulfilling all of the listing
requirements of the TSXV.

Assuming that all the regulatory conditions are satisfied, the proceeds from the
private placement are intended to be used to acquire the El Bote processing
plant, including transportation of plant to new site, refurbishment of plant, and
new ground works at the site, mine expansion as well as for working capital and
corporate purposes.

This processing plant has the capacity for processing up to 1,500 tonnes per day
and is expected to provide significant cost savings from toll milling.

Since 30 June 2013, the Company has issued 5,293,499 common shares at an average
price of GBP 0.043 in relation to the drawdown of the SEDA, generating funding of
GBP 225,655.

Following this share issue the Company has in issue 328,088,286 common shares
with voting rights.

The Company sold all of its shareholding (of 1,089,318 shares) in Geologix
Explorations Inc. ("Geologix") for proceeds of $143,603 (CAD 148,916). This
shareholding was reported with a fair value of $104,000 at 30 June 2013.



--  Obtain advanced and low-cost (acquisition cost) silver projects and
    rapidly build up resources in the ground. Arian is focusing its
    exploration efforts in one of the richest known silver-bearing districts
    in the world - the Zacatecas State of Mexico.
--  Focus on projects with prior exploration and production history, thereby
    reducing risks and capital costs.
--  Develop projects towards production through a combination of company
    development and/or Joint Venture (JV) and acquisition opportunities.
--  Build shareholder value by expanding silver resources and reserves, and
    increasingly efficient production.




                                       Q2     Q1     Q4     Q3     Q2     Q1
                                     2013   2013   2012   2012   2012   2012
Head grade - Ag grams per tonne
 (g/t)                                191    174      -      -    181    173
Tonnes mined                        4,628      -      -  4,072 26,268 21,553
Tonnes milled                       3,221    258      -      - 28,903 24,394

Silver concentrate tonnes produced     43      4      -      -    298    302
Recovery %                          47.05  60.90      -      -  58.74  49.01
Silver ounces produced              9,294    878      -      - 98,616 66,688
Silver ounces per concentrate
 tonne produced                       216    251      -      -    331    221

Silver ounces sold                  9,058      -      -  8,937 93,112 75,911
Silver concentrate tonnes sold         37      -      -     32    286    330

Quarter end inventory balances
Mined tonnes stockpile             17,142 17,935 18,192 18,204 15,003 17,637
Silver concentrate inventory
 tonnes                                 4      4      -      -     36     24
Silver ounces included in
 concentrate inventory              1,114    878      -      - 11,276  5,772


Head Grade

The head grade of 191 is an increase on previous quarters.

Tonnes mined

4,628 tonnes were mined in the quarter.

Tonnes milled

3,221 tonnes of stockpiled ore were milled during Q2 2013 as processing commenced
at the Juan Reyes mill.

Silver concentrate produced

9,294 ounces of silver concentrate were produced during Q2 2013 compared to 878
ounces during Q1 2013.

% Recovery

The recovery rate of 47.05% is a reduction from the 61.90% reported for Q1 2013,
and is attributable to low and discontinuous throughput.

Mined tonnes stockpile

The stockpile of mined ore was 17,142 tonnes at the end of Q2 2013 compared to
17,935 tonnes at the end of Q1 2013.

Mining Operations


All figures in this table are
 quoted in metres                      2013                 2012
                                       Q2     Q1     Q4     Q3     Q2     Q1
Exploration Drilling                   44      -      -     12    121    120
Ramp development                       67    107     81     68    242     98
Preparation                            25      -      -      8    151    179
Raises                                 70      -      -     33     31     32
Total                                 206    107     81    121    545    429


Mining focussed on the Ramal Norte/Sur, San Jose 75 m Level Central Zone and
Santa Ana resource blocks. These were selected from several delineated resource
blocks to support an initial pilot scale mining operation with the potential to
increase the mining rate to circa 1,500 tpd subject to milling capacity

During Q2 2013 the Company developed 206 metres. The preparation and exploring of
mining blocks continued in order to verify the continuity of mineralisation.
Level 150 was dewatered and rehabilitated, and sampling took place obtaining new
accessible mining blocks that were included in the resource estimate. Development
continues at the mine, but on a reduced scale to meet obligations to keep the
mine operational until mining is resumed.

Milling Operations

The Company played an important role in managing and completing the commissioning
of the Juan Reyes plant during Q2 2013. This included the identification of
milestones, critical paths, task management, supervision and the completion of
the Lead circuit and testing of the crushing section.

Water had been scarce owing to low levels of rainfall in Zacatecas state,
although heavy rainfall during summer 2013 has alleviated this somewhat. Efforts
were made to ensure a reliable source of water for the Juan Reyes processing
plant, including sourcing water from the Calicanto mine, less than 1km away. This
had the advantage of reducing the water levels in the mine, which will improve
access to mining blocks.

During Q2 2013 a total of 3,221 tonnes were processed at Juan Reyes. This was
more conservative than initial estimates, and reflects on-going adjustments to
refine the operations and processes.

Following the recent volatility in the silver price, an agreement has been
reached by mutual consent with the owner of Juan Reyes to cease operations in
June 2013. The decrease in revenues is due partly to the silver price being
significantly lower, but mainly due to the production being much less than the
equivalent quarter in 2012.

Exploration Drilling

The phase 5 exploration drilling program has been prepared and it is anticipated
that it will begin once additional funding has been secured.


The independent on-site laboratory was operated by the Stewart Group (a
subsidiary of the ALS Chemex Group) until June 2013. Thereafter the Company
assumed responsibility for laboratory operations in order to reduce expenditure.
This valuable facility which provides timely analysis of samples and critical
information to improve the decision making process of mining and milling staff.
In addition the laboratory provides an invaluable tool during drilling programmes
which has significantly decreased the turnaround times for analysis of Arian's
sampled drill cores.


Three of the Company's concessions representing 145 hectares, which were not
considered to hold any mineralisation and which were outside the mineralisation
trend, have been cancelled. The cancellation of these concessions does not impact
the Company's NI 43-101 mineral resource estimate and the Company now holds 28
mineral concessions in Mexico totalling 7,755 hectares as set out below.


Project Name          No. of Concessions            Area in hectares ("ha")
San Jose                               8                              6,134
Calicanto                              7                                 84
Others                                13                              1,537


Qualified Person

Mr. Jim Williams, Eur Ing, Eur Geol, BSc, MSc, DIC, FIMMM, the Chief Executive
Officer of Arian, a "Qualified Person" as defined in the AIM guidelines of the
London Stock Exchange, and a "Qualified Person" as such term is defined in
Canadian National Instrument 43-101 ("NI 43-101"), has reviewed and approved the
technical information in this Review of Operations other than the mineral
resource estimates referred to below.

San Jose Project, Zacatecas State

The 100%-owned San Jose property is located approximately 55 kilometres ("km") to
the southeast of Zacatecas City and comprises 8 mining concessions totalling
approximately 6,134 ha. The property has significant infrastructure, including a
4.5 x 5 metre ("m") main haulage ramp extending more than 4.0km along the San
Jose vein ("SJV") system, and a 350m deep, 500 tonne per day ("tpd") vertical
shaft with operational hoist. In addition, a number of shallower vertical shafts
are located along the SJV.

A 2% NSR (net smelter royalty) on SJV revenue is payable to the vendor of the San
Jose property.

Mineral Resource

Arian's resource estimate includes all drilling programmes from 2006 along the
SJV which has a delineated NI 43-101 and a JORC-compliant resource estimate of
approximately 30.61 million ounces of silver, 67.02 million pounds of lead and
149.91 million pounds of zinc in the "indicated" mineral resource category, and
88.65 million ounces of silver, 205.25 million pounds of lead and 410.50 million
pounds of zinc in the "inferred" mineral resource category. These NI 43-101 and
JORC-compliant mineral resources are summarised in the table below:


                                     Average Grade       Contained Metal
Resource Category           Tonnes     Ag    Pb    Zn     Ag      Pb      Zn
                               (t)  (g/t)     %     %  (Moz)   (Mlb)   (Mlb)
Indicated                8,000,000    119  0.38  0.85  30.61   67.02  149.91
Inferred                24,500,000    110  0.38  0.76  86.65  205.25  410.50

1.  Geological characteristics and +30 ppm grade envelopes used to define
    resource volumes.
2.  Each mineral resource estimate is in accordance with CIM standards.
3.  The effective date of each mineral resource estimate is 12 March 2012.
4.  The estimates are based on geological, statistical and geostatistical
    data assessment and computerised IDW3, Ag grade wireframe restricted,
    linear block modelling.
5.  The resource was estimated using 188 drill holes and more than 38,000
6.  Resource figures were prepared under the supervision of Malcolm Titley
    who is a Qualified Person (as defined in Canadian National Instrument
7.  Tonnage figures have been rounded to reflect this as an estimate.
8.  Ag (silver) ounces have been calculated using 31.1035 g = 1 oz.
9.  Pb (lead) and Zn (zinc) tonnes have been calculated using 2204.622 lbs =
    1 tonne.
10. The mineral resource is 100% owned by Arian.


The following reports prepared by A.C.A. Howe International Limited relating to
the San Jose project are available on the Company's website
or on SEDAR at


a.  Report dated 22 September 2009 and entitled "Preliminary Economic
    Assessment Report (PEAR) on the San Jose Silver-Lead-Zinc Deposit,
    Zacatecas, Mexico"; and

b.  Report dated 15 August 2008 and entitled "Resource Estimation Update for
    the San Jose Silver-Lead-Zinc Deposit, Zacatecas, Mexico".


Readers are reminded that mineral "resources" are not mineral "reserves" as they
have not yet demonstrated economic viability. There is no certainty that mineral
resources can be upgraded to mineral reserves through continued exploration.

On 24 May 2013 the Company filed an updated technical report entitled 'NI43-101
Technical Report Update - San Jose Project, Zacatecas, Mexico'.



Milling re-commenced in February 2013. However, in June 2013, following downward
volatility in the silver price, an agreement was reached with the owner of the
mill to cease operations at the Juan Reyes plant. These factors have had a
significant impact on the comparability of quarter-on-quarter figures set out


Unaudited                    2013                       2012
                            Q2       Q1       Q4       Q3       Q2       Q1
                         $'000    $'000    $'000    $'000    $'000    $'000
Revenue                    129        -       34      136    2,104    2,314
Cost of sales              413      206      256      475    2,242    2,379
Gross (loss)/profit       (284)    (206)    (222)    (339)    (138)     (65)
 (loss)/profit            (879)    (935)  (1,072)  (1,025)  (1,006)    (855)
Net investment
 (loss)/profit             (68)     (21)     (84)      57     (127)      81
Net (loss)/profit for
 the period               (947)    (956)  (1,156)    (968)  (1,133)    (774)
Basic and diluted loss
 per share             $  0.00  $  0.00  $  0.00  $  0.00  $  0.00  $  0.00

Total assets            14,582   15,154   14,119   14,409   15,021   16,732
Total non-current
 financial liabilities     182      186      177      175      172      171
Shareholders' equity    13,414   13,971   13,003   13,464   13,647   15,370

Unaudited                    2011
                            Q4       Q3
                         $'000    $'000
Revenue                  2,367    2,434
Cost of sales            1,921    1,914
Gross (loss)/profit        446      520
 (loss)/profit            (393)    (486)
Net investment
 (loss)/profit             (50)    (116)
Net (loss)/profit for
 the period               (443)    (602)
Basic and diluted loss
 per share             $  0.00  $  0.00

Total assets            16,250   16,894
Total non-current
 financial liabilities     170      168
Shareholders' equity    14,909   15,806



As announced on 27 September 2012, the Company entered into a 3 year GBP 5
million SEDA with YA Global Master SPV Ltd ("Yorkville"), an investment fund
managed by YA Global LP. The SEDA allows the company to draw down funds in
exchange for the issue of shares in the Company.

Under the terms of the SEDA, any equity issued shall be priced at 95 per cent of
the prevailing market price over a pricing period of between 5 and 20 days, in
accordance with the agreement. The amount of each advance may not exceed, an
amount not more than 400 per cent of the average daily trading volume of shares
multiplied by the volume weighted average price on AIM for the five trading days
prior to the drawdown request.

Use of the facility is entirely at the discretion of the Company and there are no
penalties for not drawing down on the facility.

The following share purchase options were outstanding as of 28 August, 2013, each
entitling the holder to acquire one common share of the Company: 22,310,000 share
purchase options with exercise prices ranging from GBP 0.055 to GBP 0.4925
(Cdn$0.10 to Cdn$0.79) and expiring on various dates up to May 2018.

Working Capital - 30 June 2013

As at 30 June 2013, the Company has working capital of approximately $1.4m (31
December, 2012: $1.6m). The items of working capital and changes compared to 31
December 2012 are as follows:

Current assets


--  cash and cash equivalents of $0.6m (31 December 2012: $0.5m);
--  trade and other receivables of $1.0m (31 December 2012: $1.2m). $0.9m of
    the outstanding balance relates to the IVA (government sales tax) debtor
    owed to Arian which is in the process of being recouped as well as $0.1m
    for the concentrate sold;
--  inventories of $0.7m (31 December 2012: $0.6m) relates to stockpile held
    at cost relating to production at the San Jose mine, this includes an
    inventory adjustment of $41,000 to write down to net realisable value;
--  financial assets held at fair value through profit or loss of $0.1m (31
    December 2012: $0.2m) relates to the Geologix shares received as part
    consideration for the final instalment for the sale of the Tepal


Current liabilities


--  trade payables of $1.0 million (31 December 2012: $0.9 million).


Off-balance sheet arrangements

The Company has no off-balance sheet arrangements.


On 15 March 2013 the Company announced the signing of a provisional agreement
with Sandy Hill Ltd, a company incorporated in the British Virgin Islands, to
acquire a processing plant currently located close to Zacatecas City, with a
capacity to treat up to 1,500 tonnes per day of silver-lead-zinc ore ("EL Bote

In March 2013 the Company paid an initial $100,000 to secure a 120 day due
diligence period, which has been extended into August 2013. On acquisition, the
El Bote Mill would be reassembled in modular fashion on-site at San Jose, and
once operating will enable production efficiencies and increased revenue

The final purchase price for the El Bote Mill was agreed at $3.12 million.

Forward-Looking Information:

This press release contains certain "forward-looking information". All
statements, other than statements of historical fact, that address activities,
events or developments that the Company believes, expects or anticipates will or
may occur in the future. This forward-looking information reflects the current
expectations or beliefs of the Company based on information currently available
to the Company as well as certain assumptions (including that the Company will be
able to obtain the necessary financing and that the proposed subscriber will
complete the Private Placement). Forward-looking information is subject to a
number of significant risks and uncertainties and other factors that may cause
the actual results of the Company to differ materially from those discussed in
the forward-looking information, and even if such actual results are realized or
substantially realized, there can be no assurance that they will have the
expected consequences to, or effects on the Company. Factors that could cause
actual results or events to differ materially from current expectations include,
but are not limited to, the failure to close the Private Placement and obtain the
necessary financing to acquire the El Bote processing plant or to satisfy the
other conditions precedent to the transaction as well as unexpected delays in
completing the transportation and refurbishment of the El Bote processing plant
which could lead to unexpected delays in the start of operations and delays in
the Company's mine expansion plans.

Any forward-looking information speaks only as of the date on which it is made
and, except as may be required by applicable securities laws, the Company
disclaims any intent or obligation to update any forward-looking information,
whether as a result of new information, future events or results or otherwise.
Although the Company believes that the assumptions inherent in the forward-
looking information are reasonable, forward-looking information is not a
guarantee of future performance and accordingly undue reliance should not be put
on such information due to the inherent uncertainty therein.

This press release does not constitute an offer to sell or a solicitation of an
offer to buy any of the securities of the Company in the United Sates. The
securities of the Company have not been and will not be registered under the
United States Securities Act of 1933, as amended (the "U.S. Securities Act") or
any state securities laws and may not be offered or sold within the United States
or to U.S. persons unless registered under the U.S. Securities Act and applicable
state securities laws or an exemption from such registration is available.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that
term is defined in the policies of the TSX Venture Exchange) and no stock
exchange, securities commission or other regulatory authority accepts
responsibility for the adequacy or accuracy of this release nor approved or
disapproved of the information contained herein.


Arian Silver Corporation
Jim Williams
+44 (0)20 7887 6599


Arian Silver Corporation
David Taylor
Company Secretary
+44 (0)20 7887 6599


Grant Thornton UK LLP
Philip Secrett
+44 (0)20 7383 5100


Grant Thornton UK LLP
David Hignell
+44 (0)20 7383 5100


Yellow Jersey PR Limited
Dominic Barretto
+44 (0)77 6853 7739


XCAP Securities PLC
Jon Belliss
+44 (0)20 7101 7070


CHF Investor Relations
Juliet Heading
+1 416 868 1079 x 239

Contact Information

  • Arian Silver Corporation