Silver Mines

LSE : SVLP


February 06, 2013 07:42 ET

Drilling Report and Quarterly Cashflow and Activities Report

            DRILL INTERSECTIONS ON REGIONAL TARGETS AND QUARTERLY ACTIVITY AND CASH FLOW REPORT
                                                     

HIGHLIGHTS
    -         Shallow RC drilling intersects sulphide rich lodes with elevated silver and base metals.
        
    -         Higher grade intersections include:
               -         1m @ 460g/t Ag, 0.2% Cu, 9.6% Pb and 3.7% Zn from 24m in hole HZRC010;
               -         1m @ 251g/t Ag, 0.9% Cu, 3.7% Pb and 2.4% Zn from 37m in Hole MMRC003;
               -         1m @ 200g/t Ag, 0.02% Cu, 5.9% Pb and 7.3% Zn from 48m in Hole EQRC004; and
               -         1m @ 162g/t Ag, 0.1% Cu, 2.8% Pb and 2.4% Zn from 28m in hole TORC001.
        
    -         Mineralised lodes are associated with disseminated zones and locally massive veins of
              pyrite/pyrrhotite, sphalerite, galena with local arsenopyrite and chalcopyrite.
        
    -         Silica-sericite alteration and sulphides observed over downhole widths from 5m to plus 25m.
        
    -         Geology and mineralisation similar styles to Webbs.
        
    -         Ongoing exploration likely to add to existing target list.

Silver Mines is pleased to announce that shallow reverse circulation (RC) drilling its 100% owned Mole
River project in northern NSW has intersected numerous zones of silver -base metal mineralisation at
several prospects.

The drill targets have been delineated from geochemical sampling, geological mapping and geophysics. Many
targets occur proximal to old workings, most of which have never been drill tested.

Higher grade, silver rich mineralisation is hosted in 1-4m wide, single or multiple lode zones with narrow
sulphide +/- quartz veins, commonly enveloped by quartz-sericite altered host rocks with disseminated
sulphides. The mineralised zones are structurally controlled and occur in a variety of host rocks.

Many drill intersections remain open and many other targets in the area require additional exploration.

CEO, Charles Straw commented "We consider these results to be highly encouraging given this program
comprises first pass shallow reconnaissance drilling at prospects that have never been drilled previously.
The style of mineralisation intersected certainly supports our view for potential Webbs style deposits in
this area."

BACKGROUND

Exploration Licenses 6771and 6114  are located approximately 30-40km north east of the Webb's Silver
project and are part of a contiguous group of tenements known as the Mole Project. The project area hosts
numerous documented metalliferous occurrences which occur along a broad northwest trend approximately 11km
long and 2km wide (see Figure 1). The geology of the area is dominated by Permian aged sediments and local
granite which are intruded by the Triassic aged Mole Granite to the southwest. Silver Mines believes this
area has excellent potential to host Webb's style silver rich polymetallic deposits.

Prior to the current drilling, exploration conducted on EL 6771 and EL 6114 has included rock chip and soil
sampling, geological mapping, Induced Polarisation (IP) surveys and aeromagnetic interpretation.

Rock chip and soils sampling conducted by Silver Mines and previous explorers has delineated a broad
district scale zone of highly anomalous geochemistry. Many rock chip samples and local soil sampling
programs have returned anomalous to highly elevated levels of Ag, Pb, Zn, and Cu in common association with
As and locally elevated Sb, Sn, Bi and W. The geochemical signature and associated geology is analogous to
the Webbs Silver deposit and supports SVL's view of the silver potential in the region.

RECENT DRILLING RESULTS

Silver Mines have recently completed reconnaissance RC drilling targeting the near surface expression of
geochemical and geophysical anomalies commonly near old workings. Drilling has been undertaken at the Burra-
Ecquador, Mount Morgan, Torny and Hazeldean and Hazeldean West prospects (see Figure 1). The program
comprised 31 holes and a total of 1,667m. Hole details are presented in Table 1. Assay results are reported
in Table 2.

Higher grades of mineralisation intersected are present as massive-semi massive sulphide +/- quartz veins
in altered country rock . These lode zones generally around 1-4m wide and carry up to 30% total sulphides
as estimated from RC drill chips. Dominant sulphide minerals are generally pyrite-pyrrhotite-sphalerite-
galena with local arsenopyrite, chalcopyrite and cassiterite. Rare stannite and tetrahedrite were noted but
require confirmation. These lodes are generally hosted in fractures such as cleavage, joints, breccia fill
associated with shear zones and faults, sometimes at lithological contacts.

The sulphide rich structures are commonly enveloped by quartz-sericite+/- chlorite altered wallrock with
accompanying veinlets and disseminations of sulphides. These broader zones are observed over downhole
widths of 10-30m and generally defined by elevated zinc values +/- lead. Within these broader zones,
multiple 'higher grade' lodes usually occur. The altered wall rocks are either granites and porphyry at
Burra-Ecqaudor and the southern end of the Torny or inter-bedded metasediments. These zones often contain
disseminated sulphides.

Sulphide mineralisation and metal associations are similar for most prospects. However, the Mount Morgan
prospect is enriched in tin and arsenic compared to the others.

Silver Mines believes the style of mineralisation in the area is similar to that occurring at the Webbs
Silver deposit. That is higher grade silver-base metal lodes are enveloped by lower grade altered and
mineralized country rock containing a geochemical halo of Zn-Pb and Ag.

To view the map associated with this press release, please visit the following link: 
http://media3.marketwire.com/docs/silvmap1.pdf


FUTURE WORK

Silver Mines is highly encouraged by the results of this first pass reconnaissance drilling program. The
geological model for potential mineralisation in this area is developing and favors high grade shoots
associated with high levels of sulphide and strong alteration probably best developed at structural and/or
lithological intersections.

Current results will be assessed in detail. However, zones that require immediate follow-up are evident
especially where mineralised drill intersections offer potential for extensions. In these areas further
sampling and mapping can quickly establish additional near surface drill targets.

The style and type of the sulphide mineralisation intersected in the drilling is amenable to exploration by
geophysical methods such as electro-magnetics and IP which could greatly assist in sub-surface drill
targeting. IP targets already exist and more IP is planned.

Additional target generation work is required throughout many areas of the prospective corridor and
surrounds. This work will consist of grid based soil and rock-chip geochemical sampling and associated
mapping especially along possible extensions of currently identified trends. Geophysics will assist in
drill targeting.

Silver Mines are sponsoring an Honours study with the University of New South Wales to assist in
documenting the mineralisation and alteration styles in the project area. This work should assist future
exploration.

The Company looks forward to continuing exploration success at the Mole project and will update
shareholders as the results of current and future work become available.

Please direct any queries regarding the content of this report to Charles Straw (CEO) on +61 2 9253 0900 or
cstraw@silverminesltd.com.au.

Competent Person Declaration

The information in this Document that relates to Exploration Results, Mineral Resources or Ore Reserves is
based on information compiled by Mr David Hobby, consulting Chief Geologist to SVL, who is a Member of The
Australasian Institute of Mining and Metallurgy. Mr Hobby has sufficient experience which is relevant to
the style of mineralisation and type of deposit under consideration and to the activity which he is
undertaking to qualify as a Competent Person as defined in the 2004 Edition of the 'Australasian Code for
Reporting of Exploration' for Reporting of Exploration Results, Mineral Resources and Ore Reserves'. Mr
Hobby consents to the inclusion in the report of the matters based on his information in the form and
context in which it appears.


  Hole ID     East (MGA)     North (MGA)      Dip      Azimuth     Hole Depth        Prospect
                                                        (MGA)          (m)
-----------------------------------------------------------------------------------------------
  EQRC001       386657         6765196        -60         51           64        Burra
-----------------------------------------------------------------------------------------------
  EQRC002       386649         6765203        -60         51           60        Burra
-----------------------------------------------------------------------------------------------
  EQRC003       386641         6765229        -60         56           60        Burra
-----------------------------------------------------------------------------------------------
  EQRC004       386553         6765264        -60         31           63        Ecquador
-----------------------------------------------------------------------------------------------
  EQRC005       386530         6765272        -60        314           60        Ecquador
-----------------------------------------------------------------------------------------------
  EQRC006       386689         6765182        -60         51           51        Burra
-----------------------------------------------------------------------------------------------
  HZRC001       383889         6770847        -60        237           40        Hazeldean
-----------------------------------------------------------------------------------------------
  HZRC002       383895         6770808        -60        254           58        Hazeldean
-----------------------------------------------------------------------------------------------
  HZRC003       383936         6770676        -60        267           70        Hazeldean
-----------------------------------------------------------------------------------------------
  HZRC004       383899         6770699        -65        267           57        Hazeldean
-----------------------------------------------------------------------------------------------
  HZRC005       383872         6770708        -60        270           58        Hazeldean
-----------------------------------------------------------------------------------------------
  HZRC006       383940         6770619        -60        239           60        Hazeldean
-----------------------------------------------------------------------------------------------
  HZRC007       383780         6770995        -60        102           60        Hazeldean
-----------------------------------------------------------------------------------------------
  HZRC008       383878         6770885        -60        270           54        Hazeldean
-----------------------------------------------------------------------------------------------
  HZRC009       383818         6770969        -60        267           57        Hazeldean
-----------------------------------------------------------------------------------------------
  HZRC010       383384         6771193        -60         90           57        Hazeldean West
-----------------------------------------------------------------------------------------------
  HZRC011       383406         6771192        -60         90           58        Hazeldean West
-----------------------------------------------------------------------------------------------
  HZRC012       383420         6771254        -60         90           58        Hazeldean West
-----------------------------------------------------------------------------------------------
  MMRC001       385050         6767608        -60        267           60        Mount Morgan
-----------------------------------------------------------------------------------------------
  MMRC002       385022         6767598        -60        272           60        Mount Morgan
-----------------------------------------------------------------------------------------------
  MMRC003       385053         6767557        -60        270           55        Mount Morgan
-----------------------------------------------------------------------------------------------
  MMRC004       385058         6767507        -60        272           40        Mount Morgan
-----------------------------------------------------------------------------------------------
  MMRC005       385054         6767472        -60         90           28        Mount Morgan
-----------------------------------------------------------------------------------------------
  MMRC006       385049         6767400        -60         90           37        Mount Morgan
-----------------------------------------------------------------------------------------------
  TORC001       384182         6766895        -60        271           61        Torny
-----------------------------------------------------------------------------------------------
  TORC002       384195         6766935        -60        271           49        Torny
-----------------------------------------------------------------------------------------------
  TORC003       384167         6766950        -60         89           45        Torny
-----------------------------------------------------------------------------------------------
  TORC004       384188         6766974        -60        270           40        Torny
-----------------------------------------------------------------------------------------------
  TORC005       384188         6767072        -60         91           40        Torny
-----------------------------------------------------------------------------------------------
  TORC006       384189         6767159        -60        109           51        Torny
-----------------------------------------------------------------------------------------------
  TORC007       384176         6767222        -60         82           56        Torny
-----------------------------------------------------------------------------------------------
Table 1: Drill hole location details.

----------------------------------------------------------------------------------------------------
HOLE ID        from       to        Int#       Ag        Cu        Pb         Zn        Sn        As
               (m)       (m)        (m)      (g/t)       (%)       (%)       (%)       (%)       (%)
----------------------------------------------------------------------------------------------------
EQRC001         2         12         10        3                             0.3                   
EQRC001         16        17         1         20                            0.6                   
EQRC001         24        27         3         6                             0.8                   
----------------------------------------------------------------------------------------------------
EQRC002         0         12         12       1.4                            0.3                   
EQRC002         25        26         1         8                             2.0                 0.8
----------------------------------------------------------------------------------------------------
EQRC003         3         21         18        4                             0.2                   
EQRC003         3         4          1         16                 0.09       0.06                  
EQRC003         12        13         1         10                            0.9                   
----------------------------------------------------------------------------------------------------
EQRC004         7         8          1         18                  0.4       0.8                   
EQRC004         30        52         22        20                  0.5        1                    
EQRC004         30        31         1         41        0.2       0.2       4.6                 0.3
EQRC004         37        38         1         18                  0.6       0.1                   
EQRC004         44        52         8         46                  1.3       1.9                   
EQRC004         48        49         1        199                  5.9       7.3                   
----------------------------------------------------------------------------------------------------
EQRC005         1         9          8         <1                            0.2                   
EQRC005         20        24         4         21                  0.5       0.8                   
----------------------------------------------------------------------------------------------------
EQRC006         0         11         11        2                             0.8                   
EQRC006         8         10         2         6                             3.4                   
----------------------------------------------------------------------------------------------------
TORC001         5         34         29        7                             0.5                   
TORC001         19        23         4         37                  0.5       2.2                   
TORC001         21        22         1         88        0.1       1.3       6.9                 0.5
----------------------------------------------------------------------------------------------------
TORC002         28        29         1        162        0.1       2.8       2.4                 0.2
----------------------------------------------------------------------------------------------------
TORC003         13        25         12        3                             0.2                   
TORC003         19        20         1         26                  0.5       0.5                   
----------------------------------------------------------------------------------------------------
TORC004         3         21         18        8                             0.3                   
TORC004         15        18         3         38       0.08       0.1       0.7                 2.4
----------------------------------------------------------------------------------------------------
TORC005         12        16         4         28                  0.3       0.7                   
----------------------------------------------------------------------------------------------------
TORC006                                       NSA                                                  
----------------------------------------------------------------------------------------------------
TORC007         16        28         12        20                            0.2                   
TORC007         16        20         4         57        0.1       0.6       0.06                0.1
TORC007         18        19         1        119        0.6       1.1       0.2                 0.1
----------------------------------------------------------------------------------------------------
HZRC001         7          15        8         19                  0.3        0.1                  
----------------------------------------------------------------------------------------------------
HZRC002         4          22        18        12                  0.2        0.2                  
HZRC002         5          6         1         37                  0.3        0.1                  
HZRC002         17         18        1         127                 1.8        1.2                  
HZRC002         46         48        2         42                  0.6        0.6                  
------------------------------------------------------------------------------------------------------
Table 2: Assay results.

------------------------------------------------------------------------------------------------------
HOLE ID        from        to       Int#       Ag         Cu        Pb        Zn        Sn         As
               (m)        (m)       (m)       (g/t)      (%)       (%)        (%)       (%)       (%)
------------------------------------------------------------------------------------------------------
HZRC003         11         15        4         64                  0.5        0.1                   
HZRC003         11         12        1         147                 1.4        0.1                   
------------------------------------------------------------------------------------------------------
HZRC004         2          17        15        16                  0.2        0.1                   
HZRC004         6          9         3         25                  0.4                              
HZRC004         14         15        1         24                  0.2        0.1                   
------------------------------------------------------------------------------------------------------
HZRC005         21         22        1         10                  0.2        0.1                   
------------------------------------------------------------------------------------------------------
HZRC006         10         16        6         22                  0.4       0.08                   
HZRC006         13         14        1         41                  0.5                              
HZRC006         26         44        18                                       0.2                   
HZRC006         40         44        4         22                  0.3        0.5                   
------------------------------------------------------------------------------------------------------
HZRC007         9          33        24         6                             0.2                   
HZRC007         22         32        10        12                  0.1        0.2                   
HZRC007         30         31        1         23                  0.2        0.2                   
------------------------------------------------------------------------------------------------------
HZRC008                                        NSA                                                  
------------------------------------------------------------------------------------------------------
HZRC009         29         35        6         16                  0.2        0.3                 0.5
HZRC009         34         35        1         23                  0.5        0.8                   
------------------------------------------------------------------------------------------------------
HZRC010         22         25        3         162                 3.4        1.6                   
HZRC010         24         25        1         460       0.2       9.6        3.7       0.1         
------------------------------------------------------------------------------------------------------
HZRC011         7          8         1         30                  0.4                              
------------------------------------------------------------------------------------------------------
HZRC012                                        NSA                                                  
------------------------------------------------------------------------------------------------------
MMRC001         24         36        12         3                             0.8                   
MMRC001         32         34        2         12        0.2                  3.7                 0.4
------------------------------------------------------------------------------------------------------
MMRC002                                        NSA                                                  
------------------------------------------------------------------------------------------------------
MMRC003         36         39        3         104       0.4       1.6        2.2       0.1       5.5
MMRC003         37         38        1         251       0.9       3.7        2.4       0.2       15.4
------------------------------------------------------------------------------------------------------
MMRC004         25         28        3         21        0.06      0.3        1.5                   
------------------------------------------------------------------------------------------------------
MMRC005         6          23        17         3                             0.3                   
MMRC005         15         17        2         17        0.1       0.1        0.7       0.3         
------------------------------------------------------------------------------------------------------
MMRC006         19         29        10         7                             0.4                   
MMRC006         24         25        1         56        0.2       0.7        2.3       0.2       4.3
------------------------------------------------------------------------------------------------------
Table 2 continued.

Notes for Table 1.

All easting and northing data are located by handheld GPS which has an accuracy of
about +/- 5m. Units are in metres relative to the MGA grid. Dip and azimuth data is
predominantly derived from handheld compass and clinometers. Units are in degrees.

Notes for Table 2.

Samples  sent  for  assay  are derived from 'spearing' 1m RC samples. Samples  weighing  2-3kg  are
dispatched  by  courier  to ALS Chemex in Brisbane. Samples are dried then pulverised  to  80%p  75
microns.  Routine assaying is conducted by ALS Method ICP41. This is an Aqua Regia digest  with  an
ICP-AES finish. When elements exceed upper detections limits of 100ppm for Ag and 1% for Cu, Pb and
Zn  they are reanalysed by and appropriate ore grade acid technique (ALS method OG46), and  in  the
case  of silver, occasionally using a gravimetric technique. Insertion of appropriate QA/QC samples
ensures that laboratory accuracy and precision are monitored.
Some lower grade zinc and lead assays are based on Niton Handheld XRF results taken on the 1m split
sample  from the drilling rig which weighs around 2kg. Readers should be aware that Niton  Handheld
XRF  results  should  be  viewed with caution and may differ from actual assays  reported  by  ALS.
However,  SVL has conducted extensive testwork with the Niton XRF on all drilling programs  and  is
confident  yet  cautious  that  it provides a very sound preliminary  indication  of  target  metal
content.

#Downhole intersections are NOT true widths due to the geometry of the lodes and angle of intersection of
the drill hole. True widths are estimated to be half to one third of downhole interval reported.

                                                                                                           
                                                                                                           
                                                                                                   Rule 5.3
                                                Appendix 5B

                                Mining exploration entity quarterly report


Name of entity
------------------------------------------------------------------------------------------------------
SILVER MINES LIMITED
------------------------------------------------------------------------------------------------------
ABN                                                            Quarter ended ("current quarter")
----------------------------------                             ----------------------------------
45 107 452 942                                                           31 December 2012
----------------------------------                             ----------------------------------
Consolidated statement of cash flows                 --------------------------------------------------
                                                         Current quarter          Year to date (6
Cash flows related to operating activities               $A'000                   months)
                                                                                  $A'000
                                                     --------------------------------------------------
1.1     Receipts from product sales and related                                                         
        debtors
        
1.2     Payments for   (a)  exploration & evaluation                      (498)                    (889)
                       (b)  development                                                                 
                       (c)  production                                                                  
                       (d)  administration                                (252)                    (562)
1.3     Dividends received                                                                              
1.4     Interest and other items of a similar nature                          8                       11
        received
1.5     Interest and other costs of finance paid                            (2)                      (3)
1.6     Income taxes paid                                                                               
1.7     Other (provide details if material) Pre paid                                                    
        drilling
                                                      --------------------------------------------------
                                                                          (744)                  (1,443)
        Net Operating Cash Flows
--------------------------------------------------------------------------------------------------------
                                                                                                        
        Cash flows related to investing activities
1.8     Payment for purchases of: (a)  prospects                                                        
                      (b)  equity investments                                 -                        -
                      (c)  other fixed assets                              (31)                     (34)
                                                                                                        
1.9     Proceeds from sale of:    (a)  prospects                              -                        -
                      (b)  equity investments                                 -                        -
                      (c)  other fixed assets                                 -                        -
1.10    Loans to other entities                                                                         
1.11    Loans repaid by other entities                                                                  
1.12    Other (provide details if material)           --------------------------------------------------
                                                                           (31)                     (34)
        Net investing cash flows                                                                        
                                                      --------------------------------------------------
1.13    Total operating and investing cash flows                          (775)                  (1,477)
        (carried forward)
--------------------------------------------------------------------------------------------------------
1.13    Total operating and investing cash flows                          (775)                  (1,477)
        (brought  forward)
--------------------------------------------------------------------------------------------------------
                                                                                                        
        Cash flows related to financing activities
1.14    Proceeds from issues of shares, options, etc.                         -                      830
1.15    Proceeds from sale of forfeited shares                                                          
1.16    Proceeds from borrowings                                                                        
1.17    Repayment of borrowings                                                                         
1.18    Dividends paid                                                                                  
1.19    Other (provide details if material)                                                             
                                                      --------------------------------------------------
        Net financing cash flows                                              -                      830
--------------------------------------------------------------------------------------------------------
        Net increase (decrease) in cash held                              (775)                    (647)
        
1.20    Cash at beginning of quarter/year to date                           928                      800
1.21    Exchange rate adjustments to item 1.20                                                          
                                                      --------------------------------------------------
1.22    Cash at end of quarter                                              153                      153
--------------------------------------------------------------------------------------------------------

Payments to directors of the entity and associates of the directors
Payments to related entities of the entity and associates of the related entities
                                                                                           ---------------
                                                                                           Current quarter
                                                                                           $A'000
                                                                                           ---------------
1.23     Aggregate amount of payments to the parties included in item 1.2                  21
                                                                                           ---------------
1.24     Aggregate amount of loans to the parties included in item 1.10
----------------------------------------------------------------------------------------------------------

1.25     Explanation necessary for an understanding of the transactions
         -------------------------------------------------------------------------------------------------
         Director Fees
         -------------------------------------------------------------------------------------------------
         
Non-cash financing and investing activities

2.1    Details of financing and investing transactions which have had a material effect on consolidated
       assets and liabilities but did not involve cash flows
       -------------------------------------------------------------------------------------------------
       
       -
       -------------------------------------------------------------------------------------------------

2.2    Details of outlays made by other entities to establish or increase their share in projects in
       which the reporting entity has an interest
      ------------------------------------------------------------------------------------------------- 
       -
       
      ------------------------------------------------------------------------------------------------- 



Financing facilities available
Add notes as necessary for an understanding of the position.

                                                                 ---------------------------------------
                                                                  Amount available          Amount used
                                                                  $A'000                    $A'000
                                                                 ---------------------------------------
3.1    Loan facilities                                                            
                                                                 ---------------------------------------
3.2    Credit standby arrangements                                                
--------------------------------------------------------------------------------------------------------

Estimated cash outflows for next quarter                              -----------------------------------
                                                                      $A'000
                                                                      -----------------------------------
4.1    Exploration and evaluation (Note 1)                            -
                                                                      -----------------------------------

4.2    Development                                                       
                                                                      -----------------------------------

4.3    Production                                                     
                                                                      -----------------------------------
4.4    Administration (Note 2)                                        100
---------------------------------------------------------------------------------------------------------
       Total                                                          100
---------------------------------------------------------------------------------------------------------
Note 1 - Future exploration as set out in the December 2012 Quarterly Activities Report is subject to
         future fund raising. Silver Mines also has already prepaid for almost 5,000m of future RC
         drilling. These metres will be used for upcoming RC drilling at Webbs subject to availability.
Note 2 - Administration costs have been cut pending future fund raising.

Reconciliation of cash
                                                       -------------------------------------------------
Reconciliation of cash at the end of the quarter (as   Current quarter         Previous quarter
shown in the consolidated statement of cash flows) to  $A'000                  $A'000
the related items in the accounts is as follows.
---------------------------------------------------------------------------------------------------------
5.1   Cash on hand and at bank                         153                     16
                                                       --------------------------------------------------
5.2   Deposits at call                                 -                       912
                                                       --------------------------------------------------
5.3   Bank overdraft                                   -                       -
                                                       --------------------------------------------------
5.4   Other (provide details)                          -                       -
---------------------------------------------------------------------------------------------------------
      Total: cash at end of quarter (item 1.22)        153                     928
---------------------------------------------------------------------------------------------------------

Changes in interests in mining tenements
                                  -----------------------------------------------------------------------
                                  Tenement      Nature of interest             Interest     Interest
                                  reference     (note (2))                     at           at end of
                                                                               beginning    quarter
                                                                               of quarter
                                  -----------------------------------------------------------------------
6.1   Interests in mining                                                                             
      tenements relinquished,
      reduced or lapsed
      
                                  -----------------------------------------------------------------------
6.2   Interests in mining                                                                   
      tenements acquired or
      increased
      
                                  -----------------------------------------------------------------------

Issued and quoted securities at end of current quarter

Description  includes  rate of interest and any redemption or conversion rights together  with  prices  and
dates.

                           Total number        Number quoted      Issue price per     Amount paid up per
                                                                  security (see       security (see note
                                                                  note 3) (cents)     3) (cents)
---------------------------------------------------------------------------------------------------------
7.1     Preference                                                                    
        +securities
        (description)
                           ------------------------------------------------------------------------------
7.2     Changes during                                                                
        quarter
        (a)  Increases
        through issues
        (b)  Decreases
        through returns
        of capital, buy-
        backs,
        redemptions
---------------------------------------------------------------------------------------------------------
7.3     +Ordinary           165,887,091         165,887,091                           
        securities                             
                           ------------------------------------------------------------------------------
7.4     Changes during                                                                
        quarter                                                                       
        (a)  Increases                                                                
        through issues     1,890,000           1,890,000          6 cents             6 cents
        
        
        (b)  Decreases
        through returns
        of capital, buy-
        backs
---------------------------------------------------------------------------------------------------------
7.5     +Convertible                                                                  
        debt securities
        (description)      
                           ------------------------------------------------------------------------------
7.6     Changes during                                                                
        quarter
        (a)  Increases
        through issues
        (b)  Decreases
        through
        securities
        matured,
        converted
---------------------------------------------------------------------------------------------------------
7.7     Options                                                   Exercise price      Expiry date
        (description and                                                              
        conversion          14,140,343         -                  Unlisted Options    Expiring 13 Nov
        factor)                                                   exercisable at      2013
                                                                  10 cents per        
                                                                  share               
                                                                                      
                           2,000,000           -                  Unlisted Options,   Expiry 27 August
                                                                  exercise price 40   2013. Vest - 27
                                                                  cents, Expiry 27    August 2011
                                                                  August 2013.        
                                                                  Vest - 27 August    
                                                                  2011
                                                                                
                           8,500,000           -                  Unlisted Employee   Expiry Date 23
                                                                  Options, exercise   December  2015
                                                                  price  50 cents,   
                                                                  Unlisted    
                                                                              
                           5,000,000                              
                                                                  Performance
                                                                  Rights
                          ------------------------------------------------------------------------------
7.8     Issued during      5,000,000                              Performance         
        quarter                                                   Rights
                          ------------------------------------------------------------------------------
7.9     Exercised during                                                              
        quarter
                          ------------------------------------------------------------------------------
7.10    Expired during     13,609,882          13,609,882         Listed Options     Expiring 31 October
        quarter                                                   exercisable at     2012
                                                                  35 cents per        
                                                                  share
                                                                  
---------------------------------------------------------------------------------------------------------
7.11    Debentures                                                                    
        (totals only)
------------------------------------------------------------------
7.12    Unsecured notes                                                               
        (totals only)
                          ----------------------------------------        


Compliance statement

1         This statement has been prepared under accounting policies which comply with accounting standards
          as defined in the Corporations Act or other standards acceptable to ASX (see note 4).

2         This statement does give a true and fair view of the matters disclosed.


Sign here:  ............................................................Date: 31 January 2013...............
           (Company secretary)
Print name:         ...Kevin Lynn......................................................

Notes

1         The quarterly report provides a basis for informing the market how the entity's activities have
          been financed for the past quarter and the effect on its cash position.  An entity wanting to
          disclose additional information is encouraged to do so, in a note or notes attached to this
          report.

2         The "Nature of interest" (items 6.1 and 6.2) includes options in respect of interests in mining
          tenements acquired, exercised or lapsed during the reporting period.  If the entity is involved
          in a joint venture agreement and there are conditions precedent which will change its percentage
          interest in a mining tenement, it should disclose the change of percentage interest and
          conditions precedent in the list required for items 6.1 and 6.2.

3         Issued and quoted securities The issue price and amount paid up is not required in items 7.1 and
          7.3 for fully paid securities.

4         The definitions in, and provisions of, AASB 1022: Accounting for Extractive Industries and AASB
          1026: Statement of Cash Flows apply to this report.

5         Accounting Standards ASX will accept, for example, the use of International Accounting Standards
          for foreign entities.  If the standards used do not address a topic, the Australian standard on
          that topic (if any) must be complied with.

                                              == == == == ==

31st January 2013

To: The Company Announcement Officer
                                                     
                                                     
                                                     
                        ACTIVITIES REPORT FOR THE QUARTER ENDED 31ST DECEMBER 2013

HIGHLIGHTS

    -   Approval received from the NSW Department of Trade and Investment - Resources and Energy Division
        (DRE) to re-commence drilling at Webbs Silver Project.
        
        
        
    -   1,667m of drilling in 31 holes was completed at six prospects in the Mole Project area located 30-
        40km north of Webbs. Several higher grade intersections were achieved such as 1m @ 460g/t Ag, 0.2% Cu, 9.6%
        Pb and 3.7% Zn.
        
WEBBS SILVER PROJECT
EL 5674

Silver Mines is pleased to advise that approval has been received from the NSW Department of Trade and
Investment - Resources and Energy Division (DRE) to re-commence drilling at Webbs.

This approval has been a long time coming and has unfortunately precluded any drilling at the Webbs Silver
Project for much of 2012. The approvals process has been protracted due to NSW State Government delays and
has caused significant frustration for the Company during the year. However, the outcome is very positive
and Silver Mines is confident that the planned drilling programs can now be implemented as designed so that
the potential of Webbs can be realised.

Pending the availability of Silver Mines' contracted drill rig, drilling is expected to commence at Webbs
in late February 2013. Drilling will be targeted at depth extensions beneath, and along strike from the
current resource, where the deposit remains open at many locations. Drilling will also be undertaken to
potentially extend some near surface mineralisation. Silver Mines' key focus at Webbs is to grow the
current high grade resource.

Additional exploration will take place along the strike extensions of the Webbs trend which has now been
traced for over 3km along strike. Closer spaced mapping and sampling as well as ground based geophysics are
proposed in order to delineate drill targets.

Silver Mines has already prepaid for almost 5,000m of future RC drilling. These metres will be used for
upcoming RC drilling at Webbs, subject to availability.

MOLE PROJECT
          EL 6771 - EL 6114

During the quarter Silver Mines completed 1,667m in 31 shallow RC holes on SVL's 100% owned Mole project in
          northern  NSW.  Many  holes intersected numerous zones of silver -base  metal  mineralisation  at
          several prospects.

Exploration  Licenses  6771  and  6114 are located approximately 30-40km north east of  the  Webb's  Silver
          project  and  are part of a contiguous group of tenements known as the Mole Project. The  project
          area  hosts  numerous documented metalliferous occurrences which occur along  a  broad  northwest
          trend approximately 11km long and 2km wide (See Figure 1).

The drill targets  were  delineated  from  geochemical sampling, geological mapping  and  geophysics.  Many
          targets occur proximal to old workings, most of which have never been drill tested.

Shallow drilling was undertaken at relatively close spacings along and across strike.

Higher grade,  silver rich mineralisation is hosted in 1-4m wide, single or multiple lode zones with narrow
          sulphide  +/-  quartz  veins,  commonly  enveloped by quartz-sericite  altered  host  rocks  with
          disseminated sulphides. The mineralised zones are structurally controlled.

Higher grade intersections include:
       -         1m @ 460g/t Ag, 0.2% Cu, 9.6% Pb and 3.7% Zn from 24m in hole HZRC010;
       -         1m @ 251g/t Ag, 0.9% Cu, 3.7% Pb and 2.4% Zn from 37m in Hole MMRC003; and
       -         1m @ 200g/t Ag, 0.02% Cu, 5.9% Pb and 7.3% Zn from 48m in Hole EQRC004.

Many drill intersections remain open and many other targets in the area require additional exploration.

The style of  mineralisation intersected in the drilling is similar to that occurring at the  Webbs  Silver
          deposit.  That is higher grade silver-base metal lodes are enveloped by lower grade  altered  and
          mineralized country rock.

A full description  of  the results of this drilling program will be the subject of a separate announcement
          to be released 1 February, 2013.


METALLURGY

Some on-going testwork was completed during the quarter. This testwork was aimed at flotation optimisation
and completion of testwork investigating the doré recovery circuit. Data obtained will be utilised in
conceptual design work as part of the processing study,


PLANNED ACTIVITIES FOR THE MARCH QUARTER 2013

     -  The Webbs Silver Project will be the focus of renewed activity for Silver Mines in the upcoming
        Quarter with an emphasis on re-commencing the planned drilling program in order to grow the resource.

     -  A detailed assessment of the exploration drilling results from the Mole project will be
        completed. Additional follow-up work will be designed and planned and budgeted.
        
     -  The Conceptual/Scoping level metallurgy study will be completed.
   
        
        
Please direct any queries regarding the content of this report to Charles Straw (CEO)
on +61 2 9253 0900 or cstraw@silverminesltd.com.au.



Competent Person Declaration

The information in this Document that relates to Exploration Results, Mineral Resources or Ore Reserves  is
          based  on  information compiled by Mr David Hobby, consulting Chief Geologist to SVL,  who  is  a
          Member of The Australasian Institute of Mining and Metallurgy. Mr Hobby has sufficient experience
          which  is relevant to the style of mineralisation and type of deposit under consideration and  to
          the  activity  which he is undertaking to qualify as a Competent Person as defined  in  the  2004
          Edition of the 'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore
          Reserves'.  Mr  Hobby  consents  to the inclusion in the report  of  the  matters  based  on  his
          information in the form and context in which it appears.

To view the map associated with this press release, please visit the following link: 
http://media3.marketwire.com/docs/silvmap1.pdf

Contact Information

  • Silver Mines