Silver Mines
LSE : SVLP

December 21, 2011 06:54 ET

Drilling Report Webbs Project Update

To: Company Announcements Officer

Australian Securities Exchange

21st December, 2011

WEBBS PROJECT UPDATE

    *       Metallurgical testwork indicates that silver at Webbs may be amenable to cyanide extraction
        offering the potential for the production of silver doré.
        
*       DDH021 intersects:
            o       6.9m @ 213g/t Ag, 0.12% Cu, 0.79%Pb and 0.83% Zn from 21.1m
                 
                 including 1.0m @ 1130g/t Ag, 0.46% Cu, 1.50% Pb and 1.51% Zn from 26.0m
                 
    *       DDH022 intersects:
        
            o       17.4m @ 194g/t Ag, 0.18% Cu, 0.46% Pb and 1.43% Zn from 30m;
                 
                 including 9.0m @ 308g/t Ag, 0.28% Cu, 0.44% Pb and 1.77% Zn from 35m
        
    *       DDH016 intersects:
        
            o       Previous sample assay of 1m @ >10,000g/t Ag returns assay of 11,212g/t Ag
                 
Silver Mines Limited (ASX:SVL, PLUS:SVLP) is pleased to announce some very encouraging preliminary
metallurgical results which indicate that mineralisation at Webbs may be amenable to cyanide leaching
leading to the possible production of silver doré. More testwork is required to adequately test this
concept.

SVL has also received results for a further two of nineteen recently completed diamond drill holes (DDH) at
the Webbs Silver project. These DDH holes were designed to infill the previous reverse circulation (RC)
drill pattern, twin RC holes in order to assist in geological interpretation and test deeper targets. Drill
core samples will also be used for metallurgical testwork.

Silver Mines CEO Charles Straw stated "the bottle roll metallurgical results constitute an exciting
development for the Webbs project. Although very preliminary in nature the results demonstrate the
production of silver doré may be possible. If so, this could have a significant positive impact on the
project. At the same time results from the diamond drilling are in line with expectations based on previous
RC results. We still await results for several key diamond holes which need to be included in the new
resource model due to their positions. At the same time we are always pleased to obtain bonanza grade
results like that reported in DDH016. It's always good when you can report silver assays in percent, even
if it is only from a single metre, and it helps to demonstrate the high nature of the Webbs deposit"

METALLURGY

As part of the metallurgical testwork program, Silver Mines has conducted preliminary investigations into
the cyanide solubility of silver at the Webbs deposit.

The tests were conducted on two types of material and results are shown Table 1. Samples 68678-68681
represent jig-gravity tailings from operations dating from 1888-1900. Samples 86906-86916 represent
individual assays through the mineralized zone from recent diamond drill hole DDH019. All samples were
pulverized to 90% passing 75 microns and subjected to cyanide bottle roll tests. Cyanide bottle roll
involves a 24hr agitated leach of 500-1000g of the pulverized samples using weak sodium cyanide solution.
The liquor and/or solid residue are assayed for silver (Ag) and when compared with the sample head grade Ag
the percentage of Ag extracted by can be calculated.

Table 1. Bottle roll results

Sample                               Head grade Ag (g/t)                   Ag (%) leached by CN
                                                                          
68678                                278                                   83
68679                                247                                   74
68680                                236                                   85
68681                                272                                   56
86906                                24                                    36
86907                                140                                   28
86908                                1940                                  26
86909                                151                                   20
86910                                30                                    22
86912                                269                                   28
86913                                123                                   36
86914                                2270                                  20
86915                                435                                   30
86916                                41                                    21


The results in Table 1 indicate that silver extraction from the jig tailings samples average 75% and ranged
from 56-85%. The samples from DDH019 yielded a lower average silver extraction of 27% and ranged from 20-
36%. The increased recovery in the jig tailings sample is likely due to the fact the stockpile contains
material 2-10mm in size has been exposed at surface for 100 years resulting in the oxidation of
tetrahedrite which has liberated much of the contained silver thereby increasing its cyanide solubility.

Results from this early stage evaluation are considered very encouraging as they demonstrate that at least
some of the silver at Webbs is cyanide soluble thereby indicating the production of silver doré may be
possible. Additional detailed testwork is required but the results demonstrate this is a potential
treatment route worth pursuing.

DIAMOND DRILLING

DDH016

Results for DDH016 were reported in ASX Announcement dated November 16, 2011. A single sample from the
mineralised section of this hole returned an assay of 1m @ >10,000g/t Ag. The value >10,000g/t Ag is the
maximum that can be reported from the laboratory used by Silver Mines. Accordingly, this sample was sent to
a laboratory in Canada to obtain an accurate analysis. The assay returned was 11,212g/t or 1.12% Ag. This
value is the highest individual silver assay reported from Webbs to date.

DDH021 and 022

Results for diamond core holes DDH021 and DDH022 have been received. Results are summarized in Table 2.

DDH021 was essentially drilled as a twin of RC hole 202. DDH021 intersected 1m @ 1130g/t Ag, 0.4% Cu, 1.50%
Pb and 1.51% Zn from 26m. RC203 intersected 2m @ 588g/t Ag, 0.65% Cu, 5.40% Pb and 5.40% Zn from 25m.
Additional intersections in RC203 included 2m @ 502g/t Ag from 41m and 1m @ 146g/t Ag from 51m. These
intersections were not duplicated in DDH021, although similar width but lower grade zones could be
interpreted as corresponding zones. It is also possible that cross cutting faults may displace the lode
zone in the area.

DDH022 was effectively a twin of RC hole 214. DDH022 intersected the lode about 6m above the intersection
in drillhole RC214. Comparative intersections are: RC214: 15m @ 256g/t Ag, 0.21% Cu, 0.30% Pb and 1.78% Zn.
DDH022 intersected 17.4m @ 194g/t Ag, 0.18% Cu, 0.46% Pb and 1.43% Zn. In both holes the true width of the
mineralized zone is around 6.0m.

FUTURE PLANS

An updated resource estimate for the Webbs deposit is currently being prepared. However, the company is
still awaiting assay results for several key diamond drill holes which need to be included in the resource
estimate. Accordingly the resource estimate is likely to be released in early 2012 once the new results
have been incorporated into the resource database.

Drill core is also being used to formulate metallurgical samples upon which additional metallurgical
testwork will be conducted to pre-feasibility level. This work will include flotation testwork and
additional testwork on pre-treatment of concentrate and cyanide leaching of silver.

Additional drilling at Webbs is planned in early 2012 in order to expand the resource base. This drilling
will test deeper high grade targets as well as several near surface gaps in the existing drill pattern.

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

Table 2. Diamond drilling: Hole details and intersections

Hole ID     MGA North    MGA East   Dip    Azi MGA  Hole      From (m) To (m)  Int#    Ag      Cu (%)  Pb (%)  Zn (%)
                                                Depth                    (m)     (g/t)
DDH021      6751893      358921     -55    299      83.6      21.1     28      6.9     213     0.12    0.77    0.83
DDH021      Incl.                                            26       27      1       1130    0.46    1.5     1.5
DDH021                                                       57       59      2       67      0.30    1.00    1.37
DDH022      6751714      358873     -50    298      64.9      30       47.4    17.4    194     0.18    0.46    1.43
DDH022      Incl.                                             35       44      9       308     0.28    0.44    1.77
All co-ordinates are in MGA grid.

# Down-hole 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 approximately 40% of down-hole interval in holes with dips
of -50o.

Sampling and Assaying

HQ diamond core samples are cut lengthways to produce half core. Samples are usually taken at 1m intervals
or as geology dictates. Silver Mines have opted to utilise the services of ALS-Chemex (Brisbane), a
globally respected company servicing the mining industry. Samples are dispatched by TNT Couriers from Glen
Innes to ALS. Core is crushed to -6mm and a 1kg split is then pulverised to provide the assay pulp. Routine
assaying is conducted by ALS Method ICP41 This is acid digest with an ICP-AES finish analysing for Ag, As,
Bi, Cu, Fe, Pb, S, Sb, Sn, W and Zn. 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). For
silver above 1500g/t a gravimetric technique is used. Certified Standards and blanks are routinely
submitted in each assay batch to monitor QA-QC.

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 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.

Contact Information

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