Silver Mines
LSE : SVLP

February 02, 2011 03:50 ET

Quarterly cash and activity report

31st January, 2011

To: Company Announcement officer

ACTIVITIES REPORT - FOR THE QUARTER ENDED 30th DECEMBER 2010.


HIGHLIGHTS
    
*   Updated Webb's Resource estimate of approximately 1.23Mt @ 256ppm Ag, 0.3% Cu, 0.8% Pb and 1.8% Zn at
    a 70ppm Ag cut-off.
        
*   RC drilling includes previously reported intersections of:
             
       8m @ 358 g/t Ag, 0.5% Cu, 1.7% Pb and 2.7% Zn from 66m and;
             
       4m @ 581 g/t Ag, 1.1% Cu, 3.0% Pb and 3.6% Zn from 86m.
             
                
              
*   New intersections not previously reported from this program include LAB assays;
        
                          
       RC124  - 9m @ 210 g/t Ag, 0.2% Cu, 1.7% Pb and 1.6% Zn from 54m, including; 2m @ 653 g/t Ag,  0.6%
       Cu, 3.5% Pb and 3.1% Zn from 55m
                                                    
             
       RC126  - 10m @ 164 g/t Ag, 0.2% Cu, 1.6% Pb and 1.7% Zn from 81m, including; 3m @ 335 g/t Ag,  0.5
       %Cu, 1.9% Pb and 2.3% Zn from 81m
                                       
                 
*   A total of 6 HQ diamond core holes completed for 781m. Diamond drilling is ongoing. All holes to date
    have intersected mineralisation.
        
    
*   A Scoping study was reinitiated and will investigate potential open pit mining and on site production
    of concentrates for export. Completion due by end of February 2011.
        
*   Reconnaissance mapping and rock chip sampling conducted around Webbs to follow up IP geophysical
    anomalies identifies drill targets.

*   IP geophysics completed at the Torny prospect on EL6114 located 25km north of Webbs. Highly chargeable
    zones identified in association with old workings and anomalous geochemistry.

*   Reconnaissance mapping and rock chip sampling commenced across prospects on the Mole River Project.




RESOURCE UPDATE

During the Quarter Silver Mines announced that independent consultants GeoRes had completed an updated
resource estimate for the Webb's Silver Project. The resource is reported in Table 1.

--------------------------------------------------------------------------------
JORC Category           Tonnes      Ag g/t        Cu %         Pb %         Zn %
--------------------------------------------------------------------------------
Inferred             1,066,000         240        0.27         0.83         1.83
--------------------------------------------------------------------------------
Indicated              167,000         360        0.32         0.55         1.91
--------------------------------------------------------------------------------
TOTAL                1,233,000         256        0.28         0.79         1.84
--------------------------------------------------------------------------------
Table 1: Resource estimate for Webb's Silver Project at 70ppm Ag lower cut-off.



The updated resource demonstrates that Webb's is one of the highest grade standalone silver
development/exploration projects in Australia. Resource grade mineralisation extends to surface and is
potentially amenable to open cut mining with possible underground mining targeting higher grade zones at
depth. The resource is open along strike, at depth and in many areas near those already drilled including
up dip.

DRILLING

Silver Mines has continued drilling at Webbs during the Quarter with a total of 12 RC holes completed at Webbs
Main for 1381m. This drilling included both infill and extensional holes. Results for the first 9 holes were
reported in ASX Announcement on November 30, 2011. These and the new results will serve to support and extend
the current resource.

The program was curtailed due to wet weather in late 2010 which prevented rig access to many sites.

Diamond drilling commenced late in the Quarter utilising a track mounted rig. A total of 6 holes were completed
for 781m. The diamond drill program will provide samples for metallurgical testwork, geotechnical data, and
additional assay data to increase confidence levels of the current resource and improve the geological
understanding of the deposit. To achieve this several holes were drilled as 'twins' to previous RC holes, with
other holes designed to infill and extend the current resource. All diamond holes drilled to date have
intersected visible mineralisation.

Silver Mines have opted to utilise the services of ALS-Chemex  (Brisbane laboratory).  ALS-Chemex are a
globally respected company servicing the mining industry. Samples from the rig are dispatched by TNT Couriers
from Glenn Innes to Brisbane laboratory. Routine assaying is conducted by ALS Method ICP41-S. 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.



SCOPING STUDY

Silver Mines has retained Lycopodium to complete a Scoping study to assess the potential of open pit mining at
Webbs to produce silver rich concentrates for export. The study is due for completion by end of February, 2011.


EXPLORATION DURING THE QUARTER


Webbs Silver Project - EL5674


Silver Mines has received the results of further rock chip sampling at Webbs. This program was primarily
targeting the possible surface geochemical expressions of dominantly subsurface chargeable IP anomalies.
Results indicate subtle but encouraging geochemical indicators of mineralisation exist at many of the
chargeability anomalies.

Rock chip sampling was also completed at other prospects east of the current IP coverage. Several areas of
strong alteration and elevated geochemistry were identified. One area identified minor workings over a strike
length of 80m. Peak silver values of 81ppm Ag were achieved in rock chip sampling along the trend.

Additional sampling was also undertaken along the northern extensions of the Webbs trend.


Torny Silver Project - EL6114

During the quarter an IP survey was conducted at the Torny prospect. Results from the IP survey indicate a 500m
long chargeable zone which is open to the north and south and is coincident with the trend of the old workings.
The old Torny Mine was small producer from high grade silver-lead-zinc lodes.  Previous rock chip sampling by
Silver Mines has yielded numerous encouraging results in and around the old workings.


Mole River Projects - Els 6512 and 6771


Silver Mines has commenced rock chip sampling and reconnaissance geological mapping at numerous prospects in
the Mole River tenement located approximately 30km north of Webbs. This program will follow up previous mapping
and sampling by Silver Mines.


PLANNED ACTIVITIES for MARCH QUARTER 2011


The current program of diamond drilling is expected to be completed by the end of February. Assay results will
be reported when available. Results from holes drilled in late 2010 should be available in the coming weeks.

An RC program of approximately 12,000m is due to commence in early March. Approximately 8,000m are planned for
Webbs, and will be aimed at increasing near surface resources by drilling strike and dip extensions.
Reconnaissance RC drilling will be conducted at several other prospects to follow up geochemical and/or
geophysical targets. Silver Mines has elected to pre pay for 10,000m of drilling for this program. For this,
Silver Mines has achieved significant discounts to current drilling industry costs and also ensured timely
delivery of the new rig by the contactor.


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


The information in this report that relates to Exploration Results is based on information compiled by Charles
Straw, consulting geologist and CEO, who is a Member of The Australasian Institute of Mining and Metallurgy.
Charles Straw 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'. Charles Straw consents to the inclusion in the report of the matters based on his information in the
form and context in which it appears.

The mineral resource estimate in this report has been classified and reported in accordance with the JORC Code.
The following statement is made in accordance with Clause 8 of the JORC Code: The information in this report
that relates to mineral resources is based on information compiled by Mr Robin Rankin, who is a Member of The
Australian Institute of Mining and Metallurgy. Mr Rankin is a full-time employee of GeoRes Pty Ltd, and has
sufficient experience, which is relevant to the style of mineralisation and type of deposit under consideration
and to mineral resource estimation processes to qualify as a Competent Person as defined in the JORC Code. Mr
Rankin consents to and has provided his prior written consent to the inclusion in this report of these matters
based on the documentation in the form and in the context in which it appears.



                                                                                                 Appendix 5B
                                                                  Mining exploration entity quarterly report



                                                                                                    Rule 5.3
                                                Appendix 5B

                                Mining exploration entity quarterly report
Introduced 1/7/96.  Origin:  Appendix 8.  Amended 1/7/97, 1/7/98, 30/9/2001, 01/06/10.


Name of entity
SILVER MINES LIMITED

ABN                                                             Quarter ended ("current quarter")
45 107 452 942                                                            31 December 2010

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     (755)                    (1,424)
                       (b)  development                                           
                       (c)  production                                            
                       (d)  administration               (340)                    (593)
1.3     Dividends received                                                        
1.4     Interest and other items of a similar nature     10                       16
        received
1.5     Interest and other costs of finance paid         (2)                      (2)
1.6     Income taxes paid                                                         
1.7     Other (provide details if material) Pre paid     (595)                    (680)
        drilling
                                                         
        Net Operating Cash Flows                         (1,682)                  (2,683)
                                                                                  
        Cash flows related to investing activities
1.8     Payment for purchases of: (a)  prospects                                  
                      (b)  equity investments            -                        (100)
                      (c)  other fixed assets
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)                                       
                                                         
        Net investing cash flows                         -                        (100)
        
1.13    Total operating and investing cash flows         (1,682)                  (2,783)
        (carried forward)

1.13    Total operating and investing cash flows         (1,682)                  (2,783)
        (brought  forward)

        Cash flows related to financing activities
1.14    Proceeds from issues of shares, options, etc.    2,604                    4,323
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                         2,604                    4,323
                                                                                  
        Net increase (decrease) in cash held             922                      1,540
        
1.20    Cash at beginning of quarter/year to date        1,006                    388
1.21    Exchange rate adjustments to item 1.20                                    
1.22    Cash at end of quarter                           1,928                    1,928

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                                     -
       
4.2    Development                                                    
       
4.3    Production                                                     
       
4.4    Administration                                                 350
       
                                                                      
       Total                                                          350

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                         228                     106

5.2   Deposits at call                                 1,720                   900

5.3   Bank overdraft                                   -                       -

5.4   Other (provide details)                          -                       -

      Total: cash at end of quarter (item 1.22)        1,928                   1,006


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          106,568,415        106,568,415                             
        securities                            
        
7.4     Changes during                                                                
        quarter                                                                       
        (a)  Increases      10,000,000         10,000,000       24 cents per share   24 cents per share
        through issues       2,379,128          2,379,128       12 cents per share   12 cents per share
                                                                  
        (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   28,183,281         28,183,281          12 cents per share  1 May 2011
        conversion                                                               
        factor)            300,000            -                   employee            Nov 2011
                                                                  
                           1,000,000          -                   Unlisted Options,   Expiry 10 July 2013.
                                                                  exercise price 7   
                                                                  cents,   
                                                                             
                           1,000,000          -                   Unlisted Options,   Expiry   13   January
                                                                  exercise price 50   2011.
                                                                  cents,
                                     
                           1,300,000          -                   Unlisted Options,   Expiry    27   August
                                                                  exercise price 17   2011.
                                                                  cents,    
                                     
                           2,000,000          -                   Unlisted Options,   Expiry 27 August
                                                                  exercise price 24   2012.Vest 27
                                                                  cents,              February 2011
                                                                                
                           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
                                                                  
                           5,000,000          -                   Unlisted Options,   Expiry  Date  1   May
                                                                  exercise price      2012
                                                                  35 cents,      
                                                                          
                           8,500,000          -                   Unlisted Employee   Expiry Date 23
                                                                  Options, exercise   December  2015
                                                                  price  50 cents,   
                                                                
                                                                  
                           3,000,000          -                   Performance
                                                                  Rights
                                                                  
                                                                  
7.8     Issued during                                                                 
        quarter            1,000,000          -                   Unlisted Options,   Expiry 10 July 2013.
                                                                  exercise price 7    
                                                                  cents,              
                                                                                      
                           1,000,000          -                   Unlisted Options,   Expiry   13   January
                                                                  exercise price 50   2011.
                                                                  cents,              
                                                                                      
                           1,300,000          -                   Unlisted Options,   Expiry    27   August
                                                                  exercise price 17   2011.
                                                                  cents,              
                                                                                      
                           2,000,000          -                   Unlisted Options,   Expiry 27 August
                                                                  exercise price 24   2012.Vest 27
                                                                  cents,              February 2011
                                                                                      
                           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                
                                                                                      
                           5,000,000          -                   Unlisted Options,   Expiry  Date  1   May
                                                                  exercise price      2012
                                                                  35 cents,           
                                                                                      
                           8,500,000          -                   Unlisted Employee   Expiry Date 23
                                                                  Options, exercise   December  2015
                                                                  price  50 cents,    
                                                                  
                                                                  
                           3,000,000          -                   Performance
                                                                  Rights
                           
                           
7.9     Exercised during   (2,379,128)        (2,379,128)         12 cents per        1 May 2011
        quarter                                                   share               
                                                                                      
                                                                  
7.10    Expired during                                                                
        quarter
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 December 2010
                    (Director/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.


                                              --------------------
                                              
+ See chapter 19 for defined terms.

Contact Information

  • Silver Mines