Silver Mines

July 31, 2012 07:13 ET

Quarterly Results (Fourth Quarter)


31st July, 2012
To: Company Announcement officer

                            ACTIVITIES REPORT FOR THE QUARTER ENDED 30th JUNE 2012

 -    Metallurgical Test work demonstrates excellent potential to recover over 90% of silver to doré bars
      -    96% Ag is recovered to flotation concentrate and 98% Ag recovered via cyanide leach after Albion
           Process (TM). Silver then recovered to doré through Merrill-Crowe process.
 -    Potential to recover base metal (zinc and copper) concentrates to be investigated.
 -    Further test work is underway.
 -    Results will be used to estimate capital and operating costs to Scoping study level.

 -    Drill planning is well advanced at Webbs and is aimed at increasing the resource base.

 -    Drilling planned for Silver Mines' regional targets in New England aimed at demonstrating the
      potential for Webbs style mineralisation in the region.

EL5674 (Webbs)

    1.  Metallurgical Testwork

Silver Mines has engaged Mineralurgy Pty Ltd to oversee a metallurgical testwork program for the Webbs Silver
Project. Mineralurgy is a world recognised metallurgical consultancy, with particular expertise on complex
polymetallic projects in Australia and overseas. Mineralurgy conducted a review of metallurgical data related
to the Webbs project, including testwork conducted by Silver Mines and previous explorers. Based upon this
review the flow sheet decided upon for testing was; produce a bulk sulphide concentrate for further processing
to extract silver to doré using the Albion Process (TM) and possibly produce Zn and Cu concentrates.

This current testwork program has utilised the following key phases;

    1.  Following on from sighter flotation testwork a bulk sulphide flotation concentrate was produced at the
        relatively coarse grind of 212 microns. This recovered 95.9% of the silver to a 12% mass pull (ASX news release
        31st May 2012) which assayed 2.2 kg/t Ag and also recovered appreciable amounts of Cu, Zn and Pb.
    2.  The bulk concentrate was then subjected to the Albion Process (TM) which consists of ultra-fine grinding
        down to a product size of 80% passing 8-12 microns followed by oxidative alkaline leaching.
    3.  The Albion leach residue was then treated with conventional cyanidation. Cyanide soluble silver
        analysis showed 98.4% recovery of Ag.
    4.  This testwork results in total silver recovery of 94.3% into cyanide solution.

Recovery of silver into doré from the cyanide solution has not been investigated as yet, however the well
recognised Merrill-Crowe process is currently favoured which, based on many commercial applications SVL would
expect to recover over 95% of the silver from the silver cyanide solution, thus delivering greater than 90%
silver recovery overall to doré bars .

These results have the potential to be a major step for the Webbs Silver project. Once the test work is
completed, Core Resources will prepare capital and operating cost estimates to Scoping Study level to evaluate
a 500,000 tonne per year processing facility, capable of producing up to 4Moz of silver per annum.

Test work is ongoing and results will be reported as they come to hand. However, at this stage all indications
are very positive that a potentially economic metallurgical flow sheet utilising the Albion Process (TM)  to
produce silver doré is taking shape.

    2.  Exploration

Silver Mines is preparing to re-commence drilling at Webbs in around 4 weeks. This program will consist of RC
and diamond drilling and will target potential for near surface extensions as well as extensions at depth to
the existing deposit. At this stage the company is expecting to drill up to 12,000m of RC and diamond drilling
prior to delivering an updated resource estimate for the Webbs deposit. Further resource increases are
anticipated following additional deeper and extensional drilling as the deposit still remains open along strike
to the south and down plunge at Webbs Main and Webbs South. These targets are considered high priority as some
of the widest and highest grade intercepts are still open at relatively shallow depth of approximately 80-140m
below surface.

EL6771-EL6114 (Mole River)

The Mole River projects are highly prospective for silver rich polymetallic mineralisation as demonstrated by
the vast number of documented mineral occurrences combined with exploration results achieved by Silver Mines
and previous explorers. None of the targets in this project area have ever been drill tested. Silver Mines
anticipates that reconnaissance drilling will be undertaken at the Burra, Ecquador and Torny prospects by the
end of 2012.

EL6269 (Walla Walla Joint Venture)

Silver Mines has elected to withdraw from this joint venture with Australia Oriental Minerals.


The September Quarter will continue to be an exciting time for Silver Mines with the following key programs
underway or planned to commence;
      - Establish optimal grind size, oxidative leach conditions, sulphide oxidation requirements and cyanide
        leaching parameters for Albion Process(TM)-Cyanide Leach-Merrill Crowe flow sheet.
      - Investigate options for Zn, Cu and Pb recovery post Albion leach.
      - Complete bench scale and bulk sulphide testwork on composite sample for Webbs South deposit using
        similar flotation and leach conditions to the existing work on the Main Zone.
      - Develop capital and operating cost estimates to Scoping study level for an Albion plant at Webbs to
        treat 0.5Mt per year.
      - Extensional drilling at the Webbs Silver project aimed at growing the Webbs resource.
      - Exploration drilling on regional targets aimed at demonstrating potential for high grade silver rich
        polymetallic mineralisation similar to Webbs.

Please direct any queries regarding the content of this report to Charles Straw (CEO) on +61 2 9253 0900 or

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.

                                                                                                 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

ABN                                                             Quarter ended ("current quarter")
45 107 452 942                                                            30 June 2012

Consolidated statement of cash flows
                                                         Current quarter          Year to date (12
Cash flows related to operating activities               $A'000                   months)
1.1     Receipts from product sales and related                                   
1.2     Payments for   (a)  exploration & evaluation     (560)                    (2,778)
                       (b)  development                                           
                       (c)  production                                            
                       (d)  administration               (222)                    (832)
1.3     Dividends received                                                        
1.4     Interest and other items of a similar nature     8                        77
1.5     Interest and other costs of finance paid         (1)                      (5)
1.6     Income taxes paid                                                         
1.7     Other (provide details if material) Pre paid                              
                                                         (775)                    (3,538)
        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            (1)                      (40)
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)                                       
                                                         (1)                      (40)
        Net investing cash flows                                                  
1.13    Total operating and investing cash flows         (776)                    (3,578)
        (carried forward)

1.13    Total operating and investing cash flows         (776)                    (3,578)
        (brought  forward)
        Cash flows related to financing activities
1.14    Proceeds from issues of shares, options, etc.    703                      1,007
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                         703                      1,007
        Net increase (decrease) in cash held             (73)                     (2,571)
1.20    Cash at beginning of quarter/year to date        873                      3,371
1.21    Exchange rate adjustments to item 1.20                                    

1.22    Cash at end of quarter                           800                      800

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
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
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                         26                      15

5.2   Deposits at call                                 774                     858

5.3   Bank overdraft                                   -                       -

5.4   Other (provide details)                          -                       -

      Total: cash at end of quarter (item 1.22)        800                     873

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
Issued and quoted securities at end of current quarter

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

                           Total number        Number quoted      Issue price per     Amount paid up per
                                                                  security (see       security (see note
                                                                  note 3) (cents)     3) (cents)
7.1     Preference                                                                    
7.2     Changes during                                                                
        (a)  Increases
        through issues
        (b)  Decreases
        through returns
        of capital, buy-
7.3     +Ordinary          148,611,201         148,611,201                            
7.4     Changes during                                                                
        (a)  Increases     12,504,733          12,504,733         6 cents per share   6 cents per share
        through issues                                                                
        (b)  Decreases
        through returns
        of capital, buy-
7.5     +Convertible                                                                  
        debt securities
7.6     Changes during                                                                
        (a)  Increases
        through issues
        (b)  Decreases

7.7     Options                                                   Exercise price      Expiry date
        (description and                                                              
        conversion         13,609,882          13,609,882         Options             Expiring 31 October
        factor)                                                   exercisable at      2013
                                                                  35 cents per        
                           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   
                           8,500,000           -                  Unlisted Employee   Expiry Date 23
                                                                  Options, exercise   December  2015
                                                                  price  50 cents,   
                           3,500,000           -                  Employee Options,   Expiry Date 6 July
                                                                  exercise price      2012
                                                                  20 cents            
                           3,000,000           -                  Performance         
7.8     Issued during      6,252,367           -                  Unlisted Options    Expiring 31 October
        quarter                                                   exercisable at      2013
                                                                  10 cents per        
7.9     Exercised during                                                              
7.10    Expired during     5,000,000                              Unlisted Options,   Expiry  Date  1   May
        quarter                                                   exercise price      2012
                                                                  35 cents            
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:          July 2012
                    (Company secretary)

Print name:            Kevin Lynn


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

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

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