Silver Mines
LSE : SVLP

April 20, 2011 04:26 ET

Scoping Study

To: Company Announcements Officer

Australian Securities Exchange

19th April 2011.



                           POSITIVE WEBBS SCOPING STUDY WITH SIGNIFICANT UPSIDE POTENTIAL

KEY POINTS of SCOPING STUDY ARE;


1.	BASE CASE:

        -     Optimum pit shells using silver price of $A31/oz extracts 432,000t @ 344g/t Ag;

        -     15 month mine life and has pre-tax, pre-capital cash surplus of $A49 Million dollars at a cash production                            
              cost of ~$A18/oz.

2.	SPOT CASE:

        -     Optimum pit shells using silver price of $A40/oz extracts 578,000t @ 304g/t Ag;

        -     20 month mine life has pre-tax, pre-capital cash surplus of $A85 Million dollars at cash production cost   
              of ~$A22/oz.

3.	350,000 tonne per annum process plant has capital cost of approximately $A66 Million Dollars.

4.	Process plant operating costs approximately $A55/t.

5.	Open pit mining costs approximately $A4.36/t.

PROJECT HAS SIGNIFICANT UPSIDE;


        -     By extending project life through the likely identification of additional near surface resources within     
              and adjacent to existing pit shells, where an Exploration Target of between 1Mt-2.3Mt has been defined 
              from surface to 120m below surface and

        -     If metal recoveries and/or operating and capital costs can be 'improved'. Detailed metallurgical testwork   
              to begin shortly.

Silver Mines Limited (ASX:SVL) is very pleased to announce that a scoping study evaluation has been completed, based on 
open cut mining, of the Webbs Ag-Cu-Pb-Zn deposit at the 100% owned Webbs Silver project in northern NSW. The results of 
the study highlight positive operating revenue from the base case model of approximately $A49Million (pre capital, i.e. 
plant costs; and pre-tax) over an initial project life of 15 months Operating revenue increases significantly to 
approximately $A85Million dollars using a silver price of $A40/oz and extends the project life to 20 months based only 
on the current resource. These projections demonstrate that capital pay back is potentially very rapid, based on current 
estimates, with any extension to project life offering significant additional revenues.


Silver Mines Limited 									
ACN 107 452 942		
L5, 17-19 Bridge St
Sydney, NSW Australia 2000 
P: +61 2 0253 0900 W: www.silverminesltd.com.au


Further to this, SVL considers the Webbs Silver project's upside potential can be defined in the following key areas;


        -      the delineation of additional resources inside current pit shells;
        
        -      the delineation of additional near surface resources adjacent to and along strike from existing pit   
               shells;

        -      improvements in metallurgical recovery and smelter terms;
        
        -      decreases in capital and operating costs and 
  
        -      outlining of additional resources at depth, potentially amenable to underground mining and in parallel      
               structures east and west of the main identified lode system which contains the existing resource and    
               exploration target.


The scoping study was intended to be a high level technical and financial review of the potential of the Webbs Silver 
project to be developed into a mining operation. The Company is very pleased with the outcomes and recommendations 
delivered. The project will continue to be aggressively evaluated as per our Company strategy.

The Company will now focus on delineating additional resources at Webbs in line with key recommendations of the scoping  
study. The main target will initially be within and adjacent to the current pit shells. In these areas Silver Mines has 
defined an Exploration Target(2) of between 420,000t and 770,000t at 200-260 g/t Ag, shown as Zone 1 in Figure 1. 
Additional Exploration Targets exist along strike (Zone 2) and at depth (Zone 3) also shown in Figure 1.


SCOPING STUDY INPUTS.

Silver Mines had several independent consultancies assist with various aspects of the Scoping Study:

     	 -     Resource Estimation - GeoRes Consultants, NSW.

         -     Process Plant - engineering, capital and operating costs  -Lycopodium Minerals, QLD.

         -     Mining-operating costs, pit optimisations and financial outputs - AMC Consultants, VIC.



Readers should note that most of the resource is currently classified as Inferred. Clause 20 of the JORC Code states 
that caution should be taken when using inferred resources in technical and economic studies. Accordingly Silver Mines 
treats the results of the Scoping Study as conceptual in nature. However, the results and recommendations emanating from 
the Scoping Study assist the Company in the next phase of evaluation for the project, and is in-line with internal 
expectations. As such the Company is ramping up work programs.



SCOPING STUDY OUTCOMES.

1.	RESOURCE ESTIMATION: GeoRes(1) completed an updated resource estimate for Webbs in late 2010, as shown in Table  
        1.

                      Table 1. Webbs Silver Project - Resource estimate at 70g/t Ag cutoff
                   
                       JORC         Tonnes	 Ag     Cu %	Pb %	Zn %
                     Category                   (g/t)
                   
                     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


2. PROCESSING: Capital and operating costs were developed for a conventional comminution and floatation plant with 
a capacity of 350,000 tonnes per annum. Capital costs for the processing plant were estimated at $66 Million with 
operating costs of $55/tonne. The plant employs a crush size to 12mm for ball mill feed, primary grind size of 75 
microns and rougher concentrates regrind of 25 microns prior to concentrate cleaning.

The operation assumes the production of Cu-Ag and Pb-Ag concentrates for export. Metallurgical recoveries (Ag 78%, Cu 
60%, Pb 60% and Zn 20%) and concentrate data are based on limited metallurgical testwork and assumed smelting and 
refining costs.

These data when combined produce a result in Net Smelter Returns (NSR) of: Ag 70%, Cu 26%, Pb 30% and Zn 6%.


3. MINING: The scoping study considered only open cut mining based on the existing resource model. Underground 
mining was not evaluated on the basis that the project would be developed with open cut mining as the start-up option 
and the fact that existing resources are substantially in the Inferred category. 

AMC Consultants conducted pit optimisations based on mining costs which they derived from current industry prices and 
extensive experience. Mill operating costs were derived by Lycopodium using their knowledge and experience in the 
industry. Metallurgical recoveries, concentrate data and Net Smelter Returns were derived from high level metallurgical 
testwork and assumption inputs from Lycopodium and SVL.

Pit optimisations considered two options;

-	a BASE CASE and 

-	a SPOT CASE.

These options were based on differing commodity prices as shown in Table 2. The SPOT CASE used prices and exchange rates 
as at April 15, 2011. All other inputs such as operating costs and mining parameters remained identical for both cases.


                                    Table 2. Base Case/Spot Case Comparison
	                               
                                                Base Case   Spot Case

                                  Ag $A/oz	31	    40
                                  Cu $A/t	8,000	    8,942
                                  Pb $A/t	2,100	    2,561
                                  Zn $A/t	2,100	    2,267
                                  $A/$US	1.00	    1.05


The results of the AMC pit optimisations are shown in Table 3 and relate to potential mill feed from open cut mining and 
also show total costs and cash surplus generated..


                                    Table 3. Open pit optimisation results
                 Mill Feed       Ag      Cu      Pb      Zn       Costs    Cash Surplus
	          Tonnes	(g/t)	 %       %	 %	  $Mill	       $Mill
                                       

BASE CASE       432,000	        344	0.31	 0.93	 1.43	   65	    49
SPOT CASE	578,000	        304	0.28	 0.90	 1.41	   90	    85



From the optimisations there are two pit shells generated; one at Webbs South and the other at Webbs Main/ North as 
shown in Figure 1.


4. FINANCIAL: The BASE CASE scenario resulted in a pre-capital and pre-tax surplus revenue of approximately 
$A49Million over a mine life of 15 months. In the SPOT CASE scenario the pre-capital and pre-tax operating cash flow 
increases to approximately $85Million over a mine life of approximately 20 months. 


Silver Mines considers the results of the Scoping Study to be extremely encouraging and indicate that open pit mining of 
the Webbs deposit and the production of silver rich concentrates to be potentially economically viable. This is 
considered a very positive outcome given the Exploration Target identified and the additional resources likely to be 
delineated within and adjacent to the pit shells used to derive the scoping study revenue projections.


The Company is just about to begin a 10,000m RC drilling program at Webbs which aims to upgrade the current resource and 
quantify the exploration target. Silver Mines will also soon to commence testwork on fresh drill core samples to enable 
comminution and floatation performance to be evaluated and potential markets for concentrates to be assessed. 

The results of the upcoming drilling program will feed into a new resource estimate and, combined with additional 
metallurgical testwork, will assist SVL with further evaluation of the Webbs silver project.

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



(1)The information in this Document that relates to Exploration Results, Mineral Resources or Ore Reserves is based on 
information compiled by Mr Robin Rankin, who is a Member of the Australasian Institute of Mining and Metallurgy 
(MAusIMM) and registered as a Chartered Professional Geologist (CPGeo). Robin Rankin is Principal Consulting Geologist 
and operator of the independent geological consultancy GeoRes. He 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' (the  JORC Code). He consents to the inclusion in the report of the matters based on 
his information in the form and context in which it appears.

(2)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' 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.


 
 
Figure 1A: Webbs Silver Project Optimised Open Pit Shells outlines.
Run 6 - Base Case Option, Run 07 - Spot Case Option: http://media3.marketwire.com/docs/SILVER1A.jpg

Figure 1B. Webbs Long Section showing exploration target zones, existing drilling and optimized pit shells.
Blue Line - Base Case Pit Outline. Red Line - Spot Case Pit Outline: http://media3.marketwire.com/docs/SILVER1B.jpg

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