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Silvercorp Metals Receives Approval to Acquire 70% Interest in Yunxiang Mining, China

Silvercorp Metals Inc. (TSX:SVM)(NYSE:SVM) has announced that it has received the necessary Chinese government approvals, including Chinese military clearance, to acquire a 70% equity interest in Yunxiang Mining Co. Ltd., a private mining company in Hunan Province, China.

Yunxiang's primary asset is the BYP Gold-Lead-Zinc mine (the "BYP mine"), located 220 km, or a 3 hour drive, southwest of Changsha, the capital city of Hunan Province, China. The BYP mine has a mining permit covering 3.67 km2, a safety production permit, and a 400 tonne per day ("t/d") floatation mill. As a result of this acquisition, Yunxiang is now converted into a Sino-Foreign joint venture company and Silvercorp has now taken over the control of Yunxiang.

Pursuant to the share purchase agreement and Sino-Foreign cooperative joint venture contract, the total consideration for the 70% interest is USD$33 million. Silvercorp has paid USD$19 million to the owner, representing 80% of the required payment for the share purchase, and is required to make USD$9 million equity capital investment to Yunxiang. Silvercorp will make payment of the remaining 20% share purchase payment (USD$5 million) after certain conditions, including completion of a government tax audit of Yunxiang, are satisfied.

Silvercorp intends to utilize the existing 400 t/d floatation mill to mine and process gold mineralizations starting from fiscal 2012, initially, focusing on higher grade materials. Concurrently, Silvercorp plans to expand the mining and milling capacity to 1,000 t/d gold mineralization for fiscal 2013 and to 2,000 t/d (1,000 t/d gold mineralization and 1,000 t/d lead-zinc mineralization) by fiscal 2014.

A 50,000 metre drilling program has been planned for the BYP project, with the intent of upgrading the current historical resources and expanding the mineralization bodies along strike and down-dip.

A Canadian engineering firm has been engaged to complete a NI 43-101 report on the project and a Chinese engineering firm will be engaged to design a full plan for mining development and mill construction. Based on internal analysis, it is possible that the expansion of the production and exploration drilling will be financed by cash flow generated by Yunxiang.

The completion of this acquisition marks another significant step for Silvercorp's growth in China, allowing Silvercorp to establish a third base for production in a prominent polymetallic belt with a mixed production of precious and base metals. The acquisition fits Silvercorp's strategy of acquiring precious metal projects that it expects can generate healthy cash flows before the project is fully explored and developed, so that further resource expansion and production growth can be financed by internal cash flow. This will also enable Silvercorp to further establish its reputation as an efficient producer and enhance its ability to consolidate other producing mines and exploration projects in the region.

Myles Gao, P. Geo, is the Qualified Person on the project as defined under National Instrument 43-101. He has verified the information and has reviewed and approved the contents of this news release.

Source:

Silvercorp Metals Inc.

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