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Silvercorp Metals Receives Preliminary Assessment Technical Report for Silvertip Project

Silvercorp Metals Inc. (TSX:SVM)(NYSE:SVM) has announced it has received an independent Preliminary Assessment Technical Report prepared by Golder Associates Ltd. on its 100% owned Silvertip project, British Columbia, Canada.

This PA is based on the mineral resource update for the Silvertip deposit detailed in the NI 43-101 technical report by Mr. Randy Cullen released on February 19, 2010.

For a small mine and mill operating seasonally (six months per annum, non-winter) at 500 tonne per day or 72,000 tonne per year, and using the three year average prices, (silver price: US$15.50/oz, lead price: US$0.98/lb, and zinc price: US$0.92/lb) the undiscounted pre-tax NPV is $US122 million, with a pre-tax IRR of 21 per cent. For the upside case (silver price: US$25/oz, lead price: US$1/lb, and zinc price: US$1/lb) the undiscounted pre-tax NPV is US$311 million, with a pre-tax IRR of 49%. The initial capital cost of the project is estimated to be $US49 million with sustaining capital costs over the remaining mine life (21 years) estimated at $US54.2 million. The payback period is estimated at 4 years for the base case and 2 years for the upside case after reaching commercial production.

As a comparison, the scenario for a 200 tonne per day and a 1000 tonne per day mine and mill are also evaluated in the PA. According to the PA, a small mine and mill operating seasonally at 500 tonne per day offers better economic benefit in terms of capital return and cash flow than a 200 tonne per day mine and mill operating year round, and still allows Silvercorp to operate under the BC Small Mines Permit since the annual production would be less than 75,000 tonnes per year. By operating seasonally Silvercorp will avoid extreme winter conditions of cold weather and heavy snow.

While the 1,000 tonne per day operation does offer some economic advantage, the mine life is relatively short at approximately 7 years. Golder believes that while the economics are favourable, the current resource is too small to sustain this level of production and there is significant risk of logistical failure at this higher production rate.

Preliminary Assessment Parameters

Mining and processing for a seasonal 500 tonne per day operation

The PA is based on an underground mine operation using a drift and fill mining method, tailings dam, processing and concentrate production facility, capable of processing 500 tonnes per day seasonally.

Extraction of the mineral resources would use drift and fill methods, with cemented rock fill (first 2 years) and paste backfill (year 3 onwards) used to fill open voids. It is expected that up to 50% of the mill tailings could be sent back underground, significantly reducing the size of the tailings area. The mine would be developed via a new ramp and the existing main decline for the transportation of personnel, equipment and materials, as well as transport of the mined resources to the surface for processing. Additional primary development would include two ventilation raises, escape way raises and level access drifts. A total of 5,700 metres of primary and secondary underground development is contemplated during the 21-year mine life.

Mineral processing will use differential flotation to produce lead and zinc concentrates for sale to a third party smelter. Concentrates will be bagged and delivered to the port of Stewart, BC then to smelters overseas. Numerous consultants have conducted metallurgical work on the Silvertip Project. The PA used the average recoveries of all tests completed to date (all pre-1999), that is, recoveries of 75.8 % for silver, 85.5 % for lead and 82.9% for zinc, with silver reporting to the lead concentrates, which will contain 2,000 to 3,000 grams silver per concentrate tonne. The lower silver recovery rate of 75.8% may be due in part to historical attempts to maximize zinc recovery. New metallurgical work is currently being conducted by SGS Mineral Services.

Over the mine life for the 500 tonne per day seasonal operation, mine production is expected to total 1.49 million tonnes at average diluted grades of 469 g/t silver, 8.9% lead and 10.4% zinc with a mining dilution of 10% and a mining recovery rate of 90%. Average total cost is expected to be $3.76 per silver ounce for the base case and $2.41 per silver ounce for the upside case over the 21-year mine life, net of base metal byproduct credits.

Capital costs (500 tonne per day seasonal)

Sustaining capital costs over the 21 year mine life amounts to $US54.2-million primarily attributed to underground development and equipment replacement costs.

Operating costs (500 tonne per day seasonal)

Based on the PA, a 500 tonne per day seasonal operation is the best option for the development of the Silvertip project. Under this option, the project can be built with a capital investment of less than $50 million and will generate an average annual cash flow in years 1-5 of $11 million using 3 year average metal prices. The upside case generates an average annual cash flow in years 1-5 of $22 million using metal prices of: (silver price: US$25.00/oz, lead price: US$1.00/lb, and zinc price: US$1.00/lb). The Silvertip project will have a mine life of 21 years without any new discovery, providing the surrounding communities with long term employment opportunities. The cash flow generated can be used by Silvercorp to carry out more drilling to increase resources and potentially extend the mine life. Production will also provide benefits to the local community through profit sharing, business opportunities, and to government through tax payment.

Silvercorp intends to complete the continuing environmental assessment study, to prepare and submit an application for the Small Mine Permit, and to complete a feasibility study for the Silvertip project in fiscal 2012.

This press release has been reviewed by Golder Associates Ltd. Mr. Frank Hrdy P.Geo. is the Qualified Person on the project as defined under National Instrument 43-101. Mr. Hrdy has verified the information and has reviewed and approved the contents of this news release.

Source: Silvercorp Metals Inc.

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