Silvercorp Metals Inc (NYSEAMERICAN:SVM) (TSE:SVM) (FRA:S9Y) said it has added to its portfolio in China by successfully bidding for the exploration rights at the Zhonghe Silver project via an online auction, offering RMB 495 million, or around US$76 million.
The project covers an area of nearly five square kilometres (sq km) and lies around 75 kilometres (km) by road northeast from the firm's producing Ying project, which is also in Luoning County, Henan Province.
READ: Silvercorp told investors that the silver-lead-zinc mineralization at Zhonghe was similar to that found at its SGX mine, one of the six mines that make up the group's flagship Ying project
Silvercorp told investors that the silver-lead-zinc mineralization at Zhonghe was similar to that found at its SGX mine, one of the six mines that make up the group's flagship Ying project.
Between March, 2016 and August, 2019, the Department of Natural Resources of Henan Province completed 3,213 cubic metres of trenching and 36,091 metres (m) of diamond drilling in 54 holes that defined silver-lead-zinc vein structures extending over 4.9km.
Silvercorp reported that 23 of the holes had hit significant silver grades. Highlight assays included a 1.95m intersection from 513.95m depth, which graded 1,592 grams per ton (g/t) silver, 12.33% lead and 3.45% zinc.
Another hole showed 1.36m, starting from a depth of 283.16 m, grading 1,383 g/t silver, 29.92% lead, and 5.08% zinc.
Silvercorp subsidiary Henan Found Mining Co Ltd won the auction and will use its existing management team at the Ying district to manage the future development of Zhonghe, the company said.
Henan Found is the largest taxpayer in Luoning County and has established a good working relationship with the Luoning government. Notably, It intends to bring in the local government and community as between 8% and 10% partners on the Zhonge project.
To get a mining licence for the asset, China requires that it needs to be advanced to so-called "exploration stage", that is, at least 50% of the resource estimates shall be defined by a drilling grid averaging no greater than 75m by 75m.
Silvercorp said it plans to begin a drilling campaign in the first quarter of 2021 that will be completed by 2022.
The company will make a first payment of around US$15.2 million, once the project area is cleared by the authorities as a non-military area. That represents 20% of the purchase price.
The remaining 80% is due only once the exploration right is converted into a mining license and shall be paid annually over the duration of the mining license.
Contact the author at giles@proactiveinvestors.com