UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934

June 18, 2019

Commission File No. 0001-34184

SILVERCORP METALS INC.
(Translation of registrant's name into English)

Suite 1750 - 1066 West Hastings Street
Vancouver, BC Canada V6E 3X1
(Address of principal executive office)

[Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F]

Form 20-F [   ] Form 40-F [ X ]

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1) [   ]

Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.

Indicate by check mark if the registrant is “submitting” the Form 6-K in paper as permitted by Regulation S-T “Rule” 101(b)(7) [   ]

Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant's “home country”), or under the rules of the home country exchange on which the registrant's securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant's security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.

Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes [   ] No [ X ]

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1

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

2

EXHIBIT INDEX

 

3

Technical Report

NI 43-101 Technical Report Update on the Gaocheng Ag-Zn-Pb Project in Guangdong Province, People’s Republic of China

Silvercorp Metals Inc.

Guangdong Province, People’s Republic of China

In accordance with the requirements of National Instrument 43-101 “Standards of Disclosure for Mineral Projects” of the Canadian Securities Administrators

Qualified Persons:
D. Nussipakynova, P.Geo.
H. Smith, P.Eng., B.Sc., M.Sc. A. Riles, B.Met. (Hons), Grad Dipl Business Management, M. Econ. Geol, MAIG (QP)
P. Stephenson, P.Geo., B.Sc., FAusIMM (CP), MAIG, MCIM

AMC Project 719004
Effective date 30 June 2019

 

 

AMC Mining Consultants (Canada) Ltd. (AMC) was commissioned by Silvercorp Metals Inc. (Silvercorp) to prepare an independent Technical Report (the 2019 Technical Report) on the Gaocheng (Gaocheng or GC) property, located in Gaocun Township, Yun’an District, Yunfu City, Guangdong Province, China. AMC has prepared previous Technical Reports on the GC property in 2009 (‘NI 43-101 Technical Report Update on the GC Ag-Zn-Pb Project in Guangdong Province,

People’s Republic of China’, effective date 18 June 2009), 2012 (‘NI 43-101 Technical Report on the GC Ag-Zn-Pb Project in Guangdong Province, People’s Republic of China’, effective date 23 January 2012), and 2018 (‘NI 43-101 Technical Report Update on the Gaocheng Ag-Zn-Pb

Project in Guangdong Province, People’s Republic of China’, effective date 30 June 2018). Two of the authors of the 2019 Technical Report, Ms Dinara Nussipakynova and Mr Herbert Smith of AMC, visited the GC property in January 2018. All authors of this report qualify as Independent Qualified Persons.

In preparing this report, AMC has relied on various geological maps, reports, and other technical information provided by Silvercorp. AMC has reviewed and analyzed the data provided and drawn its own conclusions augmented by its direct field observations. Much of the original geological information in this report was written in Chinese. Translations of key technical documents and data into English were provided by Silvercorp. The Qualified Persons have no reason to believe that the translations are not credible and believe they are generally reliable but cannot attest to their absolute accuracy.

The GC property is located in the vicinity of Gaocheng village, Gaocun Township, Yun’an District,

Yunfu City, Guangdong Province, People’s Republic of China. The Property is located west of the metropolitan city of Guangzhou, the capital of Guangdong Province. Guangzhou is located about 120 kilometres (km) north-west of Hong Kong and has a total population of almost 14 million residents, as of December 2016. Access to the GC project from Guangzhou is via 178 km of four-lane express highway to Yunfu, then 48 km of paved road to the project site.

Silvercorp owns 95% of the GC Mine through its 100% ownership of the shares of Yangtze Gold Ltd. (Yangtze Gold), which in turn wholly owns Yangtze Mining Ltd. (Yangtze Mining). Yangtze Mining owns a 95% interest in a Sino-Foreign joint venture company, Anhui Yangtze Mining Co. Ltd. (Anhui Yangtze). Anhui Yangtze’s main asset was the GC exploration permit for the GC Mine, which was subsequently converted to a mining permit in November 2010. Guangdong Found Mining Co. Ltd. (China), (Guangdong Found), is the designated joint venture operating company of the GC Mine. Yangtze Mining (H.K.) Ltd., a wholly owned subsidiary of Yangtze Mining, owns 95% of Guangdong Found.

The Mining Permit in the name of Guangdong Found is valid for 30 years to 24 November 2040, covers the entire 5.5238 km² area of the GC Mine and permits mining from 315 metres (m) to minus 530 m elevations. The permit allows for the operation of an underground mine to produce silver, lead and zinc.

Currently, GC Mine is subject to Mineral Resources tax, levied at 3% of sales. This tax together with other government fees totals around 5% of net revenue. AMC is not aware of any additional royalties, back-in rights, payments, agreements, environmental liabilities, or encumbrances particular to the property other than those stated above.

 

Various state-sponsored Chinese Geological Brigades and companies have conducted geological and exploration work in the project area with systematic regional geological surveys commencing in 1959. Historical drilling commenced in 2001.

Prior to Yangtze Mining acquiring the GC Property in 2005, illegal mining activity resulted in the excavation of several tunnels and small-scale mining of veins V2, V2-2, V3, V4, V5, V6, and V10. It is reported that a total of 1,398 m of excavation comprised of 10 adits and tunnels had been completed on the property through the illegal activity.

A total of 43 diamond drillholes for a combined total of 13,463.74 m was drilled on the GC property between 2001 and 2007 prior to the property acquisition by Silvercorp. Diamond drillholes were drilled using PQ size in overburden, then reduced to HQ size for up to 100 m depth.

The Guangdong Provincial Institute of Geological Survey (GIGS) prepared a resource estimate for nine mineralized veins for the GC project after the 2004 – 2005 exploration season. This was not compliant with the Canadian Institute of Mining, Metallurgy and Petroleum (CIM) Standards and is not material to the 2019 Technical Report.

The GC property is located on the east margin of the Luoding basin, east of the Wuchuan – Sihui major fault within the north portion of the Yunkai uplift of the South China Orogenic Belt. North-east striking structures and arc structures form the basic geological framework of the region. Deposits on the property occur at the intersection of a north-easterly striking fault zone and a near east-westerly striking fault zone.

Basement geology in the area comprises late Proterozoic Sinian sedimentary clastics and carbonate rocks; Palaeozoic (Ordovician, Silurian, Devonian, Carboniferous) sedimentary clastics and carbonate rocks; and Mesozoic (Triassic) coal-bearing clastic rocks and Cretaceous red clastic rocks. Ag-Pb-Zn poly-metallic deposits occur within late Proterozoic rocks. Cu-Pb-Zn, Mn, and Au-Ag deposits occur within Palaeozoic rocks.

The GC Project is located at the intersection between the Wuchuan-Sihui Deep Fault zone and Daganshan Arc-ring structural zone. It is situated in the south-west part of the Daganshan uplift. Structures developed in the area are mainly the NWW-EW striking Gaocheng Fault zone, the NE striking Baimei Fault zone, and the Songgui Fault zone.

Basement rocks within the GC Project area encompass quartz sandstone, meta-carbonaceous siltstone, carbonaceous phyllite, calcareous quartzite, and argillaceous limestone of the Sinian Daganshan Formation; quartz sandstone and shale of the Triassic Xiaoyunwushan Formation, and sandy conglomerate and conglomerate of the Cretaceous Luoding Formation. These rocks are intruded by Palaeozoic gneissic, medium-grained biotite granite, and Mesozoic fine- to medium-grained adamellite, brownish, fine-grained, biotite mylonite, granite porphyry, quartz porphyry, diabase, and aplite. The Mesozoic intrusives intruded along the south and south-west contacts of the Palaeozoic granites. The majority of Ag-Zn-Pb mineralization is hosted by the Mesozoic granite. The granite dips south and strikes west north-west, parallel to the majority of mineralized veins on the GC property.

Mineralization at GC is primarily hosted within a WNW-ENE trending, 4.8 km long and 2 km wide fault zone. This zone encompasses numerous veins which strike between 112° and 146° and dip between 65° to the south-west and sub-vertical. The average thickness of these veins is 0.89 m.

There are east-west striking veins which typically strike 65° to 110° and dip between 59° and sub-vertical to the SE and SSW. The average thickness is around 0.9 m.

 

NE-striking faults cut through the NWW-striking structures with no or minor displacement. These veins are sub-parallel to major NE striking faults and strike between 20° and 78° and dip between 60 and 84° to the SE. The average thickness of these veins is 0.68 m.

Ag-Pb-Zn mineralization at the GC deposit can be divided into two types: primary and oxidized. The primary mineralization is mainly composed of galena-sphalerite-silver minerals, which occur sparsely, as disseminations, veinlets, and lumps. Primary mineralization accounts for 95% of the entire Mineral Resource. Oxide mineralization occurs on and near the surface.

Mineralized veins in the GC area occur in relatively permeable fault-breccia zones. These zones are extensively oxidized from the surface to depths of about 40 m. Veins in this zone exhibit open space and boxwork lattice textures resulting from the leaching and oxidation of sulphide minerals. Secondary minerals present in varying amounts in this zone include kaolinite, hematite, and limonite.

The dominant sulphide mineral is pyrite, and other constituents are a few percent of sphalerite, galena, pyrrhotite, arsenopyrite, magnetite, and less than one percent of chalcopyrite and cassiterite. Gangue minerals include chlorite, quartz, fluorite, feldspar, mica, and hornblende, with a small or trace amount of kaolinite, tremolite, actinolite, chalcedony, garnet, zoisite, apatite, and tourmaline.

Alteration minerals associated with the GC vein systems include quartz, sericite, pyrite, and chlorite, together with clay minerals and limonite. Silicification commonly occurs near the centre of the veins. Chlorite and sericite occur near and slightly beyond the vein margins.

Quartz, pyrite, fluorite, and chlorite are closely related to the mineralization.

The poly-metallic mineralization of the GC deposit belongs to the mesothermal vein infill style of deposit.

Silvercorp has carried out surface and underground exploration activities since 2008.

Surface-based exploration occurred primarily during 2008, which included soil sampling, geological mapping and trenching. Following up on geochemical anomalies, Silvercorp conducted trenching and pitting programs that exposed the mineralized veins on the surface and at shallow depth. A total of seven pits and one trench were excavated by Silvercorp exposing three veins.

More than 52 km of underground tunnelling and sampling at the Property was carried out between 2012 and 2018. These programs comprised 33,297 m of drifting along mineralized structures, 10,147 m of crosscutting across mineralized structures, and 8,833 m of raises. Drifts and crosscuts were developed at 40 m intervals vertically to increase geological confidence in the Mineral Resource.

A total of 6,314 channel / chip samples were collected from the mine areas during 2018, with samples being assayed for Ag, Pb, and Zn. Prior to 2018, 44,166 channel / chip samples had been collected.

Silvercorp completed its first phase of diamond drilling on the GC property in 2008. Systematic drilling commenced on the property in 2011 and continued through into 2018. All Silvercorp drilling was completed as NQ-sized core. Drillhole collars were surveyed using a total station and downhole surveys were completed every 50 m downhole. Surface drillhole collars were cemented after

 

completion and locations of drillholes were marked using 50 x 30 x 20 centimetres (cm) concrete blocks.

Core recoveries from Silvercorp drilling programs varied between 41.67% and 99.96% averaging 96.85%. AMC reviewed the relationship between grade and core recovery and found no bias.

All drill core is stored in a clean and well-maintained core shack in the GC camp complex. This core shack is locked when unattended and monitored by two security personnel 24 hours a day.

The majority of drillholes were drilled as inclined holes to test multiple vein structures. Underground drillholes were drilled as fans of multiple holes from single set-ups.

Drill core processing is completed by Guangdong Found employees in accordance with a standard procedure. Core recovery is measured followed by detailed logging of the core with lithological, vein and mineralization contacts identified and recorded. The core is photographed and sampled on 1.5 m maximum intervals and at geological or mineralization contacts. Core is cut in half with a rock saw with one half bagged and secured for shipment to the laboratory, and the other half retained in the core tray for future reference.

Channel samples are collected along sample lines perpendicular to the mineralized vein structure as well as from walls of cross-cut tunnels and bottom of trenches. Samples include vein material and associated wallrock.

Samples were shipped from Gaocheng site to an ALS Laboratory in Guangzhou between 2008 and 2014 and for part of 2018. Commencing in 2012 Silvercorp shipped samples to the Gaocheng onsite laboratory in addition to ALS. Gaocheng was the primary laboratory from 2014 to 2017. In 2018, ALS was the primary laboratory at the beginning of the year, but Silvercorp reverted to the Gaocheng lab later in the year. The Gaocheng onsite laboratory is owned and operated by Silvercorp. It is not certified by any standards association.

All data for the Gaocheng Project is stored within a central Microsoft Access Database, which is managed by two designated database administrators. Drillhole data is collected in Microsoft Excel and imported into the Access database. Underground mapping is recorded on grid paper and in Excel and then imported into Access or Micromine 3D software.

Silvercorp has routinely inserted Certified Reference Materials (CRMs) since 2011. Blank (uncrushed) samples and coarse duplicates have been inserted since 2012 (drilling) and 2014 (underground sampling). Umpire samples (pulp duplicates) have been sent to a different laboratory since 2011.

The CRM insertion rate for drillhole sample batches has been in the range of 3 – 4% in the last five years, and for underground chip sample batches has been in the range of 2 – 4%. AMC understands that CRM performance at Gaocheng has not, to date, been monitored on a batch by batch basis, and Silvercorp was unable to provide AMC with control charts compiled at the time of assaying. Subject to certain caveats, CRM results have generally confirmed the reasonable analytical accuracy of the laboratories used.

The Qualified Person (QP) has highlighted some issues for improvement in the Quality Assurance / Quality Control (QA/QC) process and has provided a series of recommendations in that regard (see ‘Recommendations’). The QP does not consider these issues to have a material impact on Mineral Resource estimates and considers the assay database to be acceptable for Mineral Resource estimation.

 

 

The Mineral Resources for the GC deposit have been prepared by Mr Shoupu Xiang, Resource Geologist of Silvercorp. Ms Dinara Nussipakynova, P.Geo., of AMC, has reviewed the methodologies and data used to prepare the Mineral Resource estimates and, after some adjustment to the Mineral Resource classification, is satisfied that they comply with reasonable industry practice. Ms Nussipakynova takes responsibility for these estimates.

AMC is not aware of any known environmental, permitting, legal, title, taxation, socioeconomic, marketing, political, or other similar factors that could materially affect the stated Mineral Resource estimates.

The data used in the Mineral Resource estimation includes results of all drilling carried out on the Property to 31 December 2018. The estimation was carried out in Micromine™ software.

Interpolation was carried out using inverse distance cubed (ID³) for all the veins.

Table 1.1 Summary of Mineral Resources as of 31 December 2018

The GC deposit consists of 110 veins, each of which has a separate block model. Approximately 22,660 m of channel samples and 34,160 m of core samples from 1,311 drillholes form the basis of the estimate. Capping is employed on the raw data and the composite length equals the vein thickness.

The parent block size for all veins was 2 m by 2 m by 2 m (x, y, z), with sub-cells employed. The sub-celling resulted in minimum cell dimensions of 0.4 m by 0.4 m by 0.4 m (x, y, z). AMC imported all 110 block models into Datamine software. The volume comparison of the original models versus the Datamine models showed a difference of less than 1%.

Interpolation was carried out using the ID³ method. Mining depletion and write-offs based on survey information to 31 December 2018 were coded into the block models by Silvercorp.

Mineral Resources are classified as Measured, Indicated, and Inferred. AMC reviewed the classification of each vein and requested changes when the classification needed to be modified to form potentially mineable shapes.

The block models were validated by AMC in three ways. First, visual checks were carried out to ensure that the grades respected the raw assay data. Secondly, swath plots were reviewed. Thirdly, the estimate was statistically compared to the composited assay data, with satisfactory results.

 

The following observations have been made by the QP from a comparison of the 2018 Mineral Resource estimate and the 2019 Mineral Resource estimate:

• Measured and Indicated tonnes have increased by 42%. The Inferred resource decreased by 3%.

• In the Measured category silver grade decreased by 5% and lead and zinc grades increased by 3% and 4% respectively.

• In the Indicated category silver grades decreased by 16%, lead and zinc grades decreased by 16% and 6% respectively.

• In the Inferred category the grades decreased for silver, lead, and zinc by 15%, 13%, and 6% respectively.

• The net result in the Measured category has been a significant increase in contained metals: silver by 17% and lead and zinc by approximately 28% and 26% respectively.

• The net result in the Indicated category has been an increase in contained silver metal of 31%, with lead and zinc contained metals increased by 29% and 46% respectively.

• The net result in the Inferred category has been a decrease in contained silver of 18%, a lead metal decrease of 15% and a zinc metal decrease of 9%.

Reasons for the differences in grade, tonnes, and contained metal include:

• Updated interpretation of the veins.

• Discovery of new veins.

• Conversion of Inferred resources to a higher classification.

• Depletion through mining.

To convert Mineral Resources to Mineral Reserves, mining cut-off grades have been applied, mining dilution has been added and mining recovery factors assessed on an individual vein mining block basis. Only Measured and Indicated Resources have been used for Mineral Reserves estimation.

The Mineral Reserve estimates for the Gaocheng property were prepared by Silvercorp under the guidance of independent Qualified Person, Mr H. Smith, P.Eng., who takes QP responsibility for those estimates.

The Mineral Reserve estimation is based on the assumption that current stoping practices will continue at the Gaocheng property, namely predominantly shrinkage stoping but also with some cut and fill resuing. Minimum mining widths of 1.0 m for shrinkage and 0.5 m for resuing, and dilution of 0.20 m total for shrinkage and 0.10 m for resuing cut and fill stopes are assumed. Full breakeven cut-off grades used are 200 g/t AgEq for shrinkage and 245 g/t AgEq for resuing.

Table 1.2 summarizes the Mineral Reserves estimate for the Gaocheng mine. 49% of the Mineral Reserve tonnage is categorized as Proven and 51% is categorized as Probable.

 

Table 1.2 Gaocheng Mineral Reserve estimate at 31 December 2018

 

Since the start of mining operations through to the end of 2018, a total of 1,251,000 tonnes has been milled from pre-and post-commercial production mined at Gaocheng, with average head grades of 96 g/t silver, 1.5% lead, and 2.7% zinc. The comparison of the head grades to date with the current Mineral Reserve estimates shows a reduction in silver grade of 1%, a reduction in lead grade of 1%, and an increase in zinc grade of 18% in the Mineral Reserves.

Mining to date has been conducted in two stages. Stage 1 targeted bringing the project into production as soon as practicable using mobile, rubber-tired, diesel-powered equipment (development jumbo, loader, and truck) with surface declines access down to -50 mRL. Stage 2 development from -50 mRL down to -300 mRL employs conventional tracked equipment (battery powered locomotives, rail cars, electric rocker shovels and pneumatic hand-held drills) via a surface shaft access. In-stope rock movement is by gravity to draw points or hand-carting to steel-lined passes.

The rock mass condition is categorized as Fair to Good and it is anticipated that the vein and host rocks in the mine area will continue to be largely competent and require minimal ground support other than in weaker ground areas.

A pillar is maintained around the Main Shaft. Development may occur within the pillar zone, however stope production will not be allowed. The shaft pillar is an expanding cone with a dip from the collar elevation of 80^o. The pillar radius at surface (248 mRL) is 13 m and the Main Shaft radius is 3 m.

Relative to the Mineral Reserve estimates in the previous Technical Report (2018 Technical Report), there is a 10% increase in Proven Mineral Reserve tonnes and a 4% increase in Probable Mineral Reserve tonnes, with an increase in Mineral Reserve total tonnes of 7% (256,000 t).

Since the metallurgical testing reported in the 2012 Technical Report, no further testing has been done. The mill functioned in a trial mode up to 2014 and, from that point (FY2015 starting Q2 2014), has been in commercial production.

Metallurgical testing for the GC project was carried out by the Hunan Research Institute of Non-Ferrous Metals and reported in May 2009 in the report “Development and Research of the

Comprehensive Recovery Test of Lead Zinc Silver Tin Sulphur for the Lead Zinc Ore Dressing in GC

Mine Area”. This report was made available to AMC in English translation by Silvercorp. The testwork

 

was also summarized in the January 2011 GMADI report as part of the “Design Instructions” for the plant design.

The objectives of the testwork were, following on from previous testwork of 2007 on samples from artisanal mining dumps, to i) maximize silver recovery to the lead concentrate, ii) investigate the potential for tin recovery, iii) develop a process flow sheet with appropriate operating parameters as a basis for the industrial scale implementation of lead, zinc, sulphur (and possibly tin) recovery, and iv) determine the product quality characteristics relative to the relevant national standards.

Since the start of trial operations in 2013 and commercial production in 2014, lead and zinc concentrates have been produced in commercial quantities at the Gaocheng mill. The overall process consists of crushing, grinding, sequential flotation of lead, zinc, and pyrite concentrates, and concentrate dewatering by disc filtration. An experimental tin recovery gravity separation circuit is installed on pyrite flotation tails.

Two-stage crushing is carried out, with the second stage in closed circuit. Run of mine ore at -350 millimetres (mm) is reduced to crusher product at -10 mm. This is followed by two-stage grinding in ball mills to a product size of 80% passing 75 µm (P80 of 75 µm).

The flotation process consists of a standard flotation of lead, with three-stage cleaning of the lead concentrate, then flotation of zinc concentrate with three-stage cleaning, leaving pyrite tailings as sulphur concentrate. Concentrates are dewatered by conventional thickening and filtration.

Trucks under escort by security personnel are used to transport lead and zinc concentrates from the mine site to refineries. A front-end loader is used to load the concentrate from storage sheds near filters at the mill site to the concentrate shipping trucks.

Since completion of commissioning, the plant has processed approximately the same amount of ore each year (approximately 260 ktpa).

There is a laboratory on site equipped with the customary sample preparation, wet chemistry, and basic photometric analytical equipment; as well as crushing, grinding, flotation, and gravity-separation metallurgical testing equipment.

Table 1.3 shows the life-of-mine (LOM) mill feed and metal production profile.

 

Table 1.3 Gaocheng LOM mill feed and metal production

 

 

 

The filtered tailings are conveyed to the TMF area via conveyor and then spread by bulldozer on a bench-by-bench basis. The tailings deposition method is dry stacking and filling (from bottom to top and stacking by bench to form the embankment), with concurrent rolling and compaction to the desired dry density standards.

The waste rock dump is located a short distance to the east of the mine portal. It is understood to have an immediate capacity of the order of 275,000 m³ (~558 kt). Underground waste rock produced to date has largely been used for construction purposes by Silvercorp or transported off site by local area persons, free of charge, again to be used for construction activities. The removal of waste rock from site is anticipated to continue for the foreseeable future. Waste rock could opportunistically be disposed of into shrinkage stope voids (with approximately 1.2 Mm³ or 2.3 million tons (Mt) void capacity) but this is not in the current mine plan.

Based on the GC environmental assessment report, AMC understands that waste rock at the GC mine has no significant acid-generating potential.

There is a 110 kilo volts (kV) substation near Gaocun, about 6 km from the mining area. This is fed from the Guangdong Province electrical grid system. Silvercorp uses this substation as the main source of power for the mine. Currently there are two overhead power lines for the 6 km route. Two 1,500 kV diesel generators are designated for emergency backup to the man-hoist, underground ventilation system, water pumping and essential services in the plant.

A 10 kV substation within the mining area provides power service for the entire operations area. The power supply and distribution in the process plant, mining area, administrative and living areas are configured based on needs.

Sewage treatment and water treatment plants operate at the mine site. Any water that is not recycled and is released to the environment is treated to comply with standing regulations.

Underground water is discharged to surface using conventional centrifugal pumps via pipelines installed in the Ramp, Ramp Shaft, and Main Shaft. Underground water pumped to surface is collected in ponds at the Ramp portal or Main Shaft for sediment settling prior to being pumped to the process plant water treatment station. In 2017, a total volume of 468,630 m³ of underground water was treated, including 268,844 m³ discharged and 199,786 m³ recycled.

There is a comprehensive repair workshop on surface for the maintenance of large-scale production equipment, vehicle repair, processing and repair of partial components, and the processing of emergency parts. It has the following services: tyre processing, maintenance, and servicing, welding, electrical, hydraulic, tools, parts, and materials warehouse. In addition, the mining contractor has its own mobile equipment surface workshop for repairs and servicing located adjacent to the Ramp portal.

There are also underground equipment workshop facilities that are composed of mining equipment maintenance workshop, equipment and spare parts store, dump oil depot, reserve electric locomotives, and tramcars maintenance workshop and stockpile yard.

The explosives warehouse was constructed in the valley to the south-east of the GC Mining Area.

A properly constructed containment for storage of fuel is located in the vicinity of the diesel generators and fuel dispensing facilities.

 

There is a mine dry facility near the portal accommodating lockers, change room, showers, and washrooms for the miners. The mine office complex is for administration and engineering functions and to provide working space for management, supervision, geology, engineering, and other operations support staff.

Silvercorp operates the mine using contractors for development and production. The operation and maintenance of Silvercorp’s fixed plant is via Silvercorp personnel. Silvercorp provides its own management, technical services, and supervision staff to manage the GC mine operation.

Sales contracts are in place for lead concentrates with Shandong Humon Smelting Co. Ltd., and for zinc concentrates with Chenzhou Qiantai Industrial Co. Ltd. and Henan Yuguang Zinc Industry Co. Ltd. All contracts have an effective period of one year, with key elements of the contracts subject to change based on market conditions when monthly supplemental agreements to the annual contracts are negotiated. Arsenic levels in the concentrates are acceptable to the Chinese smelters. All contracts have freight and related expenses to be paid by the customers.

Silvercorp has all the required permits for its operations on the GC Property and, in conjunction with safety and environmental certificates, these give Silvercorp the right to carry out full mining and mineral processing operations.

An Environmental Impact Assessment (EIA) report on the GC Project was prepared by the Guangdong Environmental Technology Centre (GETC) initially, and then reassessment is done periodically as required by regulations. An Environmental Permit was issued by the Department of Environmental Protection of Guangdong Province in June 2010.

There are no cultural minority groups within the general area surrounding the project. No records of cultural heritage sites exist within or near the GC project areas. The surrounding land is used predominantly for agriculture. The mining area does not cover any natural conservation, ecological forests, or strict land control zones.

Silvercorp has made a range of cash donations and contributions to local capital projects and community support programs, sponsoring university students and undertaking projects such as village road construction, and school upgrading and construction. Silvercorp has also made economic contributions to the local economy in the form of direct hiring and retention of local contractors, suppliers, and service providers.

A monitoring plan has been negotiated between the company and the local environmental protection department to meet the environmental management requirements of the project. Key components of the monitoring plan are water pollution monitoring, together with environmental air and noise monitoring. The monitoring work is carried out by qualified persons and / or a third-party contractor and is undertaken on a regular basis.

FY2020 budget is based on mining 271,500 tonnes of ore (milling 272,000), of which 78% would be by shrinkage and 22% by resuing. Other major operational requirements budgeted are waste development at 5,348 m, exploration tunnelling at 12,129 m, and drilling at 20,000 m. Sustaining development of 715 m is also budgeted.

All major infrastructure for operation of the Gaocheng mine is in place, including that for the potential production rate increase to 1,600 tons per day (tpd). FY2020 non-sustaining capital for

 

further main ramp development and a backfill plant is budgeted at $3,538,000. FY2020 sustaining capital is budgeted at $1,662,000, which equates to $6.12 per tonne of ore projected to be mined.

Mining operating costs are categorized by direct mining (shrinkage or resuing), waste development, exploration tunnelling, drilling, and common costs. Other budgeted operating costs are for milling, general and administrative items, and government fee, Mineral Resources tax, and other taxes. The operating cost breakdown for the FY2020 budget is as follows: mining – $40.94/tonne, milling – $15.33/tonne, G&A – $6.76/tonne, Mineral Resources tax, etc. – $5.13/tonne, for a total budget operating cost of $68.17/tonne.

Contractor costs are the major component of the mining cost. The principal components of the milling costs are utilities (power and water), consumables (grinding steel and reagents), and labour.

The Gaocheng mine has been in commercial production for five years. From FY2020 onwards, a 12-year LOM is envisaged for the resource as currently understood at an average annual production rate of 300,000 tonnes. Average silver equivalent grades are projected to be of the order of 334 g/t for the first six years and then 271 g/t for the remainder of the mine life.

A base case NPV at 8% discount rate of $107M (pre-tax), $80M (post-tax) is projected for the 12-year LOM.

Polymetallic mineralization at the GC project comprises over 100 distinct veins, ranging in thickness from a few centimetres to several metres, with a general east-west orientation and dipping generally south at 60^o – 80^o. The Mineral Resource estimates were prepared by Silvercorp using Micromine software and reviewed, classified and signed off by Ms D. Nussipakynova, P.Geo. of AMC, who is a Qualified Person for the purposes of the Technical Report.

Using a 100 g/t silver equivalent (AgEq) cut-off grade, Measured and Indicated Resources (inclusive of Mineral Reserves) are estimated at 9.05 Mt grading 84 g/t silver (Ag), 1.2% lead (Pb), and 2.8% zinc (Zn); and Inferred Mineral Resources are estimated at 7.25 Mt grading 91 g/t Ag, 1.0% Pb, and 2.4% Zn.

Compared to the previous estimate of Mineral Resources (Technical Report effective date 30 June 2018 – the ‘2018 Technical Report’) Measured and Indicated Resource tonnes have increased by 42%, which is mainly associated with new resource delineation and upgrading of what was previously Inferred material. Inferred Mineral Resource tonnes have decreased by 3%. In the Measured category the silver grade has decreased by 5% and lead and zinc grades have increased by 3% and 4% respectively. In the Indicated category silver grades have decreased by 16%, and lead and zinc grades have decreased by 16% and 6% respectively. In the Inferred category, grades have decreased for silver, lead, and zinc by 15%, 13%, and 6% respectively.

The results of the underground drilling program show that vein structures are still open at depth.

Silvercorp has implemented industry standard practices for sample preparation, security, and analysis. This has included common industry QA/QC procedures to monitor the quality of the assay database, including inserting CRM samples, blank samples, and coarse (uncrushed) sample duplicates into sample batches on a predetermined frequency basis. Umpire check duplicates samples have been submitted to check laboratories to confirm analytical accuracy.

AMC’s 2017 review of Silvercorp’s QA/QC procedures highlighted a number of issues that required further investigation and improvement. AMC did not consider the previous issues to have a material impact on the global Mineral Resources and Mineral Reserve estimates but believes that there could

 

be material impacts on a local scale. In the last year, Silvercorp has substantially improved its QA/QC program. Overall, AMC considers the assay database to be acceptable for Mineral Resource estimation.

Mineral Reserves have been estimated using a full breakeven cut-off grade of 200 g/t AgEq for shrinkage stoping and 245 g/t AgEq for resuing, based on a mine design and plan prepared by Silvercorp engineers and reviewed by Mr H. Smith, P.Eng. of AMC, who is a Qualified Person for the purposes of the Technical Report. Total Proven and Probable Reserves are 3.82 Mt grading 95 g/t silver, 1.5% lead, and 3.2% zinc, containing 11.7 million ounces silver, 125 million pounds lead, and 271 million pounds zinc.

Metal prices used in determining cut-off grades for both Mineral Resources and Mineral Reserves are: silver - $18/troy ounce; lead - $1.00/lb; zinc - $1.25/lb. An exchange rate of RMB6.5 to US$1 and mining costs of $35/t for shrinkage and $53/t for resuing have been assumed. Average metallurgical recovery assumptions are: silver – 77%; lead – 88%, zinc – 84%.

In comparison with the Mineral Reserve estimate in the 2018 Technical Report, there is a 10% increase in Proven Mineral Reserve tonnes and a 4% increase in Probable Mineral Reserve tonnes, resulting in an increase in total Mineral Reserve tonnes of 7% (256,000 tonnes). Silvercorp received a mining permit in December 2010. From the start of commercial operations at Gaocheng in 2014 through to 31 December 2018, 1,251,000 tonnes have been mined at average head grades of 96 g/t silver, 1.5% lead, and 2.7% zinc.

The predominant shrinkage mining method uses the blasted ore as the working platform for each stope lift. The ore is removed on completion of stope mining leaving an empty void. There is potential to opportunistically dispose of development waste into these voids, but current mine plans do not include this approach. The resue method uses blasted waste from the footwall as the working platform for each stope lift. The waste remains in the stope at completion of stope mining. Some hand sorting of ore from waste is conducted.

The rock mass condition is categorized as Fair to Good. Previous AMC assessment had anticipated that the vein and host rocks in the mine area would generally be competent and require minimal ground support. This has largely been confirmed in operations, with most areas deemed to require little or no support. Where Poor ground conditions have been encountered, ground support is provided, with a range of strategies available depending on the local situation.

Based on Proven and Probable Reserves only, the GC mine is a viable operation with a projected life-of-mine (LOM) of 12 years through to 2031, with an average annual production rate of approximately 300,000 tonnes, and with average silver equivalent grades of the order of 334 g/t for the first six years and then 271 g/t for the remainder of the mine life. GC also has the potential to extend the LOM beyond 2031, via conversion of existing Mineral Resources to Mineral Reserves, and further exploration and development.

Since the start of trial operations in 2013 and commercial production in 2014 (FY2015), lead and zinc concentrates have been produced in commercial quantities at the GC processing plant. Small amounts of tin concentrate and sulphur have also been produced but these quantities have not been significant enough to be material to mine economics. In all sections of the plant, space / capacity has been allocated for an expansion to 1,600 tpd, but such expansion is not contemplated at this time.

Sales contracts are in place for the lead concentrates with Shandong Humon Smelting Co. Ltd., and for the zinc concentrate with Chenzhou Qiantai Industrial Co. Ltd. and Henan Yuguang Zinc Industry Co. Ltd. All contracts have an effective period of one year, with key elements of the contracts subject

 

to change based on market conditions when monthly supplemental agreements to the annual contracts are negotiated. All contracts have freight and related expenses to be paid by the customers.

AMC understands that an acceptable arsenic level in base metal concentrates, without penalty, for the Chinese smelters with which Silvercorp has contracts is of the order of 1.0%, and notes that the GC lead and zinc concentrates are acceptable to those smelters.

All pertinent facilities are in place at the GC site, inclusive of security, accommodation, catering, engineering and administration building, mine dry, mine ventilation, main power sub-station, mine rescue, water supply, compressed air, underground dewatering, sewage treatment, explosives magazines, water treatment plant, maintenance / repair facilities, storage, laboratory, communications, fuel farm, fire prevention, waste rock dump, and TMF.

With respect to waste rock, all such material brought to surface is either used by Silvercorp for construction / maintenance activities or is removed from the site, free of charge, by local persons, again as construction material. The environmental assessment has indicated that waste rock at the GC mine has no significant acid-generating potential.

The TMF utilizes dry stacking and filling (from bottom to top and stacking by bench to form the embankment) with concurrent rolling and compaction. The most recent TMF risk assessment report was approved by the Chinese authorities on 14 May 2018 and the TMF Safety Production Certificate was renewed on 4 September 2017. That notwithstanding, AMC recommends that Silvercorp continues to satisfy itself, as per best industry practice, that all fundamental aspects of the TMF design, construction and operation have been and continue to be satisfactorily addressed. This may include geotechnical drilling of the dam foundation area, as it is AMC’s understanding that such activity has not specifically been undertaken.

Silvercorp utilizes contract labour for mining at GC on a rate per tonne or a rate per metre basis. The contract includes all labour, all fixed and mobile equipment, materials, and consumables, including fuel and explosives, which are purchased through the company. Ground support consumables such as timber and power are the responsibility of the company.

The FY2020 budget is based on mining 271,500 tonnes of ore and milling 272,000 tonnes, of which 78% would be by shrinkage and 22% by resuing. Other major operational requirements budgeted are waste development tunnelling at 5,348 m, exploration tunnelling at 12,129 m, and drilling at 20,000 m. Sustaining development of 715 m is also budgeted. Cost estimates are in US$ and assume an exchange rate of RMB6.5 to US$1.

FY2020 non-sustaining capital for further main ramp development and a backfill plant is budgeted at $3,538,000.

FY2020 sustaining capital is budgeted at $1,662,000, which equates to $6.12 per tonne of ore projected to be mined.

Based on the LOM production forecast and projected mining costs, and assuming long-term metal prices to be the same as those used for cut-off grade determination (silver - $18/troy ounce; lead $1.00/lb; zinc - $1.25/lb), a simple economic model analysis indicates a pre-tax NPV at 8% discount rate of $107M ($80M post-tax). Over the LOM, 46% of the net revenue is projected to come from zinc, 31% from silver, and 23% from lead.

 

 

AMC makes the following recommendations for the GC mine: Re sample preparation, analyses and security:

• Implement a modification of the CRM program at Gaocheng as follows:

• Investigate the high failure rate of CRMs CDN-ME-1604 and CDN-ME-1410 for lead and the high failure rates of CRMs CDN-ME-1401 and CDN-ME 1801 for zinc.

• Assay the source of the blank material to ensure its suitability as a blank.

• Substantially reduce Silvercorp’s pass / fail criteria to conform with common industry practice.

• Investigate the very marked differences in performance between the ALS and GC labs and seek reassurance from the GC lab that it is using the blanks in a manner consistent with good industry practice.

• Insert blanks immediately after expected high grade mineralization.

• Monitor blanks immediately upon receipt of results and have batches re-analyzed if significant contamination is indicated.

• Blank assays values below detection should be recorded at half the detection limits.

• Consider the introduction of crushed duplicates as part of the Gaocheng QA/QC program to improve monitoring of sample preparation and assaying performance.

• Conduct sieve analyses at various stages of sample preparation at the laboratory to ensure optimal parameters are achieved and minimal sampling errors are introduced.

• Continue the use of pulp duplicates as part of the Gaocheng QA/QC program.

• Plotting of the 2018 scatter graph charts based on the two different primary labs to check for systematic bias.

There are a number of recommendations with respect to Mineral Resource estimation:

• Collect additional bulk density samples to represent various ore types including low grade, medium grade, high grade, and waste material (see below for further details).

• Use of a dynamic anisotropy search or increase the search radius of the ellipse across the veins, to improve grade continuity within the estimation.

• Continue to use the recommended AMC approach to Mineral Resource classification, which is based on estimation criteria and manual adjustments where appropriate. This eliminates outliers.

• Future modelling of Gaocheng deposit to be completed as a single block model as opposed to individual block models for each vein.

Further recommendations in the Technical Report are:

• For bulk density assessment and verification, collect an additional 100 bulk density samples from representative veins of the deposit and of the varying base metal and pyrite contents. The average grade of bulk density samples should reasonably approximate the average grade of the Mineral Resources. AMC also recommends that samples are assayed for total S in addition to Ag, Pb, and Zn. Bulk density samples should also encompass bounding waste

 

material in situations where minimum mining widths are applied for Mineral Resource estimation purposes. AMC has provided detailed instructions on taking bulk density measurements as well as these recommendations to Silvercorp.


• Modification of the central database so that assay data is recorded without rounding to accurately reflect the original assay certificates.

• Internal validation of the existing sample database to ensure that any other sample prefix issues are addressed.

• Review of database and sample procedures to ensure that sample prefix issues do not reoccur.

• Assess ground conditions on a round by round basis in all development headings (ore and waste) to determine the requirement for ground support. Doing so will help prevent the occurrence of significant failures from backs and walls, which require timely rehabilitation and expose the workforce to rock fall hazard.

• Ensure scaling of the development headings on a round by round basis.

• Maintain a focus on dilution and grade control.

• Conduct routine check scaling of all unsupported development at the mine. This process can help identify areas of the mine in which rock mass deterioration is occurring and allow rehabilitation works to be planned.

• As part of overall mine design, consider possible destabilizing effects associated with major structures such as faults or shear zones. These should be considered on a case by case basis.
  Where possible, avoid mining development intersections in fault zones, and design drifts to cross fault zones at right angles (to minimize the exposure length within the drift).

• Assess specific rock mass conditions for critical underground infrastructure, including shafts and chambers, to determine ground support and pillar requirements to ensure serviceability of the excavation for the LOM.

• Ensure that an assessment of crown pillar requirements has been incorporated into the detailed mine design, with particular focus on surface pillar requirements in the vicinity of Hashui Creek valley, and any other streams (or drainage paths) that traverse the mine area.

• As part of ongoing operations at the mine, geotechnical and ground support aspects should be continuously reviewed in a formal and recordable manner, bearing in mind previous recommendations, local and mine-wide operating experience in all rock types encountered, data collection protocols, and also looking to future mining development.

• Collection of additional detailed geotechnical logging data, from drill core and mapping of underground workings, should incorporate collection of structural orientation data. Data collection should allow rock mass classification using an internationally recognized system, such as the Q-System (after Barton et al, 1974) or RMR (after Bieniawski, 1989).

• Development of a three-dimensional geological model with interpretations of primary lithologies and structures (such as faults and shear zones).

• As the mine moves deeper, undertake further investigation of in situ stresses to confirm assumptions made in the mine design and stability assessments.

• Consider the advisability of any further hydrogeological assessments.

• With respect to the TMF, Silvercorp to continue to satisfy itself, as per best industry practice, that all fundamental aspects of the TMF design, construction and operation have been and continue to be satisfactorily addressed. This may include geotechnical drilling of the dam foundation area, as it is AMC’s understanding that such activity has not specifically been undertaken.

• Continue with a focus on safety improvement, including implementation of a policy where the more stringent of either Chinese or Canadian safety standards are employed.

 

• Place a strong focus on stockpiling and record keeping procedures and ensure that the summation of individual ore car weights by stope and zone is, as far as practicable, fully integrated into the tracking and reconciliation process.

• Undertake periodic mill audits aimed at ensuring optimum process control and mill performance.

Continue exploration tunnelling and diamond drilling at Gaocheng. The exploration tunnelling is used to upgrade the drill-defined Resources to the Measured category, and the diamond drilling is used to expand and upgrade the previous drill-defined Resources, explore for new mineralized zones within the unexplored portions of vein structures, and test for extensions of the vein structures.

 

Contents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tables

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AMC Mining Consultants (Canada) Ltd. (AMC) was commissioned by Silvercorp Metals Inc. (Silvercorp) to prepare an updated independent Technical Report (the 2019 Technical Report) on the Gaocheng (Gaocheng or GC) property, located in Gaocun Township, Yun’an County, Guangdong Province, China. AMC has prepared previous Technical Reports on the Gaocheng property in 2009 (‘NI 43-101 Technical Report Update on the GC Ag-Zn-Pb Project in Guangdong Province, People’s Republic of China’, effective date 18 June 2009), 2012 (‘NI 43-101 Technical Report on the GC Ag-Zn-Pb Project in Guangdong Province, People’s Republic of China’, effective date

23 January 2012), and 2018 (‘NI 43-101 Technical Report Update on the Gaocheng Ag-Zn-Pb

Project in Guangdong Province, People’s Republic of China’, effective date 30 June 2018). Table 2.1 indicates persons who prepared or contributed to the 2019 Technical Report.

Table 2.1 Persons who prepared or contributed to this Technical Report

AMC acknowledges the numerous contributions from Silvercorp in the preparation of this report and is particularly appreciative of prompt and willing assistance of Mr Leon Ma, Mr Derek Liu, and Mr V. Zang.

 

Ms Dinara Nussipakynova and Mr Herbert Smith visited the GC property in January 2018. All aspects of the project were examined by the Qualified Persons, including drill core, laboratories, underground workings, processing plant, tailings stockpile, water treatment plant, and other surface infrastructure. Other AMC personnel have previously visited the site.

In preparing this report, AMC has relied on various geological maps, reports, and other technical information provided by Silvercorp. AMC has reviewed and analyzed the data provided and drawn its own conclusions augmented by its direct field observations. The key information used in this report is listed in Section 27 References, at the end of this report.

Much of the original geological information in this report was written in Chinese. Translations of key technical documents and data into English were provided by Silvercorp. The Qualified Persons have no reason to believe that the translations are not credible and believe they are generally reliable but cannot attest to their absolute accuracy.

Silvercorp’s internal technical information reviewed by AMC was adequately documented, comprehensive and of good technical quality. It was gathered, prepared, and compiled by competent technical persons. Silvercorp’s external technical information was prepared by reputable companies and AMC has no reason to doubt its validity. AMC used its professional judgement and made recommendations in this report where it deems further work is warranted.

This report includes the tabulation of numerical data which involves a degree of rounding for the purpose of resource estimation. AMC does not consider any rounding of the numerical data to be material to the project.

All currency amounts and commodity prices are stated in U.S. dollars (US$). Quantities are stated in metric (SI) units. Commodity weights of measure are in grams (g) or percent (%) unless otherwise stated.

This report has been produced in accordance with the Standards of Disclosure for Mineral Projects as contained in the National Instrument 43-101 (NI 43-101) and accompanying policies and documents. NI 43-101 utilizes the definitions and categories of Mineral Resources and Mineral Reserves as set out in the Canadian Institute of Mining, Metallurgy and Petroleum (CIM) Standards on Mineral Resources and Mineral Reserves Definitions and Guidelines (2014) (CIM Standards).

A draft of the report was provided to Silvercorp for checking for factual accuracy. The report is effective at 30 June 2019.

 

 

The Qualified Persons (QPs) have relied, in respect of legal aspects, upon the work of the Expert listed below. To the extent permitted under NI 43-101, the QPs disclaim responsibility for the relevant section of the Report.

• Expert: Henry Shi, Jun He Law Offices, Beijing, as advised in a letter of 21 March 2018 to Mr Lorne Waldman, then Senior Vice President, Silvercorp Metals Inc.

• Report, opinion, or statement relied upon; information on mineral tenure and status, royalty obligations, Mineral Resources tax, etc.

• Extent of reliance: full reliance following a review by the QPs.

• Portion of Technical Report to which disclaimer applies: Section 4.

The QPs have relied, in respect of environmental aspects, upon the work of the issuer’s expert listed below. To the extent permitted under NI 43-101, the QPs disclaim responsibility for the relevant section of the Report.

• Expert: Mr Lai Jinming, Environmental Specialist, Silvercorp Metals Inc.

• Report, opinion, or statement relied upon; information on environmental studies, permitting, social and community impact, site monitoring, remediation and reclamation, and closure plan.

• Extent of reliance: full reliance following a review by the QPs.

• Portion of Technical Report to which disclaimer applies: Section 20.

 

 

The Gaocheng property is located in the vicinity of Gaocheng village, Gaocun Township, Yun’an

District, Yunfu City, Guangdong Province, People’s Republic of China (Figure 4.1).

Figure 4.1 GC property location map

 

 

In 2008, Silvercorp acquired 100% of the shares of Yangtze Gold Ltd. (Yangtze Gold), a private British Virgin Island (BVI) company, which in turn wholly owns Yangtze Mining Ltd. (Yangtze Mining). Yangtze Mining owns a 95% interest in a Sino-Foreign joint venture company, Anhui Yangtze Mining Co. Ltd. (Anhui Yangtze). Anhui Yangtze’s main asset was the GC exploration permit for the GC Mine, which was subsequently converted to a mining permit in November 2010.

Guangdong Found Mining Co. Ltd. (China), (Guangdong Found), is the designated joint venture operating company of the GC Mine. Yangtze Mining (H.K.) Ltd., a wholly owned subsidiary of Yangtze Mining, owns 95% of Guangdong Found. Guangdong Found has a 100% beneficial interest in the GC Mine. The boundaries of the mining permit were surveyed, and the boundary markers were staked in the ground by the Bureau of Land and Resources of Guangdong Province before issuing the mining permit to Guangdong Found in 2010.

On 14 June 2010 Silvercorp announced that it had been issued an Environmental Permit for the project from the Department of Environmental Protection of Guangdong Province, an essential document required for a mining permit application.

A Mining Permit was issued to Anhui Yangtze by the Ministry of Land and Resources of China on 24 November 2010. The permit is valid for 30 years to 24 November 2040, covers the entire 5.5238 km² area of the GC Mine and permits mining from 315 metres (m) to minus 530 m elevations. The permit was issued on the terms applied for and allows for the operation of an underground mine to produce silver, lead, and zinc. In June 2012, Anhui Yangtze transferred the mining permit to Guangdong Found, and a new mining permit was issued to Guangdong Found by the Ministry of Land and Resources of China on 6 June 2012.

Mining Permit Corner Points of the GC Project area are as shown below in Table 4.1.

Table 4.1 Mining Permit corner points of the GC Property

The grid system used for the GC project is the Xi’an Geodetic Coordinate System 1980. Altitude is referred to the Yellow Sea 1956 Elevation System. The project survey control points were generated from three nearby national survey control points.

Key information contained in the Mining Permit is provided in Table 4.2.

 

Table 4.2 Gaocheng Mining Permit, owned by Guangdong Found

Currently, the Gaocheng mine is subject to Mineral Resources taxes, levied at 3% of sales. This tax together with other government fees currently total between 5% and 7% of net revenue, but with the projection being 5% of net revenue from 2021 forwards. AMC is not aware of any additional royalties, back-in rights, payments, agreements, environmental liabilities, or encumbrances particular to the property other than those stated above.

 

 

The Gaocheng Mine is located in the vicinity of Gaocheng Village of Gaocun Township, Yun’an District, Yunfu City, Guangdong Province, China. Altitudes in the region range from 78 m to 378 m above sea level (ASL), usually 150 to 250 m ASL, with relative differences of 50 to 150 m. Vegetation is in the form of secondary forests of pine and hardwoods, bushes and grasses. Topsoil covers most of the ground. Outcrops of bedrocks can only be observed in valleys.

The mine is located west of the metropolitan city of Guangzhou, the capital of Guangdong Province. Guangzhou is located about 120 kilometres (km) north-west of Hong Kong and has a population of almost 14 million registered residents and temporary migrant inhabitants, as of December 2016, according to an economic report released by the Guangzhou Academy of Social Science. It is serviced by rail and daily flights from many of China’s larger population centres. Access to the mine from Guangzhou is via 178 km of four-lane express highway to Yunfu, then 48 km of paved road to the project site. A railway connection from Guangzhou to Yunfu is also available.

The region belongs to a sub-tropical monsoon climate zone with average annual temperature of 20 – 22^oC. Rainfall is mainly concentrated in spring and summer from March to August. Winters feature short periods of frosting. The GC project is able to operate year-round.

Streams are well developed in the district, with the Hashui Creek flowing in the Gaocheng mine area. There is a reservoir upstream of the mine. Small hydro power stations are developed in the region that are connected to the provincial electrical grid. There is a 10 kilovolts (kV) power line that crosses through the project area.

A power supply system consisting of a 5.8 km power line, a 110 kV substation, and a 10 kV safety backup-circuit was completed in 2013. This system has sufficient capacity to support the current production and any envisaged future production expansion.

The economy of Yun’an District mainly relies upon agriculture and some small township industrial enterprises. Labour is locally available, and technical personnel are available in Yunfu and nearby cities. The Gaocheng village is located within the Gaocheng mine area.

 

 

Various state-sponsored Chinese Geological Brigades and companies have conducted geological and exploration work in the project area. Systematic regional geological surveys covering the area started in 1959. The following is a brief history of the exploration work in the area:

• During 1959 to 1960, No. 763 Geological Brigade of Guangdong Bureau of Geology conducted a 1:200,000 regional geological survey and mapping, and regional prospecting of Mineral Resources in the area. A geological map and geological reports were published.

• From 1964 to 1967, the Comprehensive Study Brigade of Guangdong Bureau of Geology conducted general prospecting and 1:50,000 geological mapping in the area, including the current project area, and submitted a geological report.

• In 1983, the Geophysical Survey Brigade of Guangdong Bureau of Geology and Mineral Resources conducted a 1:200,000 airborne magnetic survey covering the project area.

• In 1988, the Regional Geological Survey Brigade of Guangdong Bureau of Geology and Mineral Resources conducted a 1:200,000 stream sediment survey, which covers the project area.

• In 1991, the Geophysical Survey Brigade of Guangdong Bureau of Geology and Mineral Resources conducted a 1:200,000 gravity survey covering the project area.

• In 1995, the Ministry of Geology and Mineral Resources completed the compilation and interpretation of 1:1,000,000 geochemical, geophysical and remote sensing surveys covering the area.

• During 1995 and 1996, the Geophysical Survey Brigade of Guangdong Bureau of Geology and Mineral Resources conducted a 1:50,000 soil survey, and defined some large and intensive Pb, Zn, Ag, Sn, W, and Bi geochemical anomalies, which cover the project area.

• During 1990 and 2000, the Guangdong Provincial Institute of Geological Survey (GIGS) conducted a 1:50,000 stream sediment survey, which covers the project area, and defined several intensive anomalies of Pb-Zn-Ag-Sn-Mn, leading to the discovery of the GC deposit.

• During 2001 and 2002, and again in 2004 and 2005, GIGS conducted general prospecting at the GC project area, and defined some mineralized bodies and estimated Mineral Resources for the GC deposit.

• During 2006 and 2007, contracted by Yangtze Mining, GIGS conducted detailed prospecting at the GC project area, and completed a 36-hole, 11,470 m surface diamond drilling program and 1,964 m³ of trenching and surface stripping to update and upgrade the Mineral Resources of the GC deposit.

• In 2008, Silvercorp completed a 22-hole, 10,083 m drilling program, which resulted in the discovery of an additional 15 mineralized veins.

A summary of the historical work between 2001 and 2008 is shown in Table 6.1. Table 6.2 contains a drill record for the same period.

 

Table 6.1 Historical exploration work 2001 – 2008

Table 6.2 Record of drilling 2001 – 2008

 

 

 

Prior to Yangtze Mining acquiring the Gaocheng Property, illegal mining activity resulted in the excavation of several tunnels and small-scale mining of veins V2, V2-2, V3, V4, V5, V6, and V10. GIGS reported that a total of 1,398 m of excavation comprised of 10 adits and tunnels had been completed on the property through the illegal activity.

In 2002, GIGS developed 66 m of tunnel to crosscut veins V5 and V5-1. GIGS sampled and mapped adits ML1 to ML5, ML6, ML7, ML9, and PD12.

Yangtze Mining, after its purchase of the property in 2005, mapped and sampled the accessible tunnels ML5 and ML8. Tunnel ML5 had exposure to vein V10 and tunnel ML8 had exposure to vein V2-2. Assay results of tunnel samples were used in resource estimation. Table 6.3 details the underground workings and work completed. However there are no detailed reconciliation data available for any of the mineralization extracted.

Table 6.3 Details of historical underground workings

 

GIGS prepared a resource estimate for nine mineralized veins for the Gaocheng project after the 2004 – 2005 exploration season. GIGS has its own classification system of Mineral Resources / Reserves, which is different from CIM Standards. AMC does not consider the GIGS estimation of resources to be material to this report.

Silvercorp acquired the Gaocheng property in 2008 (see Section 4.1). Four resource estimates for Gaocheng have been reported since 2008:

• Technical Report by SRK Consulting (SRK), dated April 2008 (entitled “Technical Report on Gaocheng Ag-Zn-Pb Project and Shimentou Au-Ag-Zn-Pb Project, Guangdong Province, People’s Republic of China”).

• AMC Technical Report (entitled “NI 43-101 Technical Report Update on the GC Ag-Zn-Pb Project in Guangdong Province, People’s Republic of China”), effective date 18 June 2009.

• AMC Technical Report (entitled “NI 43-101 Technical Report on the GC Ag-Zn-Pb Project in Guangdong Province, People’s Republic of China”), effective date 31 December 2011.

• AMC Technical Report (entitled ‘NI 43-101 Technical Report Update on the Gaocheng Ag-Zn-Pb Project in Guangdong Province, People’s Republic of China’), effective date 30 June 2018.

Current estimates of Mineral Resources and Mineral Reserves are discussed in the relevant sections of this report.

 

 

This section includes a summary of the geological setting and mineralization presented in AMC’s

Technical Report titled “NI 43-101 Technical Report on the GC Ag-Zn-Pb Project in Guangdong

Province, People’s Republic of China” dated 22 June 2009 and SRK Consulting’s “Technical Report on Gaocheng Ag-Zn-Pb Project, and Shimentou Au-Ag-Zn-Pb Project, Guangdong Province, People’s Republic of China”, dated April 2008.

The GC property is located on the east margin of the Luoding basin, east of the Wuchuan – Sihui major fault within the north portion of the Yunkai uplift of the South China Orogenic Belt. North-east striking structures and arc structures form the basic geological framework of the region. Deposits on the property occur at the intersection of a north-easterly striking fault zone and a near east-westerly striking fault zone.

Figure 7.1 Tectonic geology map of southern China

Source: Silvercorp Metals Inc.

Basement geology in the area comprises late Proterozoic Sinian sedimentary clastics and carbonate rocks; Palaeozoic (Ordovician, Silurian, Devonian, Carboniferous) sedimentary clastics and carbonate rocks; and Mesozoic (Triassic) coal-bearing clastic rocks and Cretaceous red clastic rocks. Ag-Pb-Zn poly-metallic deposits occur within late Proterozoic rocks. Cu-Pb-Zn, Mn, and Au-Ag deposits occur within Palaeozoic rocks.

 

Three prominent sets of structures occur within the region:

• North-easterly striking structures comprising a series of folds and faults that host some mineralized bodies.

• Approximately east-westerly striking structures which dip steeply and contain structural breccias and quartz infill within the fault zones. Prominent alteration zones occur along both sides of these structures.

• Arc or ring structures which include folds and faults surrounding the Daganshan granite body. The Pb-Zn-Ag-Sn deposits, mineralization showings, and Au-Ag-Pb-Zn geochemical anomalies occur in the arc / ring structural zone.

Palaeozoic granite batholiths and Mesozoic granite stocks and dykes occur commonly within the arc / ring structure. These intrusions are closely related with Pb-Zn-Ag poly-metallic mineralization in the region.

Figure 7.2 Regional geological map

Source: Silvercorp Metals Inc.

 

 

The GC Project is located at the intersection between the Wuchuan-Sihui Deep Fault zone and Daganshan Arc-ring structural zone.

Basement rocks within the GC Project area encompass quartz sandstone, meta-carbonaceous siltstone, carbonaceous phyllite, calcareous quartzite and argillaceous limestone of the Sinian Daganshan Formation; quartz sandstone and shale of the Triassic Xiaoyunwushan Formation, and sandy conglomerate and conglomerate of the Cretaceous Luoding Formation. These rocks are intruded by Palaeozoic gneissic, medium-grained biotite granite, and Mesozoic fine- to medium-grained adamellite, brownish, fine-grained, biotite mylonite, granite porphyry, quartz porphyry, diabase, and aplite. The Mesozoic intrusives intruded along the south and south-west contacts of the Palaeozoic granites. The majority of Ag-Zn-Pb mineralization is hosted by the Mesozoic granite. The granite dips south and strikes west north-west, parallel to the majority of mineralized veins on the GC property.

Figure 7.3 Property geology map

Source: Silvercorp Metals Inc.

 

 

The project area is situated in the south-west part of the Daganshan uplift. Structures developed in the area are mainly the NWW-EW striking Gaocheng Fault zone, the NE striking Baimei Fault zone, and the Songgui Fault zone.

Mineralization at GC is primarily hosted within a WNW-ENE trending, 4.8 km long and 2 km wide fault zone. This zone encompasses numerous veins (V2E, V2-1, V2-2, V6-0, V6-1, V6E, V6M, V6M-2, V7, and V7-3) which strike between 112° and 146° and dip between 65° to the south-west and sub-vertical. Vein V1 dips north-east with a lesser dip of around approximately 44°. The average thickness of veins is 0.89 metres (m).

East-west striking veins include V2W, V2W-0, V2W-4, V5, V5-5, V6, V6-2, V8, V9-1, V9W-2, V9-5, V11, V16, V17, V18, and V19. These veins typically strike 65° to 110° and dip between 59° and sub-vertical to the SE and SSW (Figure 7.4 and Figure 7.5). The average thickness is around 0.9 m.

NE-striking faults cut through the NWW-striking structures with no or minor displacement. Mineralized veins including V9-9, V10, V10-1, V10-3, V10-4, NV10, V12, V13, V14, V25, V26, V28, and V29 form part of this trend. These veins are sub-parallel to the major NE striking faults F25 and F27. These veins strike between 20° and 78° and dip between 60 and 84° to the SE (Figure 7.4). The average thickness of these veins is 0.68 m.

Figure 7.4 The occurrence and distribution of mineralized veins (Level -100 m)

Source: Silvercorp Metals Inc.

 

Figure 7.5 Cross section of Exploration Line 22A

Source: Silvercorp Metals Inc.

 

Photos of the NWW and NE striking faults are presented in Figure 7.6. The faults demonstrate a sharp contact between the veins and the host rock.

Figure 7.6 Fault planes

Source: Silvercorp Metals Inc.

Ag-Zn-Pb mineralization at the GC deposit can be divided into two types: primary and oxidized. The primary mineralization is mainly composed of galena-sphalerite-silver minerals which occur sparsely, as disseminations, veinlets and lumps. Primary mineralization accounts for 95% of the entire Mineral Resource. Oxide mineralization occurs on and near the surface.

Mineralized veins in the GC area occur in relatively permeable fault-breccia zones. These zones are extensively oxidized from the surface to depths of about 40 m. Veins in this zone exhibit open space and boxwork lattice textures resulting from the leaching and oxidation of sulphide minerals. Secondary minerals present in varying amounts in this zone include kaolinite, hematite, and limonite.

The dominant sulphide mineral is pyrite, typically comprising a few percent to 13% of the vein. Other constituents are a few percent of sphalerite, galena, pyrrhotite, arsenopyrite, magnetite, and less than a percentage of chalcopyrite and cassiterite. Metallic minerals in much smaller amounts include argentite, native silver, bornite, wolframite, scheelite, and antimonite. Metallic minerals occur in narrow massive bands, veinlets or as disseminations in the gangue. Gangue minerals include chlorite, quartz, fluorite, feldspar, mica, hornblende, with a small or trace amount of kaolinite, tremolite, actinolite, chalcedony, garnet, zoisite, apatite, and tourmaline.

Alteration minerals associated with the GC vein systems include quartz, sericite, pyrite, and chlorite, together with clay minerals and limonite. Silicification commonly occurs near the centre of the veins. Chlorite and sericite occur near and slightly beyond the vein margins.

Quartz, pyrite, fluorite, and chlorite are closely related to the mineralization.

 

 

Table 7.1 presents a summary of the characteristics of selected veins on the GC property.

Table 7.1 Dimensions and occurrences of selected mineralized veins

 

 

 

 

 

 

Source: Silvercorp Metals Inc.

The following are additional mineralization features of the GC deposit.

• High-grade shoots of Ag-Zn-Pb mineralization are commonly associated with the intersections of the NWW and east-west striking faults. This intersection results in east plunging shoots of high-grade mineralization.

• Ag-Zn-Pb mineralization is most intense, continuous, and wide within fault breccia zones.

Grade contours of individual metals within mineralized veins suggests that the Zn mineralization is more continuous than Ag and Pb. Ag and Pb appear to be locally concentrated.

 

 

This section is a summary of the geological setting and mineralization descriptions presented in the Technical Report titled “NI 43-101 Technical Report Update on the GC Ag-Zn-Pb Project in

Guangdong Province, People’s Republic of China” dated 18 June 2009. The original data source was the earlier Technical Report on the property titled “Technical Report on Gaocheng Ag-Zn-Pb Project, and Shimentou Au-Ag-Zn-Pb Project, Guangdong Province, People’s Republic of China”, dated April 2008.

The poly-metallic mineralization of the GC deposit belongs to the mesothermal vein infill style of deposit and exhibits the following characteristics:

• The mineralization occurs as veins which are structurally controlled within broader alteration zones. The alteration can reach more than a few metres along the faults distributing in both hangingwall and footwall.

• The veins have a sharp contact with the host rocks and steeply dip at angles between 60 – 85°.

In general, the Ag-Zn-Pb mineralization occurs along the strike of the faults. The veins have true widths varying from just over 0.1 m to over 10 m. They have been traced for over 1,250 m along strike, and approximately 550 m down dip.

 

 

The section describes surface and underground exploration activities carried out by Silvercorp between 2008 and 2018.

Surface-based exploration occurred primarily during 2008. This work included soil sampling, geological mapping, and trenching (Table 9.1).

Table 9.1 Surface exploration programs completed in 2008

Source: Silvercorp Metals Inc.

In addition to surface sampling, Silvercorp also completed more than 40 km of underground tunnelling and sampling at the property through to 2017, and 11.4 km in 2018.

Details of drill programs completed between 2008 and 2018 are presented in Section 10 of this report.

The grid system used for the GC project is Xi’an Geodetic Coordinate System1980. The altitude referred to is the Yellow Sea 1956 Elevation System. The project survey control points were generated from three nearby national survey control points. The control points were surveyed using four NGS-9600 GPS receivers. Survey machines used for topographical survey and geological points, trenches, adits and drillhole collars were Topcon GTS-Serial Total Station Instrument – XJ0747 and NX2350, and Sokkia SET-230PK Total Station Instrument.

In 2008, a 1:10,000 scale soil geochemical survey was completed by Silvercorp on the southern portion of the property. The soil sampling program comprised 20 m spaced samples along 200 m spaced lines covering a 2.22 km² area where no previous drilling had occurred. A total of 535 soil samples were collected from C-horizon soils. Samples were analyzed by aqua regia digestion and ICP analysis for Au, Ag, Cu, Pb, Zn, Mo, and As.

Three significant Ag-Zn-Pb geochemical anomalies were identified (Figure 9.1):

• AS1 anomaly: Encompasses an area 500 m in length and 50 to 100 m in width and includes peak values of 2.1 parts per million (ppm) Ag, 0.19% Pb, and 0.03% Zn at the eastern extent of V4 vein along F4 fault. Trenching was subsequently carried out over this anomaly.

• AS2 anomaly: Encompasses an area 500 m in length and 20 to 200 m in width and includes maximum values of 14.5 ppm Ag, 0.11% Pb, and 0.02% Zn.

• AS3 anomaly: Approximately 500 m in length and between 20 and 50 m wide (between exploration lines 28 – 44). The anomaly increases to 250 m in width to the east (between lines 36 to 44).

 

Figure 9.1 Soil geochemical anomalies of Ag, Pb, and Zn on the GC Property

Source: Silvercorp Metals Inc.

The GIGS conducted 1:10,000, 1:5,000, and 1:2,000 geological mapping programs, and a 1: 2,000 topographic survey covering the GC project area in 2008. The geological mapping programs established stratigraphic sequences and size and distributions of intrusions and faults, which was used as a framework for exploration targeting.

Based on the soil geochemical and surface mapping, Silvercorp conducted trenching and pitting programs on the GC Property. The program exposed the mineralized veins on the surface and at shallow depth. A total of seven pits and one trench were dug by Silvercorp exposing three veins.

Table 9.2 presents results of this program.

 

Table 9.2 Trenches and pits completed by Silvercorp in 2008 with vein highlights

Source: Silvercorp Metals Inc.

The trenches or pits were dug perpendicular to striking direction of a soil geochemical anomaly or alteration zone. The trenching or pitting was undertaken by digging into bedrock approximately 0.3 m to 0.5 m.

Figure 9.2 Trenches and pits on the GC Property

Note: Silvercorp acquired the GC Property in 2008. Silvercorp 2008 trenches highlighted.
Source: Silvercorp Metals Inc.

 

 

Underground tunnelling programs comprising 11,415 m of tunnelling were completed on the GC Property in 2018. These programs comprised 5,894 m of drifting along mineralized structures, 2,855 m of crosscutting across mineralized structures, and 2,666 m of raises. Drifts and crosscuts were developed at 40 m intervals vertically to increase geological confidence in the Mineral Resource.

A breakdown of all underground tunnelling between 2012 and 2018 is shown in Table 9.3.

Channel samples across the mineralized vein structures were collected across the back of the adits at 5 m intervals, with the spacing of channel sample lines increasing to 15 or 25 m in the non-mineralized sections of the vein structures. Individual channels consisted of multiple chip samples, cut across the mineralization and associated wallrocks across the tunnel. Details of the procedures and parameters relating to the underground channel sampling and discussion of the sample quality are given in Section 11.

A total of 6,314 channel / chip samples were collected from the mine areas in 2018. Figure 9.3 outlines channel sample density and location of drifts on one of the main veins at GC Mine. Table 9.4 summarizes the characteristics of the mineralized veins exposed by the underground works between 2012 and 2018 and includes Ag, Pb, and Zn assay highlights.

Table 9.3 Summaries of underground works between 2012 and 2018

Source: Silvercorp Metals Inc.