TSX:SVM   CAD$ 4.65 +0.02
 

X-Mines


 

XBG 350 tpd Floatation Mill

Siniuxia Adit (explore X1)

Surface Outcrop


 

Introduction

The X-Mines Property comprises the XBG and XHP silver-gold-lead-zinc (Ag-Au-Pb-Zn) mines and associated exploration properties, in two project areas. In August 2011, Silvercorp acquired a 90% interest in the XBG project, and in November 2011, it acquired a 100% interest in the XHP project. Both acquisitions were made through Silvercorp’s 77.5% owned subsidiary, Henan Found. In Q1 Fiscal 2014, the Company entered into a share transfer agreement with an arm's length private Chinese company. Pursuant to the Agreement, the Company's subsidiary, Henan Found Mining Co. Ltd., will sell its 90% equity interest in Zhongxing Mining Co. Ltd. (XBG project) for $13.8 million (RMB 84 million). As of November 14, 2013 the Company has received payment of $8.2 million (RMB 50 million) for the sale. The transaction is expected to be completed within 12 months.

Location and Ownership

The Property is located about 220 km southwest of Zhengzhou, the capital city of Henan Province, and 100 km southwest of Luoyang, the nearest major city. Zhengzhou is the region's largest industrial city, offering full service facilities and daily air flights to Beijing and other major population centres such as Shanghai and Hong Kong. The nearest small city is the Songxian county town, about 60 km by paved roads to the northeast of the Property.

The XBG project has a mining license covering 26.4 square kilometers (km2) expiring in November 2022 and the adjacent NTM gold exploration license covering 2.5 km2. The main assets include a 350 tonne per day (tpd) flotation mill, a tailings management facility (TMF) built in 2010 within the mining license area, and an environment permit to construct a 1,000 tpd flotation mill.

The XHP project has a 14.1 km2 mining license, the HGDG gold exploration license of 4.5 km2 and a 400 tpd flotation mill. The XHP project is located 6 km northwest of the XBG project.

As one of the major metallogenic belts for precious and base metal resources in West Henan, the Property and its adjacent areas have been the subject of a number of government-funded research and exploration programs since the mid-1950s.

History of the XBG Project

The XBG area has been mined by artisanal miners for gold and silver since the late 1980s. Early exploration activities were restricted to regional scale surface mapping, stream sediment geochemical sampling, and limited surface trenching. In the middle and late 1980s and 1990s, a number of state-owned geological exploration teams carried out exploration programs for gold and polymetallic mineralization in the project area. The exploration was restricted to surface exploration.

Between 2003 and 2008, the previous owner, Zhongxing Mining Ltd. (Zhongxing), conducted surface trenching and tunnelling that tested the known mineralized structures. This led to a reported combined lead and zinc resource (estimated according to Chinese standards, non NI 43-101 compliant) of 0.463m tonnes averaging 3.1% Pb and 3.4% Zn. This resource is officially approved by the Henan Provincial Review Centre of Mineral Resources and Mineral Reserves, a Henan Provincial government agency. Sufficient work has not been done to classify the historical estimates reported above as current Mineral Resources or Mineral Reserves, and these historical estimates are not treated as current Mineral Resources or Mineral Reserves as defined in Sections 1.2 and 1.3 of NI 43-101. The historical estimates should not be relied upon.

After being issued with the mining license in November 2010, Zhongxing carried out underground exploration and development tunnelling. By the end of July 2011, a total of 4,500 m of tunnels and several shallow shafts had been developed in the mine area. According to Zhongxing’s records, over 20,000 t of silver-lead-zinc mineralized material were recovered from underground tunnels and about 12,000 t of mineralized material were treated in the 350 tpd flotation mill at the mine camp. Metal recoveries from the test milling were reported to be over 90% for silver and lead and 80% for gold and zinc.

History of the XHP Project

From 1956 to 1958, the Regional Geological Survey Team of the Northwest Bureau of Geological Ministry completed a 1:200,000 scale regional reconnaissance and investigated the geological background of mineralization in the project area. This was followed up by a 1:50,000 magnetic survey in 1961.

Between 1982 and 1993, the No.1 Geo-exploration Team of the Henan Provincial Geological Exploration Bureau carried out several surface geochemical sampling programs and delineated a number of gold showings, including the Dianfang gold deposit, which is directly adjacent to the project area. Gold mineralization at Dianfang is classified as explosive breccia-hosted. The Dianfang mine is still in operation, and is discussed under Adjacent Properties, in Section 23 of the current Technical Report for the X-Mines Property.

Between 2001 and 2007, the No.5 Nonferrous Geo-exploration Team of the Henan Provincial Geological Exploration Bureau carried out an extensive exploration program in the project area and delineated 15 gold mineralized zones, four lead-zinc mineralized zones and one fluorite zone. Resource estimation for gold, lead and zinc was conducted according to Chinese official standards. Reported resources include a gold resource of 820,000 tonnes at 4.71 g/t Au, a lead resource of 510,300 tonnes at 4.77% Pb, and a fluorite resource of 1,529,800 tonnes at 49.22% CaF2 (non NI 43-101 compliant).

The Songxian Gold Company (SX Gold) of Luokuang Group acquired the XHP project in 2008, and focused on mining the oxidized gold zone near surface. The oxidized mineralization was treated in the 500 tpd carbon-in-leach (CIL) circuit to recover gold only. In 2011, a flotation circuit was installed to recover lead-silver concentrate from the partially oxidized gold mineralization after gold is recovered through the CIL circuit. Mill recoveries were reported as 75% for gold, 70% for silver and 60% for lead. Sufficient work has not been done to classify the historical estimates reported above as current Mineral Resources or Mineral Reserves, and these historical estimates are not being treated as current Mineral Resources or Mineral Reserves as defined in Sections 1.2 and 1.3 of NI 43-101. The historical estimates should not be relied upon.

Geology & Mineralization

The Property is situated in the 300 km-long west-northwest trending Qinling orogenic belt, a major structural belt formed by the collision of two large continental tectonic plates in Paleozoic time. The Qinling orogenic belt is comprised largely of Proterozoic- to Paleozoic-age rock sequences consisting of mafic to felsic volcanic rocks with variable amounts of interbedded clastic and carbonate sedimentary rocks. The rocks are weakly metamorphosed to lower greenschist facies, with local areas of strongly metamorphosed, lower amphibolite facies. The metamorphosed sequence is intruded by mafic to felsic dikes and stocks of Proterozoic and Mesozoic ages. They are overlain by non-metamorphosed sedimentary rock sequences of Mesozoic- to Cenozoic-age, primarily marls and carbonaceous argillites, which are in turn overlain locally by sandstone-conglomerate sequences. The dominant structures in the Qinling orogenic belt are west-northwest trending folds and faults generated during the collision of the two major tectonic plates in Paleozoic time. The faults have associated conjugate shear zones, which display features of brittle fracturing such as fault gouge, brecciation and well-defined slickensides. These are associated with all the important mineralization recognized along the orogenic belt.

The XBG and XHP project areas are underlain by Middle Proterozoic andesite flows intercalated with minor thinly-bedded rhyolite. The Proterozoic volcanic sequence was intruded by Mesozoic granitic stocks. Mesothermal-style silver-gold-lead-zinc mineralization is controlled by NNE-, NEE-, and NW-trending faults developed within the regional Machaoying deep fault zone and distributed along the northeast margin of a large granitic batholith with an elongated extension of more than 40 km.

In the XHP area, about 20 mineralized veins have been identified by mapping, trenching, underground channel sampling and surface diamond drilling. Known mineralized structures in the XHP area have been categorized into four types. These are:

  1. Explosive breccia-hosted, gold-dominant, polymetallic veins
  2. Gold-silver-dominant polymetallic veins
  3. Polymetallic sulphide veins
  4. Fluorite Vein

 

Mineralization in the XBG project area is closely associated with fault zones. The fault zones are widely developed in Proterozoic intermediate and acidic volcanics. The mineralization zones mainly occur as silicified veins in the fault zones, with some of the major fault zones highly brecciated. On the basis of their occurrences, the mineralized zones can be categorized into three major groups based on trend of mineralization and mineralogy.

Exploration

Silvercorp initiated exploration-development activities in the XHP area and the XBG area in 2011 after the acquisition of the two mineral properties. The objective of the exploration was to evaluate the overall exploration potential of the Property and define resource potential in the major known mineralization veins. Excluding drilling, the exploration programs in the Property comprised 5 km of surface prospecting and sampling on the major mineralized structures, 2,772 m of systematic underground logging including sampling of the available and accessible mining tunnels, and 4,552 m of underground exploration tunnelling. Sizes of tunnels vary from 1.8 X 1.8 m to 2.2 X 2.0 m (Songxian Gold Mining Company, 2011).

In the XHP project area, gold and silver polymetallic mineralization is located in two separate sub-areas, the West area and the East area. The 2011 exploration activities were mainly focused on the known mineralized veins K2, K11, K5, K9, K3-1 and K19 in the West area and K13, K14, K18 and K15 in the East area. A total of 3,899 m exploration tunnelling was completed between levels 420 and 757 m. Major veins in the west are north- and northeast-trending gold veins around or within concealed explosively brecciated rhyolite. Major zones in the east are lead-zinc-silver polymetallic veins associated with SWW-trending structures.

The 2011 exploration program in the XBG project area began with surveying and mapping the previous tunnels through six portals. A total of 2,772 m of tunnels was surveyed, logged and sampled. Exploration tunnelling of 653 m was conducted in locations where mineralization was observed during the phase-one surveying and mapping program. A surface reconnaissance survey was completed to investigate the distribution of 17 known lead-zinc zones and three known fluorite veins. A total of 748 chip samples were collected during the 2011 exploration program.

The X mines will continue to focus on an exploration program that will include surface and underground mapping and systematic sampling as well as surface and underground diamond drilling, with the goal of defining an initial NI 43-101 compliant mineral resource. Exploration and mine development at the X mines will be partially supported from cash flows generated from limited development ore and existing ore stockpiles.

Drilling

A diamond drilling program was conducted in the XHP and XBG areas of the Property in 2011. Underground drilling was carried out in areas with previous mining activities and accessible tunnels, and was conducted to test the down-dip extension of major mineralized vein structures. Surface drilling was implemented to test the exploration potential along strike of some major mineralized structures recognized on surface. Down-hole surveying was conducted every 50 m with a gyro inclinometer by drillers. A total of 7,398 m of core drilling was completed in the 2011 drilling programs.

The 2011 drilling program in the XHP project area consisted of 3,480 m in nine surface holes and 1,142 m in six underground holes. Most of the holes were drilled on the major mineralized vein structures K13 and K14 to explore for the down-dip extension of the known zones, and three holes were designed as exploration holes to investigate the deep potential of veins K6, F40 and K5.

At K13, nine surface holes were designed to trace down-dip extension of the mineralized zone, of which six intersected the mineralization zone. As a result of this drilling, the zone has been successfully extended to the 160 m elevation and is still open at depth.

An exploration drilling program was conducted in late 2011 at XBG, and consisted of 1,407 m in three surface holes and 683 m in two underground holes.

The exploration holes were designed to test the deep exploration potential of some major mineralized vein structures recognized at surface or exposed by previous near-surface mining activities. Four of the five exploration holes intercepted down-dip extensions of the known mineralized structures.

Mineral Resource Estimates

There are currently no Mineral Resource estimates that comply with NI 43-101. Silvercorp acquired the Property in the second half of 2011 and has since been undertaking exploration test drilling and tunnelling on the major mineralized structures.

Recovery Methods

The following two plants were operated by Luoyang Mining Group Co. (LMGC) until they were taken over by Silvercorp in 2011:

Plant 1 on XHP is the 400 tpd, Shi-Tong-Gou Mill Flotation Plant. It was designed for gold-lead mineralization by Sandong Jingdu Engineering Inc in December 2008. The plant was then built and started operation in Dec 2009. The plant was shut down in August 2011 due to a decrease in the gold grade. After it was taken over by Silvercorp in 2011, the plant was modified to process lead-zinc mineralization by differential flotation.

Plant 2 on XBG is the 300 tpd, Xi-Bai-Gou Lead-Zinc Processing Plant. It was designed by San-Men-Xia Gold Mine Engineering Inc in 2008. The plant started operation in 2009. The plant was shut down in 2011 for maintenance and remains closed.

The distance between the two plants is about 16 km.

Of major relevance to this report is the Plant 1 at XHP, modified to include crushing, grinding, flotation of lead-zinc concentrates, and concentrate dewatering unit operations, as listed below:

  • Crushing circuit (closed circuit with two-stage crushers-screen: jaw crusher, one cone crusher, vibrating screen, dust collectors, one fine ore storage bin) (one train: 400 tpd).
  • Ball mill circuit - screw classifier circuit (one train: 400 tpd).
  • Flotation circuit (PbS flotation-ZnS flotation circuit: rougher-scavenger-cleaner cells, chemical preparation tanks) (one train: 400 tpd)
  • Concentrate thickening ceramic filtration circuit (PbS filtration, ZnS filtration) (one train each for Pb and Zn).
  • Water make-up system.
  • Tailings pond.

Infrastructure

There are two tailings management facilities (TMF) on the Property. TMF 1 (Shi-Tong-Gou tailings pond) was built in 2009. This facility has served Plant 1 (400 tpd Au-Pb mill) from 2009 to 2011 and the Pb-Zn mill since 2012. TMF 2 (Xi-Bai-Gou tailings pond) was built in 2008. This facility serves Plant 2 with a 300- 400 tpd Pb-Zn mill. The design of the two facilities is very similar. TMF 1 is located in a valley approximately 1.5 km away from the processing plant and within the lower reaches of Shi-Tong-Gou valley. TMF 2 is located within the lower reaches of X i - B a i -Gou valley and adjacent to Plant 2.

The dams are are located on the southern edge of the North China Platform, within the Xiaoshan -Lushan arch fault fold cluster area and the Feiwei Earthquake Zone. Songxian County has been classified as Grade 6 in terms of seismicity and, as such, a seismic acceleration of 0.05 g is required to be taken into consideration in the design. TMF 1 has a working volume of 957,500 m3 with an expected life of 7.5 years at the current deposition rate of 120,500 tpa. Both TMF 1 and TMF 2 are classified as Grade IV facilities based on the dam height (30-60 m) under the Chinese system.

Geochemical properties of the tailings were assessed by a multi-element analysis (Pb, Zn). No leaching tests have been carried out to determine the potential for metal leaching.

Water used for mineral processing is treated before being discharged to the TMF. About 75% of the process water is recycled back to the plant for reuse. Zero discharge is the production target for dry seasons.

Surface water drainage features have been incorporated into the design of the TMFs. Immediately downstream of the starter dam embankment there is a surface water cut- off trench. There is provision in the design for the construction of cut-off trenches 2 m above the starter dam embankment to prevent scour of the abutments by rainwater run-off. Seepage control is affected by geomembrane and geo-textile impervious layers together with an intercepting drain and collector system discharging into a downstream water storage dam for pumping to the plant.

Flood calculations have been performed appropriate to the Grade IV classification of the TMFs, which requires the flood control measures to meet a 1 in 100 year recurrence interval for design purposes, with a 1 in 500 year probable maximum flood criterion. A safety and reliability analysis for the TMF has been carried out in accord with relevant Chinese Safety Technical Regulations for Tailings Ponds requirements. AMC notes that the calculation method is now considered outdated and normal industry practice would be to conduct finite element numerical modelling.

A waste rock dump is located outside each portal at both the XHP mine and the XBG mine. Waste rock is hoisted to surface and trucked to the waste dump. Some of the waste is used for road construction and for other local construction work such as hardstand areas, retainer walls and other miscellaneous infrastructure foundations. It is also envisaged that waste could be disposed of into shrinkage stope voids to aid ground stability and reduce transportation costs.

Mine power for XHP is sourced from Dazhang 35/10kV substation, 17 km northwest of the mine site, via a 10kV high voltage line. One back-up generator unit is in place to provide power for underground ventilation, dewatering and the accommodation area in case of a power failure.

The XBG mine power is delivered via a 10kV high voltage line from Chantang 35/10kV substation, 10 km northwest of the mine site. The back-up power at XBG is similar to XHP.

The XHP mine includes the mine site, camp complex, Silvercorp’s local administration office and the mill plant. The company has built a 1 km long by 6 m wide concrete road to link the mill/office complex to the Luoyang-Luanchuan Express Way. Access to the mine site from the mill-office complex is via a 10 km paved road and a 2 km gravel road in the mountainous area.

The XBG plant is located about 16 km from the XHP plant, the two being connected by a concrete road.

A network of gravel roads links mine camp facilities to the underground adits, process plant, waste dump, water supply areas and TMFs.

Mine production water for drilling and dust suppression is sourced from underground water at both of XHP and XBG mines. Water for XHP and XBG mines is also sourced from nearby creeks and underground water wells.

For further information on the X-Mines, please refer to the current NI-43-101 Technical Report for the property.

Fiscal 2014

Capital expenditure at the X-mines were budgeted at $2.9 million for Fiscal 2014, but the Company has now suspended activities at the XHP project as part of its cost saving measures.

Last updated November 15, 2013

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