TECHNICAL REPORT for SONGXIAN PROPERTY, HENAN PROVINCE, CHINA For

AMC Mining Consultants (Canada) Ltd. BC0767129

Suite 1330, 200 Granville Street Vancouver BC V6C 1S4 CANADA T +1 604 669 0044 F +1 604 669 1120 E [email protected]

TECHNICAL REPORT FOR SONGXIAN PROPERTY, HENAN PROVINCE, CHINA for

SILVERCORP METALS INC.

Prepared by AMC Mining Consultants (Canada) Ltd

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

Report prepared by:

P R Stephenson, P.Geo. H A Smith, P.Eng. A Riles, MAIG M Molavi, P.Eng.

AMC: 712020 Effective Date 30 June 2012

ADELAIDE BRISBANE MELBOURNE PERTH TORONTO VANCOUVER MAIDENHEAD +61 8 8201 1800 +61 7 3839 0099 +61 3 8601 3300 +61 8 6330 1100 +1 416 640 1212 +1 604 669 0044 +44 1628 778 256 www.amcconsultants.com SILVERCORP METALS INC Technical Report Songxian Property

1 SUMMARY

Introduction

AMC Mining Consultants (Canada) Ltd (AMC) was commissioned by Silvercorp Metals Inc. (Silvercorp) to prepare a Technical Report on the Songxian Property (Property) (also known as “X Mines”), in Henan Province, China, which Silvercorp acquired in late 2011. There has been no previous Technical Report on the Property.

The 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.

The Property is situated in the east extension of the Qinling Mountain Belt, near the margin of the Northern China Craton and in the same regional mineralization belt as Silvercorp’s Ying Property. This belt is one of the largest silver-gold and base metal belts and largest silver producing regions in China.

Location and History

The Property is located about 220 km southwest of Zhengzhou (pop. 7.0 million), the capital city of Henan Province, and 100 km southwest of Luoyang (pop. 1.4 million) 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 (pop. 65,000+), 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.

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History of 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.

AMC has not done sufficient work 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.

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 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.

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

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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.

Geology and 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.

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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.

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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.

Sample Preparation, Analyses and Security

Exploration samples collected in Silvercorp’s 2011 programs on the Property comprise chip samples from underground tunnelling and core samples from surface and underground drilling. NQ-sized drill cores (48 mm in diameter) were recovered from the mineralized zones. Drill core was logged, photographed and sampled in detail at the mine site. The mine camp has a perimeter fence with a security guard at the gate. A total of 1,120 core samples were collected from the 2011 drilling program in the XHP area and 81 core samples were collected in the XBG area.

Core and chip samples from the Property are shipped or couriered in securely sealed bags to the Analytical Lab of the 6th Nonferrous Geo-exploration Team in Luoyang (Luoyang Lab), Henan Province. This lab is officially accredited in China. The certificate of certification has been sighted by AMC.

Silvercorp did not employ a full-scale QA/QC program for its 2011 exploration program in the Property. Limited QA/QC measures adopted in 2011 include six blanks in samples from

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the XBG area. Although limited blank material was assayed, analysis of the blanks showed no contamination.

It is considered that the sampling procedures (excluding QA/QC) adopted by Silvercorp in its 2011 exploration program in the Property comply with industry standards.

AMC notes that improvement is required in QA/QC measures as current provisions do not meet appropriate industry practices.

From an inspection of core intersections chosen by Silvercorp to represent the major mineralized zones from the Property, the observed mineralization was generally consistent with the assays reported.

AMC collected 11 random mineralized quarter-core samples for check assaying during an April 2012 site visit. The samples were prepared and assayed at ALS Chemex laboratory in Guangzhou. The check results overall do not compare closely with the original results, which is not unusual given the nature of the mineralization. However, the grade trends are broadly compatible.

Based on independent reviews and validations of information and data provided, AMC is satisfied that the data is acceptable for the purposes of this report.

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.

It is Silvercorp’s intention to prepare Mineral Resources estimates in 2013 after the additional planned 30,000 m drilling program is complete.

Mineral Processing

Gold mineralization from the XHP project was tested by both Henan Rock Mineral Testing Centre (HRMTC, Zhengzhou, Henan) and Ying-Tai Jingban Metallurgical Test (YTJMT) Laboratory in 2008. Based on the two laboratory test reports, a 400 tpd plant (Plant 1, Shi- Tong-Gou) for lead-gold recovery by flotation – gravity separation was then designed by Sandong Jingdu Engineering Inc. in Dec 2008. The plant began operating in 2009 to produce a lead-gold sulphide concentrate product. The plant was shut down due to declining gold grades in August 2011.

Lead-zinc mineralization from the XBG project was tested by China National Engineering Research Centre for Utilization of Industrial Minerals (UIM, Zhengzhou, Henan) in 2010 in regard to feed for Plant 2.

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After Plant 1 was sold to Silvercorp, addition of a zinc flotation bank to the existing lead flotation bank at Plant 1 was begun. At the time of the AMC site visit in February 2012, these modifications were still in progress. AMC understands that, as of June 2012, Plant 1 has started to process Pb-Zn mineralization to produce lead and zinc sulphide concentrate products.

Note that no testwork has been reported for mineralization pertaining to the Xi-Bai-Gou plant (Plant 2), which has been shut down since 2011.

With respect to the gold-lead mineralization, the mineralogy suggests that:

 Most of the galena and associated gold can be recovered by bulk flotation.

 Lead and gold associated with oxide minerals are poorly recovered via flotation.

This is confirmed by the metallurgical testwork, and projected performance indices are:

 69% of lead recovery to a high grade (60% Pb) lead concentrate with 82 to 83% of gold recovery via bulk flotation.

 High lead loss (31%) to the flotation tailings due to the mineralization being partially oxidized.

 Further processing will be required to recover remaining gold (approximately 17%) from flotation tailings by gravity separation or cyanidation.

It should be noted that the processing of gold mineralization in Plant 1 was shut down in August 2011 due to declining gold grades.

With respect to the lead-zinc mineralization, the mineralogy indicates that:

 About 55% of lead is in the sulphide form (galena), and about 72% of zinc is in the sulphide form (sphalerite). The remainder of the lead and zinc is associated with the oxide minerals.

 Galena and sphalerite grains are quite significantly intergrown, which makes liberation difficult. This is confirmed by the metallurgical testwork, with projected performance indices being:

 52% lead recovery to a high grade (61% Pb) lead concentrate, consistent with the mineralogy.

 An additional 13% lead recovery is potentially achievable with a sulphidizing float to recover oxide minerals. The resulting combined concentrate would be 53% Pb.

 66% zinc recovery to an acceptable (48.5% Zn) zinc concentrate.

 Low lead and zinc metal recovery due to the mineralization being partially oxidized.

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 Contamination of lead concentrate with high zinc, and zinc concentrate with high lead due to the difficult liberation of galena/sphalerite grains, even with fine grinding.

Mineral Reserves and Production Plan

The XHP and XBG mines are under development and Silvercorp has yet to prepare a production plan and schedule. Consequently, there are currently no Mineral Reserves to report.

Mine operations are being scheduled for 365 days of the year, but with production on a 330 days per year basis. Table 1 below shows reported production from 2010 to May 2012. Silvercorp anticipates a production rate increase as development is further advanced.

Table 1 Production* Reported for XHP and XBG Mines (2010-2012)

Mine 2010 (t) 2011 (t) 2012 (t) Total (t) XHP 16,787 18,764 27,565 63,116 XBG 8,000 700 8,700 Total 71,816 *No reported metal grades were provided to AMC Mining

The XHP and XBG mines are located in narrow valleys, and a series of adits at each mine provides access from surface to the mining areas. Most of the operational levels do not have their own access portal and must connect to internal shafts or declines.

Since Silvercorp’s acquisition of the operations in 2011, exploration and small-scale mining activities have been conducted using small conventional tracked equipment (rail cars, electric rocker shovels and pneumatic hand-held drills). Further development is underway to provide better access for exploration and mining activities. A new adit and internal decline are being developed at XHP, and a surface decline will also be constructed at XBG. Construction of a shaft from surface is also underway at XBG.

Adits serve as ventilation airways and are the main means of access for personnel, materials and rock transport. All services such as electrical power, compressed air, drill water and dewatering pipelines are installed. Most adits are equipped with narrow gauge rail for use by railcars. Where there is no rail, manual carts or tricycle cars are utilized for transport of rock and supplies.

Operational levels connect to declines that are driven at approximately 25° to 28°. The declines are equipped with narrow gauge rail and steps on one side for foot travel.

Shrinkage stoping is the main mining method. Resue stoping to minimize dilution is also proposed to be implemented in high-grade, narrow vein areas in the future. Typical vein widths are of the order of 1 m at XHP mine and 1.5 m at XBG mine. Stoping blocks are

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generally about 40 m to 60 m in strike length by 40 m to 50 m in height. Stopes are extracted bottom-up, but with the inter-level extraction sequence generally being top-down. Production drilling is by jackleg and in-stope rock movement is by gravity to draw points. Mucking is mostly via hand shovels or, occasionally, rocker shovels to rail cars pulled by battery locomotive. Designed dilution is of the order of 30%, with the average mining recovery factor at 90%.

Mineralization transport to surface is via hoist in the internal decline or shaft, with the rail cars then being manually moved to the portal from the adit. At surface, mineralized material is transported to the unloading stockpile, and then to the mill by haul trucks. Waste rock cars are tipped at a temporary waste dump adjacent to the adit. It is anticipated that a significant amount of future waste rock will be used for pavement and road upgrades for local villages. A permanent waste rock dump is planned for the near future.

Major mineralized veins being extracted at XHP are K13 and K14, with initial planning envisaging mineralized material being produced from nine levels between 340 mRL and 650 mRL. At XBG, seven veins are projected to provide the majority of mineralized material production.

No specific geotechnical or hydrogeological study data is available for the mines. Silvercorp’s initial activities have encountered generally good ground conditions. The excavation of relatively small openings, both in development and stopes, facilitates ground stability. Support is only installed where deemed to be necessary, with rock bolts being used for hanging wall support on occasion. Timber and steel I-beams may also be used where unstable ground is encountered.

Water in-flow to date at the XHP mine and XBG mine has not created any significant problems.

The XHP mine is operated using one contractor for mine development, production, and exploration, while the XBG mine is operated using Silvercorp’s own mining crew for all activities. Silvercorp also provides its own management, technical services and supervision staff to manage the operations at the two mines. As of the time of this report, the XHP mine and XBG mine had 339 workers in total, including Silvercorp’s 238 staff and 101 contract workers.

Almost all main equipment is provided by Silvercorp and maintained by the contractor. Fixed plant is provided by Silvercorp and is largely domestically manufactured and locally sourced.

Mine ventilation requirements are as per Chinese laws and regulations. Primary ventilation at XHP is via a pull-system using main axial fans. Secondary ventilation consists of auxiliary fans for ventilating production faces, development faces and infrastructure chambers.

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Prior to Silvercorp’s acquisition, the XBG mine was dependent on natural ventilation. Upgrading to a mechanical ventilation system is occurring as the mine is further developed, with ventilation ducts and mechanical fans being employed for production and development headings.

Mine dewatering is regulated by Chinese regulations. Levels are self-draining to shafts or blind declines. At both sites, dewatering is planned in two stages. Main centrifugal pumps and local submersible pumps are used, with twin pipelines to surface. For safety in case of a flood, water dams are set up adjacent to the surface pump house.

Safety is governed by Chinese health and safety laws and regulations. Safety training for all personnel is mandatory. Procedures are in place for enforcing occupation health and safety policies and procedures, making safety recommendations and carrying out routine inspections. A safety committee is maintained for each mine; the XHP committee includes contractor representation. Silvercorp and the contractor supply personnel protective equipment to their personnel. In 2011, no lost time injuries were reported at either mine.

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 Dec 2008. The plant was then built and started operation in Dec 2009. The plant was shut down in Aug 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).

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 Concentrate thickening ceramic filtration circuit (PbS filtration, ZnS filtration) (one train each for Pb and Zn).

 Water make-up system.

 Tailings pond.

Mass Balance for Plant 1 (June 2012)

Materials Yield Grade Recovery (%) Pb (%) Zn (%) Ag (g/t) Pb (%) Zn (%) Ag (%) PbS Conc 1.38 48.8 10.7 960 51.4 11.4 51.3 ZnS Conc 1.56 6.3 34.9 12 7.6 41.8 0.72 Tails 97.1 0.65 0.63 12.7 41.1 46.8 47.9 Head Feed 100 1.31 1.3 25.8 100 100 100

The processing results show that:

 Pb grade (49%) in PbS concentrate is lower than the design target of 61%. Pb recovery (51%) in PbS concentrate is close to the design target of 52%.

 Zn grade (35%) and recovery (42%) are lower than the target Zn grade of 48% and 66% recovery.

 Inferior zinc and lead grade-recovery performance is due to low ore grade, the ore feed being partially oxidized, and the fine intergrowths of galena/sphalerite grains in the feed ore.

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 Xi- 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.

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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.

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.

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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.

Marketing Studies and Contracts

AMC understands that the sale of concentrates for the Songxian Property is as per that of Silvercorp’s Ying Property. The lead and zinc concentrates will be marketed to existing smelter customers in Henan and Shaanxi provinces and appropriate terms have been negotiated.

Monthly sales contracts are in place for the lead concentrates with leading smelters, mostly located in Henan province; among them are Henan Yuguang Gold and Lead Smelting Co., Ltd, Jiyuan Wanyang Smelting (Group) Co., Ltd, Jiyuan Jinli Smelting (Group) Co., and Luoning Yongning Gold and Lead Smelting Co., Ltd. For the zinc concentrate, sales contracts are in place with Henan Yuguang Zinc Industry Co., Ltd and Shaanxi Shangluo Zinc Smelting Co. Ltd. The contracts are renewed on a monthly basis.

Environment and Social

The existing mining permits of the XBG and XHP projects cover all the active mining areas and, in conjunction with the safety and environmental certificates, give the right to carry out full mining and mineral processing operations.

There are no cultural minority groups in the general project area. The cultural make up of the broader Song County is predominantly Han Chinese. The surrounding land use in the mining area is predominantly agriculture. The mining area does not cover any ecological forests, or strict land control zones. The current vegetation within the area is mainly secondary vegetation including farming vegetation. Larger wild mammals are not found in the region. Small birds nesting and moving in the woodland are occasionally observed in the evaluation region. The surrounding villagers raise domestic animals, such as chickens, ducks, pigs, sheep, goats, dogs, and cows.

The XBG and XHP projects operate under Chinese laws, regulations and guidelines. The relevant permits and approvals have been obtained for the Property.

Recommendations

(Costs are estimated for those recommendations not covered by current development activities.)

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General

AMC recommends that a full-scale QA/QC program be employed in Silvercorp’s future exploration programs on the Property. The QA/QC program should include inserting certified reference materials, blanks and duplicate samples to monitor quality in the procedures of collection, preparation and analysis of exploration samples.

AMC recommends that Silvercorp include formal recognition of local geotechnical conditions and make specific reference to ground support requirements within its mine planning process.

AMC notes that some operating practices and procedures at XHP and XBG that are probably within Chinese safety standards fall short of common international standards. AMC recommends that Silvercorp continue with a focus of improving mine and site safety that would include implementation of a policy where the more stringent of either Chinese or Canadian safety standards are employed.

AMC recommends that at Plant 1 at XHP (recently re-commissioned following the modifications to install zinc flotation), an intensive campaign of plant sampling and analysis be carried out in parallel with laboratory testing of plant feed at the time of sampling; this in order to verify that the plant is performing to expectations for the ore mineralogy being treated.

AMC considers that an integral part of the planning process should be the projection of capital and operating costs after a Mineral Resource is estimated.

Exploration

Silvercorp has initiated a 2012 exploration program comprising 38,525 m diamond drilling and 7,640 m underground tunnelling; AMC recommends that this program be carried to completion. Total estimated cost for the 2012 exploration program is RMB 25.1m (approximately $4.1m).

The estimated exploration cost at XHP is RMB 14.1m (approximately $2.3m). The program consists of 8,050 m surface drilling and 10,475 m underground drilling, including:

 Resource Delineation Drilling: Underground drilling on a grid of 80 X 80 m to be conducted on major mineralized vein structures where known mineralization zones have been previously defined or mined; this to further expand and delineate the known zones down-dip and along strike at depth. These veins include K13, K2, K11, K19, and K19-1.

 Test Drilling: Both surface and underground drilling to be conducted with a grid of 160-320 X 160 m on vein structures with recognized mineralization and alteration on surface. These veins include the west section of K13, K14, K17, K18, K5 and K21.

AMC 712020 : 30 October 2012 xiv SILVERCORP METALS INC Technical Report Songxian Property

 Exploratory Drilling: Surface drilling to be conducted on vein structures with exploration potential at depth. These veins include F40 and the south section of K2, as well as other structures delineated with surface mapping and geochemical sampling. The XHP program also includes exploration tunnelling to be driven on K13, K2, K15 and K19, to further define the area of the known mineralization zones in these vein structures. Total recommended tunnelling is 4,140 m at the XHP area.

The estimated exploration cost at XBG is RMB 11.0 m (approximately $1.8m). The recommended diamond drilling program includes 11,055 m surface drilling and 8,945 m underground drilling.

 Surface exploration drilling is to be conducted on the major structures X1, X5 and X6 to investigate deep exploration potential. Test drilling with a grid of 160 X 160 m is to be conducted on mineralized structures with known mineralization zones and previous mining activities, to test the down-dip and strike extensions of the mineralized structures.

 Underground drilling is to be carried out on veins with accessible mining tunnels. Veins for test drilling include X8, X9, X10, X11, and X12.

XBG exploration tunnelling is planned for vein structures X1, X8, X9, X10, X11, X12 and X13, where mining activities were carried out by previous operators. Total 2012 proposed tunnelling is 3,500 m at the XBG area.

AMC 712020 : 30 October 2012 xv SILVERCORP METALS INC Technical Report Songxian Property

CONTENTS

EXECUTIVE SUMMARY

1 SUMMARY ...... I 2 INTRODUCTION ...... 1 3 RELIANCE ON OTHER EXPERTS ...... 3 4 PROPERTY DESCRIPTION AND LOCATION...... 4 4.1 Property Location ...... 4 4.2 Exploration and Mining Licenses ...... 4 4.3 Exploration and Mining Rights and Taxes ...... 10 5 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY ...... 11 6 HISTORY ...... 12 6.1 History of XBG Project ...... 12 6.2 History of XHP Project ...... 13 7 GEOLOGICAL SETTING AND MINERALIZATION ...... 15 7.1 Geological Setting ...... 15 7.2 Mineralization ...... 16 7.2.1 XHP Area ...... 17 7.2.1.1 Vein Types ...... 17 7.2.1.2 Characteristics of Major Vein Structures ...... 19 7.2.2 XBG Area ...... 22 7.2.2.1 Vein Types ...... 22 7.2.2.2 Characteristics of Individual Mineralized Zone ...... 24 7.2.3 Mineralization in the Exploration Permit Areas ...... 30 8 DEPOSIT TYPES ...... 31 9 EXPLORATION ...... 32 9.1 XHP Project Area ...... 32 9.1.1 Exploration Results from the West Area ...... 33 9.1.1.1 K2 Exploration Results ...... 33 9.1.1.2 K11 Exploration Results ...... 34 9.1.2 Exploration Results from the East Area ...... 34 9.1.1.3 K13 Exploration Results ...... 34 9.1.1.4 K14 Exploration Results ...... 36 9.1.1.5 K15 Exploration Results ...... 36 9.2 XBG Project Area ...... 36 9.2.1 NNE-Trending Mineralized Structures ...... 37 9.2.1.1 Zone X1 Exploration Results ...... 37 9.2.1.2 Zone X2, X3 and X4 Exploration Results ...... 38 9.1.3 NEE-Trending Mineralized Structures...... 38

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9.1.4 NW-Trending Structures ...... 39 10 DRILLING ...... 40 10.1 XHP Drilling ...... 40 10.1.1 Zone K13 Drilling ...... 41 10.1.2 Zone K14 Drilling ...... 41 10.1.3 Zone K6, K5, F40 Drilling...... 42 10.2 XBG Drilling ...... 42 11 SAMPLE PREPARATION, ANALYSES AND SECURITY ...... 43 11.1 Sampling ...... 43 11.1.1 Core Samples ...... 43 11.1.2 Chip Samples ...... 43 11.2 Sample Preparation & Analysis ...... 43 11.3 Quality Assurance & Quality Control ...... 44 12 DATA VERIFICATION ...... 46 13 MINERAL PROCESSING AND METALLURGICAL TESTING ...... 49 13.1 Introduction ...... 49 13.2 Test Samples ...... 49 13.2.1 Gold Mineralization (Shui-Lu-Tang Mine, Songxian) ...... 49 13.2.2 Pb-Zn Mineralization ...... 50 13.3 Mineralogy ...... 50 13.3.1 Gold Mineralization (Mixed Bulk Sample) ...... 50 13.3.2 Pb-Zn Mineralization (Songxian #6, Mixed Bulk) ...... 52 13.4 Metallurgical Testwork Results ...... 54 13.4.1 Gold Mineralization ...... 54 13.4.1.1 Option 1: Direct Cyanidation-CIP Process ...... 54 13.4.1.2 Option 2: Bulk Flotation Process ...... 55 13.4.1.3 Option 3: Gravity Separation – Flotation-Cyanidation Process ...... 56 13.4.1.4 Water Treatment ...... 59 13.4.2 Pb-Zn Mineralization ...... 59 13.4.3 Flowsheet Development and Optimization Tests ...... 59 13.4.4 Locked Cycle Flotation Tests for Option 3 ...... 62 13.4.4.1 Flotation Performance ...... 62 13.4.4.2 Flotation Performance with Recycled Water ...... 64 13.4.5 Flotation Tailings ...... 64 13.4.5.1 Flotation Tailings and Particle Size...... 64 13.4.5.2 Water Treatment ...... 65 13.5 Bulk Density ...... 65 13.5.1 Gold mineralization ...... 65 13.5.2 Pb-Zn mineralization ...... 65 13.6 Summary of Testwork Outcomes ...... 65 13.6.1 Gold Mineralization ...... 65 13.6.2 Lead-Zinc Mineralization ...... 66

AMC 712020 : 30 October 2012 ii SILVERCORP METALS INC Technical Report Songxian Property

14 MINERAL RESOURCE ESTIMATES ...... 67 15 MINERAL RESERVE ESTIMATES ...... 68 16 MINING METHODS ...... 69 16.1 Introduction and Mine Description ...... 69 16.2 Mining Methods & Mine Design ...... 69 16.2.1 Geotechnical and Hydrogeological Considerations ...... 69 16.2.2 Development and Access ...... 69 16.2.2.1 XHP ...... 70 16.2.2.2 XBG ...... 73 16.2.3 Mining Method ...... 75 16.2.3.1 Shrinkage Stoping ...... 75 16.2.3.2 Dilution and Recovery Factors ...... 76 16.2.4 Contractor Operation ...... 76 16.2.5 Mineralization & Waste Haulage ...... 76 16.2.5.1 XHP ...... 76 16.2.5.2 XBG ...... 77 16.2.6 Equipment ...... 78 16.2.6.1 Mine Equipment ...... 78 16.2.6.2 Equipment Advance Rates ...... 80 16.2.7 Manpower ...... 80 16.2.8 Ventilation ...... 81 16.2.8.1 XHP ...... 81 16.2.8.2 XBG ...... 81 16.2.9 Dewatering ...... 82 16.2.9.1 XHP ...... 82 16.2.9.2 XBG ...... 83 16.2.10 Mine Infrastructure ...... 83 16.2.11 Safety ...... 84 16.3 Production ...... 84 17 RECOVERY METHODS ...... 85 17.1 Introduction ...... 85 17.2 Ore and Concentrate Production from the Property ...... 86 17.2.1 Gold-Lead Ore for Plant 1 (2009-2011) ...... 86 17.2.2 Lead-Zinc Ore for Plant 1 (after June 2012) ...... 86 17.2.3 Concentrate Quality and Average Metal Recovery ...... 86 17.3 Mill Plant 1 for Gold – Lead Mineralization Processing (2009-2011) ...... 87 17.3.1 Process Flowsheet ...... 87 17.3.2 Process Description ...... 91 17.3.2.1 Crushing ...... 91 17.3.2.2 Milling classification ...... 92 17.3.2.3 Flotation Circuit (Lead Flotation) ...... 92 17.3.2.4 Product Concentrating, Dewatering and Handling ...... 92 17.3.2.5 Tailings Discharge ...... 92 17.3.3 Metallurgical Performance (Plant 1, Lead-Gold, 2009-2011) ...... 93

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17.4 Mill Plant 1 for Lead-Zinc Processing (after June 2012) ...... 93 17.4.1 Flowsheet (Pb-Zn Flotation) ...... 95 17.4.2 Process Description (Pb-Zn Flotation) ...... 95 17.4.2.1 Crushing ...... 95 17.4.2.2 Milling Classification ...... 95 17.4.2.3 Flotation ...... 95 17.4.2.4 Product Concentrating, Dewatering and Handling ...... 96 17.4.2.5 Tailings Discharge ...... 96 17.4.3 Metallurgical Performance (Plant 1, Lead and Zinc after June 2012) ...... 97 17.4.4 Sampling (Plant 1) ...... 98 17.5 Process Control and Automation ...... 98 17.6 Ancillary Facilities ...... 98 17.6.1 Laboratory ...... 98 17.6.2 Maintenance Workshop(s) ...... 99 17.7 Key Inputs ...... 99 17.7.1 Power (Plant 1) ...... 99 17.7.2 Water Usage and Mass Balance for Plant 1 ...... 99 17.7.3 Flotation Reagents (Plant 1) ...... 99 17.8 Summary ...... 101 17.9 Recommendations ...... 101 18 PROJECT INFRASTRUCTURE ...... 102 18.1 Tailings Management Facility (TMF) ...... 102 18.1.1 Overview ...... 102 18.1.2 Tailings Properties ...... 103 18.1.3 Site Description ...... 105 18.1.4 TMF Design, Construction, Operation and Safety Study ...... 106 18.1.4.1 Design: TMF 1 ...... 106 18.1.4.2 Design: TMF 2 ...... 108 18.1.4.3 Dam Classifications ...... 112 18.1.4.4 Starter Dam (TMF 1) ...... 112 18.1.4.5 Trench Design for Surface Water (TMF 1) ...... 112 18.1.4.6 Water Decant System Design (TMF 1) ...... 113 18.1.4.7 Seepage Collection Design (TMF 1) ...... 113 18.1.4.8 Reclaim Pond Design (12 m x 7 m x 3 m, TMF 1) ...... 113 18.1.4.9 Geotechnical Stability, Safety and Risk Assessment Study ...... 114 18.1.4.10 Site Monitor Stations ...... 114 18.1.4.11 Tailings Pond Operation and Management ...... 114 18.1.5 Tailings Transfer to the Ponds (TMF 1) ...... 114 18.1.6 Water Balance Considerations ...... 114 18.2 Waste Rock Dumps ...... 115 18.3 Power Supply ...... 116 18.3.1 XHP Mine ...... 116 18.3.2 XBG Mine ...... 117

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18.4 Compressed Air ...... 117 18.5 Roads ...... 117 18.5.1 XHP Mine ...... 117 18.5.2 XBG Mine ...... 117 18.6 Transportation ...... 118 18.7 Water Supply ...... 118 18.8 Waste Water and Sewage Treatment ...... 118 18.9 Mine Dewatering ...... 119 18.10 Site Communication ...... 119 18.11 Camp ...... 119 18.12 Dam and Channel ...... 120 18.13 Surface Maintenance Workshop ...... 120 18.14 Explosives Magazine ...... 120 18.15 Fuel Farm ...... 120 18.16 Mine Dry and Administration Building ...... 121 18.17 Warehouse and Assay Laboratory ...... 121 18.18 Security/Gatehouse ...... 121 19 MARKET STUDIES AND CONTRACTS ...... 122 19.1 Concentrate Marketing ...... 122 19.2 Smelter Contracts ...... 122 20 ENVIRONMENTAL STUDIES, PERMITTING AND SOCIAL OR COMMUNITY IMPACT ...... 123 20.1 Introduction ...... 123 20.2 Laws and Regulations ...... 123 20.2.1 Laws ...... 123 20.2.2 Regulation Guidelines ...... 124 20.3 Waste and Tailings Disposal Management ...... 125 20.4 Water Management ...... 126 20.4.1 Water Supply ...... 126 20.4.2 Groundwater...... 127 20.4.3 Waste Water...... 127 20.5 Permitting Requirements ...... 127 20.5.1 Environmental Impact Assessment Reports and Approvals ...... 127 20.5.2 Project Safety Pre-assessment Reports and Safety Production Permits ...... 127 20.5.3 Resource Utilization Plan (RUP) Reports & Approvals ...... 128 20.5.4 Soil and Water Conservation Plan and Approvals ...... 128 20.5.5 The Geological Hazards Assessment Report and Approval ...... 128 20.5.6 Mining Permits ...... 128 20.5.7 Land Use Right Permits ...... 129 20.5.8 Water Permits ...... 129 20.6 Social Issues ...... 129 20.6.1 Social and Community Interaction ...... 129 20.6.2 Cultural Monitories and Heritages ...... 130

AMC 712020 : 30 October 2012 v SILVERCORP METALS INC Technical Report Songxian Property

20.6.3 Relationships with Local Government ...... 130 20.6.4 Labour Practices ...... 130 20.6.5 Remediation and Reclamation ...... 130 20.6.6 Site Closure Plan ...... 131 21 CAPITAL AND OPERATING COSTS ...... 132 22 ECONOMIC ANALYSIS ...... 133 23 ADJACENT PROPERTIES ...... 134 24 OTHER RELEVANT DATA AND INFORMATION ...... 136 25 INTERPRETATION AND CONCLUSIONS ...... 137 26 RECOMMENDATIONS ...... 139 26.1 General ...... 139 26.2 Exploration ...... 139 27 REFERENCES ...... 141 28 QUALIFIED PERSONS`CERTIFICATES ...... 142

TABLES

Table 2.1 Persons who Prepared or Contributed to this Technical Report ...... 1 Table 4.1 Summary of Mining and Exploration Licenses ...... 6 Table 4.2 Details of XHP Mining License ...... 6 Table 4.3 Coordinates of XHP Mining License ...... 7 Table 4.4 Details of XBG Mining License ...... 7 Table 4.5 Coordinates of XBG Mining License ...... 8 Table 4.6 Details of HGDG Exploration License ...... 8 Table 4.7 Coordinates of HGDG Exploration License ...... 9 Table 4.8 Details of NTM Exploration License ...... 9 Table 4.9 Coordinates of NTM Exploration License ...... 9 Table 6.1 Summarized Historic Exploration Work - 2002 to 2007 ...... 14 Table 9.1 Summary of 2011 Exploration Tunnelling at XHP ...... 33 Table 9.2 Selected Significant Intersections of Vein K2 from the 2011 Tunnelling ...... 33 Table 9.3 Selected Intersections of Vein K11 from the 2011 Tunnelling ...... 34 Table 9.4 Selected Intersections of Vein K13 from the 2011 Tunnelling ...... 36 Table 9.5 Intersections of Vein K14 from the 2011 Tunnelling ...... 36 Table 9.6 Summary of Underground Mapping and Sampling of Previous Tunnels ...... 37 Table 9.7 Summary of 2011 Exploration Tunnelling at XBG ...... 37 Table 9.8 Results of Surface Sampling from Zone X1 between Lines 132 and 140 ..... 38 Table 9.9 Results of Underground Sampling between Lines 106 and 103 ...... 38 Table 10.1 Summary of the 2011 Drilling Program on the Property ...... 40 Table 10.2 Completed Drill Holes in the 2011 Drill Program at XHP ...... 40 Table 10.3 Significant Results from 2011 Drilling Program on Zone K13...... 41

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Table 10.4 Completed Exploration Holes in the 2011Drilling Program at XBG ...... 42 Table 11.1 Assay Result of Blank Samples in the XBG Area ...... 44 Table 12.1 Independent Sample Verification – Gold, Silver, Lead, Zinc Assays ...... 47 Table 13.1 Songxian Gold Mineralization Samples Used for Metallurgical Testing ...... 50 Table 13.2 Summary of Songxian Pb-Zn Samples Used for Metallurgical Testing ...... 50 Table 13.3 Mineralogy of the Samples Taken From the Songxian Deposit ...... 51 Table 13.4 Summary of Gold Mineralogical Analysis ...... 52 Table 13.5 Mineralogy for Songxian #6 Pb-Zn Deposit ...... 52 Table 13.6 Summary of Lead Mineralogy ...... 53 Table 13.7 Summary of Zinc Mineralogy ...... 53 Table 13.8 Composition of Gold Mineralization Head Sample ...... 54 Table 13.9 Gold Recovery for Cyanidation-CIP Process ...... 55 Table 13.10 Mass Balance of Lead-Gold Bulk Flotation (60% -200 mesh) ...... 55 Table 13.11 Composition of Gold Flotation Concentrate Product (%) ...... 55 Table 13.12 Mass Balance of Lead-Gold Flotation (65% -200 mesh) ...... 56 Table 13.13 Mass Balance of Gravity Separation-Flotation (65% -200 mesh) ...... 57 Table 13.14 Gold Cyanidation Recovery from Flotation Tailings (%), 24 hrs leaching ..... 57 Table 13.15 Gold Cyanidation Recovery from Flotation Tailings (%), 75%-200mesh ...... 57 Table 13.16 Head Grade of the Blended Test Sample ...... 59 Table 13.17 Comparison of Metal Recovery Options ...... 60 Table 13.18 Impact of Grinding Size on Lead Concentrate Recovery (Songxian #1 mineralization sample)...... 60 Table 13.19 Lead Oxide Recovery Comparison: Flotation vs Gravity Separation ...... 61 Table 13.20 Mass Balances of PbZn Flotation Tests for Option 3 ...... 63 Table 13.21 PbS Concentrate Composition for Option 3 ...... 63 Table 13.22 PbS Concentrate Composition vs Particle Size for Option 3 ...... 64 Table 13.23 ZnS Concentrate Composition for Option 3 ...... 64 Table 13.24 Tails Composition vs Particle Size for Option 3 ...... 65 Table 16.1 Main Access System at XHP Mine ...... 71 Table 16.2 Characteristics of Adits, Internal Shafts, and Declines at XHP Mine ...... 71 Table 16.3 Main Access System at XBG Mine ...... 74 Table 16.4 Characteristics of Existing Adits, Shafts and Declines at XBG Mine ...... 74 Table 16.5 Main Parameters for Declines/Shafts and Winches at XHP Mine ...... 77 Table 16.6 Main Parameters of Declines, Shaft and Winches at XBG Mine ...... 78 Table 16.7 Equipment at the XHP and XBG Mines ...... 79 Table 16.8 Advance Rates ...... 80 Table 16.9 Silvercorp and Contract workers at the XHP and XBG Mines ...... 80 Table 16.10 XHP Water Pump Parameters ...... 83 Table 16.11 XBG Water Pump Parameters ...... 83 Table 16.12 Production* Reported for XHP and XBG Mines (2010-2012) ...... 84 Table 17.1 Summary of Processing Plants 1 & 2’s Capacities ...... 85 Table 17.2 Ore Supplied to the Processing Plant 1 (July 2011, dry base) ...... 86 Table 17.3 Ore Supplied to the Processing Plant 1 (June 2012) ...... 86 Table 17.4 Product Quality for Plant 1 (2009-July 2011) ...... 86 Table 17.5 Product Quality Plant 1 (June 2012) ...... 87

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Table 17.6 Designed Mass Balance at the No.1 Mill (Dry Daily Based, 400tpd) ...... 93 Table 17.7 Product Quality and Mass Balance for Plant 1 (July 2011) ...... 93 Table 17.8 Designed Mass Balance at the No.1 Mill (Daily Based, Option 3) ...... 97 Table 17.9 Mass Balance for Plant 1 (June 2012) ...... 97 Table 18.1 Outline of the Two TMFs ...... 102 Table 18.2 Tailings PSD1 and Compositions* ...... 103 Table 18.3 Chemical Compositions for Pond Recycle Water ...... 104 Table 18.4 Tailings PSD1 and Compositions* ...... 104 Table 18.5 Chemical Compositions for Pond Recycle Water ...... 105 Table 18.6 Criteria for Dam Grade Definition (PRC) ...... 112 Table 18.7 Waste Dumps at the XHP + XBG mines ...... 115 Table 18.8 Estimated Water Inflow from the two Mines ...... 119 Table 20.1 Expenditures for Environmental Protections and Land Acquisition ...... 131

FIGURES

Figure 4.1 Regional Geology and Project Locations ...... 4 Figure 4.2 Project Locations and Geology in Property Area ...... 5 Figure 7.1 Project Locations and Geology in Property Area ...... 16 Figure 7.2 Property Geology of XHP Area ...... 18 Figure 7.3 Mineralized Structure in Tunnels at 500 m and 460 m Levels ...... 19 Figure 7.4 Mineralized Zone within the K2 structure ...... 21 Figure 7.5 Massive Sulphide Veins in Tunnels. K2 (left) and K11 (right)...... 21 Figure 7.6 Property Geology of the XBG Area ...... 23 Figure 7.7 Zone X1 Gold Mineralization in Artisan Tunnel ...... 24 Figure 7.8 Portal of Adit at the Southern End of Zone X1 ...... 25 Figure 7.9 Zone X1 Galena, Sphalerite, Magnetite Mineralization ...... 25 Figure 7.10 Adit Portal within the Fluorite Mining Permit ...... 26 Figure 7.11 Gold Ore mined from Zone X1 within Fluorite Mining Permit ...... 26 Figure 7.12 Silicified Outcrop of Zone X6 ...... 27 Figure 7.13 Pb-Zn-Cu Mineralization Observed on 777 m level ...... 28 Figure 7.14 Alteration Observed at Zone X11 ...... 29 Figure 7.15 Pyrrhotite and Pyrite Dominated Veins in Zone X12 ...... 29 Figure 9.1 Cross Section of Exploration Drilling and Tunnelling on Zone K13 ...... 35 Figure 13.1 Locked-Cycle Sheet for Lead Flotation ...... 58 Figure 16.1 XHP Mine Development System in Composite Plan View ...... 72 Figure 16.2 XHP Mine Development System in Composite Long-Section View ...... 73 Figure 16.3 Schematic of Shrinkage Stoping Method ...... 76 Figure 17.1 Outside View Plant 1: Shi-Tong-Gou Mill Flotation Plant ...... 88 Figure 17.2 Inside View Plant 1: Shi-Tong-Gou Mill Flotation Plant ...... 89 Figure 17.3 Flowsheet for Plant 1 (2009-2011) ...... 90 Figure 17.4 Flowsheet for Plant 1 (after June 2012) ...... 94 Figure 18.1 Shi-Tong- G ou TMF 1...... 107 Figure 18.2 Shi-Tong-Gou TMF 1 Downstream View of Starter Dam ...... 108

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Figure 18.3 Xi-Bai-Gou TMF 2 Tailings Discharge ...... 109 Figure 18.4 Xi-Bai-Gou TMF 2 Downstream View of Starter Dam ...... 110 Figure 18.5 XHP Mine Surface Infrastructure Layout ...... 116 Figure 23.1 Distribution of Major Gold Deposits in the West Henan Province ...... 134

Distribution list: 1 hard copy: Mr M Gao, Silvercorp Metals Inc, Vancouver 1 digital copy: Mr M Gao, Silvercorp Metals Inc, Vancouver 1 digital copy: Mr P Torn Silvercorp Metals Inc, Vancouver 1 hard copy, stamped and sealed: AMC Vancouver office

AMC 712020 : 30 October 2012 ix SILVERCORP METALS INC Technical Report Songxian Property

2 INTRODUCTION

AMC Mining Consultants (Canada) Ltd (AMC) was commissioned by Silvercorp Metals Inc. (Silvercorp) to prepare a Technical Report on as the Songxian Property (Property) (also known as “X Mines”), in Henan Province, China, which Silvercorp acquired in late 2011. There has been no previous Technical Report on the Property.

Table 2.1 Persons who Prepared or Contributed to this Technical Report

Qualified Independent Date of Professional Position Employer Sections of Report Person of Silvercorp Site Visit Designation

Qualified Persons responsible for the preparation and signing of this Technical Report P.Geo., BSc AMC Mining Mr P R General (Hons), Consultants Yes No visit 1 to 12, 14, 20, 23 to 26 Stephenson Manager FAusIMM (CP), (Canada) Ltd MAIG, MCIM P.Eng., (BC), Principal AMC Mining 14-15 Mr H A P.Eng. (Ontario), Mining Consultants Yes February 15, 16 Smith P.Eng. (Alberta), Engineer (Canada) Ltd 2012 MSc, BSc Riles BSc (Hons) Principal Integrated 14-15 Grad Dipl Mr A Riles Metallurgical Resource Yes February Business 13, 17, 19, part 18 Consultant Management 2012 Management, Ltd MAIG Principal AMC Mining 14-15 P.Eng., M.Eng., Mr M Molavi Mining Consultants Yes February Part 18, 21, 22 B.Eng. Engineer (Canada) Ltd 2012 Other Experts who assisted the Qualified Persons Independent Visited Professional Expert Position Employer of Sections of Report Site Designation Silvercorp? Mr B 14-15 AMC Mining O’Connor Principal February P.Geo., BSc Consultants Yes 12 (left AMC, Geologist and April MCIM (Canada) Ltd May 2012) 2012 AMC Mining Certificate, Mr A T Principal Consultants Yes Mining 16 Smith Consultant (Canada) Ltd Technician Mr J Zhang, Metallurgical P.Eng., MSc, Self employed Yes No 13,17 P.Eng. Consultant BSc Mr L Wu, Mining Silvercorp No No EIT, MSc,BSc 16,18 EIT Engineer Metals Inc. Senior Mr. A Li Silvercorp Since July, P.Eng., MSc, Mining No 16,18 P.Eng. Metals Inc. 2011 BSc Engineer President Mr M Gao, and Chief Silvercorp Yes, since P.Geo, MSc, No General P.Geo. Operating Metals Inc July 2011 BSc Officer Vice- Yes, since Mr R Jiang, Silvercorp P.Geo, MSc, President, No January 4,5,6,7,8,9,10,11,22 P.Geo. Metals Inc BSc Exploration 2012

AMC 712020 : 30 October 2012 1 SILVERCORP METALS INC Technical Report Songxian Property

H A Smith, A Riles and M Molavi visited the Songxian Property in February 2012. All aspects of the project were examined by the Qualified Persons, including drill core, exploration sites, underground workings, processing plant and surface infrastructure.

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

Much of the geological information in this report was 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.

All currency amounts are stated in Chinese Yuan Renminbi (RMB) with an approximate Canadian dollars equivalent in brackets ($). 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 NI 43-101 and accompanying policies and documents. NI 43-101 utilises 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 (CIM Standards).

A draft of the report was provided to Silvercorp for checking for factual accuracy. The report is effective at 30 June 2012.

AMC 712020 : 30 October 2012 2 SILVERCORP METALS INC Technical Report Songxian Property

3 RELIANCE ON OTHER EXPERTS

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

The following disclosure is made in respect of this Expert:

Audrey Chen, Partner, Jun He Law Offices, Beijing.

Report, opinion or statement relied upon: information on mineral tenure and status, title issues, royalty obligations, etc., in a letter to Silvercorp dated 28 March 2012.

Extent of reliance: full reliance following a review by the Qualified Person(s).

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

For Section 20 the environmental material was provided by Silvercorp. To the extent permitted under NI 43-101, the Qualified Persons disclaim responsibility for this section of the report.

AMC 712020 : 30 October 2012 3 SILVERCORP METALS INC Technical Report Songxian Property

4 PROPERTY DESCRIPTION AND LOCATION

4.1 Property Location

The Songxian Property comprises the XBG and XHP silver-gold-lead-zinc (Ag-Au-Pb-Zn) mines and associated exploration properties, totaling four project areas (Figure 4.1). In August 2011, Silvercorp acquired control of the XBG project in the Henan Province of China, and in November 2011, it acquired control of the XHP Ag-Au-Pb-Zn project, located 6 km northwest of the XBG project. The two mines are located about 120 km southeast of Silvercorp’s Ying Property and approximately a three hour drive from Luoyang City.

The Songxian Property is situated in the east extension of the Qinling Mountain Belt near the margin of the Northern China Craton in the same regional mineralization belt as the Ying Property. This is one of the largest silver-gold and base metal belts and largest silver producing regions in China.

Figure 4.1 Regional Geology and Project Locations

4.2 Exploration and Mining Licenses

Silvercorp acquired interests of 90% and 100% in the XBG and XHP projects, respectively, through its 77.5% owned subsidiary, Henan Found. The XBG project has a mining license covering 26.4 square kilometres (km2) expiring in November 2022 and the adjacent NTM

AMC 712020 : 30 October 2012 4 SILVERCORP METALS INC Technical Report Songxian Property

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 locations of these projects relative to each other are shown in Figure 4.2.

Figure 4.2 Project Locations and Geology in Property Area

AMC 712020 : 30 October 2012 5 SILVERCORP METALS INC Technical Report Songxian Property

A summary of the mining and exploration licenses is provided in Table 4.1 and detailed information is provided in the tables following.

Table 4.1 Summary of Mining and Exploration Licenses

License type License No. Expiration Date Km2 C4100002010024110056114 Mining February 2020 14.05 (XHP Project)

Mining C4100002010113210081248 (XBG Project) November 2020 26.35

T41120090102023502 Exploration January 1, 2014 4.45 (HGDG Exploration License)

Exploration and T41120090202024452 (1) February 19, 2012 2.54 approval letters (NTM Exploration License) Mining Permit total 40.40 Exploration Permit total 6.99 Total 47.39 Notes: (1) The Licensee received an approval letter for designating the mining area of Henan Province Song County Nantianmen Gold Mine (“Approval Letter”).The Approval Letter was issued to the Licensee by the Department of Land and Resources of Henan Province on August 24, 2011. The reserved term of the designated mining area is one year, till the end of August 2012.

The details and coordinates for XHP are shown in Tables 4.2 and 4.3.

Table 4.2 Details of XHP Mining License

Exploration Licensee Luoyang Mining Group Co. Ltd. License No. C4100002010024110056114 Address of Licensee Binhe Road, Gaoxin District, Luoyang City Name of the Mine Luoyang Mining Group Co. Ltd., Song County Type of Business: Limited Liability Company Term 10 Years (from February 2010 to February 2020) Minerals to Be Mined Gold Mode of Mining Underground Mining Production Scale 60,000 tpa Mining Area 14.0582 km2 Depth of Mining From 790 m to 340 m relative to sea level

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Table 4.3 Coordinates of XHP Mining License Gauss-Krüger Grid Geographic Coordinate (Xian 80 Zone 37, shown on mining (for reference) Points permit) Northing Easting Longitude Latitude 1 3762191.72 37583097.35 111°53′58″ 33°59′00″ 2 3762211.74 37585407.37 111°55′28″ 33°59′00″ 3 3760826.73 37585420.38 111°55′28″ 33°58′15″ 4 3760819.73 37584650.38 111°54′58″ 33°58′15″ 5 3759894.72 37584658.39 111°54′58″ 33°57′45″ 6 3759908.73 37586199.40 111°55′58″ 33°57′45″ 7 3760832.74 37586190.39 111°55′58″ 33°58′15″ 8 3760835.74 37586575.39 111°56′13″ 33°58′15″ 9 3762222.76 37586563.38 111°56′13″ 33°59′00″ 10 3762247.78 37589258.40 111°57′58″ 33°59′00″ 11 3759474.76 37589284.43 111°57′58″ 33°57′30″ 12 3759418.70 37583122.38 111°53′58″ 33°57′30″ The coordinates listed on the left are those officially adopted in the Chinese permit system for mining. The coordinates listed on the right are only for reference.

The details and coordinates for XBG are shown in Tables 4.4 and 4.5.

Table 4.4 Details of XBG Mining License

Exploration Licensee Song County Zhongxing Mining Co. Ltd. License No. C4100002010113210081248 Address of Licensee Baihe Street, Baihe Town, Song County Song County Zhonxing Mining Co. Ltd. South of Xibeigou Name of the Mine Lead-Zinc Mine Type of Business: Limited Liability Company Term 10 Years (November 2010 to November 2020) Minerals to Be Mined Lead, zinc, silver, gold and fluorite Mode of Mining Underground Mining Production Scale 30,000 tpa Mining Area 26.3566 km2 Depth of Mining From 1,055 m to 570 m relative to sea level

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Table 4.5 Coordinates of XBG Mining License Gauss-Krüger Grid Geographic Coordinate (Xian 80 Zone 37, shown on mining (for reference) Points permit) Northing Easting Longitude Latitude 1 3754882.55 37592410.70 111°59′58″ 33°55′00″ 2 3754897.76 37593952.11 112°00′58″ 33°55′00″ 3 3757670.99 37593924.59 112°00′58″ 33°56′30″ 4 3757702.12 37597006.41 112°02′58″ 33°56′30″ 5 3754928.79 37597034.84 112°02′58″ 33°55′00″ 6 3754985.55 37602429.68 112°06′28″ 33°55′00″ 7 3753136.73 37602449.70 112°06′28″ 33°54′00″ 8 3753033.73 37592428.72 111°59′58″ 33°54′00″ Excluding the area determined by the following four turning points 1 3755833.68 37595098.81 112°01′43″ 33°55′30″ 2 3755841.49 37595869.42 112°02′13″ 33°55′30″ 3 3756765.90 37595860.11 112°02′13″ 33°56′00″ 4 3756758.09 37595089.51 112°01′43″ 33°56′00″ The coordinates listed on the left are those officially adopted in the Chinese permit system for mining. The coordinates listed on the right are only for reference.

The details and coordinates for HGDG are shown in Tables 4.6 and 4.7.

Table 4.6 Details of HGDG Exploration License

Song County Gold Mining Co., Ltd. of Luoyang Mining Exploration Licensee Group Co. Ltd. License No. T41120090102023502 Address of Licensee Renling Village, Dazhang Town, Song County, Luoyang City Name of Exploration General Exploration of Henan Province Song County Project Hugudonggou Gold Mine Geographic Position Song County, Luoyang City, Henan Province Map Sheet No. 149E012016 Exploration Area 4.45 km2 Term From January 22, 2012 to January 21, 2014 Henan Provincial Non-ferrous Metals Geological and Mineral Exploration Unit Resources Bureau No. 4 Geological Team Address of Exploration 16 East Jinshui Road, Zhengdong District, Zhengzhou City, Unit Henan Province

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Table 4.7 Coordinates of HGDG Exploration License Gauss-Kruger Grid Geographic Coordinates (Xian80 Zone 37, for Points reference) Longitude Latitude Northing Easting HGD-1 111°53'00" 34°03'30" 3770491.15 37581535.53 HGD-2 111°54'15" 34°03'30" 3770507.95 37583459.00 HGD-3 111°54'15" 34°02'15" 3768197.04 37583479.42 HGD-4 111°53'00" 34°02'15" 3768180.23 37581555.48 The coordinates listed on the left are those officially adopted in the Chinese permit system for mining. The coordinates listed on the right are only for reference.

The details and coordinates for NTM are shown in Tables 4.8 and 4.9.

Table 4.8 Details of NTM Exploration License

Exploration Licensee Song County Zhongxing Mining Co. Ltd. License No. T41120090202024452 Address of Licensee Baihe Street, Baihe Town, Song County Name of Exploration General Exploration of Henan Province Song County Project Nantianmen Gold Mine Geographic Position Song County, Luoyang City, Henan Province Map Sheet No. 149E013016, 149E013017, 149E013017 Exploration Area 2.54 km2 Term From February 10, 2010 to February 9, 2012 Exploration Unit Henan Geological Exploration Institute of CHEM Address of Exploration 20 South Tongbai Road, Zhongyuan Distict, Zhengzhou Unit City, Henan Province

Table 4.9 Coordinates of NTM Exploration License

Geographic Coordinates Gauss-Krüger Grid (shown on exploration permit) (Xian 80 Zone 37，for reference) Points Longitude Latitude Northing Easting 1 111°59′12″ 33°56′30″ 3757643.9800 37591150.9600 2 112°00′00″ 33°56′30″ 3757655.9200 37592383.6900 3 112°00′00″ 33°55′45″ 3756269.2900 37592397.2200 4 111°58′30″ 33°55′45″ 3756247.0300 37590085.5000 5 111°58′30″ 33°56′10″ 3757017.3800 37590078.1700 6 111°59′12″ 33°56′10″ 3757027.7000 37591156.8900 The coordinates listed on the left are those officially adopted in the Chinese permit system for mining. The coordinates listed on the right are only for reference.

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The existing exploration and mining licenses cover all the active exploration and mining areas discussed in this Technical Report. The exploration licenses give the right to carry out all contemplated exploration activities with no additional permitting required. Exploration licenses are subject to charges for exploration rights usage fees, a fixed annual charge, and applicable taxes. Mining licenses are subject to charges for mining-right usage fees, a fixed annual charge, mineral resource compensation fee and applicable mineral resource taxes. Renewing of mining licenses and extending mining depth and boundaries are an ordinary business process as long as mineral resources exist and are defined, the required documentation is submitted and the government resources royalty is paid. The mining licenses give the right to carry out full mining and mineral processing operations in conjunction with safety and environmental certificates. The safety certificates for Silvercorp’s mining activities were issued by the Department of Safety, Production and Inspection of Henan Province. Environmental certificates were issued by the Department of Environmental Protection of Henan Province.

Surface rights for mining purposes are not included in the permits but Silvercorp has acquired surface rights for mining and milling activities by payment of a purchase fee based on the appraised value of the land. Subject to negotiation, some land-use compensation fees may also be due to the local farmers if their agricultural land is disturbed by exploratory work.

There are no known or recognized environmental problems that might preclude or inhibit a mining operation in this area. Some major land purchases may be required in the future for mine infrastructure purposes (processing plant, waste disposal, offices and accommodation).

4.3 Exploration and Mining Rights and Taxes

China has an established Mining Code which defines the mining rights guaranteed by the government of China.

China has a 17% Value Added Tax (VAT) on sales of concentrates and on articles such as materials and supplies. The 17% VAT paid on materials purchased for mining is returned to the company as an incentive to mine in China. There is no VAT on labor or services. According to China’s mining law, a 2% resources tax is payable by companies as a royalty to the government. Income tax rate is 25%. In addition the Company pays a VAT surtax which amounts to approximately 1.6% of sales.

Other taxes such as Business, City Construction, and school taxes are exempted for foreign invested companies.

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5 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY

The Property is located about 220 km southwest of Zhengzhou (pop. 7.0 million), the capital city of Henan Province, and 100 km southwest of Luoyang (pop. 1.4 million) the nearest major city (Figure 4.1). 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 (pop. approximately 65,000), which is situated about 60 km by paved roads to the northeast of the Property.

The Property is situated within a rugged, deeply dissected mountainous region. The Xiong’er Mountain is on the west, the Funiu Mountain Range on the south and Waifangshan Mountain on the east of the Property. Generally, southeast is higher and northwest is lower. Hill slopes are steep, commonly between 30º and 50º. Elevation ranges from 638 m to 736 m above sea level (asl) in the XBG area and from 492 m to 864 m asl in the XHP area.

The Property area has a continental monsoonal climate with four distinct seasons. Temperatures range from a recorded maximum of 43.6º C to a recorded minimum of minus 19.1º C, with an annual average of 13º C. The annual precipitation averages 725 mm, mostly occurring in the rainy season from July to September and supplemented by snow and frost occurring from November to March.

The area is sparsely vegetated, consisting mostly of bushes, shrubs, ferns and small trees. At higher elevations the vegetation is denser and the trees are larger. The local economy is based on agriculture (wheat, corn, medicinal herbs) and mining. Agriculture is confined to the bottoms of the larger valleys and to the many terraced hillsides.

Several rivers and streams run through the Property and provide sufficient water for local daily living and industry use. The streams in the XBG area flow into the Ruhe River in the north with maximum discharge of 2.885 m3/s within the project area. In the XHP area, there are two significant tributaries, the East Bailugou and West Bailugou creeks, which flow into the Yihe River in the northwest and have a general discharge of 4.779 m3/s and 1.877 m3/s respectively within the project area. The historic Yihe River flows to the north and feeds into the Luhun Reservoir of Songxian County.

There are major power grids adjacent to the property. A 35 kVa substation near the Property and 380 V local electrical grid within the project areas can provide sufficient power. A skilled labor force is available for all levels of mining and related activities in the nearby villages and towns. The provincial highways, S322 and S248 on the west, S247 on the east and national highway G311 on the south connect the local communities and major cities.

See Section 18 for a more detailed description of the Property infrastructure.

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6 HISTORY

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

6.1 History of 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. Major exploration and development activities are summarized below (Henan Found Mining, 2011).

From 1981 to 1982, the 5th Nonferrous Geological Exploration Team of Henan Province conducted a 1:50,000 stream sediment sampling program, and outlined potential Pb-Zn-Ag- Au anomalies in the area.

In 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. No Mineral Resources were estimated.

From April 2003 to June 2004, the previous owner, Zhongxing Mining Ltd. (Zhongxing), having acquired the project from a private owner, contracted the No.1 Nonferrous Geo- exploration Team of Henan to conduct an exploration program comprising 400 m3 of surface trenching, 185 m of adit development and limited sampling. Some high grade mineralized pockets were delineated along mineralized structures X8 and X9. No Mineral Resources were estimated.

From March 2007 to January 2008, Zhongxing commissioned the Henan Nonferrous Geology and Mineral Resources Company Limited (HNGMR) to conduct comprehensive research on the available exploration data and to further test the deeper portions of some known mineralized structures with exploration tunnelling. The HNGMR reported a combined lead and zinc resource (estimated according to Chinese standards, and non NI43-101 compliant), of 0.463 million tonnes averaging 3.1% Pb and 3.4% Zn, which is officially approved by the Henan Provincial Review Centre of Mineral Resources and Mineral Reserves.

AMC has not done sufficient work to classify the historical estimates reported above as current Mineral Resources or Mineral Reserves. Silvercorp is not treating the historical estimates as current Mineral Resources or Mineral Reserves as defined in Sections 1.2 and 1.3 of NI 43-101, and the historical estimates should not be relied upon.

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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.

6.2 History of XHP Project

In 1961, the 903 Aerial Magnetic Survey Team conducted a 1:50,000 magnetic survey and delineated a magnetic anomaly zone in the area.

During 1982 and 1985, the No.1 Geo-exploration Team of the Henan Provincial Geological Exploration Bureau carried out a 1:50,000 stream sediment geochemical sampling program and a 1:10,000 soil geochemical sampling program in the project area and its adjacent areas, and delineated a regional multi-element geochemical anomaly of 63.8 km2 with a number of gold showings, including the Dianfang gold deposit directly adjacent to the project area.

From March 1984 to March 1993, the No.1 Geo-exploration Team conducted a detailed exploration program in the Dianfang area which is now surrounded by Silvercorp’s XHP project area, and prepared an exploration report titled with “Report on Gold Exploration in the Dianfang Deposit of Songxian County, Henan Province”. This report includes detailed descriptions of property geology, mineralization and structural controls of the Dianfang gold deposit, which is considered comparable to gold mineralization defined in the XHP area. Gold mineralization at Dianfang is classified as explosive breccia-hosted. Currently, the Dianfang mine is still in operation.

In 2001, the No.5 Nonferrous Geo-exploration Team of Henan Province conducted a detailed exploration program in the XHP area and delineated a number of gold mineralized zones at the periphery of the Dianfang gold deposit. Some of these discoveries constitute the west section of the XHP project.

From 2002 to 2007, the No.5 Nonferrous Geo-exploration Team carried out an extensive exploration program in the project area and delineated 15 gold mineralized zones, four Pb- Zn 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).

AMC has not done sufficient work to classify the historical estimates reported above as current Mineral Resources or Mineral Reserves. Silvercorp is not treating the historical

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estimates as current Mineral Resources or Mineral Reserves as defined in Sections 1.2 and 1.3 of NI 43-101, and the historical estimates should not be relied upon.

Table 6.1 Summarized Historic Exploration Work - 2002 to 2007 Exploration Program Duration/Year Scale Unit Quantity Sketch Geological Mapping 2002 – 2005 1:10,000 km2 14.1 Sketch Geological Survey 2002 – 2005 1:2,000 km2 1.1 Detailed Mapping 2002 – 2005 1:1,000 km 0.6

Thin Sections 2002 – 2005 pieces 65

Logging of old adits 2002 – 2005 m 494 Trench /shallow pit 2002 – 2005 m 3,335 Adit 2002 – 2005 m 738 Exploring shaft 2002 – 2005 m 66 Geophysical survey profiling 2002 – 2005 1:10,000 km 9.5

Lithogeochemical Sampling 2002 – 2005 km2 10

Lithogeochemical Samples Collected 2002 – 2005 piece 549

Channel Samples 2002 – 2005 piece 689 Diamond Drilling 2006 – 2007 m 1,975 Exploration tunnelling 2006 – 2007 m 1,967

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7 GEOLOGICAL SETTING AND MINERALIZATION

7.1 Geological Setting

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 (Figure 4.1).

The northern continental plate, the North China Plate, covers all of Henan Province, while the southern plate, the Yangtze Plate, covers the southern half of Hubei Province (Henan’s southern neighbor). Rocks of the Archean basement along the orogenic belt are severely folded and faulted and the Proterozoic cap rocks along the belt are characterized by well- developed faults of different orders. This offered optimal structural conditions for the emplacement of mineralization and resulted in one of the most important precious and base metal mineralization belts in China. A number of major operating gold, silver-lead-zinc, and molybdenum mines, including those in Silvercorp’s Ying Property, occur along this belt.

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 basement of the belt is comprised of highly metamorphosed Archean-age rocks of the North China plate, dominantly felsic to mafic gneisses with minor amphibolites, intrusive gabbros and diabases. The metamorphosed Qinling belt sequence and the underlying Archean basement rocks are 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 consist of numerous thrusts having a component of oblique movement with sets of conjugate shear structures trending either northwest or northeast. These conjugate shear zones, which display features of brittle fracturing such as fault gouge, brecciation and well- defined slickensides, are associated with all the important mineralization recognized along the orogenic belt. The W-NWW trending Machaoying deep fault zone is the major mineralization-controlling structure recognized in the west Henan province. The deep fault zone dips north at an angle of 50º to 80º and consists of four parallel overthrust faults. The Machaoying deep fault zone was originally formed from the northward subduction of the Paleao-Qingling oceanic plate to the North China Plate in early Proterozoic and has been quite active since then. Regional dynamic metamorphism, magmatism and mineralization have been noticeably influenced by the Machaoying deep fault zone. Known gold, silver, lead-zinc, and molybdenum deposits in the area occurred either in the deep fault zone or in its hanging wall rocks (Liu, et al. 1998).

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The dominant outcrop in the Property and its adjacent area includes Middle Proterozoic intermediate and acidic volcanics which overlies the Archean basement in the region. Later intrusions of late Proterozoic diorite, Hercynian syenite and Yanshanian (Middle Mesozoic) granite are seen. The Yanshanian granite formed a large-sized batholith which partially occurs at the southern part of the Property. Secondary- and third-order faults were well developed in bedrock within the Machaying deep fault zone along the northeast margin of the granite batholith and formed major structural controls of known mineralization in the Property (Figure 7.1).

Figure 7.1 Project Locations and Geology in Property Area

7.2 Mineralization

The XBG & 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 distribute along the northeast margin of a large granitic

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batholith with an elongated extension of more than 40 km. The mineralization styles for each project are discussed in the relevant sections below.

7.2.1 XHP Area

7.2.1.1 Vein Types

About 20 mineralized veins have been identified by mapping, trenching, underground channel sampling and surface diamond drilling (Figure 7.2). Known mineralized structures in the XHP area have been categorized into four types:

1. Explosive breccia-hosted, gold-dominant, polymetallic veins. These auriferous veins include K1, K2, K3, K3-1, K9, K11 and K12, and are closely associated with concentric structures developed within the explosive breccia at the XHP West sub- area. 2. Gold-silver-dominant polymetallic veins. These veins include K4, K5, K6, K7, K8, K10, K16 and K17 in the XHP East area, and mainly occur along, or at the hanging wall of, the major Shaowayao Fault which runs across the Property. 3. Polymetallic sulphide veins. These veins include K13, K14, K15, K17, K18 and K21 in the XHP East area, and occur between two major faults. 4. Fluorite Vein. One fluorite vein, K19, is located in the XHP West area.

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Figure 7.2 Property Geology of XHP Area

Different mineralization types show various mineral assemblages as follows:

 Gold mineralization: three mineral assemblages are recognized (1) quartz-pyrite; (2) quartz-polymetallic sulphides; and (3) quartz-limonite.

 Lead-zinc mineralization: the recognized mineral assemblages include (1) quartz- galena; (2) quartz-galena-polymetallic sulphides; and (3) sericite-barren sulphides.

 Fluorite mineralization: quartz-fluorite. Vertical zonation of mineralization types has been observed in individual mineralized structures. Gold-dominant mineralization usually occurs at the upper portion of the mineralized structure, and silver and lead become dominant in the deeper portion of the structure.

Mineralization is hosted in a set of quartz-sericite-chlorite-carbonate veins cross-cutting Proterozoic intermediate and acidic volcanic flows. The system consists of a series of quartz-carbonate veins with lead-zinc-silver-gold mineralization dipping NNE, NEE, and NW at a steep angle from 51º to 89º. Major alteration types associated with the mineralized structures include chloritization, sericitization, silification, carbonitization, and pyritization.

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7.2.1.2 Characteristics of Major Vein Structures

Of the 20 mineralized veins on the XHP property, ten veins have been partially tested with underground drilling and tunnelling. These veins include K2, K11, K5, K9, K3-1 and K19 in the West area and K13, K14, K18 and K15 in the East area. Characteristics of individual veins are described as follows (Songxian Gold Mining Company, 2011).

K13 K13 is a lead-zinc-silver vein and is the most important mineralized structure so far discovered in the XHP area. The vein is the second-order fracture zone of the major Shaowayao Fault, one of the parallel faults of the Machaoying deep fault zone. The surface exposed length of K13 is 550 m and the defined mineralized section is 310 m. The vein dips to the NNW at a dip angle of 83º to 87º. Vein width ranges from 0.5 m to 6.5 m with an average of 1.1 m (Figure 7.3). The average sampled grade of the mineralized section of K13 is 4.0% Pb, 4.2% Zn and 49 g/t Ag.

Figure 7.3 Mineralized Structure in Tunnels at 500 m and 460 m Levels

Over 1.2m wide Ag-Pb-Zn K13 Vein at 500mL in PD2 Ag-Pb-Zn Mineralization of K13 at 460mL in PD2

K14 The surface outcrop of K14 is located about 600 m west of K13 and is considered the westward extension of K13. The vein dips to the NW degrees at 72º to 85º. The vein has been traced for 110 m along strike with an average width of 1.0 m. The average sampled grade is 3.1% Pb, 1.8% Zn and 103 g/t Ag. Exploration tunnelling revealed that grades of the mineralized zone increase with depth. The vein has good exploration potential.

K14-1 K14-1 is a second-order vein of K14 and is parallel to K14. It has been defined by tunnelling at Level 525 and Level 505. The vein dips to the SSE at 75º to 85º. The average grade from underground sampling is 4.2% Pb, 3.5% Zn and 129 g/t Ag. Galena and pyrite are the

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dominant sulphides. The mineralization in K14-1 is associated with obvious alteration, and silicification is well developed.

K18 Vein K18 is located about 300 m south of K13 and is approximately parallel to K13. It dips to the SSE 80º to 86º. The investigated length of the structural zone is 700 m and the combined length of mineralization defined is 230 m. The width of the vein structure varies from 0.1 m to 1.0 m with an average of 0.5 m. Average grades of the mineralized sections in are 7.0% Pb, 1.9% Zn and 155 g/t Ag.

K21 K21 is a gold-silver vein located at the southeast corner of the XHP East area. The surface exposed length of the structural zone is about 200 m, and the width varies from 0.9 m to 2.5 m. The vein dips to the NW at 80º to 85º. Mineralization defined within the structure is about 140 m in length and 1.2 m in average width and occurs as lenses of varying dimensions. Average grades from limited sampling are 3.3 g/t Au and 86 g/t Ag. Gold grades are normally high when silicification and limonitization are strong.

K2 K2 is a gold-silver-lead-bearing structure located in the XHP West area adjacent to the producing Dianfang Gold Mine. It is a major auriferous mineralized structure developed in the explosive breccia (Figure 7.4), and can be traced for 500 m on surface. Structure width ranges from 0.5 m to 1.2 m with an average of 0.8 m. It dips to the west and southwest at 47º to 75º and has been partially tested between the 420 m and 615 m elevations. The mineralized structure is about 185 m long, with gold-silver-lead mainly occurring as veins and lenses.

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Figure 7.4 Mineralized Zone within the K2 structure

K11

K11 is a gold-lead-silver zone located at the footwall of K2, about 60-80 m west of vein K2. Both K11 and K2 are hosted by explosive breccia. The vein dips to the west at 82º to 87º. The mineralized structure can be traced for 270 m and has an average width of 0.5 m on surface. Mineralization partially defined in the structure covers 80 m with an average width of 0.8 m between the 430 m and the 630 m levels. Lead content increases with depth in both K2 and K11 (Figure 7.5).

Figure 7.5 Massive Sulphide Veins in Tunnels. K2 (left) and K11 (right)

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K9 K9 is an auriferous structure located to the southwest of the Dianfang Gold Mine, and which is closely controlled by the major Shaowayao fault and volcanic breccia. The structure can be traced for 475 m on surface and has an average width of 2.9 m. Gold mineralization locally occurs within the structure.

7.2.2 XBG Area

7.2.2.1 Vein Types

Mineralization in the XBG project area is closely associated with fault zones. The fault zones are widely developed in Proterozoic intermediate and acidic volcanics (Figure 7.6). The mineralization zones mainly occur as silicified veins in the fault zones. Some of the major fault zones are highly brecciated. On the basis of their occurrences, the mineralized zones can be categorized into the following three major groups:

1. NNE-trending mineralized zones: these zones include X1, X2, X3 and X4 and the wide NNE-trending brecciated faults. 2. NEE-trending mineralized zones: the NEE-trending zones include X5, X6, X7, X8, X9, X10, X11, X12, X13, X14 and X16 and are the dominant mineralized structures in the area. 3. NW-trending mineralized zones: the NW-trending zones are fluorite veins and include X31 and X32 in the XBG permit area and X33 located in the enclosed Yangsigou (YS) permit area.

The NNE- and NEE-trending mineralized veins are Pb-Zn-Ag-Au zones. The dominant metallic minerals are galena and sphalerite with minor amount of chalcopyrite, chalcocite, azurite, magnetite, pyrrhotite, molybdenite, and argentite. Gangue minerals in the mineralized zones consist of quartz, sericite, chlorite and calcite. Major sulphides such as galena, sphalerite and pyrite mainly occur as disseminated or densely disseminated mineralization in the mineralized structures. The polymetallic mineralized zones can be further categorized into quartz-galena-lead-zinc Pb-Zn zones, quartz-galena-multi-sulphide Pb-Zn zones, and sericite-sulphide-poor Pb-Zn-Ag zones.

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Figure 7.6 Property Geology of the XBG Area

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7.2.2.2 Characteristics of Individual Mineralized Zone

Among the more than 20 mineralized zones in the XBG area, eight zones, X1, X5, X6, X8, X9, X10, X11 and X12, are considered to have good potential for further exploration.

Zone X1

Zone X is located in the central part of the area. The NNE-trending X1 mineralized zone is about 1,400 metres in length and between 0.3 to 9 metres in width and generally dips east at an angle of 70 to 80 degrees. The zone occurs in one of the major brecciated structures with a number of abandoned artisan adits and tunnels, mining for gold, near surface (Figure 7.7). Selective sampling from these tunnels by Silvercorp geologists in July of 2011 returned 4.54 to 5.23% of combined Pb and Zn and 5 to 14 g/t Ag.

Figure 7.7 Zone X1 Gold Mineralization in Artisan Tunnel

An operating adit was developed for mining the Pb-Zn zone by the previous operator at the south end of the zone (Figures 7.8 and 7.9). The north section of the zone is located within the fluorite mining permit owned by a local private company. The owner of fluorite mining permit has developed an adit and a small shaft to mine an oxidized, red-colored, gold zone near the surface (Figures 7.10 and 7.11).

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Figure 7.8 Portal of Adit at the Southern End of Zone X1

Figure 7.9 Zone X1 Galena, Sphalerite, Magnetite Mineralization

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Figure 7.10 Adit Portal within the Fluorite Mining Permit

Figure 7.11 Gold Ore mined from Zone X1 within Fluorite Mining Permit

Zone X5

Zone X5 is the NEE-trending mineralized quartz zone located in the northwest part of the XBG area. It occurs in a major NE-trending structurally brecciated zone. The zone dips 81 degrees with a dip direction of 332 degrees. It can be traced for 1,040 metres on surface. An abandoned artisan tunnel of about 60 metres long has been observed at the west section of the zone. Significant silicification, limonitization and iron-manganese oxides have

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been observed on surface. Selective check sampling from surface outcrops returned 0.16% Pb, 0.14% Zn, 15.7 g/t Ag and 1.07 g/t Au.

Zone X6

Zone X6 is the NEE-trending zone located parallel to the south of zone X5 and associated with a major NE-trending fractured structure. The zone can be trace for about 1,200 metres on surface. Abandoned tunnels, shafts and adits distribute along the zone. Strong silicification and limonitization can be seen in surface outcrops (Figure 7.12). The maximum width of the alteration zone is more than 20 metres on surface in the western section of the zone.

Figure 7.12 Silicified Outcrop of Zone X6

Zone X8

Zone X8 is the NEE-trending zone located at the southeast of the XBG area. At surface it has an exposed length of 320 metres and a width of 0.2 to 1.5 metres. The zone dips at 75 degrees with a 325 degree dip direction. A 155 metre long adit was developed by previous artisan miners and two mined-out areas have been observed within the adit.

Zone X9

Zone X9 (Figure 7.13) is the NEE-trending zone located parallel to the south of zone X8. It has an exposed length of more than 750 metres. A small shaft was built by previous operators and mining activities was conducted at the 825 m, 808 m and 777 m levels.

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Figure 7.13 Pb-Zn-Cu Mineralization Observed on 777 m level

Zone X10

Zone X10 is the NEE-trending zone located to the south of X9. The zone dips 85 degrees to the northeast with a dip direction of 345 degrees. The previous operator built a small shaft at the zone and mining activities were conducted at the 835 m, 807 m and 798 m levels.

Zone X11

Zone X11 (Figure 7.14) is the NEE-trending zone is located near X10. It has an exposed length of 380 metres on surface. The zone dips at an angle of 84 degrees with a dip direction of 170 degrees. Mining activities were previously carried out at an upper portion of the zone. Check sampling from the mineralized pillars in the mined out area returned 34.3% Pb, 6.44% Zn, 205 g/t Ag and 0.98 g/t Au.

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Figure 7.14 Alteration Observed at Zone X11

Zone X12

Zone X12 is the NEE-trending zone located near the south end of the NNE-trending X1 zone. A drift tunnel was developed by previous operators and several small mined out areas have been observed along the tunnel. Pyrrhotite and pyrite dominated zones occur as fracture-filling veins and contain more than 5 g/t Au (Figure 7.15).

Figure 7.15 Pyrrhotite and Pyrite Dominated Veins in Zone X12

Generally speaking, the mineralized zones in the XBG area are poorly defined as there was no systematic underground exploration conducted until the end of 2011.

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7.2.3 Mineralization in the Exploration Permit Areas

No detailed exploration data is available from the two exploration permit areas, NTM and HGDG. Artisan mining adits and tunnels for gold have been observed in all these areas.

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8 DEPOSIT TYPES

The deep regional fault zone has played a crucial role in the magmatic, metamorphic structural, and metallogenic activities in the region. The deep fault zone is considered a regional conduit structure of the widespread polymetallic mineralization in the area. The persistent structural and magmatic activities associated with the deep fault zone have resulted in the multiple migration, enrichment and deposition of ore-forming materials in the variously-oriented secondary faults and fractures. These faults and fractures are developed within the deep fault zone itself or in its hanging wall.

The current structural controls of known mineralization on the Property and its adjacent areas were mainly formed during the intercontinental compressive subduction event in the middle Mesozoic (Yanshannian). Known mineralization on the Property shows typical fracture filling characteristics with a combination of ore-forming elements Pb+Zn+Cu+Au+Ag. Vertical zonation of the ore-forming elements has been observed. Gold is dominant in the upper portion and lead and silver is dominant in the lower portion.

The known precious and base mineralization on the Property is considered epigenetic vein types with mesothermal characteristics which may be genetically related to concealed subvolcanic rocks or intrusive rocks. Hypothermal mineralization of copper, gold and molybdenum may be expected at depth proximal to the source subvolcanics or intrusions.

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9 EXPLORATION

Silvercorp initiated exploration-development activities in the XHP area and the XBG area in August 2011 right after the successful 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. Other than drilling, the exploration programs in the Property comprised five kilometres of surface prospecting and sampling on the major mineralized structures, 2,772 metres of systematic underground mapping and sampling of the available and accessible mining tunnels, and 4,552 metres 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).

Samples were collected from the previous accessible tunnels along major mineralized structures. These chip samples were systematically collected across the mineralized structures at an interval from 4 m to 6 m along strike with the advance of the tunnelling program. Chip sampling channels were 10 cm wide and 5 cm deep with variable lengths depending on the width of mineralization and alteration zones.

A total of 4,244 exploration samples were collected during the 2011 exploration programs on the Property consisting of 4,159 chip samples, and 85 grab samples.

9.1 XHP Project Area

In the XHP project area, gold and silver polymetallic mineralization is located in two separate areas, West and East. The 2011 exploration activities were mainly focused on the known mineralized veins K2, K11, K5, K9, K3-1 and K19 in the West and K13, K14, K18 and K15 in the East. Table 9.1 summarizes the 2011 exploration tunnelling in the East. A total of 3,899 m of exploration tunnelling was completed between levels 420 and 757 metres.

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Table 9.1 Summary of 2011 Exploration Tunnelling at XHP

Target Level (m) Completed Target Level (m) Completed Structure Length (m) Structure Length (m) K13 420 193.30 K16 510 305 460 668.03 K18 605 79 500 44.30 K21 577 161 544 78.80 K22 757 50 645 93.95 K23 504 162 PD3 96.30 K2, K11 438 669 K14 475 268.70 498 149 520 101.60 K12 518 41 555 17.30 K2-1 585 96 K15 530 320.78 K3-1 670 15 560 42.80 Hugudong 420 60 Total 3,899

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.

9.1.1 Exploration Results from the West Area

9.1.1.1 K2 Exploration Results

K2 is a north- and northeast-trending vein structure that can be traced for more than 500 metres at surface between lines 00 and 28. Known mineralization mainly occurs between elevations of 420 and 615 metres along a 200 metre strike length from exploration line 00 to exploration line 20. The portion of this structure above level 518 has been mined out. Significant intersections encountered in tunnels at different levels are summarized in Table 9.2.

Table 9.2 Selected Significant Intersections of Vein K2 from the 2011 Tunnelling

Zones Elevation Length Average Weighted Average Grade Exposed (m) (m) Width (m) Au g/t Ag g/t Pb % Zn % 1 600 240 1.02 2.58 1 550 176 1.70 1.84 1 518 140 0.55 1.10 1 438 52 0.77 2.65 24 1.46 2.49

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9.1.1.2 K11 Exploration Results

K11 is a mineralization zone 80 metres in length and 0.78 metres in width. It has been delineated between exploration lines 00 and 23. The portion of the zone above level 518 metres has been mined out. Major intersections of the mineralization zone encountered on different levels are summarized in Table 9.3.

Table 9.3 Selected Intersections of Vein K11 from the 2011 Tunnelling

Zones Elevation Length Average Weighted Average Grade Exposed (m) (m) Width (m) Au g/t Ag g/t Pb % Zn % 1 565 30 0.84 1.91 1 518 160 0.42 1.84 64 2.81 BD 1 478 150 0.51 0.74 57 4.70 BD 1 438 39 1.29 0.27 77 2.10 BD BD=below detection which for zinc is 0.5%

9.1.2 Exploration Results from the East Area

9.1.1.3 K13 Exploration Results

K13 is a SWW trending, lead-zinc-silver polymetallic mineralization zone 300 metres in length and 0.50 to 6.50 metres in width. It has been delineated between levels 420 and 577 metres with exploration tunnelling and drilling by Silvercorp as shown in Figure 9.1.

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Figure 9.1 Cross Section of Exploration Drilling and Tunnelling on Zone K13

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The portion of the zone above level 544 metres has been mostly mined out. Mineralization zones encountered on different levels are listed in Table 9.4.

Table 9.4 Selected Intersections of Vein K13 from the 2011 Tunnelling

Zones Elevation Length Average Weighted Average Grade Exposed (m) (m) Width (m) Ag g/t Pb % Zn % 1 577 300 0.67 BD 3.10 3.62 1 544 210 1.37 BD 2.06 3.94 1 500 315 1.21 BD 3.23 3.56 1 460 200 1.13 44 5.34 6.25 BD=below detection which for silver is 40 g/t.

9.1.1.4 K14 Exploration Results

Vein K14 is considered the west extension of vein K13. It is a mineralized zone 110 metres in length and 0.92 metres in width. The zone has been defined between levels of 555 and 505 metres with the 2011 exploration tunnelling. Mineralized zones exposed at different levels are summarized in Table 9.5.

Table 9.5 Intersections of Vein K14 from the 2011 Tunnelling

Zones Elevation Length Average Weighted Average Grade Exposed (m) (m) Width (m) Au g/t Ag g/t Pb % Zn % 1 555 98 1.00 42 2.17 0.68 1 520 120 0.88 165 4.23 3.00 1 475 110 0.80 40 3.78 1.67

9.1.1.5 K15 Exploration Results

The K15 vein structure is marked with a number of old workings on the surface and can be traced for 500 metres. The 2011 tunnelling program on level 530 metres exposed a mineralization zone of 31 metres in length and 0.30 metres in width with average grades of 0.42 g/t Au, 488 g/t Ag, 4.44% Pb and 3.09% Zn.

9.2 XBG Project Area

The 2011 exploration program in the XBG project area began with surveying and mapping the previous tunnels through six portals. A total of 2772 metres of tunnels was surveyed, mapped and sampled, which is summarized in Table 9.6. Exploration tunnelling of 653 metres was conducted in locations where mineralization was observed during the phase- one surveying and mapping program. Tables 9.6 and 9.7 summarize this work. A surface reconnaissance survey was completed to investigate the distribution of 17 known lead-zinc zones and 3 known fluorite veins. A total of 748 chip samples were collected during the 2011 exploration program.

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Table 9.6 Summary of Underground Mapping and Sampling of Previous Tunnels

Serial # Portal Name Level Length (m) 1 Dachunshu DPD837SJ 762 2 Siniuxia Lower SPD830 1001 3 Siniuxia Middle SPD907 368 4 Siniuxia Upper SPD967 172 5 Zhuyuandong Upper ZPD835 219 6 Zhuyuandong Lower ZPD807 251 7 Total 2772

Table 9.7 Summary of 2011 Exploration Tunnelling at XBG

Tunnel Name Location Target Structure Completed Length (m) X1-967-NYM Siniuxia SPD967 X1 77 X1-967-NYM-CM Siniuxia SPD967 X1 47 X9-825-WYM Zhuyuanxi ZPD825 X9 110 X10-835-EYM Zhuyuandong ZPD835 X10 50 X12-836-EYM Siniuxia SPD830 X12 147 X17-834-EYM Siniuxia SPD830 X17 119 X31-779-WYM Dachunshu DPD837SJ X31 (Fluorite) 99 Total 653

Results of the 2011 sampling program in the XBG project area are described below.

9.2.1 NNE-Trending Mineralized Structures

The NNE-trending structures include X1, X2 X3 and X4 distributed from the south to the north and are considered major ore-control structures in the area.

9.2.1.1 Zone X1 Exploration Results

Zone X1 is a mineralized vein structure that extends for about 1,400 metres along strike on surface between exploration lines 146 and 107. Silvercorp geologists conducted surface sampling and underground sampling from available workings along the vein structure to evaluate the exploration potential of the zone. Grab sampling from outcrops at the south end of the zone between lines 132 and 140 returned noticeable lead and zinc mineralization as shown in Table 9.8. Obvious lead, zinc, silver and gold mineralization is observed along underground tunnels at the north section of the zone from lines 106 to 103. This area is located within the fluorite mining permit. The result of underground sampling, between lines 106 and 103, is shown in Table 9.9.

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Table 9.8 Results of Surface Sampling from Zone X1 between Lines 132 and 140

Survey Sample Assay Results Sample # Point Length (m) Pb % Zn % Ag g/t Au g/t H320058 D10 Grab Trace 0.87 10 0.25 H320059 D10 Grab Trace 0.09 <5 1.19 H320057 D11 Grab 0.36 0.18 27 0.13 H350065 D19 1.00 1.22 4.01 <5 0.06 H350066 D19 15 (chip) Trace 1.05 <5 0.06 H350067 D20 0.60 1.24 3.30 14 0.06 H350068 D22 0.50 0.13 0.67 <5 Trace

Table 9.9 Results of Underground Sampling between Lines 106 and 103

Assay Result Sample # Length (m) Remarks Pb % Zn % Ag g/t Au g/t I899019 1.50 4.24 0.00 327 2.57 Drift North 65 m from fluorite permit shaft I899020 1.50 12.94 0.37 144 0.13 Drift South 60 m from the fluorite permit shaft. I899021 1.50 20.22 1.40 244 0.30 I899022 2.20 1.46 0.98 33 0.86 I899023 2.80 2.75 0.00 27 5.16 I899024 2.00 1.03 0.79 19 1.41 I899025 0.30 12.78 0.41 856 63.18

9.2.1.2 Zone X2, X3 and X4 Exploration Results

Zone X2 is located about 130 metres west of the north section of Zone X1. In outcrop silicification and limonitization are observed. Sampling from an outcrop revealed a zone 3.80 metres in width with 1.05% Pb, 0.70% Zn, 87 g/t Ag and 0.44 g/t Au.

Both Zones X3 and X4 are located in the northern portion of the project area. The two structures are wide brecciated zones with weak mineralization observed locally. One chip sample from X4 returned 1.93% Pb, 0.74% Zn and 30 g/t Ag.

9.1.3 NEE-Trending Mineralized Structures

The NEE-trending vein group includes zones X5, X6, X7, X8, X9 and X10. Surface sampling was conducted to investigate the distribution of the NEE-trending zones X5, X6 and X7. Most of the chip and grab samples from outcrops of these zones contain anomalous values of lead, zinc, silver and gold.

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Zone X5 is a fractured structure zone 1040 metres in length located in the northwest portion of the project area. A silicified quartz vein of 3 metres width was defined with surface prospecting and sampling. A chip sample of 0.80 metres in length from a strong alteration zone returned grades of 0.16% Pb, 0.14% Zn, 16 g/t Ag and 1.07 g/t Au.

Zone X6 is located parallel to the south of Zone X5 and can be traced for about 1,200 metres in old workings and outcrops. One grab sample contained 3.94% Pb, 0.69% Zn, 26 g/t Ag and 1.37 g/t Au.

The exposed length of Zone X8 is about 320 metres and the width varies from 0.2 to 1 metre. A chip sample 0.40 metres in width collected from the surface returned grades of 0.93% Pb, 1.08% Zn, 43 g/t Ag and 7.84 g/t Au. Two channel samples from remaining pillars in the old workings returned grades of 3.12% Pb, 2.66% Zn, and 6 g/t Ag over 0.40 metres and 1.97% Pb, 1.36% Zn, and 36 g/t Ag over 0.40 metres. Two mineralization zones, 20 and 12 metres in length and 0.52 metres in width, were delineated with underground mapping and sampling in old workings. The average grade of the mineralized zones is 2.48% Pb, 2.22% Zn, and 14 g/t Ag.

Zone X9 is located parallel to the south of Zone X8 and exposed at surface for about 750 metres. Previous small scale mining was conducted in three stopes on levels 825, 808 and 777 metres. Two mineralization zones of 18 and 32 metres in length and 0.74 metres in width have been delineated by underground logging and sampling of the previous tunnels. Average grades of the two zones are 1.21% Pb, 2.17% Zn, 16.17 g/t Ag and 2.54 g/t Au.

Zone X10 occurs as a short zone located to the south of Zone X9. Previous mining was conducted on levels 835, 807 and 797 metres. Underground logging and sampling on level 835 have returned grades from 17.89% to 29.57% Pb, 1.06% to 18.13% Zn, 42 to 269 g/t Ag, and 1.09 to 9.53 g/t Au over a strike length of 50 metres along the two mined out stopes. Two samples from a new zone of 20 metres in length on level 797 metres contain 13.84% and 6.11% Pb, 0.89% and 0.42% Zn, and 151 and 190 g/t Ag, respectively.

Zone X11 is about 17 metres south of Zone X11. Previous mining was conducted on levels 807 and 798 metres. Underground logging and sampling was carried out along a 150 m tunnel on level 807 metres in 2011, and one sample from pillar remnant of 1.30 metres in width returns grades of 34.30% Pb, 6.44% Zn, 205 g/t Ag and 0.98 g/t Au.

Zone X12 is located at the south end of Zone X1. Underground sampling was conducted along a 290 m tunnel on level 843 metres. A mineralized zone of 60 metres in length and 0.48 metres in width has been delineated with an average grade of 1.2% Pb, 2.69% Zn, 187 g/t Ag and 1.37 g/t Au.

9.1.4 NW-Trending Structures

NW-trending structures mainly occur in the southern part of the project area and are mostly fluorite-bearing zones.

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10 DRILLING

A diamond drilling program was conducted in the XHP and XBG areas of the Property in 2011, by Silvercorp. 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. A down hole survey was conducted every 50 metres with a gyro inclinometer by the drillers. NQ- sized drill cores (48 mm in diameter) were recovered from both underground and surface holes. Drill core recoveries range from 95% to 100%.

A total metreage of 7,398 metres of core drilling was completed in the 2011 drilling programs. Table 10.1 summarizes the 2011 drill program.

Table 10.1 Summary of the 2011 Drilling Program on the Property

Project Area Exploration Drill Holes Completed Total Metres Completed Surface Drilling 9 3480 XHP Underground Drilling 6 1142 Sub-total 15 4,622 Surface Drilling 2 2093 XBG Underground Drilling 2 682 Sub-total 4 2,776 Total 19 7,398

10.1 XHP Drilling

The 2011 drilling program in the XHP project area consisted of 3,480.22 metres in 9 surface holes and 1,142.13 metres in 6 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. A summary of the completed drillholes is shown in Table 10.2.

Table 10.2 Completed Drill Holes in the 2011 Drill Program at XHP

Target Dip Type of Hole ID Collar Azimuth Metreage Structure Angle Drilling North East

ZK13082 37588897 3760572.2 163 -75 Surface 340.9 ZK13083 37588886 3760604.1 163 -75 Surface 421.8 K13 ZK13153 37588671 3760490.2 163 -75 Surface 306.4 ZK13154 37588665 3760509.2 163 -75 Surface 416.0 ZK13073 37588754 3760491.6 163 -80 Surface 362.9

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Target Dip Type of Hole ID Collar Azimuth Metreage Structure Angle Drilling ZK13074 37588742 3760530.5 163 -75 Surface 399.1 ZK13003 37588821 3760543.1 163 -79 Surface 440.1 ZK13004 37588811 3760578.8 163 -79 Surface 441.7 ZK13162 37588974 3760586.5 163 -74 Surface 351.3 ZK131001 37587689 3760207 156 -55 Underground 100.16 K14 ZK131002 37587689 3760207 156 -70 Underground 100.7 K131003 37587689 3760207 156 -40 Underground 67.0 K6 ZK601 37588439 3761154.9 270 -90 Surface 150.0 F40 ZK01A 37584080 3761890 289 -90 Surface 533.5 K5 ZK501 37587801 3760778 340 -75 Surface 190.9

10.1.1 Zone K13 Drilling

K13 is a significant zone of mineralization, 300 metres in length. It has been defined with five tunnels developed between levels 577 and 420 metres. Nine surface holes were designed to trace down-dip extension of the mineralized zone in 2011. Six of the nine completed holes 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 to depth. Details of intersections are summarized in Table 10.3.

Table 10.3 Significant Results from 2011 Drilling Program on Zone K13

From Interval Elevation Average Grade Hole ID To (m) (m) (m) (m) Pb % Zn % Ag g/t ZK13004 424.90 427.20 2.30 163 3.57 4.15 40 ZK13073 283.30 286.90 3.60 334 2.87 3.74 31 ZK13074 387.99 391.92 3.93 200 1.48 1.06 20 ZK13082 323.50 325.50 2.00 260 7.80 9.02 83 ZK13083 407.60 419.70 12.10 180 2.54 4.31 83 ZK13162 327.60 327.90 0.30 260 26.53 9.53 105

10.1.2 Zone K14 Drilling

Zone K14 is a mineralized zone 110 metres in strike length and 0.92 metres in width. It was delineated with tunnels on four levels between the 560 m and 470 m elevations. Three underground holes were drilled in 2011 and one hole intersected the mineralization zone at the 460 m elevation. The mineralized interval is 1.50 m in length with grades of 3.83% Pb, 0.26% Zn, and 56 g/t Ag.

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10.1.3 Zone K6, K5, F40 Drilling

Three test holes were drilled on Zones K6, K5 and F40, respectively. No mineralization was intersected in these holes.

10.2 XBG Drilling

An exploration drilling program was conducted in late 2011 and consisted of 1406.67 metres in three surface holes and 682.52 metres in two underground holes. Details of the completed holes are summarized in Table 10.4.

Table 10.4 Completed Exploration Holes in the 2011Drilling Program at XBG

Target Collar Type of Hole ID Azimuth Dip Angle Metreage Structure Drilling North East X10/X11 ZK5501 3754523.84 596745.624 345 -52 Surface 541.9 X8/X9 ZK3901 3754939.60 596321.954 170 -53 Surface 309.6 X6/X16 ZK30401 3756204.80 594951.603 155 -48 Surface 555.1

X8/X9 ZK5521 3754698.81 596688.41 345 -33 Underground 319.1

X8/X9 ZK5121 3754698.47 596687.57 325 -36 Underground 363.4

Total 2,089.2

ZK5501: a 1.38 m interval was intercepted with grade of 5.62 g/t Au at the 480 m elevation.

ZK3901: a 0.31 m interval was intersected with grade of 1.08% Pb, 1.45% Zn and 0.19 g/t Au at the 617.50 m elevation.

ZK5521: a 1.5 1m interval was intercepted with grade of 0.37% Pb at the 740 m elevation.

ZK5121: a 3.52 m interval was intercepted with grade of 2.18% Pb and 23 g/t Au at the 683 m elevation.

The above intervals are reported as down-hole lengths and are not corrected to true widths for the mineralized intervals as drill holes typically cut mineralization at variable angles and geometries of mineralized zones remain speculative until further drilling is completed.

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11 SAMPLE PREPARATION, ANALYSES AND SECURITY

11.1 Sampling

Exploration samples collected in Silvercorp’s 2011 programs in the Property comprise of chip samples from underground tunnelling and core samples from surface and underground drilling.

11.1.1 Core Samples

NQ-sized drill cores (48 mm in diameter) are recovered from the mineralized zones. A preliminary log of the drill core is done at the drill sites on a daily basis. When the hole is completed, the drill core is shipped to the mine camp where it is logged, photographed and sampled in detail. Samples are prepared by cutting the core in half with a diamond saw. One half of the core is marked with sample number and sample boundary and then returned to the core box for archival storage. The other half is placed in a labelled cotton cloth bag with the sample number marked on the bag. The bagged sample is then shipped to the laboratory for assaying.

The mine camp has a perimeter fence with a security guard at the gate.

A total of 1,120 core samples were collected from the 2011 drilling program in the XHP area and 81 core samples were collected in the XBG area.

11.1.2 Chip Samples

Chip samples are collected along sample lines perpendicular to the mineralized vein structure in exploration tunnels. Spacing between sampling lines is typically from 4 to 6 m along strike. Both the mineralized vein and the altered wall rocks are cut with continuous chisel chipping. Chip samples are generally 10 cm wide and 5 cm deep with variable lengths. Sample length ranges from 0.2 m to more than 1 m, depending on the width of the mineralized vein and the type of mineralization. A total of 3,411 chip samples from the XHP area and 748 chip samples from the XBG area were collected in the 2011 underground tunnelling programs.

11.2 Sample Preparation & Analysis

The preparation and analytical methods in this lab are as follows:

Drying, crushing and splitting of the sample to 250 grams, and then the sample is pulverized to minus 200 mesh. Two acid digestion and AAS finish are utilized on a 0.5 gram

AMC 712020 : 30 October 2012 43 SILVERCORP METALS INC Technical Report Songxian Property

sample for lead, zinc and silver assay. Titration is utilized as a modified process for higher grade materials. Gold is analysed using an aqua regia on a 20 gram sample and AA finish at the Luoyang Lab.

11.3 Quality Assurance & Quality Control

Silvercorp didn’t employ a full-scale QA/QC program for its 2011 exploration program. Limited QA/QC measures adopted in 2011 include 6 blanks in samples from the XBG area.

Blank materials were made of barren rocks from the Property. The barren rocks were crushed and pulverized at the Luoyang Lab and then sent to the Analytical Lab of Henan Non-Ferrous Metals Geological and Exploitation Institute in Zhengzhou (Zhengzhou Lab), the ALS-Chemex Lab in Guangzhou and the Mine Lab in the Ying Property. The Zhengzhou Lab, Luoyang Lab and ALS-Chemex Lab are all officially accredited commercial labs in China. The blank material was sent for analysis of major ore elements Ag, Pb, Zn Cu and Au. The averages of the assay results from four labs are used as reference values. Table 11.1 shows assay results of blank samples inserted in exploration samples from the XBG area in 2011 and shows the reference values for the blanks. Pass/fail criteria for coarse blanks has been established as 80% of coarse blank assays should be less than, or equal to, twice the detection limit (Long et al., 1997). Although limited blank material was assayed, analysis of the blanks meets this criterion.

Table 11.1 Assay Result of Blank Samples in the XBG Area

Reference Value Assay Data Sample # Assay Lab Pb% Zn% Ag g/t Cu% Au g/t Pb% Zn% Ag g/t Au g/t K667208 0.01 0.01 2.60 0.004 0.04 0.01 0.01 2.99 0.03 Luoyang K667542 0.01 0.01 2.60 0.004 0.04 0.01 0.01 1.18 0.05 K667494 0.01 0.01 2.60 0.004 0.04 0.00 0.02 0.70 0.01 K667481 0.01 0.01 2.60 0.004 0.04 0.02 0.05 2.19 0.01 K671624 0.01 0.01 2.60 0.004 0.04 0.02 0.01 0.22 0.02 K671329 0.01 0.01 2.60 0.004 0.04 0.02 0.02 1.97 0.02

It is considered that the sampling procedures adopted by Silvercorp in its 2011 exploration program basically comply with the industry’s standards. However, AMC notes that improvement is required in itsQA/QC measures employed in the on-going exploration programs. The project geologist on site advised that they will select a certain percentage of reject coarse material and pulps intermittently for internal and external checks as a common practice in China during the exploration programs. AMC considers this insufficient for QA/QC. AMC recommends that a full-scale QA/QC program be employed in Silvercorp’s future exploration programs on the Property in order to meet common best practices. The QA/QC program should include inserting certified reference materials, blanks and duplicate samples to monitor quality in the procedures of collection, preparation and analysis of exploration samples.

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Specifically, certified reference materials (standards) should be obtained for all economic minerals. For each economic mineral there should be three corresponding standards 1) at the expected the cut-off grade of the deposit, 2) one at the expected average grade of a deposit and 3) one at a higher grade. The standards should represent 5% of total samples assayed. Standard results should be reviewed immediately upon receipt of assay. Assay batches with two standards outside two standard deviations should be re-run. Assay batches with one standard outside three standard deviations should be re-run. As standard data accumulates over time, results should be reviewed for biases in the data.

Coarse blanks test for contamination during both the sample preparation and assay process. Pulp blanks test for contamination during the assay process. Blanks should be inserted in each batch sent to the laboratory with an additional coarse blank inserted immediately after expected high grade samples. The “pass” criteria for blanks are that 80% of coarse blank assays should be less than twice the detection limit for that element.

Coarse-reject duplicates are used to evaluate the sample preparation process. Duplicates should constitute 5% of the samples submitted to the laboratory. Unmineralized samples should not be sent as duplicates as assays near detection limit are commonly inaccurate. Duplicate data can be viewed on a scattergram but should also be compared using the relative paired difference (RPD). This method measures the absolute difference between a sample and it’s duplicate. It is desirable to achieve 80-85% of the pairs having less than 15% RPD between the original assay and check assay (Stoker, 2006). Sample pairs should be excluded from the analysis if the combined mean of the pair is less than 15 times the detection limit (Kaufman and Stoker, 2009). Removing the low values ensures there is no undue influence on the RPD plots due to the higher variance of grades likely near to the detection limit, where precision becomes poorer (Long, 1997).

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12 DATA VERIFICATION

During AMC’s site visit in February 2012 all aspects of the project were examined and verified including drill core, exploration sites, data collection and verification procedures, data storage, underground workings, processing plant and surface infrastructure. Discussions were held with Silvercorp personnel, using an interpreter as required.

During a second site visit in April 2012, 11 random mineralized quarter core samples were taken for check assaying. The samples were prepared and assayed at ALS Chemex laboratory in Guanzhou and the relevant Certificate authenticating the sample preparation and assaying procedures has been sighted by AMC. The results of these samples are listed in Table 12.1.

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Table 12.1 Independent Sample Verification – Gold, Silver, Lead, Zinc Assays

Sample Number Original Assay Check Assay* Difference (Original v Check) (%) Vein Hole ID From To Au Ag Au Ag ID Original# Check# Length Pb % Zn % Pb % Zn % Au Ag Pb Zn g/t g/t g/t g/t XHP Project

K13 ZK13082 ZK13082-3 ZK13082-WJ1 1.00 324.50 325.50 0.22 115.0 9.57 9.49 0.37 190.0 14.65 10.10 -68.64 -65.19 -53.08 -6.43 - K13 ZK13082 ZK13082-8 ZK13082-WJ2 1.10 330.10 331.20 0.11 249.6 22.43 9.43 0.58 345.0 >20.0 11.95 -38.25 n/a -26.72 427.27 K13 ZK13083 ZK13083-2 ZK13083-WJ3 1.00 407.60 408.60 9.58 21.5 1.82 2.99 0.83 17.0 1.61 2.08 91.33 20.93 11.81 30.43

K13 ZK13083 ZK13083-7 ZK13083-WJ4 1.10 412.50 413.60 4.45 18.5 4.05 0.89 0.76 11.0 3.80 0.70 82.97 40.54 6.17 21.35

K13 ZK13083 ZK13083-13 ZK13083-WJ5 1.10 418.70 419.70 0.28 46.4 3.44 1.13 0.38 28.0 3.21 0.96 -37.14 39.66 6.69 14.87

K13 ZK13162 ZK13162-8 ZK13162-WJ6 1.00 326.30 327.30 0.06 9.3 0.66 0.13 0.01 0.5 0.03 0.01 90.00 94.64 95.45 89.23

XBG Project

- n/a ZK0281 K667480 K671301 0.53 146.96 147.49 2.86 78.7 2.25 2.36 2.36 7.1 1.53 18.30 17.48 4.69 32.22 675.42 - n/a ZK31102 K667538 K671302 0.66 319.65 320.31 0.12 5.3 0.15 0.11 0.03 0.5 0.06 0.27 72.50 90.62 60.67 144.55 n/a ZK31101 K667191 K671303 1.30 257.15 258.45 0.10 25.6 2.28 1.78 0.02 12.0 1.28 1.27 78.00 53.13 44.08 28.93

n/a ZK31101 K667193 K671304 1.00 259.59 260.59 0.09 15.9 1.95 2.08 0.02 7.0 0.51 0.48 73.33 55.97 73.74 77.07

n/a ZK5501 K669212 K671305 0.72 438.73 439.45 2.74 1.9 0.01 0.02 2.58 0.5 0.02 0.03 5.84 73.40 -80.00 -30.00 *Below detection is recorded as 1/2 the detection limit. Numbers in red indicate a value significantly higher than the check assay. Numbers in green indicate a value significantly lower than the check assay. High variations within samples of low grade mineralization have not been flagged as high variance is expected when assays are near the detection limit.

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Given the nature of the mineralization, it is not unusual that the check results overall do not compare closely with the original results. However, the trends in grades are broadly compatible.

Based on AMC’s independent reviews and validations of information and data provided, AMC is satisfied that the data is acceptable for the purposes of this report.

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13 MINERAL PROCESSING AND METALLURGICAL TESTING

Note: The word “ore” is used in this section in a generic sense and does not imply that Mineral Reserves have been estimated.

13.1 Introduction

At the request of Songxian Gold Mine Ltd., a division of Luoyang Mining Group Co (LMGC), lab scale mineral processing tests were completed on the gold mineralization from the Shui- Lu-Tang mine and the lead-zinc mineralization from the Songxian mine.

Gold mineralization from XHP project, was tested by both Henan Rock Mineral Testing Centre (HRMTC, Zhengzhou, Henan) and Ying-Tai Jingban Metallurgical Test (YTJMT) Laboratory in 2008. Based on the two laboratory test reports, a 400 tpd plant (Plant 1, Shi- Tong-Gou) for lead-gold recovery by flotation – gravity separation was then designed by Sandong Jingdu Engineering Inc. in Dec 2008. The plant began operating in 2009 to produce a lead-gold sulphide concentrate product. The plant was shut down due to declining gold grades in August 2011.

Note that no testwork has been reported for mineralization pertaining to the Xi-Bai-Gou plant which has been shut down since 2011. Where referred to this plant is Plant 2, and is located on the XBG project.

The two lab studies included assay, mineralogical analysis, mineral processing, mass balance, water recycle and disposal. The two technical reports respectively referred to gold mineralization and Pb-Zn mineralization tests were then transferred to Silvercorp in June, 2012 when Silvercorp took over these two mines from LMGC.

13.2 Test Samples

13.2.1 Gold Mineralization (Shui-Lu-Tang Mine, Songxian)

In 2008, LMGC provided two batches of gold mineralization samples, totalling 400 kg, to YTJMT and HRMTC for lab tests. The two batches of mineralization were then mixed to produce a bulk sample for lab tests. Table 13.1 gives the gold and silver grades of the samples.

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Table 13.1 Songxian Gold Mineralization Samples Used for Metallurgical Testing

Sample No. Grade Weight (%) Au (g/t) Ag (g/t)

Songxian #1 High 17.28 4.56 N/A Songxian #2 Low 82.72 2.13 N/A Songxian #3 Mixed Bulk 100 2.55 74.8 Data Source: YTJMT, 2008

13.2.2 Pb-Zn Mineralization

In April 2010, LMGC provided two batches, Songxian #4 and #5, of Pb-Zn mineralization samples to UIM for lab tests. For the first three weeks, Songxian #4 sample was used for the trial runs. After that, a bulk sample Songxian #6 (Table 13.3) was produced by mixing #4 and #5 at ratio of 1.7:1. Table 13.2 summarizes the weight and composition of Songxian #4, #5 and #6.

Table 13.2 Summary of Songxian Pb-Zn Samples Used for Metallurgical Testing

Sample No. Grade Weight (kg) Zn (%) Pb (%)

Songxian #4 High Grade 200 5.31 4.62 Songxian #5 Low Grade 117.4 0.85 0.98 Songxian #6 Mixed #4 & #5 317.4 3.66 2.73

For most of the tests, the final mixed bulk sample of 2.73% Pb and 3.66% Zn, was used to conduct mineralization processing experiments in order to produce lead concentrate and zinc sulphide concentrate products, as well as to recover the silver in the lead concentrate.

13.3 Mineralogy

13.3.1 Gold Mineralization (Mixed Bulk Sample)

The mineralogical analysis results for the gold mineralization composite samples are summarized in Table 13.3. The results show that:

 The major components are gangue minerals, including 62.26% quartz, plus small amounts of potassium feldspar, sericite, biotite, with minor fluorite, chlorite, carbonate and clay minerals.

 The sulphide content is very low. The major sulphide minerals are galena and sphalerite.

 There are some iron oxide minerals. Limonite and hematite account for 10.5% of the sample.

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Table 13.3 Mineralogy of the Samples Taken From the Songxian Deposit

Mineral Content (%) Mineral Content(%) Mineral Content Quartz 62.26 Chlorite N/A Native gold 0.74 g/t Mica N/A Talc N/A Chalcopyrite 0.28% Feldspar N/A Pyrite Trace Galena 6.87% Limonite & Clay minerals N/A 10.5 Limonite N/A Hematite Dolomite N/A Greigite N/A Pyrolusite N/A Calcite N/A Arsenopyrite trace Sphalerite 1.07%

A discussion of the occurrences of gold and other minerals present are summarized below:

 Native Gold was observed in the polished specimen sample of the primary ore. Native gold was also observed in the polished specimen sample of the flotation concentrate.

 Sulphides such as sphalerite, galena and chalcopyrite, in the size range of <0.03 mm, constitute the major sulphides. Pyrite and arsenopyrite contents are quite low.

 The iron oxides, mainly limonite and hematite, are less than <0.1 mm and occur in granular column form. They are dispersed in the ore.

 The main gangue minerals are quartz (62.26%), K-feldspar, sericite, chlorite, fluorite and carbonate. Gold grain size analysis shows that 70% of gold is in fine-grained form, the rest is in medium- and coarse-grained forms. The coarse-grained gold was recovered via gravity separation. Gold mineralogical analysis, as shown in Table 13.4, on milled mineralization samples (65%-200 mesh) indicates that gold is mainly associated with the following minerals:

 The majority of gold (51.0%) is encapsulated in quartz and other gangue silicate minerals.

 About 29.0% of the gold is in native, free-milling and/or exposed form.

 About 15.5% of the gold is associated with galena; and

 About 4.5% of the gold is enclosed by oxide minerals, mainly within calcite (dolomite); some is occasionally within hematite and limonite iron oxide minerals.

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Table 13.4 Summary of Gold Mineralogical Analysis

Gold 2 1 Distribution Grade Observation Gold Form (%） (g/t) Native Gold 0.74 29.0 Native, free-milling and exposed gold Inclusion within Oxides 0.11 4.5 Gold included or locked within calcite or dolomite Inclusions within Sulphide 0.40 15.5 Gold included or locked in fine-grained galena etc Inclusions within Silicate 1.30 51.0 Gold included or locked in quartz or other silicates Total 2.55 100.0 Note：sample grinding size is 65％－200 mesh Notes: (1) Gold grade is calculated based on gold distribution data; (2) Distribution: data from extraction recovery

13.3.2 Pb-Zn Mineralization (Songxian #6, Mixed Bulk)

The mineralogy of the composite bulk samples (Songxian #6) is summarized in Table 13.5. The major components are gangue minerals (53% quartz; dolomite, calcite, k-feldspar, mica) and sulphide minerals (3.93% sphalerite, 1.74% galena, and 0.75% pyrite).

Table 13.5 Mineralogy for Songxian #6 Pb-Zn Deposit

Mineral Content (%) Mineral Content (%) Sphalerite 3.93 Quartz 53 Zinc spinel N/A Pyrolusite N/A Galena 1.74 Dolomite N/A Pyrite 0.75 Kaolinite N/A Pyrrhotite N/A Barite N/A Arsenopyrite Trace Calcite N/A Hematite N/A Calamine N/A Chalcopyrite Trace Others N/A Anglesite N/A Stibnite Trace Total 100

Table 13.6 shows the lead mineralogy. The average lead grade in the bulk sample is about 2.73% Pb. Lead mainly occurs in the form of galena which accounts for 55.31% of the total lead. Galena is usually intergrown with sphalerite and pyrite. The second most common occurrence of lead is in oxide/carbonate form (23.08%, cerussite). Other forms account for 21.61% of the lead.

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Table 13.6 Summary of Lead Mineralogy

Occurrence Pb Content (%) Distribution (%) Comment Sulphide 1.51 55.31 Galena Oxide 0.63 23.08 Cerussite Others 0.59 21.61 Total 2.73 100

Table 13.7 shows the zinc mineralogy. Average zinc grade in the bulk sample is about 3.66% Zn. Zinc mainly occurs in sphalerite, accounting for 72.13% of the total zinc, and secondarily in zinc oxide/carbonate form which accounts for19.13%. Other minerals account for 8.74%. Sphalerite usually occurs intergrown with galena and pyrite.

Table 13.7 Summary of Zinc Mineralogy

Occurrence Zn Content (%) Distribution (%) Comment Sulfide 2.64 72.13 Sphalerite Oxide 0.7 19.13 Calamine Hemimorphite Others 0.32 8.74 Spinel Total 3.66 100

Sulphur grades in the samples average about 1.92%. Sulphur mainly occurs in sphalerite (3.93%), galena (1.74%) and pyrite (0.75%). Pyrite content is quite low. Arsenopyrite and chalcopyrite contents are at trace level. There are two types of iron sulphide minerals. One type occurs as subhedral crystals and the other type occurs as fine-grained anhedral crystals. Pyrite crystal grain size is in the range of 0.1 to 10 mm.

Mineralogical analysis shows that:

 Some of the lead (23%) and zinc (19%) are in the form of oxide which may get lost to the flotation tailings.

 Fine intergrowths between galena and sphalerite grains may result in poor liberation of galena and sphalerite grains, thus making difficult the separation of PbS/ZnS grains in flotation even with fine grinding.

In consideration of these mineralogical factors, specific tests were designed in order to improve the flotation performance, as described in Section 13.4.

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13.4 Metallurgical Testwork Results

13.4.1 Gold Mineralization

In 2008, the Henan Rock Mineral Testing Centre (HRMTC, Zhengzhou, Henan), and the Ying-Tai Jingban Metallurgical Test (YTJMT) Lab. completed metallurgical tests based on the request made by Luoyang Mining Group Co (LMGC). The main purpose of the work was to develop a process to maximize gold and lead recovery.

Table 13.8 shows the compositions of the head bulk sample.

Table 13.8 Composition of Gold Mineralization Head Sample

Element Au Ag Cu Pb Zn S Comp. (%) 2.66 g/t 74.8 g/t 0.12 5.95 0.72 1.26 Element Fe2O3 As CaO Al2O3 SiO2 Comp. (%) 10.5 0.0023 0.66 7.53 62.26

Based on the mineralogical analysis, the following conclusions can be made:

 The native gold and/or free gold component (29-30%) should be recoverable by gravity separation (29-30%) and/or direct cyanidation leaching.

 Depending on the extent of the locking of gold within gangue minerals, the balance of the non-sulphide gold may be recoverable by direct cyanidation; Sulfide (galena) and associated gold can be recovered as a lead-gold sulfide concentrate product.

At the early lab test stage, the following three options were tested by HRMTC and YTJMT:

 Option 1: direct cyanidation where gold can be recovered as gold-enriched zinc cemented residue or bullion via cyanidation leaching-CIP-carbon elution-dore- electrolysis process.

 Option 2: flotation to produce a lead-gold sulfide concentrate product.

 Option 3: gravity separation – flotation-cyanidation where lead-gold can be recovered in sulfide concentrate, and the remaining gold in the flotation tails can be leached by cyanidation. 13.4.1.1 Option 1: Direct Cyanidation-CIP Process

Option 1 is a direct cyanidation-CIP (Carbon-In-Pulp) Process. Testwork was completed at HRMTC.

Table 13.9 shows gold cyanidation recovery under the operating conditions: grinding 90%- 200 mesh, pulp density 35% solids, lime 12kg/t, NaCN 0.98-1.5 kg/t.

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Table 13.9 Gold Recovery for Cyanidation-CIP Process

Cyanidation Residue Au Leach Total NaCN Usage Time (g/t) Recovery Au Recovery Au (kg/t mineralization) (hr) (%) (%) 24 0.16 74.52 67.56 0.98 48 0.13 80.03 72.56 1.54

The results show that gold recovery is 67.56% in 24 hrs which is quite low. The process requires fine grinding (90% -200mesh), high NaCN dosage and a long cyanidation time.

13.4.1.2 Option 2: Bulk Flotation Process

Option 2 is the bulk flotation process. Testwork was carried out at HRMTC. Figure 13.1 shows a conventional lead sulfide flotation process (1-stage rougher - 2 stage cleaner - 3 stage scavenger, locked-cycle). Table 13.10 shows the mass balances with 88.28% of gold recovery and 17.45% of lead recovery. Table 13.11 shows the composition of the final flotation concentrate product (low grade lead sulfide concentrate).

Table 13.10 Mass Balance of Lead-Gold Bulk Flotation (60% -200 mesh)

Grade Recovery（%） Yield Stream Au （%） Ag (g/t) Pb(%) Au Ag Pb （g/t） Float Conc 4.87 48.04 746.4 21.39 88.28 48.60 17.45 Tails 95.13 0.33 40.42 5.18 11.72 51.40 82.55 Feed 100 2.65 74.8 5.97 100 100 100 mineralization

Table 13.11 Composition of Gold Flotation Concentrate Product (%)

Element Au Ag Al2O3 SiO2 CaO TFe Comp. (%) 48.04 g/t 746.4g/t 2.13 18.45 1.09 17.75 Element As Cu Pb Zn Mn S Comp. (%) 0.012 0.76 21.39 7.1 0.72 21.94

Table 13.10 and Table 13.11 show that lead concentrate grade of 21.39% Pb and lead recovery of 17.5% are quite low due to:

 The mineralization was partially oxidized.

 Lead bulk flotation conditions were not optimized by HRMTC.

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13.4.1.3 Option 3: Gravity Separation – Flotation-Cyanidation Process

Option 3 is gravity separation-flotation-cyanidation process with test work carried out at YTJMT. It includes the following unit operations:

 Gravity separation is used to recover the native gold (29-30%).

 Bulk flotation (locked-cycle) is used to recover a lead-gold concentrate which is then mixed with the gravity separation gold concentrate, to produce marketable gold concentrate products for sell.

 Recover the rest of gold from the flotation tailings by cyanidation leach if the process is cost effective. The impact of grinding size (65-85% -200 mesh) on gold recovery was examined. The results show that gold losses in flotation tailings are insensitive to the grinding size in the tested range from 65 to 85% -200 mesh.

Table 13.12 Mass Balance of Lead-Gold Flotation (65% -200 mesh)

Grade Recovery（%） Yield Stream Au （%） Pb(%) Au Pb （g/t） Gravity Conc 0.78 88.62 63.29 25.32 8.77 Float Conc 5.63 27.76 59.81 57.25 59.81 Tails 93.59 0.51 1.89 17.48 31.42 Feed 100 2.73 5.63 100.05 100.00 mineralization

Table 13.12 shows a mass balance for the run at grinding 65%-200 mesh. It seems that:

 Lead losses (31.42%) to the flotation tailings are quite high due to the mineralization being partially oxidized.

 Gold losses to the flotation tailings (17.5% for 65%-200 mesh) are high. It is proposed to use cyanidation leaching process to further recover this remaining gold if the process is economically feasible.

Table 13.13 shows the composition and mass balances for the combined gravity concentrate and flotation concentrate. The total gold recovery is 82.58%, and lead recovery is 68.58%.

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Table 13.13 Mass Balance of Gravity Separation-Flotation (65% -200 mesh)

Grade Recovery（%） Yield Stream Au （%） Pb(%) Au Pb （g/t） Float Conc 6.41 35.17 60.23 82.58 68.57 Tails 93.59 0.51 1.89 17.42 31.43 Feed 100 2.73 5.63 100 100 mineralization

Cyanidation of the flotation tails was carried out and the results are shown in Tables 13.14 and 13.15.

Table 13.14 shows that gold cyanidation recovery (24hr leaching) increased from 58% to 70.9% with the help of finer grinding target increase from 65% to 85% (-200 mesh).

Table 13.14 Gold Cyanidation Recovery from Flotation Tailings (%), 24 hrs leaching

Grinding Tailings Leach Total Au -200mesh Au (g/t) Recovery (%) Recovery (%) 65% 0.23 58.18 91.35 75% 0.18 67.27 93.23 85% 0.16 70.91 93.98

Table 13.15 shows that gold cyanidation recovery increased from 67.27% to 76.36%, with the increase of cyanidation time from 24 to 36 hrs.

Table 13.15 Gold Cyanidation Recovery from Flotation Tailings (%), 75%-200mesh

Cyanidation Tailings Leach Au Total Au Time (hrs) Au (g/t) Recovery (%) Recovery (%) 24 0.18 67.27 93.23 30 0.15 72.73 94.36 36 0.13 76.36 95.11

No information has been provided on cyanide consumption for the leaching of flotation tails but, if similar to direct cyanidation (a reasonable assumption), AMC considers that a cost- benefit analysis of the additional gold recovery (>10%) vs cyanide costs would show this leaching to be cost effective.

Compared with Option 1 (recovery: Au 67.56%, Pb 0%) and Option 2 (Au88.28%, Pb 17.45%), Option 3 (Au 82.58%, Pb 68.58%) achieved high metal recovery for both gold and lead.

Option 3 is recommended considering the following advantages over other options:

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 Native gold can be recovered via gravity separation.

 Only coarse grinding (65%-200 mesh) is required to ensure high gold and lead recoveries.

 Bulk flotation operation is quicker, simpler and safer (no cyanide required) than cyanidation-CIP process.

 High grade lead-gold sulfide concentrate product can be sold easily to the market.

In the original design, Option 3 was chosen by the designer, Sandong Jingdu Engineering. The corresponding flowsheet for Option 3 is shown in Figure 13.1. It should be noted that the following changes were made to the plant due to the declining gold grades:

 Gold cyanidation-CIP circuit was shut down (off line).

 Gravity separator was relocated from the front step (after grinding) to the end of flotation circuit (to process the lead scavenger tailings).

 Only the lead bulk flotation circuit was used.

Figure 13.1 Locked-Cycle Sheet for Lead Flotation

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13.4.1.4 Water Treatment

Considering the fact that all the pond water will be reused in the mill-flotation plant via recycle, no water treatment tests were done on waste pond water. At a later stage, water treatment and recycle tests should be done to meet the national water discharge standard.

13.4.2 Pb-Zn Mineralization

In order to develop a processing flowsheet to produce commercial grades of lead and zinc concentrate products, LMGC contracted the UIM Lab in Zhengzhou to perform mineral processing and metallurgical tests. Testing was done between April and August, 2010. The head sample for lab flotation test was a 1.7:1 ratio of SONGXIAN#4 and SONGXIAN#5. (refer to section 13.2.2) bulk composite material. Head sample assay results are listed in Table 13.16.

Table 13.16 Head Grade of the Blended Test Sample

Element Pb Zn S Cu TFe Au Ag*

Content (%) 2.73 3.66 1.92 0.029 8.38 0.06 g/t 34.6 g/t

Element SiO2 Al2O3 MgO As K2O Na2O

Content (%) 53.0 10.47 1.49 0 0.05 3.16 *Silver (34.6 g/t) is quite low and thus it is ignored in this study.

13.4.3 Flowsheet Development and Optimization Tests

The flowsheet proposed for lab tests include the following unit operations:

 Comminution by crushing-ball mill grinding

 Pb/Zn sulphide separation by flotation

 concentrate dewatering by filtration

 Pb/Zn oxide recovery from zinc rougher tails using gravity separation or flotation.

Considering the above-mentioned mineralization features such as low grade, weathered and fine galena-sphalerite intergrowths, the following options were considered:

 Option 1: High chemical dosaged bulk flotation of Pb/Zn sulphide to produce a PbS- ZnS mixture without separation of PbS/ZnS.

 Option 2: Separation of PbS/ZnS via differential flotation.

 Option 3: Low chemical dosaged bulk flotation of Pb/Zn sulphide-Separation of PbS/ZnS via differential flotation.

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In all cases: (1) lead oxide minerals are recovered from the zinc rougher tails via either gravity separation or sulfuration-flotation; (2) then zinc oxide minerals are recovered from lead oxide flotation tails. However, zinc oxide recovery is quite low.

Table 13.17 shows the metal recovery for the three different options. The results show that:

 Option 1 has the highest metal recovery by producing a PbS-ZnS mixture which is hard for separation of PbS and ZnS concentrate by further differential flotation.

 Option 2 (differential flotation, conventional process) uses a simple flowsheet with lead recovery of 46% and zinc recovery of 80.2%. After the mine was taken over by Silvercorp in June 2012, the mill plant has been modified to use Option 2 flowsheet.

 Option 3 has the lowest chemicals consumption, is recommended by UIM Lab in its 2010 test report (UIM, 2010).

Table 13.17 Comparison of Metal Recovery Options

Test Chemicals Pb Zn Options Advantages Disadvantages ID Dosage (%) (%) High dosage chemicals 1-Bulk consumption, only a PbS-ZnS N1 High 77.79 77.93 High lead recovery Flotation mixture conc., hard for Pb/Zn separation 2- Simple flowsheet, low N2 Normal 46.06 80.17 Low lead recovery Differential chemicals consumption 3-Bulk- Simple flowsheet, low Low lead recovery, long N26 Low 44.68 60.91 Differential chemicals flotation time

Table 13.18 shows the impact of grinding size on metal recovery. Based on the results, grinding target of 60%-200 mesh was selected with 76.6% of lead recovery.

Table 13.18 Impact of Grinding Size on Lead Concentrate Recovery (Songxian #1 mineralization sample)

Test Grinding Size Yield Pb Grade Pb Recovery Material ID （%-200 mesh) （%）（%）（%） Lead 25.01 13.11 74.83 Concentrate N-9-1 50 Tails 74.99 1.47 25.17

Feed Head 100.00 4.38 100.00 Lead 28.21 11.71 75.41 Concentrate N-9-2 55 Tails 71.79 1.50 24.59

Feed Head 100.00 4.38 100.00

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Test Grinding Size Yield Pb Grade Pb Recovery Material ID （%-200 mesh) （%）（%）（%） Lead 28.23 11.89 76.57 Concentrate N-9-3 60 Tails 71.77 1.43 23.43

Feed Head 100.00 4.38 100.00 Lead 31.63 10.80 77.99 Concentrate N-9-4 65 Tails 68.37 1.41 22.01

Feed Head 100.00 4.38 100.00 Lead 34.31 9.93 77.80 Concentrate N-9-5 70 Tails 65.69 1.48 22.20

Feed Head 100.00 4.38 100.00

In order to recover lead and zinc oxide minerals from the zinc rougher tails, different tests were conducted:

 Lead oxide is recovered by sulphidization using Na2S and then flotation, or gravity separation. Table 13.19 shows that flotation recovery of 36.5% is higher than that (10.8%) using gravity separation.

 Zinc oxide was then recovered from lead flotation tails sulphurization using Na2S- NaOH and then flotation. The recovery is quite low <5% due to poor liberation of zinc oxide from the associated minerals.

Table 13.19 Lead Oxide Recovery Comparison: Flotation vs Gravity Separation

Recovery from Grade Recovery based on Unit Operation Feed Head Yield （%） Process Stream （%） mineralization（%）（%） Pb Zn Pb Zn Pb

Lead Oxide Conc 0.91 41.32 3.91 36.54 3.37 12.80

Sulfide Tails 99.09 0.66 1.03 63.46 96.63 22.22 Flotation Head (Zn 100.00 1.03 1.06 100.00 100.00 100.00 Rougher Tails)

Lead Oxide Conc 0.24 46.86 6.25 10.86 1.40 3.81 Gravity Separati Tails 99.76 0.92 1.05 89.13 98.60 31.20 on Head (Zn 100.00 1.03 1.06 100.00 100.00 100.00 Rougher Tails)

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13.4.4 Locked Cycle Flotation Tests for Option 3

13.4.4.1 Flotation Performance

After performing a number of tests at different conditions, optimized test parameters and processing techniques were finalized. From there, locked cycle tests using Option 3 were then performed by the UIM lab (UIM, 2010). The flotation flowsheet for option 3 includes:

 The optimum grinding target for the mineralization sample was 65% passing 200 mesh.

 Bulk flotation (one stage): bulk flotation concentrate is sent to a PbS flotation circuit, and bulk flotation tails is sent to a ZnS flotation circuit.

 A Pb flotation circuit with one-stage rougher, 2-stage scavenger and 3-stage cleaner.

 A Zn flotation circuit with one-stage rougher, 2-stage scavenger and 4-stage cleaner.

 Locked close loop between Pb and Zn circuit with optimized reagent dosage at different locations. It should be noted that since June 2012, a zinc flotation bank has been added to the existing lead flotation circuit (in plant #1) by Silvercorp. Silvercorp adopted its successful operating experiences from Ying Mine to this new facility using conventional differential Pb- Zn flotation process. Also, operation strategy has been changed from producing high grade concentrate products with low recoveries to medium grade concentrate products for the benefits of higher metal recovery.

Tables 13.20 summarized the mass balance for Option 3 tests under grinding 75%- 200 mesh. The total recovery is 65.75% for Pb and 66% for Zn.

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Table 13.20 Mass Balances of PbZn Flotation Tests for Option 3

Yield Grade（%） Recovery（%） Materials （%） Pb Zn Pb Zn

PbS Concentrate 2.31 60.98 8.24 52.19 5.20

ZnS Concentrate 1 (PbS Scavenger Conc) 2.43 6.45 48.39 7.39 32.05

ZnS Concentrate 2 (ZnS Cleaner Conc) 2.54 3.31 48.94 3.11 33.94

PbO Concentrate 1.04 35.12 3.56 13.56 1.01

Tails 91.68 0.70 1.11 23.75 27.80

Head mineralization 100.00 2.70 3.66 100.00 100.00

The compositions for lead and zinc concentrates are summarized in Tables 13.21, 13.22 and 13.23. Table 13.21 shows that the quality of lead concentrate product is close to meet the grade spec for class #2 except higher zinc content.

Table 13.21 PbS Concentrate Composition for Option 3

Element Pb Zn Cu As Al2O3 MgO Au (g/t) Ag (g/t)

PbS Concentrate（%） 60.98 8.24* 0.15 0.0049 0.44 0.13 1.02 322

PbO Concentrate (%) 35.12 3.56 0.25 0.0008 6.45 1.21 1.64 296

* Zinc content in lead concentrate is higher than the spec target

Size analysis for the PbS concentrate, as shown in Table 13.22, shows that in the fine fraction (-0.032 mm), PbS concentrate is in the highest grade, 63.5% Pb, with lowest zinc contamination of 8.1%.

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Table 13.22 PbS Concentrate Composition vs Particle Size for Option 3

（）（） Size Range Yield Grade % Distribution % (mm）（%） Pb Zn Pb Zn

+0.043 7.12 41.73 13.61 4.69 10.36

-0.043+0.032 24.43 55.14 11.51 22.22 30.19

-0.032 68.45 68.69 8.13 74.09 59.45

Total 100.00 63.46 9.36 100.00 100.00

Table 13.23 shows that the quality of zinc concentrate product is close to meeting the grade spec for class #3 except the slightly higher content of lead impurities.

Table 13.23 ZnS Concentrate Composition for Option 3

Element Pb Zn Cu As SiO2 S Ag (g/t) TFe

ZnS Concentrate 1 (PbS 6.45* 48.39 0.33 0.001 5.02 27.45 342 4.72 Scavenger Conc)（%）

ZnS Concentrate 2 (ZnS 3.31 48.94 0.33 0.0011 10.01 25.62 206 4.50 Cleaner Conc) (%)

* Lead content in zinc concentrate is higher than the spec target

13.4.4.2 Flotation Performance with Recycled Water

To examine the impact of water reuse on flotation mass balance, flotation tests using combined water (4 recycle: 1 fresh make-up water) were done for Option 3. The results show that the impact of using recycled water on flotation recovery is very small.

13.4.5 Flotation Tailings

13.4.5.1 Flotation Tailings and Particle Size

Table 13.24 shows the Pb and Zn contents versus size fractions for the final flotation tails. The average Pb and Zn in the tails are 0.69% and 1.27% respectively. It seems that most of the Pb (62.7%) and Zn (59.4%) are associated with the fine fraction (-0.032 mm). Mineralogical analysis shows that the losses of lead and zinc in the tails are due to the poor flotation performance of their oxide minerals.

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Table 13.24 Tails Composition vs Particle Size for Option 3

Size Range Yield Grade（%） Distribution（%）（mm）（%） Pb Zn Pb Zn +0.074 26.16 0.40 0.63 15.17 12.98 -0.074+0.043 15.06 0.58 1.25 12.66 14.84 -0.043+0.032 10.13 0.64 1.60 9.40 12.77 -0.032 48.65 0.89 1.55 62.77 59.41 Total 100.00 0.69 1.27 100.00 100.00

13.4.5.2 Water Treatment

13.5 Bulk Density

13.5.1 Gold mineralization

The dry solids and bulk density for the bulk composite samples (-2 mm, mineralized) were measured by HRMTC Lab using conventional techniques. The true density and bulk density are 2.74 and 1.82 g/cm3 respectively.

13.5.2 Pb-Zn mineralization

The dry solids and bulk density for the bulk composite samples of Pb-Zn mineralization (- 2mm, mineralized) were measured by UIM Lab using conventional techniques. The true density and bulk density are 2.92 and 1.88 g/cm3, respectively.

13.6 Summary of Testwork Outcomes

13.6.1 Gold Mineralization

The mineralogy suggests that:

 Most of the galena and associated gold can be recovered by bulk flotation.

 Lead and gold associated with oxide minerals are poorly recovered via flotation.

This is confirmed by the metallurgical testwork (Option 3), and expected performance indices are:

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 68.6% of lead recovery to a high grade (60% Pb) lead concentrate with 82.58% of gold recovery via bulk flotation.

 High lead loss (31%) to the flotation tailings due to the mineralization being partially oxidized.

 Further processing will be required to recover remaining gold (17.4%) from flotation tailings by gravity separation or cyanidation.

It should be noted that the processing of gold mineralization in Plant 1 was shut down in August 2011 due to declining gold grades.

13.6.2 Lead-Zinc Mineralization

The mineralogy shows that:

 Only 55.3% of lead is in the sulfide form (galena). Only 72.1% of zinc is in the sulfide form (sphalerite). The rest part of lead and zinc are associated with the oxide minerals.

 Galena and sphalerite grains are quite significantly intergrown, which makes liberation difficult. This is confirmed by the metallurgical testwork, and expected performance indices are:

 52% lead recovery to a high grade (61% Pb) lead concentrate, consistent with the mineralogy.

 However an additional 13% lead recovery is potentially achievable with a sulphidizing float to recover oxide minerals. The resulting combined concentrate would be 53% Pb.

 66% zinc recovery to an acceptable (48.5% Zn) zinc concentrate.

 Low lead and zinc metal recovery due to the mineralization being partially oxidized.

 Contamination of lead concentrate with high zinc and zinc concentrate with high lead due to the difficult liberation of galena/sphalerite grains even with fine grinding.

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14 MINERAL RESOURCE ESTIMATES

Silvercorp acquired the Property in the second half of 2011. Exploration work conducted by Silvercorp as of the end of 2011 is test drilling and tunnelling on the major mineralized structures. The limited data does not warrant preparation of a Mineral Resource estimate at this time.

It is Silvercorp’s intention to prepare a Mineral Resource estimate compliant with NI 43-101 in 2013 after the additional planned 30,000 m drilling program is complete.

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15 MINERAL RESERVE ESTIMATES

There are no Mineral Reserve estimates for the Property.

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16 MINING METHODS

16.1 Introduction and Mine Description There are two operating mines, the XHP and XBG, within the Property, which is about 120 km southeast of Silvercorp’s Ying mine and approximately a three-hour drive from Luoyang City. Since Silvercorp’s acquisition of the property in 2011, exploration and small-scale mining activities have been conducted at the two mines using small conventional tracked equipment (rail cars, electric rocker shovels and pneumatic hand-held drills).

Further development is under way at both mines to provide better access for exploration and mining activities. A new adit PD590 and internal decline MXJ6 are being developed at XHP mine, their major purpose being to provide personnel access and limited transportation of rock and materials. A surface decline XJ825 will also be constructed to provide access from 820 mRL to 650 mRL at XBG mine.

The stope extraction sequence is bottom-up, but with the inter-level extraction sequence generally being top-down. Shrinkage stoping is the main mining method. Stope production drilling is by jackleg and in-stope rock movement is by gravity to draw points. Production mucking is mostly via hand shovels or, occasionally, rocker shovels to rail cars pulled by battery locomotive. Mineralization transport to surface is via hoist in the internal decline or shaft, with the rail cars then being manually moved to the portal from the adit.

16.2 Mining Methods & Mine Design

16.2.1 Geotechnical and Hydrogeological Considerations No specific geotechnical or hydrogeological study data is available for the XHP mine and XBG mine. Development and mining operations to date have encountered generally good ground conditions. The excavation of relatively small openings, both in development and stopes, facilitates ground stability. Support is only installed where deemed to be necessary, with rock bolts being used for hanging wall support on occasion. Timber and steel I-beams may also be used where unstable ground is encountered.

AMC recommends that Silvercorp include formal recognition of local geotechnical conditions and make specific reference to ground support requirements within its mine planning process.

Water in-flow to date at the XHP mine and XBG mine has not created any significant problems.

16.2.2 Development and Access The XHP and XBG mines are located in narrow valleys, and a series of adits at each mine provides access from the surface to the mining areas. Most of the operational levels do not have their own access portal and must connect to internal shafts or declines.

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At the XBG mine, construction of a shaft from surface is underway to explore and extract mineralized material from veins X31 and X13, and a decline is being driven from the surface to extract the deeper part of veins X8 and X9.

Overall, mine access for rock transportation, materials supply and personnel is provided by four different means:

 Adits and Portals

 Declines, both from surface and internal

 Internal shafts (winzes)

 Shaft

Most of the adits at both mines are driven slightly to the rise from surface at dimensions of approximately 1.8 m x 1.8 m. These adits are the main means of access for personnel, materials, transport of mineralized materials and waste. All services such as electrical power, compressed air, drill water and dewatering pipelines are installed in the adits. The adits are also used for delivery and removal of fresh and return air respectively. Most of the adits are equipped with narrow gauge rail for the transport of railcars. Where there is no rail, manual carts or tricycle cars are utilized for transport of rock and supplies.

Operational levels connect to declines that are driven at approximately 25° to 28°. Typical dimensions are 2.4 m W x 2.2 m H. These declines are equipped with narrow gauge rail and steps on one side for foot travel. The main purpose of these drives is haulage of mineralized materials and waste, and delivery of ventilation and other services such as water, compressed air, communications and electricity.

16.2.2.1 XHP Major mineralized veins being extracted at XHP are K13 and K14. The mining plan envisages mineralized materials being produced between the 340 mRL and 650 mRL, which includes nine levels in total. Current levels are 650 mRL, 610 mRL, 577 mRL, 540 mRL, 500 mRL, 460 mRL, 420 mRL, 380 mRL, and 340 mRL.

The new main adit PD590 will be employed for mine development in XHP mine. The internal shaft MSJ1 and internal decline MXJ3 will be connected to adit PD590 via internal decline MXJ6, providing access for mineralized materials, waste rocks and supplies.

Some of the existing development such as adits PD3 and PD650 were designed and constructed by the previous owner. They will only be used for personnel travel and as return airways.

The existing adits PD1 and PD2, and declines XJ0, MXJ1 and MXJ2 are located in the hangingwall area. Future excavation in the area may cause ground instability in these openings so they are to be abandoned.

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Table 16.1 summarizes the key elements of the main access system at XHP mine.

Table 16.1 Main Access System at XHP Mine

Adit Top Level Inter-Level Level Elevation Name Elevation (m) Access (m) Decline MXJ6 (has been 590, 577, 540, 500, 460 started yet) Adit PD590 590 Decline MXJ3 (underway) 460, 420, 380, 340 Internal Shaft MSJ1 577, 500, 460, 420, 380, 340 (underway)

Table 16.2 lists key characteristics of the existing and newly-designed adits, internal shafts, and declines at XHP Mine.

Table 16.2 Characteristics of Adits, Internal Shafts, and Declines at XHP Mine

Coordinates Elevation (m) Diameter/ Length Name Section Size /Depth Usages Notes X Y Top Bottom (m) (m) Return Air Adit PD3 3760411.00 37588647.00 602 1.8 x 1.8 Mainly, Existing Personnel Return Air Adit PD650 3760343.00 37588460.00 650 1.8 x 1.8 Mainly, Existing Personnel Transporting mineralized materials, Newly Adit PD590 3760445.00 37589153.00 590 2.2 × 2.4 waste, supplies, Designed equipment, Personnel; Intake air. Transporting Internal mineralized Newly Shaft 3760387.00 37588813.00 577 338 Ø 2.5 239 materials, Designed MSJ1 waste, Intake air. Transporting mineralized materials, Decline Newly 3760480.75 37589114.89 590 460 2.4 × 2.2 277 waste, supplies, MXJ6 Designed equipment, Personnel; Intake air.

Decline Personnel; Newly 3760382.55 37588696.45 460 340 2.4 × 2.2 284 MXJ3 Intake air. Designed

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Figures 16.1 and 16.2 show the XHP mine development system in composite plan and projection view respectively.

Figure 16.1 XHP Mine Development System in Composite Plan View

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Figure 16.2 XHP Mine Development System in Composite Long-Section View

16.2.2.2 XBG

The XBG mine is located approximately 6 km southeast of the XHP mine. Mineralized material is mainly mined from veins X1, X8, X9, X10, X11, X12 and X31.

Mine access for rock, materials, and personnel is provided by adit, internal shaft, decline, and surface shaft.

Adit PD807 and internal decline XJ807 provide the access to veins X10 and X11. Adit PD830 is used for access to veins X1 and X12, while adit PD967 is used for access to vein X1. Shaft SJ834, which is collared on surface, provides access to vein X31.

Adit PD825 and internal shaft SJ825 provide access to the upper part of veins X8 and X9 via three levels (825 mRL, 808 mRL, and 777 mRL). These access ways are already in operation.

The deeper parts of vein X8 and X9 can be accessed via decline XJ825, which is divided into two stages. The first Stage is from 820 mRL to 730 mRL, and the second Stage is from 730 mRL to 650 mRL. There will be four production levels in total for this area – 770 mRL, 730 mRL, 690 mRL, and 650 mRL. The existing adit PD825 and internal shaft SJ825t may be used as return airways in the future.

Table 16.3 summarizes the key elements of the main access system at XBG Mine.

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Table 16.3 Main Access System at XBG Mine

Adit Top Level Inter-Level Level Elevation Name Elevation (m) Access (m) Adit PD807 807 Decline XJ807 807, 767

Adit PD825 825 Internal Shaft SJ825 825, 808, 777

Adit PD830 830 n/a 830

Adit PD967 967 n/a 967

Shaft SJ834 834 n/a 834,800,777 Surface Decline 820 n/a 820, 770, 730 XJ825 (Stage 1) Surface Decline 730 n/a 730, 690, 650 XJ825 (Stage 2)

Table 16.4 lists key characteristics of the existing adits, shaft, internal shafts and declines at XBG Mine.

Table 16.4 Characteristics of Existing Adits, Shafts and Declines at XBG Mine

Coordinates Elevation (m) Diameter/ Length Name Section Size /Depth Usages X Y Top Bottom (m) (m) Adit 3,754,659.03 596,574.13 807 1.8 x 1.8 PD807 Explore and extract vein X9, X10, and X11, Decline 3,754,654.33 596,595.04 807 767 2.0 x 2.0 Return Air in the future XJ807

Adit 3,754,732.29 596,412.40 825 1.8 x 1.8 PD825 Explore and extract vein X8, and X9, Internal Return Air in the future Shaft 3,754,738.64 596,353.23 825 777 Ø 2.0 48 SJ825

Adit Explore and extract 3,754,608.93 595,388.99 830 1.8 x 1.8 PD830 vein X1, and X12

Adit Explore and extract 3,755,033.07 595,482.15 967 1.8 x 1.8 PD967 vein X1

Shaft Explore and extract 3,754,581.28 595,175.09 834 777 Ø 2.0 57 SJ834 vein X31, and X13

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16.2.3 Mining Method Shrinkage stoping is the mining method employed at the XHP mine and XBG mine. Resue stoping to minimize dilution is also proposed to be implemented in high-grade, narrow vein areas in the future. Typical vein widths are of the order of 1 m at XHP mine and 1.5 m at XBG mine.

16.2.3.1 Shrinkage Stoping A sill drive is initially driven along the vein at minimum extraction width and 1.8 m height. An access drive at 2 m W x 2 m H (conventionally a footwall drive) is also developed parallel to the vein at a stand-off distance of about 6 m. Crosscuts for mineralized materials mucking from draw points are driven between the vein and the strike drives at approximately 5 m spacing. Stoping blocks are generally of the order of 40 m to 60 m in strike length by 40 m to 50 m in height. Travelway raises that are also used for services are established between the levels at each end of the stope block. Waste packs are built on each void side of the raise as stoping proceeds upwards.

Jacklegs are used to drill a 1.8 – 2.0 m stope lift that is drilled and blasted as inclined up- holes with a forward inclination of 65 - 75° (“half-uppers”). The typical drill pattern has a burden of 0.6 – 0.8 m and spacing of 0.8 – 1.2 m, dependent on vein width. Holes are charged with cartridge explosives and ignited with tape fuse. The powder factor is about 0.4 – 0.5 kg/t. Stope blasting fills the void below with mineralized materials as mining proceeds upwards. Mucking from drawpoints occurs to maintain a stope working height of about 2 m. While mining is underway, only 30 – 40% of the stope mineralized materials may be mucked. When mining is complete, all mineralized materials are mucked from the stope, unless significant wall dilution occurs. The stope is left empty beneath a sill (crown) pillar of around 2 m thickness. Ventilation, compressed air and water are carried up the travel way raises to the stoping level. Loading of the mineralized materials from the draw points is by miners into rail cars, either using rocker-shovels or by hand. Figure 16.3 is a schematic of the shrinkage stoping method.

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Figure 16.3 Schematic of Shrinkage Stoping Method

16.2.3.2 Dilution and Recovery Factors

Designed dilution is of the order of 30%, with the average mining recovery factor at 90%.

16.2.4 Contractor Operation The XHP mine is operated using one contractor for mine development, production, and exploration, while the XBG mine is operated using Silvercorp’s own mining crew for all activities. In addition, Silvercorp provides its own management, technical services and supervision staff to manage the operations at the two mines.

16.2.5 Mineralization & Waste Haulage

16.2.5.1 XHP Current operations are mainly between 590 mRL and 340 mRL at XHP mine. Access to these levels is via adits plus declines and a skip shaft. All of the rock from each level is hoisted via the skip shaft and internal decline to adits, and then is transported either to a surface stockpile or the waste dump.

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Currently, the internal shaft MSJ1 is equipped with a JTP -1.2 X 1.0 winch and FJD 1.2 skip to meet the hoisting requirements of mineralized materials, waste and supplies. The hoisting capacity of internal shaft MSJ1 is estimated to be approximately 100 ktpa of mineralized materials and 50 ktpa of waste, on a schedule of 330 working days per year, 3 shifts per day and 8 hrs per shift.

At mining and development levels, the 0.7 m3 side-tipping railcars are pushed manually in the lateral drifts. At the level plat area of blind declines, the railcars are hoisted to adit levels by winches in groups of two units. In the adits, rail cars with mineralized materials or waste rocks are pushed manually to the surface.

The internal declines are also equipped with an XRC6-6/3D cage for personal transportation, with maximum capacity of 6 people at one time.

At surface, mineralized material cars are transported to the unloading stockpile; once unloaded, mineralized material is transported to the mill plant by haul trucks. Waste cars are tipped adjacent to the adit, where there is a temporary waste dump constructed as per the Chinese standard “Pollution Control Standard of Common Industry Solid Waste Disposal”. It is anticipated that a significant amount of future waste rock will be used for pavement and road upgrade for local villages. However, a permanent waste rock dump is planned to be built in the near future for major waste disposal.

Table 16.5 shows the main parameters for the declines/shafts and the winches at XHP.

Table 16.5 Main Parameters for Declines/Shafts and Winches at XHP Mine

Portal Decline/Shaft Top Bottom Dip (º) Length Model Power Hoisting capacity Internal 100 ktpa of mineralized Shaft Internal Shaft 577 338 90 239 JTP-1.2X1.0 75 kW materials, 50ktpa of MSJ1 waste Internal 90 ktpa of mineralized Internal Decline 590 460 28 277 JTP-1.6X1.25 110 kW materials, 30ktpa of Decline MXJ6 waste Internal 90 ktpa of mineralized Internal Decline 460 340 25 284 JTP-1.6X1.25 110 kW materials, 50ktpa of Decline MXJ3 waste

16.2.5.2 XBG Current operations are mainly between 590 mRL and 340 mRL at the XBG mine. Access to these levels is via adits, surface shaft and declines, plus internal declines. In the future, most of the rock from each level is hoisted from the decline XJ825 and shaft SJ834 to surface, and then will be transported either to the surface stockpile or the waste dump. Shaft SJ834 is equipped with a simply- constructed skip to hoist mineralized materials and waste.

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The decline XJ825 will be equipped with winches that can hoist a group of 2-3 railcars with capacity of 0.70 m3 each, providing service for hoisting mineralized materials, waste rock, materials and supplies. A man-cage will also used in the decline for personnel transportation. On mining and development levels, rock haulage from the stopes and development faces is by one-axle handcarts with pneumatic tires to the level plat area. All rock can then be loaded into the skip and hoisted to surface or to adits for further transport by motorized tricycle. A tracked transportation system is proposed to be constructed underground in the near future.

The hoisting capacity of decline XJ825 is designed to be approximately 60 ktpa of mineralized materials and 30 ktpa of waste, on a schedule of 330 working days per year, 3 shifts per day and 8 hrs per shift.

On surface, mineralized material cars are transported to the unloading stockpile; once unloaded, mineralized material is transported to the mill plant by haul trucks. Waste cars are tipped adjacent to the adit, where there is a temporary waste dump constructed as per the Chinese Standard “Pollution Control Standard of Common Industry Solid Waste Disposal”. As at XHP, it is anticipated that a significant amount of future waste rock will be used for pavement and road upgrade for local villages, and that, in the near future, a permanent waste rock dump will be constructed.

Table 16.6 outlines the main parameters of the declines/shafts and winches at XBG.

Table 16.6 Main Parameters of Declines, Shaft and Winches at XBG Mine

Portal Decline/Shaft Top Bottom Dip (º) Length Model Power Hoisting capacity 60 ktpa of mineralized XJ825 Stage 1 Decline 820 730 28 192 JTP-1.2X1.0 55 kW materials, 30 ktpa of waste 60 ktpa of mineralized XJ825 Stage 2 Decline 730 650 28 170 JTP-1.2X1.0 55 kW materials, 30 ktpa of waste 30 ktpa of mineralized SJ834 Shaft 834 777 90 57 JTK-0.8X0.6 25 kW materials, 20ktpa of waste

16.2.6 Equipment 16.2.6.1 Mine Equipment Almost all main equipment is provided by Silvercorp and maintained by the contractor.

Fixed plant is provided by Silvercorp at both mines and is predominantly domestically manufactured and locally sourced (Henan Province). The equipment manufacturers are well known and commonly used. Table 16.7 lists main equipment at the XHP and XBG mines.

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Table 16.7 Equipment at the XHP and XBG Mines

Mine/Camp Equipment Model Capacity Quantity Winch JTP-1.6 x 1.25 110 kW 2 Winch JTP-1.2 x 1.0 75 kW 1 Winch JTK-1.0 x 0.8 55 kW 2 K40(A) - 12 37 kW 1 Primary Fan K40(A) - 11 7.5 kW 1 Skip FJD1.2 1.2 m3 1 Shotcreter PC-5I 5 m3 /h 2 JK55-2NO.4 5.5 kW 5 Auxiliary fan JK58-4.5 11 kW 10 Loader Z-20AW 30 -40 m3/h 3 XHP Compressor LG2-10.5/7 55 kW 3 DF6-25x2 5.5 kW 2 DF6-25x4 11 kW 4 Water Pump DF12-25X12 30 kW 3 DF12-25X2 7.5 kW 3

S11-160/10-0.4 160 kVA 1

Transformer S9-100/10-0.4 100 kVA 1

KS11-400/10-0.4 400 kVA 1 Handheld Drill YT27 12

Power Switch Cabinet GGD2 30

Winch JTP-1.2 x 1.0 55 kW 2 Winch JTK-0.8 x 0.26 25 kW 2 Shotcreter PC-5I 5 m3 /h 2 JK55-2NO.4 5.5 kW 15 Auxiliary fan JK58-4.5 11 kW 10

LG2-10.5/7 55 kW 5 Compressor Flow:3m3/min;18.5 XBG 3 kW Water Pump D25-50X3 22 kW 6 Water Pump 50QW80-25-11.5 22 kW 5

S11-200/10-0.4 200 kVA 1

Transformer S11-400/10-0.4 400 kVA 1

KS11-630/10-0.4 630 kVA 1 Handheld Drill YT27 10

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16.2.6.2 Equipment Advance Rates Table 16.8 summarizes the advance rates assumed for the development and production activities at the XHP and XBG mines.

Table 16.8 Advance Rates

Development or Production Advance Schedule Rates Unit Rate Machine Type Jackleg – Levels ( Hand Mucking) m/mth 50 Jackleg (YT-27 ) Jackleg – Levels ( Mechanical Mucking) m/mth 100 Jackleg (YT-27 ) Jackleg - Stope Raises m/mth 40 Jackleg (YT-27 ) Jackleg – Shaft ( Mechanical Mucking) m/mth 55 Jackleg (YT-27 ) Jackleg – Declines ( Mechanical Mucking) m/mth 70 Jackleg (YT-27)

16.2.7 Manpower The workforce at the XHP mine and XBG mine is made up of company and contractor personnel. Contractors perform the mine development, production, and exploration activities at the XHP mine, while the company mining crew is in charge of the operation at the XBG mine. In addition, Silvercorp personnel are used for operation and maintenance of the process plant and surface workshop. Silvercorp provides its own management, technical services and supervisory staff to manage the mine operations. As of the time of this report, the XHP mine and XBG mine have 339 workers in total, including Silvercorp’s 238 staff and 101 contract workers. Tables 16.9 lists Silvercorp and contract workers at the XHP and XBG Mine.

Table 16.9 Silvercorp and Contract workers at the XHP and XBG Mines

Staff/Contract Workers Position/Location Management, Accounting, Company Administration 42 Sales Technical Services and Engineers, Geologist, 52 Supervision Staff Surveyors, Safety Others 43 Security, Maintenance workers Mill Plant 60 XHP Contractor Worker (Hengkun PD590, PD577 101 Engineering Ltd.) XBG Silvercorp Employed PD825, PD807,PD837， 41 Workers PD967 Total 339

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16.2.8 Ventilation Mine ventilation requirements are as per Chinese laws and regulations. Among the key ventilation regulations are: minimum ventilation volume per person (4 m3/min), minimum ventilation velocity (typically 0.25-0.50 m/sec dependent on location or activity), and minimum diluting volume for diesel emissions (4 m3/min/kW).

16.2.8.1 XHP The primary ventilation at the XHP mine is a pull ventilation system. The ventilation volume for the XHP mine is predominantly influenced by the minimum air velocity for the various development and production activities. The peak ventilation volume is estimated to be about 40 m3/sec, which is inclusive of about 15% air leakage.

The secondary ventilation consists of auxiliary fans for ventilating production faces, development faces and infrastructure chambers. A combination of forced air and exhaust ventilation is applied for long blind-headings. Stopes will be force ventilated using domestically manufactured fans via the access timber-cribbed travelway as required. The stope air returns to the upper level via a ventilation raise

Detailed ventilation routing for the XHP mine is described below:

Vein K13 Stopes: fresh air enters 340 mRL, 380 mRL, 420 mRL, and 460 mRL from adit PD590 via internal declines MXJ6 and MXJ3. Contaminated air is exhausted through ventilation raises to surface by a main axial fan, which is installed near the portal of adit PD3.

Vein K14 Stopes: fresh air enters 610 mRL, from adit PD590 via 577 mRL drift. Contaminated air travels through ventilation raises and is then exhausted to surface by a main axial fan, which is installed near the portal of adit PD650.

A K40 (A) - 12 axial ventilation fan will be installed in the entrance of PD3 Adit. Two 37 kW motors are in place, one is for active use and one for backup.

For PD650, a K40 (A) – 11 axial ventilation fan will be installed; two 7.5 kW motors are in place.

16.2.8.2 XBG Prior to the acquisition by Silvercorp, the XBG mine was dependent on natural ventilation. Upgrading to a mechanical ventilation system is occurring as the mine is further developed. Ventilation ducts with mechanical fans for fresh air intake are currently employed for production and development headings. Fans are domestically manufactured. For stoping, fresh air is delivered via the access timber cribbed travel way as required, with return air exiting to the upper level via a ventilation raise.

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16.2.9 Dewatering Mine dewatering is regulated by the requirements of the “Chinese Safety Regulations of Metal and Non-metal Mines”. Levels are self-draining with a nominal 0.3% gradient to shafts or blind declines.

16.2.9.1 XHP

Primary Dewatering

Dewatering is divided into two stages: the first stage is from 577 mRL to 590 mRL; the second stage is from 340 mRL to 577 level. The sumps at both 340 mRL and 577 mRL have a capacity of 80 m3 and 100 m3 respectively.

For the first stage, there are three centrifugal water pumps, model of DF12-25 X 2. The 577 mRL pump discharge capacity will be 12.5 m3/hr for a 50m head (7.5 kW). Two pipe lines with diameter of 65 mm are installed in internal decline MXJ6 from 577 mRL to 590 mRL.

For the second stage, there are three centrifugal water pump units installed in pump chamber at the bottom of internal shaft MSJ1: one unit is running, one unit is being maintained, and the other is on standby. The pump model is DF12-25 X 12, and the power is 30kW. The 340 mRL pump discharge capacity will be 12.5 m3/hr for a 300m head.

Two pipe lines with diameter of 65 mm are installed in internal shaft MSJ1 from 340 mRL to 577 mRL, one for working and the other for standby.

Pump chambers and sumps are in place at the bottom of the internal shaft and at 577 mRL. In case of a flood, water dams are set up at the entrance of the pump house in order to safeguard personnel and equipment.

Secondary Dewatering

Conventional electric submersible pumps are used for decline face dewatering on an as- needed basis. Water is stage discharged via a pump line to the nearest level pump station.

Levels are self-draining (0.3 % gradient) to internal shafts/declines.

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Table 16.10 XHP Water Pump Parameters

Pump Chambers Units Models Power Major Parameters MSJ1 Collar 1 3 DF12-25X2 7.5 kW Q=12.5m3/h, H=50m

MSJ1 Bottom 2 3 DF12-25X2 30 kW Q=12.5m3/h, H=300m Internal Decline MXJ 6 Collar 2 DF6-25x2 5.5 kW Q=6m3/h, H=30m

Internal Decline MXJ 6 3 4 DF6-25x4 11 kW Q=6m /h, H=60m Bottom

16.2.9.2 XBG At present, both shaft SJ834 and internal shaft SJ825 use conventional electric submersible pumps to pump water from underground to surface. The pump model is 50QW80-25-11.5, and the power of the motor is 22 kW.

In the future, dewatering in decline XJ825 will be divided into two stages: the first stage is from 730 mRL to 820 mRL; the second stage is from 650 mRL to 730 mRL. The sumps at both 730 mRL and 650 mRL have a capacity of 100 m3.

There will be three centrifugal water pump units installed in pump chambers at 650 and 730 level: one unit running, one unit under maintenance, and the other on standby. The pump model will be D25-50 X 3, power 22 kW. The pump discharge capacity is 25 m3/hr for a 150 m head.

Two pipe lines with diameter of 89 mm will be installed in declines and inclined haulage- way, one for working and the other for standby;

Table 16.11 XBG Water Pump Parameters

Pump Chambers Units Models Power Major Parameters Decline XJ825 730mRL 3 D25-50X3 22 kW Q = 25 m3/h, H = 150 m Decline XJ825 650mRL 3

Decline XJ807 1

Shaft SJ834 2 50QW80-25-11.5 11.5 kW Q = 25 m3/h, H = 80 m

Internal Shaft SJ825 2

16.2.10 Mine Infrastructure For details of water supply, power supply, compressed air, explosives and communications, please see Section 18.

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16.2.11 Safety The XHP mine and XBG mine safety is practiced as set out by Chinese health and safety laws and regulations, with all associated requirements to be followed during operation. The Safety and Environmental Departments ensure that all personnel receive mandatory safety training. Procedures are in place for enforcing Occupation Health and Safety policies and procedures, making mine safety recommendations and carrying out routine inspections.

A safety committee is maintained for each of the XHP and XBG mines. The committees are led by the general manager and include deputy general manager, mine manager, safety department supervisor, and mining contractor representatives. The committees are coordinated by the safety department of each mine site, and the mine management and the safety officers are required to have valid mine safety training certificates issued by the Provincial Bureau of Safe Production and Inspection. In addition, the mining contractor at the XHP mine is required to appoint one or two dedicated safety officers.

Silvercorp and the contractor supply personnel protective equipment (PPE) to their employed personnel at the mine.

In 2011, no lost time injuries were reported at the XHP mine or the XBG mine.

16.3 Production Mine operations are scheduled for 365 days of the year, but with production on a 330 days per year basis for both the XHP mine and the XBG mine. The production schedule is not fixed due to both mines still being in the pre-production period. Silvercorp anticipates that the production rate would increase as development is further advanced.

Table 16.13 shows reported production for both XHP and XBG from 2010 to May 2012.

Table 16.12 Production* Reported for XHP and XBG Mines (2010-2012)

Mine 2010 (t) 2011 (t) 2012 (t) Total (t) XHP 16,787 18,764 27,565 63,116 XBG 8,000 700 8,700 Total 71,816 *No reported metal grades were provided to AMC

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17 RECOVERY METHODS

Note: The word “ore” is used in this section in a generic sense and does not imply that Mineral Reserves have been estimated.

17.1 Introduction

The following two plants were operated by Luoyang Mining Group Co. (LMGC) until they were taken over by Silvercorp in June 2012.

Plant 1 is the 400 tpd, Shi-Tong-Gou Flotation Plant at XHP. It was designed at 400 tpd for gold-lead mineralization by Sandong Jingdu Engineering Inc in Dec 2008. The plant was then built and started operation in Dec 2009. The plant was then shut down in Aug 2011 due to a decrease in the gold grade. After it was taken over by Silvercorp in June 2012, the plant was modified to process lead-zinc mineralization by differential flotation.

Plant 2 is the 300 tpd, Xi-Bai-Gou Lead-Zinc Processing Plant at XBG. 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.

The development history is described below and summarized in Table 17.1.

Table 17.1 Summary of Processing Plants 1 & 2’s Capacities

Item Plant 1 (Gold-Lead) Plant 1 (Lead-Zinc) Plant 2 (Lead-Zinc)

Year in Operation Dec-09 June 2012 2009 Year Shut Down Aug 2011 2011 Operator LMGC Silvercorp LMGC Design Capacity (tpd) 400 400 300 Actual Capacity (tpd) 430 350 N/A Plant Availability (d/yr) 330 330 330 Feed Mineralization Gold-Lead Lead-Zinc Lead-Zinc

Tailings Pond TMF 1 (Shi-Tong-Gou) TMF 1 (Shi-Tong-Gou) TMF 2 (Xi-Bai-Gou)

The plants processed mineralized materials from local mines previously owned by LMGC in the Songxian County (Henan). The following sections describe the various feeds and products for Plant 1. Plant 2 was shut down in 2011 and is not discussed any further in this report.

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17.2 Ore and Concentrate Production from the Property

17.2.1 Gold-Lead Ore for Plant 1 (2009-2011)

From 2009 to August 2011, ore from the various mines in the local district were shipped to the mill-flotation Plant 1 by trucks. Table 17.2 summarizes the ore from the mines for July 2011. The table shows that the daily processing rate was about 430 tpd, which is higher than the design capacity of 400 tpd. The ore grades 0.75g/t Au and 0.76% Pb which is lower than that for the designed grades of 2.55g/t Au and 5.95% Pb. The silver grade of the ore was 35 g/t.

Table 17.2 Ore Supplied to the Processing Plant 1 (July 2011, dry base)

Wt. (t/day) Au (g/t) Ag (g/t) Pb (%) 430 0.75 35.0 0.76

Plant 1 was shut down in August 2011 due to the decrease in gold grade.

17.2.2 Lead-Zinc Ore for Plant 1 (after June 2012)

Since June 2012, Plant 1 was modified to process lead-zinc mineralization using differential flotation circuit. This is the same process as Silvercorp’s operation at the Ying Mine. Table 17.3 shows the average ore composition for June 2012. It indicates the ore grade is 1.31% Pb and 1.30% Zn which is lower than that reported in the lab testwork results documented in section 13.(Pb 2.73%, Zn 3.66%). The lab results were used for the design criteria. The silver grade is quite low.

Table 17.3 Ore Supplied to the Processing Plant 1 (June 2012)

Wt. (t/day) Pb (%) Zn (%) Ag (g/t)

350 1.31 1.30 25.8

17.2.3 Concentrate Quality and Average Metal Recovery

Plant 1 operated as a Pb-Au Flotation plant between 2009 and August 2011. Table 17.4 summarizes the lead-gold concentrate quality for July 2011.

Table 17.4 Product Quality for Plant 1 (2009-July 2011)

Grade Materials Au (g/t) Ag (g/t) Pb (%) Pb-Au Conc 33.19 1717 21.98

The results show that PbS concentrate grade of 21.98% meets the design target of 21.4%.

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Since June 2012, Plant 1 has operated as a Pb-Zn Flotation plant. Table 17.5 summarizes the average PbS and ZnS concentrate quality for Plant 1 during June 2012.

Table 17.5 Product Quality Plant 1 (June 2012)

Grade Materials Pb (%) Zn (%) Ag (g/t) PbS Conc 48.77 10.71 960 ZnS Conc 6.34 34.86 11.96

The results show that:

 Pb grade (48.77%) in PbS concentrate is lower than the design target of 60.98%.

 Zn grade (34.86%) is lower than the design target of 48.39%.

 A high level of zinc (10.71% Zn) was observed in lead sulfide concentrate, and high level of lead (6.34% Pb) in zinc sulfide concentrate was also reported. The contamination issue is due to the high integration of galena and sphalerite grains in the feed, which makes the grinding liberation very difficult.

17.3 Mill Plant 1 for Gold – Lead Mineralization Processing (2009-2011)

17.3.1 Process Flowsheet

General views of the Plant 1 can be seen in Figures 17.1 and 17.2. The flowsheet for the plant is illustrated in Figure 17.3.

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Figure 17.1 Outside View Plant 1: Shi-Tong-Gou Mill Flotation Plant

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Figure 17.2 Inside View Plant 1: Shi-Tong-Gou Mill Flotation Plant

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Figure 17.3 Flowsheet for Plant 1 (2009-2011)

The flowsheet includes the following major unit operations:

 Crusher circuit (one train)

 Ball mill grinding and Pb-Au flotation circuit (one train)

 Concentrate settling and dewatering (one train)

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17.3.2 Process Description

The overall process consists of crushing, grinding, gravity separation, gold cyanidation-CIP, flotation of lead-gold concentrates, and concentrate dewatering unit operations:

 Crushing circuit (closed circuit with two-stage crushers-screen: jaw crusher, one cone crusher, vibrating screen -12mm, dust collectors, fine ore storage bin) (one train 400 tpd).

 Two-stage ball mill circuits: (a) ball mill-screw classifiers circuit; (b) ball mill-cyclone classification (400 tpd).

 Flotation circuit (PbS-Au flotation circuit: rougher-scavenger-cleaner cells, chemical preparation tanks) (400 tpd).

 Pb-Au concentrate thickening-dewatering.

 Water make-up system.

 Tailings pond.

The following minor changes have been made to the original plant design:

 The gold cyanidation-CIP circuit was shut down due to a decrease in gold grade.

 A set of spiral-gravity separator system was installed at the back of the lead scavenger cells to process the tailings. This system can be operated on line or off line, depending on the gold grade in the tailings stream.

17.3.2.1 Crushing

 Crushing is in closed circuit, consisting of jaw-cone crushers with a vibrating screen. The primary jaw crusher (Model: C80) has a closed side setting of 80 mm. Discharge from the primary jaw crusher is conveyed to the 15 mm aperture vibrating screen (YAH1848).

 Mineralized material larger than 15 mm is conveyed to the secondary cone crusher (Model: GP 100SM cone crusher), which has a close side setting of 15 mm. Discharge from the secondary crusher is conveyed back to the 15 mm aperture screen. Discharge from the screen feeds storage bins with a live capacity of 100t.

 Dust from crushing and screening processes is collected under vacuum, captured in a baghouse and then transferred to a process tank for feeding as a slurry to flotation.

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17.3.2.2 Milling classification

There are two stage ball mill-classification circuits:

st  1 stage-ball mill (MQG2430)-screw classification (FG24); nd  2 stage-ball mill (MQY2140)-hydrocyclone classification (4 cyclones, ID250mm) The ball charge is made of Mn-steel balls, with diameters ranging from 60 mm to 120 mm. The target grind size is 60-70% passing 200 mesh and the overflow density is maintained at 40% solids by weight when introduced to the conditioning tanks ahead of lead-gold flotation.

17.3.2.3 Flotation Circuit (Lead Flotation)

 The ball mill discharge from classifier flows to the lead rougher conditioning tank, and then to lead rougher flotation cells. The lead flotation bank consists of one stage of roughing (3 of XCF4 cells), two stages of scavenging (11 of XCF4 cells) and three stages of cleaning (5 of SF1.2 cells).

 Lead scavenger tails flows to tailings pond.

17.3.2.4 Product Concentrating, Dewatering and Handling

 Lead concentrate slurries are diluted to 15% solids by adding water for natural settling. The diluted slurries flow to the settling containment concrete structures for settling.

 Settled slurry at the bottom (with approximately 50-60% solids by weight) is pumped to a settler for dewatering via natural evaporation. The moisture content of dewatered lead-gold concentrate is 5-8%. This concentrate is sold to the market.

17.3.2.5 Tailings Discharge

 Tailings from the lead scavenger flotation circuit are pumped into the tailings pond (TMF 1, Shi-Tong-Gou Dam) which is 1.5km away from the plant. Two slurry pumps (PZNB-80/2, one spare) are installed for tailings slurry transfer. 3  The total tailing capacity of this dam is 957,900 m , with an effective capacity of 670,500m3 or 904,005 t of tailings with 7.5 years life. The current elevation of the tailings dam is 427 m, and capacity is as high as 476 m.

 The plant recirculates the pond water from the settling pond under the starter dam.

 A crew of 6 people is monitoring the tailings dam. Reclaimed process water from the tailings pond is pumped (773m3/day) for reuse in the milling process.

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17.3.3 Metallurgical Performance (Plant 1, Lead-Gold, 2009-2011)

Table 17.6 lists the mass balance based on the original design for the No.1 Mill.

Table 17.6 Designed Mass Balance at the No.1 Mill (Dry Daily Based, 400tpd)

Mass balances are shown in Table 17.7 for July 2011.

Table 17.7 Product Quality and Mass Balance for Plant 1 (July 2011)

Yield Grade Recovery Materials (%) Au (g/t) Ag (g/t) Pb (%) Au (%) Ag (%) Pb (%) Pb-Au Conc 1.72 33.19 1717 21.98 76.83 83.38 51.43 Tails 98.28 0.18 5.92 0.37 23.17 16.62 48.57 Head Feed 100 0.75 34.99 0.76 100 100 100

The processing results show that:

 Pb and Au grade in the feed mineralization is lower than that used in the design criteria, so the concentrate yield ratio (1.7% vs 4.87%) is quite low. PbS concentrate grade (21.98%Pb) meet the design target of 21.4%.

 Operation lead (51.43%) recovery is higher than that (17.45%) from the lab tests. Operation gold (76.83%) recovery is slightly lower than the test results (Au 88.28%).

 Lead losses (49%) to the flotation tailings are quite high as mineralization is partially oxidized.

 Gold losses (21-23%) to the flotation tailings are significant in the case without cyanidation. But with the low values of gold in feed and therefore tailings AMC considers it reasonable that the cyanidation circuit was shut down.

17.4 Mill Plant 1 for Lead-Zinc Processing (after June 2012)

Since June 2012 when the mine and the plant were taken over by Silvercorp, Plant 1 was modified from lead-gold flotation to lead-zinc flotation at a rate of 400 tpd, by adding a zinc flotation bank. A Pb-Zn differential flotation flowsheet is shown in Figure 17.4.

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Figure 17.4 Flowsheet for Plant 1 (after June 2012)

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17.4.1 Flowsheet (Pb-Zn Flotation)

Figure 17.4 presents the modified flow sheet of No.1 Mill. The flowsheet includes the following major unit operations:

 Crushing circuit (one train)

 Ball mill and Pb/Zn flotation circuit (one train)

 Filtration and product handling circuit (one train)

17.4.2 Process Description (Pb-Zn Flotation)

The overall process consists of crushing, grinding, flotation of lead-zinc concentrates, and concentrate dewatering unit operations:

 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 for each Pb, Zn).

 Water make-up system.

 Tailings pond.

17.4.2.1 Crushing

No change has been made. See section 17.3.2.1.

17.4.2.2 Milling Classification

No change has been made. See section 17.3.2.2.

17.4.2.3 Flotation

 The O/F from classifier flows to the lead rougher conditioning tank, and then to lead rougher flotation cells. The lead flotation bank consists of one stage of roughing (4 of BF-6 cells), two stages of scavenging (2 of BF-6 cells, 2 of BF-6 cells) and three stages of cleaning (1, 1, and 1 of XCF-4 cells).

 Lead scavenger tails flow to zinc flotation. The zinc flotation bank consists of one stage of roughing, two stages of scavenging and three stages of cleaning, w i t h cells being the same size as in the lead circuit.

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17.4.2.4 Product Concentrating, Dewatering and Handling

 Both lead and zinc concentrates are diluted to 15% solids by adding water for natural settling. The diluted slurries flow to their respective settling containment concrete structures for settling (lead concentrate thickener NZS-18, zinc concentrate thickener NZS-9).

 The settled slurries at the bottom (with approximately 50-60% solids by weight) are pumped to a ceramic filter (lead concentrate filter TT-12-A3, 3m2; same type of filter for zinc concentrate-filter) for dewatering. The moisture content of dewatered lead and zinc concentrates is in the range of 8-10%, respectively. These products are sold to the market.

17.4.2.5 Tailings Discharge

 Tailings from the zinc scavenger flotation circuit are pumped into the tailings pond (TMF 1, Shi-Tong-Gou Dam) which is 1.5 km away from the Plant 1. Two slurry pumps (PZNB-80/2, one spare) are installed for slurry transfer. 3  The total tailing capacity of this dam is 957,900 m , with an effective capacity of 670,500m3 or 904,005 t of tailings with 7.5 years life.

 The plant recirculates the pond water from the settling pond under the starter dam.

 A crew of 6 people (2 x 3 shifts/day) is monitoring the tailings dam. Reclaimed process water from the tailings pond is pumped (773 m3/day) for reuse in the milling process.

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17.4.3 Metallurgical Performance (Plant 1, Lead and Zinc after June 2012)

Table 17.8 lists the mass balance based on the original design for the No.1 Mill.

Table 17.8 Designed Mass Balance at the No.1 Mill (Daily Based, Option 3)

Yield Grade（%） Recovery（%） Materials （） % Pb Zn Pb Zn

PbS Concentrate 2.31 60.98 8.24 52.19 5.20 ZnS Concentrate 1 (PbS Scavenger 2.43 6.45 48.39 7.39 32.05 conc) ZnS Concentrate 2 2.54 3.31 48.94 3.11 33.94 (ZnS Cleaner conc) PbO Concentrate 1.04 35.12 3.56 13.56 1.01

Tails 91.68 0.70 1.11 23.75 27.80

Head Mineralization 100.00 2.70 3.66 100.00 100.00

Mass balances have been shown in Tables 17.9 for June 2012.

Table 17.9 Mass Balance for Plant 1 (June 2012)

Yield Grade Recovery Materials (%) Pb (%) Zn (%) Ag (g/t) Pb (%) Zn (%) Ag (%) PbS Conc 1.38 48.77 10.71 960 51.38 11.37 51.35 ZnS Conc 1.56 6.34 34.86 11.96 7.55 41.83 0.72 Tails 97.06 0.65 0.63 12.74 41.07 46.80 47.93 Head Feed 100 1.31 1.3 25.8 100 100 100

The processing results show that:

 Pb grade (48.77%) in PbS concentrate is lower than the design target of 60.98%. Pb recovery (51.38%) in PbS concentrate is close to the design target of 52.19%.

 Zn grade (34.86%) and recovery (41.83%) are slightly lower than the target Zn grade of 48.39% and 66% recovery.

 Low zinc and lead recovery is due to low ore grade, the ore feed is partially oxidized with fine intergrowths of galena/sphalerite grains in the feed ore. High contamination of zinc (10.71% Zn) in lead sulfide concentrate and high lead (6.34%Pb) in zinc sulfide concentrate is also due to the fine intergrowths of galena and sphalerite grains in the feed.

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17.4.4 Sampling (Plant 1)

For metallurgical accounting purposes, a set of five samples are usually taken every eight hour shift for a total of 12-16 samples per 24 hour day. The shift samples include flotation feed from the classifier overflow, lead-gold concentrate (2009-2011), lead and zinc concentrates (after June 2012) from the 3rd cleaners, and lead and zinc tailings from the last scavengers.

17.5 Process Control and Automation

There is no centralized automation station or control room for overall plant process monitoring or control. Operation control is done locally, e.g.:

 Mineralization feed to ball mill is controlled via an electronic scale and water addition is controlled via slurry density and experience.

 Chemical dosages are controlled via a localized PLC system for each set of equipment. Chemical dosage is adjusted in a narrow range (around the default target or setting value), based on assay feedback (each half hour) to handle process upsets such as mineralization feed changes.

 Automatic sampling of key metallurgical accounting streams e.g. flotation feed, concentrates and tailings.

 A central control room in the grinding-flotation building from which TV imaging of key points in the production flow can be monitored.

 To help process monitoring and control, samples are taken every 0.5 hr for the purpose of quality control, mass balance and recovery calculation. The planned level of process control and automation is basic but adequate, recognizing that the process separation is complex and that operating labour to monitor process variables is inexpensive and plentiful.

17.6 Ancillary Facilities

17.6.1 Laboratory

The laboratory is equipped with the usual sample preparation, and fire assay, wet chemistry and basic photometric analytical equipment, as well as crushing, grinding, flotation, and gravity separation, and metallurgical testing equipment. The laboratory processes up to 50- 80 samples per day.

It also conducts routine analysis of mineralization and concentrates as well as water quality and other environmental testing. It also provides a technical service to the processing plant in monitoring plant conditions, and solving production problems and investigating processes to assist with the improvement efforts.

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Silvercorp’s QA/QC check procedures include inserting standards in the sample batches submitted to the labs on a regular basis and submitting duplicate pulps to an independent external lab on an intermittent basis.

17.6.2 Maintenance Workshop(s)

Daily maintenance requirements are serviced through section specific workshops. Each workshop is equipped with a crane, welding capability and basic machine-shop facilities. More extensive maintenance and major overhaul needs are met through use of appropriate contractors.

17.7 Key Inputs

17.7.1 Power (Plant 1)

Power design for Plant 1 is:

 Mill power is drawn from the Henan Province power authority grid. It is transformed from 10,000 V to 400 V by a 400 KVA transformer.

 Total mill power consumption is 49.8 kWh per tonne of mineralization.

 Total installed power amounts to 2,546 kW (includes standby equipment) and the estimate for actual power drawn is 830 kW which corresponds to 6.58×10x6 kWh per annum. 17.7.2 Water Usage and Mass Balance for Plant 1

The water usage includes:

 Fresh water used for cooling, reagent preparation and flotation.

 Recycle water used for ball mill and flotation.

 Water recycled from the tailings pond back to the recycle water tank.

Water balance for Plant 1 to process either the Pb-Au mineralization or Pb-Zn mineralization is very similar:

 The fresh water usage is around 247 m3/d, while the rest is made up by recycle water 1,518 m3/h from thickener and tailings pond.

 Total water usage is about 1,765 m3/hr, recycle ratio is 1324/1765= 75.0%.

17.7.3 Flotation Reagents (Plant 1)

Flotation chemicals used in processing Pb-Au mineralization or Pb-Zn mineralization at Plant 1 are very similar for lead flotation, except the chemicals used for zinc flotation.

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The reagents used in both cases include:

 Depressant/modifiers: 1-Sodium sulphide, 2-Zinc sulphate, 3-Sodium sulphite, 4- Copper sulphate.

 Collectors: 1-Di-ethyl dithiocarbamate, 2-Ammonium dibutyl dithiophosphate, 3- Butyl xanthate.

 Frother: no. 2 oil (added directly).

Reagent preparation and application of chemicals are described below:

 Reagent storage and mixing is located adjacent to the grinding/flotation plant and comprises a storage area with hoisting equipment to lift bags and drums through into the mixing area.

 From the mixing area the reagents are pumped up to the dosing station located above the flotation section for dosing and gravity feeding to the various addition points.

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17.8 Summary

A preliminary summary is below based on limited data from the plant commissioning work.

Plant 1 is the Shi-Tong-Gou plant. It processed lead and gold ore between 2009 and 2011. Processing capacity in 2011 was 430 tpd which was higher than the design capacity of 400 tpd. The grade of lead concentrate was 21.98% Pb which was close to the design target of 21.4% Pb. However, lead recovery (51.43%) is higher than the design target (17.45%), while gold (76.83%) recovery was slightly lower than the design target (Au 88.28%).This was due to the poor quality of feed mineralization quality (partially oxidized, low gold grades) and metal losses to the tailings.

After June 2012, the Shi-Tong-Gou plant processed lead and zinc ore. The plant has been under commissioning and optimization trial stage since June 2012.

 The processing capacity of 350 tpd is slightly lower than the target 400tpd. It is expected the capacity will be improved as a result of Silvercorp’s ongoing optimization study.

 Lead and silver recovery targets are being met, although zinc recovery is lower than the design target. This is attributed to low zinc feed grade and high zinc losses to the lead concentrate due to intergrowths of sphalerite grains with galena grains.

 Similarly, concentrate yield ratio and grades from the lower grade mineralization feed are below design targets due to the significantly lower feed grades.

 The challenge is to maintain superior metallurgical performance on lower grade feedstock.

Plant 2 is the Xi-Bai-Gou, Pb-Zn processing plant. It had a processing capacity of 300 tpd and was shut-down in 2011. Plant 2 is not discussed in this report.

17.9 Recommendations

AMC recommends that at Plant 1 at XHP, only just re-commissioned following the modifications to install zinc flotation, an intensive campaign of plant sampling and analysis be carried out in parallel with laboratory testing of plant feed at the time of sampling in order to verify that the plant is performing to expectations for the ore mineralogy being treated.

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18 PROJECT INFRASTRUCTURE

18.1 Tailings Management Facility (TMF)

18.1.1 Overview

The particulars of the tailings dams at Songxian are outlined in Table 18.1. TMF 1 (Shi- Tong-Gou tailings pond) which was designed by San-Dong Ying-Tai Gold Mine Engineering Inc (SYGME) was built in 2009. This facility has served Plant 1 with a 400 tpd Au-Pb mill from 2009 to 2011 and Pb-Zn mill since 2012.

The TMF 2 (Xi-Bai-Gou tailings pond) which was designed by San-Men-Xia Gold Mine Engineering Inc, was built in 2008. This facility serves Plant 2 with a 300-400 tpd Pb-Zn mill

(was down in 2009). The two facilities designs are very similar.

Table 18.1 Outline of the Two TMFs

TMF#1 (Shi-Tong-Gou) TMF#2 (Xi-Bei-Gou) Unit Gold Mine - XHP Project Pb-Zn Mine –XBG Project Year Built 2009 2008 Start Operation Dec 2009 2008 Total Volume (Mm3) 0.9579 0.6910 Working Volume (Mm3) 0.6705 0.5283 Service Life (yr, design) 7.5 5.2 Service Left (yr) 7.3 5.2 (mineralized Gold-Lead Mill Lead-Zinc Mill Plant Served materials, tpd) Plant (400tpd) Plant (300-400tpd) Tailings Rate (tpa, dry) 120,534 108,000 The rates for production and tailings deposition mentioned in this table are as per original design. Average daily production rates in the LOM plan fall within the rates indicated above.

This section describes the site, tailings properties, TMF sizing and design, tailings transfer, and water balance – recycle:

 Mainly TMF 1 for Plant 1 for the two periods of (1) 2009-2011 for lead-gold flotation by LMGC; and (2) Since June 2012 for Pb-Zn mineralization flotation by Silvercorp;

 TMF 2 is not covered in much detail in this report since it has not been in use since 2011 when Silvercorp acquired the property.

The TMF 1 design covers:

 Starter dam

 Trench, seepage collection, water decant system

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 Reclaiming and water recycle system

 Geotechnical, safety and risk assessment

18.1.2 Tailings Properties

Plant 1 (Gold-Lead Flotation Plant, 2009-Aug 2011)

Tailings properties (mainly from lead sulfide scavenger flotation circuit) are summarized below:

3 3  Dry solids: density 2.74 t/m , bulk density 1.82 t/m .

 Tailings slurry: before deposition - weight percent solids of 30.0% with slurry density of 1.35 t/m3; after deposition in the pond - solids density 49% by weight; S.G. 1.45 t/m3.

 Tailings particle sizing: 55% -75 µm (200 mesh), average diameter 65- 74 µm. A detailed particle size distribution (PSD) analysis is summarized in Table 18.2.

 Clay content is about 10-15%wt by weight. The compaction and ultimate density is normally quite sensitive to the moisture content. The optimum moisture can be fairly tightly constrained in the +/- 1-2% range. Shear tests are used for the internal strength of the tailings, which is important for the dam stability analysis.

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.

Table 18.2 Tailings PSD1 and Compositions*

Compositions Distribution Size Range Yield (%) Pb (%) Zn (%) Pb (%) Zn (%) (mm) 0.1 14.73 0.2 0.19 6.85 9.03 -0.026 15.18 0.27 0.23 9.49 11.11 -0.037 21.31 0.36 0.27 17.81 18.73 -0.018 21.57 0.62 0.4 31.1 27.83 -0.009 14.9 0.57 0.38 19.75 18.26 -0.01 12.31 0.52 0.38 15.00 15.04 Sub-total 100 0.43 0.31 100 100 *Measured by the UIM, 1Particle size distribution (PSD)

Water chemistry is shown in Table 18.3. About 75% of the process water is recycled back to the mill plant (refer to Section 17.7.2).

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Table 18.3 Chemical Compositions for Pond Recycle Water

1 Element Pb Zn Cu S2- Sulphate COD Org carbon pH Level 1.95 1.24 0.07 0.25 68 38.8 5.03 7.9 (mg/l)

1Chemical oxygen demand (COD)

Plant 1 (Lead-Zinc Flotation Plant, Since June 2012)

Tailings properties (mainly from lead sulfide rougher flotation circuit) are summarized below:

3 3  Dry solids: density 2.90 t/m , bulk density 1.88 t/m .

 Tailings slurry: before deposition – weight percent solids of 28.0% with slurry density of 1.22 t/m3; after deposition in the pond - solids density 49% by weight; S.G. 1.45 t/m3.

 Tailings particle sizing: 65% -75 µm (200 mesh), average diameter 45-50 µm. A detailed particle size distribution (PSD) analysis is summarized in Table 18.4.

 Clay content is about 8-12%wt by weight.

The compaction and ultimate density is normally quite sensitive to the moisture content. The optimum moisture can be fairly tightly constrained in the +/- 1-2% range. Shear tests are used for the internal strength of the tailings, which is important for the stability analysis.

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.

Table 18.4 Tailings PSD1 and Compositions*

Water chemistry is shown in Table 18.5. About 75% of the process water is recycled back to the plant (refer to Section 17.7.2).

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Table 18.5 Chemical Compositions for Pond Recycle Water

1 Element Pb Zn Cu S2- Sulphate COD Org carbon pH

Level(mg/l) 0.75 1.25 0.06 0.35 62 36.8 4.05 7.5

1Chemical oxygen demand (COD)

18.1.3 Site Description

TMF 1 is located adjacent to Plant 1 (1.5 km), and TMF 2 is located adjacent to Plant 2 (0.5 km). The distance between Plant 1 and Plant 2 is about 16 km.

 TMF 1: The TMF starter dam is located within the lower reaches of Shi-Tong-Gou valley.

 TMF 2: The TMF starter dam is located within the lower reaches of Xi- B a i - Gou valley.

TMF 1 and 2 are located on the south edge of North China Platform, within the Xiaoshan- Lushan arch fault fold cluster area and the Feiwei Earthquake Zone. Historically the area has been subjected to earthquakes with recorded magnitudes of less than four or five. Songxian County has been classified as grade 6 in terms of seismicity, and as such a basic design seismic acceleration of 0.05 g is required to be taken into consideration in the design.

The seismic rating is in accordance with the China Seismic Intensity Scale (CSIS), which is similar to the Modified Mercali Intensity (MMI) scale used fairly generally now and which measures the effect of an earthquake at the surface, as opposed to the now obsolete Richter magnitude scale which measures the energy released at source. In effect, CSIS grade 6 is similar to VI (Strong) on the MMI, although the CSIS scale also specifies peak acceleration and peak velocity. The 0.05 g acceleration cited above for design purposes would correlate more with MMI V (Moderate) according to the United States Geological Service (USGS) Earthquakes Hazard Program. AMC recommends that this be clarified.

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18.1.4 TMF Design, Construction, Operation and Safety Study

18.1.4.1 Design: TMF 1

The following criteria and parameters are based on the design done by the San-Dong Ying-Tai Gold Mine Engineering Inc (Report dated December 2008):

 Storage capacity calculations for the valley site indicate an estimated available volume of 0.67 Mm3. It is assumed that, at the dry density of 1.49 t/m3, this volume is equivalent to 1 . 0 Mt of tailings.

 At a rate of deposition of 120,534 tpa, the calculated service life is approximately 7.5 years.

 In December 2009, the dam elevation was 427 m as new dam.

 In August 2011 when Plant 1 was shut down, the dam elevation was 430 m with the build-up of limited tailings from the previous 6 – 7 months of production with lead-gold mineralization processing. Plant 1 was re-opened in June 2012 by Silvercorp to process lead-zinc mineralization. So far, a total of 20,000t of mineralized materials has been processed since 2009.

 At the end of 7. 5 years of service life, it is expected that the dam’s maximum elevation will be 476 m at design production rates. At a deposition rate of 6 m per year, this translates to 47 – 49 additional meters of available height. Figures 18.1 to 18.2 show the status of TMF 1 as of 14 February 2012.

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Figure 18.1 Shi-Tong- G o u TMF 1

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Figure 18.2 Shi-Tong-Gou TMF 1 Downstream View of Starter Dam

18.1.4.2 Design: TMF 2

TMF 2 was designed by San-Men-Xia Gold Mine Engineering Inc (Report dated August 2008). Figures 18.3 to 18.4 show the status of TMF 2 as of 15 February 2012.

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Figure 18.3 Xi-Bai-Gou TMF 2 Tailings Discharge

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Figure 18.4 Xi-Bai-Gou TMF 2 Downstream View of Starter Dam

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18.1.4.3 Dam Classifications

Table 18.6 shows the Chinese system of dam classifications. This system is based on height and volume of the dam. Both TMF 1 and TMF 2 are classified as Grade IV facilities based on the dam height (30-60m).

Table 18.6 Criteria for Dam Grade Definition (PRC)

Dam Grade Level Volume V（x10,000 m3） Dam Height（m） I V>10,000 and/or H>100 II V≥10000 H≥100 III 1000≤V＜10000 60≤H＜100 IV 100≤V＜1000 30≤H＜60 V V＜100 H＜30

Site-specific risk assessment such as geotechnical risk has been carried out by Henan Zhengzhou Ai-Wei Dam Safety Assessment Inc in May 2012 (Report file # 2012-14002).

18.1.4.4 Starter Dam (TMF 1)

The TMF consists of an initial earth retaining dam, behind which the tailings are stored. These tailings are delivered via a pipeline. The tailings are allowed to drain to the desired dry density. The same tailings are used to raise the dam gradually until the allowable height and volume is reached.

The starter dam is a homogeneous rock-filled dam. Starter dam embankment slopes are designed at 1:2. Construction lifts are to be 2 m high. The preliminary design requires the downstream slope of the tailings to be formed at an overall slope of 1:4.5.

The starter dam crest elevation is 427 m. The design information indicates that the crest design width is 2 m, and that it has a length of 80 m. The TMF is to be constructed by the upstream method of construction with a height of 49 m, to a maximum crest elevation of 476 m. The overall height of the TMF facility will be 49 m (23+26=49 m).

18.1.4.5 Trench Design for Surface Water (TMF 1)

Surface water drainage features have been incorporated into the preliminary design of the TMF. Immediately downstream of the starter dam embankment there is a surface water cut- off trench (cross section area 400 mm x 400 mm). There is provision in the preliminary design for the construction of cut-off trenches (cross section area 600 mm x 600 mm) 2 m above the starter dam embankment to prevent scour of the abutments by rainwater run-off.

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18.1.4.6 Water Decant System Design (TMF 1)

The results of a hydrology study are presented in the Preliminary Design report, and the water balance has been evaluated.

 Provision has been made to remove supernatant water from the TMF via ten vertical reinforced concrete decant structures. Water from the decant structures is diverted around the starter embankment via a 3.0 m diameter by 304 m long reinforced concrete lined drainage culvert with a 5.3% grade. The water discharge flow capacity is about 17. 13 m3/s, which is higher than that required (16 m3/s) to meet a 1 in 200 year recurrence interval for design purposes (probable maximum flood criterion).

 The fact that the water diversion does not pass through the starter dam embankment is considered to be a positive feature.

18.1.4.7 Seepage Collection Design (TMF 1)

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 concentrator.

The preliminary TMF design provides for a cut-off drain to be constructed 200 m downstream of the starter dam embankment at an elevation of 446 m. High strength nylon injection moulded 150 mm diameter seepage collector pipes (4 of PVC pipes, each 36m long), at a spacing of 4 m and inclined upwards at 1%, have been incorporated into the design of the cut-off drain. The cut-off drain design includes provision for a gravel (300 mm layer of 15 mm to 50 mm particle size) and a 200mm layer of sands pack filter encased in a geo-fabric (200 g/m2). The intention of this cut-off drain is to capture seepage from the TMF and also to improve stability under dynamic conditions by lowering the phreatic surface.

18.1.4.8 Reclaim Pond Design (12 m x 7 m x 3 m, TMF 1)

A “reclaim pond” was constructed below the starter dam. This is a water reclaim pond formed by the construction of an earth embankment. The stated intention of the water reclaim pond is to intercept all the seepage and discharge water of the tailing reservoir dam during normal operation to realize zero discharge for no rainfall seasons. About 75% of water is recycled back to the mill plant.

The reclaim and settling pond size (12 m x 7 m x 3 m) is about 240 m3. Two pumps (one spare pump) are used to pump the recycle water 773 m3/day back to the plant.

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18.1.4.9 Geotechnical Stability, Safety and Risk Assessment Study

The Henan Luoyang Yuxi Hydrological and Geological Reconnaissance Company prepared a geotechnical report titled Reconnaissance Report upon Geotechnical Engineering (2011). This report was prepared during the construction of the tailings starter embankment, when the foundation had been prepared and in accordance with recommendations given in the Preliminary Design report.

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 too. A safety and reliability analysis for the TMF has been carried out in accord with the Safety Technical Regulations for Tailings Ponds (AQ2006-2005) and under the Grade III requirements. These stipulate minimum Factors of Safety, as determined by the Swedish Circular Arc Method for assessing the potential for slip rotation failure, in the 1.05- 1.20 range. Although the calculated factors of safety are generally around 1.3 (minimum), the method used is now considered outdated and industry practice would be to conduct finite element numerical modelling, even if just in two-dimensions. It is noted that the quoted factors of safety are consistent with Chinese practice requirements.

18.1.4.10 Site Monitor Stations

For each TMF, survey monitoring stations have been established at regular intervals along the embankment crest.

18.1.4.11 Tailings Pond Operation and Management

According to mine management, each TMF is staffed by a total of 2x3 (3 shifts/day) = 6 people, including a safety/tailings engineer. The staffing level met the national standard, and the inclusion of tailings engineers is consistent with good practice.

18.1.5 Tailings Transfer to the Ponds (TMF 1)

Tailings (1,176 m3/day) and other water streams (totally 1176 m3/day, 49 m3/hr) from Plant 1 are being discharged into the TMF 1 via two PVC pipes (DN150, 1500m) under gravity from the crest of the starter dam.

18.1.6 Water Balance Considerations

Water usage and mass balance for Plant 1-TMF 1 and Plant 2-TMF 2 have been respectively discussed in section 17.7.2. About 75% of the process water is recycled back to the plant. Zero discharge is the production target for no rainfall seasons.

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18.2 Waste Rock Dumps

A waste rock dump is located outside each portal at both of the XHP mine and the XBG mine. Waste rock from each level is hoisted to portals through adits or surface shaft, and trucked to the waste dump near the portal.

In order to extend the life span of these dumps, part of the waste is transported out of the mine site for road construction and other usages. Based on the calculation, approximately 8405m3 of waste has been moved out for road construction by the end of May 2012. Waste rock is also consumed for local construction work such as hardstand areas, retainer walls and other miscellaneous infrastructure foundations.

It is also proposed that waste could be disposed of into the shrinkage stope voids to increase the ground stability and reduce transportation costs.

Waste dumps for the XHP mine and the XBG mine are listed in Table18.7.

Table 18.7 Waste Dumps at the XHP + XBG mines

Mines Portal Total Capacity ( m3) PD590 10,200 XHP XJ0 9,000 PD825 7,000 PD830 9,000 XBG PD967 5,000 SJ834 4,500

The surface infrastructure of XHP mine is shown in Figure 18.5.

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Figure 18.5 XHP Mine Surface Infrastructure Layout

18.3 Power Supply

18.3.1 XHP Mine

A 10kV high voltage line from Dazhang 35/10kV substation, 17 km northwest of the XHP mine site connects to a substation at the mine site. The substation is equipped with a high- voltage dropout protection cabinet and a low-voltage switch cabinet. A KS11-400-10/0.4 transformer is installed to supply power to the underground mining operation. Two transformers (model number S9-100-10/0.4 and S11-160-10/0.4) provide power to the surface maintenance plant, equipment and the living area. Ten low-voltage power distribution cabinets are located in the underground switch-board chamber. A ground- neutral system is implemented for both of the surface transformer and the underground transformer. 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 total capacity of this unit is 300KVA.

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18.3.2 XBG Mine

A 10kV high voltage line from Chantang 35/10kV substation, 10 km northwest of the XBG mine site connects to a substation at the mine site. The substation is equipped with a high- voltage dropout protection cabinet and a low-voltage switch cabinet. A KS11-630-10/0.4 transformer is installed to supply power to the underground mining operation. Two transformers (model number S11-400-10/0.4 and S11-200-10/0.4) provide power to the surface maintenance plant, equipment and the living area. Ten low-voltage power distribution cabinets are located in the underground switch-board chamber. A ground- neutral system is implemented for both of the surface transformer and the underground transformer. 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 total capacity of this unit is 200KVA.

18.4 Compressed Air

Compressed air is primarily used for drilling blast holes using jacklegs in all stopes and conventional development faces. There are some minor uses for shotcreting, and blast hole cleaning.

At both of the mine sites, the compressor plants are located adjacent to each portal and a two-stage electric piston configuration is set to these compressors. Compressed air is reticulated via steel pipes of varying sizes depending on demand to all levels and to the emergency refuge stations.

18.5 Roads

18.5.1 XHP Mine

The XHP mine including the mine site, camp complex, local Silvercorp’s administration office and the mill plant is located 32 km southwest of the Songxian County. The mill plant for the XHP mine is connected by the Luoyang-Luanchuan Express Way to the county centre. The company built a 1 km long and 6m 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.

18.5.2 XBG Mine

The XBG plant is located about 70 km south of Songxian County, and can be accessed by a concrete road. The distance from Plant 1 (XHP plant) to Plant 2 (XBG plant) is approximately 16 km, and these two plants are connected by a concrete road.

The distance between Plant 2 at XBG and all portals in the XBG mine site is approximately 1.0 km to 2.0 km mill plant and the portals are connected by concrete and gravel roads.

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All these roads providing service for XHP mine and XBG mine are constructed with drainage ditches and trees.

18.6 Transportation

Currently, mineralized materials is brought to surface via declines equipped with winches and manually pushed rail cars at the XHP mine while motor tricycles are employed for mineralized materials transport at the adit at the XBG mine. Haulage trucks are used at both mines to transport mineralized materials, mine supplies and concentrate.

The truck capacities for transporting mineralized materials are 20 tonne and 4 tonne at the XHP mine and the XBG mine respectively. The final products from the mill plants are lead and zinc concentrates, which are transported by truck to local smelters located within a 300 km radius.

18.7 Water Supply

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

Silvercorp conducts routine tests and monitors for water quality to ensure the water meets safety and sanitary requirements.

Water from the tailings areas is substantially recycled as process water; make up water is sourced from nearby creek sources.

18.8 Waste Water and Sewage Treatment

There are three sources of waste water identified at XHP mine and XBG mine:

 Mining Activities

 Mineral Processing

 Domestic Sewage

At both the XHP and XBG mines, underground water is pumped to a surface water pond via the mine portals after settling in underground sumps. This water is recycled and used for site dust suppression.

The overflow of tailing water from two TMFs is collected in designated settling ponds downstream from the tailing dams. The clarified water is then pumped back to the water tank in the mill plant area for processing reuse. No tailing water is discharged to the environment.

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Sewage water from living areas is treated separately with a designated treatment system. The treated water has met the criteria of water reuse and is reusable for landscape watering. The extra treated water would be then discharged to the environment.

18.9 Mine Dewatering

Mine dewatering is undertaken in accordance with the Chinese Safety Regulations of Metal and Non-metal Mines. Underground water inflows from the two mines are listed in Table 18.8 below.

Table 18.8 Estimated Water Inflow from the two Mines

Maximum water flow Average water flow Mines 3 3 (m /day) (m /day) XHP 132 80 XBG 340 160

All water pumps can discharge the maximum water inflow of the day within 20 hours, with the exception of when pumps are being maintained. Underground sump capacity is 6-8h at the average water inflow for both mines.

Two pipe lines with the same size are installed in internal shafts or declines at each of the mines. One line is active and the other is for standby.

See also Section 16.10 for detailed water discharge equipment.

18.10 Site Communication

At the XHP and XBG mine, the surface communications is via landline service from China Network Company and mobile phone services from China Mobile / China Unicom. Internet is also available at the mine sites.

Each mine site has its own duty room with dispatching facilities and switchboard. The station could communicate with all the working faces and refuge chamber in the underground directly.

18.11 Camp

In each of the mine and mill sites, the camp infrastructure consists of dormitory and administration buildings which are equipped with dining rooms and washrooms for Silvercorp’s own management, technical personnel and contracted workers. Steel housing structures including dining rooms and washrooms are built adjacent to each portal providing living facility for the mine contractor workers at the XHP mine site. Currently there are no contract workers at XBG mine.

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18.12 Dam and Channel

A dam and diversion channel is planned to be built at each of the mines to prevent storm and heavy rainfall from washing out surface infrastructures and the waste rock dump. The diversion channel is located in the vicinity of the shaft collar to protect the collar.

18.13 Surface Maintenance Workshop

Each mine has a maintenance workshop in which the following auxiliary services are provided:

 Tire processing, maintenance and servicing

 Welding

 Electrical

 Tools, parts and material warehouse

The repair workshop is mainly responsible for maintenance of production equipment, vehicles, processing and some components, and the processing of emergency parts. Mechanical Maintenance Facilities are composed of mining equipment maintenance workshop, equipment and spare parts store, dump oil depot, tramcars maintenance workshop and stockpile yard.

There are no underground workshops currently for either mine.

18.14 Explosives Magazine

Each mine has an explosives magazine and detonator storage house with strict security management. The structure is isolated from the main camp facility which meets local safety regulations. Each magazine is gated and guarded by two security persons at the XHP mine and the XBG mine. Strict security is applied to the magazine area. All explosives tubes and detonators are labelled with barcodes, which are scanned before release from the magazine for security audit.

18.15 Fuel Farm

Diesel fuel is used for mobile mine equipment, some small trucks and surface vehicles at the XHP and XBG mines.

There are small fuel tankers in the mine site providing fuel for tricycle trucks and mobile equipment at each of the mine sites. The fuel storage facility is located down-wind from the mine air intake fans and a reasonable distance from buildings, camp and mine portal based on the safety considerations. Containment for storage of fuel is constructed in the vicinity of the diesel generators and fuel dispensing facilities in case of spill. The lined containment

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area is constructed such that spills are confined and can readily be cleaned, and so that the need for extensive and costly remediation work can be avoided during site closure.

18.16 Mine Dry and Administration Building

At each mine site, the dormitory and administration buildings provide/will provide showers and washrooms for Silvercorp’s employees. There are or will be showers and washrooms near each adit portal for contract workers as well. Provisions for personal protective equipment such as safety boots, gloves, safety glasses, hard hats and cap lamps / batteries are provided by Silvercorp or its contractor.

At each mine site, there is an administration building, which provides working area for management, supervision, geology, engineering, and other operations support staff. Silvercorp’s local office is located at the XHP mill site with accommodation of over 100 staff. The management is responsible for sales, purchasing, accounting and technical service of the XHP and XBG mines.

18.17 Warehouse and Assay Laboratory

There are warehouses at each mine site that are designed for materials and equipment inventory storage and supplies. In addition, there are also open storage areas available for the same purpose.

There is an assay laboratory located in a separate building to the south side of the XHP mill plant. It performs the daily analysis of mine and process samples.

18.18 Security/Gatehouse

There is a designated security department at each mine site and mill plant that is responsible for daily security task. A security gatehouse is located at each mine site access road with personnel on duty 24/7. The night shift is responsible for patrol of the key areas.

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19 MARKET STUDIES AND CONTRACTS

19.1 Concentrate Marketing

AMC understands that the sale of concentrates for the Songxian Property is identical to that which has been arranged for Silvercorp’s Ying Property. The lead and zinc concentrates will be marketed to existing smelter customers in Henan and Shaanxi provinces and appropriate terms have been negotiated as detailed in Section 19.2 below.

19.2 Smelter Contracts

Monthly sales contracts are in place for the lead concentrates with leading smelters mostly located in Henan province, among them are Henan Yuguang Gold and Lead Smelting Co., Ltd, Jiyuan Wanyang Smelting (Group) Co., Ltd, Jiyuan Jinli Smelting (Group) Co., and Luoning Yongning Gold and Lead Smelting Co., Ltd. For the zinc concentrate, sales contracts are in place with Henan Yuguang Zinc Industry Co., Ltd and Shaanxi Shangluo Zinc Smelting Co. Ltd. The contracts are renewed on a monthly basis.

All contracts have freight and related expenses to be paid by the smelter customers themselves.

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20 ENVIRONMENTAL STUDIES, PERMITTING AND SOCIAL OR COMMUNITY IMPACT

20.1 Introduction The existing mining permits of XBG and XHP project cover all the active mining areas and give the right to carry out full mining and mineral processing operations in conjunction with the safety and environmental certificates.

There are no cultural minority groups surrounding the general project area. The cultural make up of the broader Song County is predominantly Han Chinese. The surrounding land use in the mining area is predominantly agriculture. The mining area does not cover any ecological forests, or strict land control zones. The current vegetation within the area is mainly secondary vegetation including farming vegetation. Larger wild mammals are not found in the region. Small birds nesting and moving in the woodland are occasionally observed in the evaluation region. The surrounding villagers raise domestic animals, such as chickens, ducks, pigs, sheep, goats, dogs, and cows.

The owners of the Property have made a range of cash donations/contributions to local capital projects and community support programs. Also local communities are used as suppliers/service providers where practical.

20.2 Laws and Regulations The XBG and XHP projects operate under the following Chinese laws, regulations and guidelines:

20.2.1 Laws

1. Law of Environmental Protection PRC (1989)

2. Environmental Impact Assessment (EIA) Law (2002)

3. Law on Prevention & Control of Atmospheric Pollution (2000)

4. Law on Prevention & Control of Water Pollution (1996, amended in 2008)

5. Law on Prevention & Control of Noise Pollution (1996)

6. Water & Soil Conservancy Law (1991)

7. Law of Minerals Resources of PRC (1996)

8. Production Safety Law of the PRC (2002)

9. Law of Occupational Disease Prevention (2001-Amended 2011)

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10. Environmental Impact Assessment (EIA) Law (2002)

11. Law on Prevention & Control of Noise Pollution (1996)

12. Law on Prevention & Control Environmental Pollution by Solid Waste (2002)

13. Forestry Law (1998)

14. Water Law (1988)

15. Water & Soil Conservancy Law (1991)

16. Land Administration Law (1999)

17. Protection of Wildlife Law (1989)

18. Energy Conservation Law (1998)

19. Management Regulations of Prevention & Cure of Tailings Pollution (1992)

20. Management Regulations of Dangerous Chemical Materials (1987)

21. Outline of State Ecological Environment Protection (2000)

20.2.2 Regulation Guidelines

1. Environmental Impact Assessment Classification and Management of Construction Project (No.002) by Environment Protection Committee of State Council of PRC (1987)

2. Environment Protection Design Regulation of Construction Project (No. 253) by Environment Protection Committee of State Council of PRC (1998)

3. Regulations on the Administration of Construction Project Environmental Protection (1998)

4. Regulations for Environmental Monitoring (1983)

5. Regulations on Nature Reserves (1994)

6. Regulations on Administration of Chemicals Subject to Supervision & Control (1995)

7. Regulations on Management of Chemicals Subject to Supervision & Control (1995)

8. Environment Protection Design Regulations of Metallurgical Industry (YB9066-55)

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9. Comprehensive Emission Standard of Wastewater (GB8978-1996)

10. Environmental Quality Standard for Surface Water (GB3838-1988)

11. Environmental Quality Standard for Groundwater (GB/T14848-1993)

12. Ambient Air Quality Standard (GB3095-1996)

13. Comprehensive Emission Standard of Atmospheric Pollutants (GB16297-1996)

14. Environmental Quality Standard for Soils (GB15618-1995)

15. Standard of Boundary Noise of Industrial Enterprise (GB12348-90)

16. Emissions Standard for Pollution from Heavy Industry; Non-Ferrous Metals (GB4913-1985)

17. Control Standard on Cyanide for Waste Slugs (GB12502-1990)

18. Standard for Pollution Control on Hazardous Waste Storage (GB18597-2001)

19. Identification Standard for Hazardous Wastes-Identification for Extraction Procedure-Toxicity (GB5085.3-1996)

20. Standard of Landfill and Pollution Control of Hazardous Waste (GB 18598-2001)

21. Environmental Quality Standard for Noise (GB3096-2008)

22. Emission Standard for Industrial Enterprises Noise at Boundary (GB12348-2008)

23. Evaluating Indicator System for Lead and Zinc Industry Cleaner Production (Trial) (2007)

20.3 Waste and Tailings Disposal Management Sources of the waste for XBG and XHP Mining Districts are mainly waste rocks produced during the exploration tunnelling, mining operation, mine tailings produced during mineral processing and some minor sanitary waste.

Waste rock produced at the XBG and XHP is being deposited in waste rock stockpiles adjacent to the mine portals and is also being utilized for construction purposes such as road upgrade and maintenance.

Waste rock is mainly limestone, sandstone, and siltstone. As a whole these rocks are composed of calcite, quartz, feldspar, chlorite and sericite, kaolin and clay minerals, hence the waste rock is non-acid generating.

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The waste rock stockpiles will be required to be covered by soil and vegetated once the stockpile is full or at the time of mine closure. Retaining wall spats will be built downstream of the waste rock site for stabilization. An interception ditch will be constructed upstream to prevent the slope surface from washing out as well as to avoid water and soil loss.

There are two mineral processing plants for the Property. The tailing generated from these two processing plants is discharged into their respective, purpose-built Tailings Management Facilities (TMF) via gravity fed tailings pipelines. The TMF 1 is at the XHP project while the TMF 2 is at the XBG project. TMF 1 has a design storage capacity of 957,900 m3 and TMF 2 has a design storage capacity of 691,000 m3.

20.4 Water Management 20.4.1 Water Supply

Water supply for both the XBG and XHP projects is mainly from spring water near the mine. This water is sourced from local mountains.

The management of surface water discharges for the XBG mine and XHP mine is comprised of two parts:

 Collection and sedimentation treatment of mine dewatering, and a containment system (i.e. zero surface water discharge).

 Installation of a stormwater drainage bypass system for the segregation/diversion of clean stormwater and for flood protection. Prior to the completion of the construction phase, drainage construction in the project water catchment area was completed. Overflow water from the mill process waste water which is segregated by the thickener, and water generated from the tailings by the pressure filter, is returned to the milling process to ensure that waste water (include tailings water) is not discharged. Water from mining operations is reused for mining operations and for mill processing.

Water from the mining operations is reused and the remaining water is treated according to the Surface Water Quality Standards (GB3838-2002) and Integrated Wastewater Discharge Standard (GB8978-1996) to meet the water quality requirements of the local government.

With an exception of a small creek with limited water flow, there is no other surface water source near the Songxian Property. The quantity of water generated from underground is quite limited. Most of the water generated underground will be used in the mining activities to make sure no mining water is discharged to the creek nearby from Songxian Property.

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20.4.2 Groundwater

Groundwater guidelines are contained in the Groundwater Environmental Quality Standards (GB/T14848-93). It is recognized that there is no requirement under the Chinese environmental approval to monitor the potential impact from mining activities.

20.4.3 Waste Water

There are three sources of waste water identified at the Property; 1) mining activities including exploration, 2) mineral processing and 3) domestic sewage. Mine water is pumped to the surface via the mine portals, and then reused for mining activities. The mineral processing waste water is pumped into the sedimentation pond downstream of the TMF via a lime dosing system to assist in flocculation. The settled water is then pumped back through a long pipe to the processing plant for reuse. No tailing water is discharged to the water sources used by the public. All sewage from the mining areas is collected and treated by a biological and artificial wetland treatment system. The treated water meets the all the criteria of water reuse and is 100% reuse for landscape watering with no discharge to water sources used by the public.

20.5 Permitting Requirements

The following permits and approvals have been obtained for the Property.

20.5.1 Environmental Impact Assessment Reports and Approvals

 Environmental Impact Assessment Report of XBG Mine Project, by Luoyang Environmental Protection & Design Institute, May 2010

 Approval of Environmental Impact Assessment Report of XBG Mine Project by Henan Environmental Protection Bureau, July 2010

 Environmental Impact Assessment Report of XHP Mine Project, by Beijing General Research Institute of Mining & Metallurgy, June 2009

 Approval of Environmental Impact Assessment Report of XHP Mine Project by Henan Environmental Protection Bureau, November 2009

 Environmental Impact Assessment Report of Chuangxin Mill Plant by Luoyang Environment Protection Design & Research Institute, September 2010

 Approval of Environmental Impact Assessment Report of Chuangxin Mill Plant by Henan Environmental Protection Bureau, September 2010

20.5.2 Project Safety Pre-assessment Reports and Safety Production Permits

 XBG Mine Safety Pre-assessment Report & Registration by Henan Mineral Test Centre, July 2009

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 XHP Mine Safety Pre-assessment Report & Registration by Henan Zhenan Corporation Management Consulting Company Ltd., April 2009

 NTM Mine Safety Pre-assessment Report & Registration by Henan Mineral Test Centre, May 2012

 Shidonggou Tailings Storage Facilities Safety Pre-assessment Report & Registration by Henan New Century Technology Service Company Ltd., June 2009

 Hongshiyangou Tailings Storage Facilities Safety Pre-assessment Report & Registration by Luoyang Jinji Mine Safety Technology Research Institute, April 2008

20.5.3 Resource Utilization Plan (RUP) Reports & Approvals

 RUP Report and Approval for XHP Mine by Yantai Dehe Metallurgy Design & Research Company Ltd., December 2008

 RUP Report and Approval for XBG Mine by Henan Metallurgy Planning and Design Company Ltd., January 2010

 RUP Report and Approval for NTM Mine by Yantai Dehe Metallurgy Research & Design Company Ltd., May 2012

20.5.4 Soil and Water Conservation Plan and Approvals

 Soil and Water Conservation Plan for XHP Mine by Luoyang Water Resources Prospect and Design Institute and approved by Luoyang Water Resources Management Bureau, September 2008

 Soil and Water Conservation Plan for XBG Mine by Luoyang Water and Soil Conservation Monitoring and Inspection Station, and approved by Luoyang Water Resources Management Bureau, August 2009

20.5.5 The Geological Hazards Assessment Report and Approval

 The Geological Environment Protection and Remediation Plan Report for XBG Mine by Zhengzhou Geological Engineering Prospecting Institute and approved by Henan Provincial Land Resources Bureau, May 2011

 The Geological Hazard Assessment Report for XHP mine by Henan Non-ferrous Metals and Geotechnical Engineering Company, December 2008

20.5.6 Mining Permits

 Mining License of XBG Lead-Zinc Mine, initially issued by Department of Land and Resources of Henan Province in November 2010, and will expiry in November 2020

 Mining License of XHP Gold Mine, initially issued by Department of Land and Resources of Henan Province in February 2010, and will expire in February 2020

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20.5.7 Land Use Right Permits

 Forest land use right permit (Yulinzixu 2008 No 063), issued by Henan Forest Bureau in June 2008. The permit covers a forest land area of 3.2920 hectares located in Renlin Village, Dazhang Township, Song County for the processing plant.

 Forest land use right permit (Yulinzixu 2009 No 030), issued by Henan Forest Bureau in March 2009. The permit covers a forest land area of 1.3333 hectares located in Yangzhuang Village, Dazhang Township, Song County for the processing plant.

 Forest land use right permit (Yulinzixu 2009 No 054), issued by Henan Forest Bureau in June 2009. The permit covers a forest land area of 1.5333 hectares located in Puchi Village, Muzhijie Township, Song County for the processing plant.

20.5.8 Water Permits

 Water Permits (Song Water No. 2009-00002). The permit allows for the taking of 90,000 m3 water for mill processing from ground water at Group 2 of Renlin Village and will expire on 19 April 2014; issued and proved by Song County Bureau of Water Resources Management on 20 April 2009.

20.6 Social Issues Residents in the project area hold a positive attitude to the development of the project. The public participates in this project through information disclosure, the inquiry form-sending, and the promotion and improvement of reclamation programs.

20.6.1 Social and Community Interaction

The nearest significant community for the Songxian Property is the Muzhijie Township, which is approximately 22 kilometres away from the mill plant. The Song County is approximately 32 kilometres to the north east of the property. The property’s surrounding land use is predominantly agriculture.

Records of donations and contributions made by Silvercorp to local communities within the Song County were provided as part of this review. These comprise of a range of cash donations/contributions to local projects and community support program. The total amount of socials funds expended to date by Silvercorp is approximately RMB 286,400 (approximately $50,000).

No records of public complaints in relation to the activities of Silvercorp in relation to the Property were sighted.

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20.6.2 Cultural Monitories and Heritages

There are no cultural minority groups surrounding the general project area. The cultural make up of the broader Song County is predominantly Han Chinese. No records of cultural heritage sites located within or near the Songxian Property have been sighted.

20.6.3 Relationships with Local Government

Silvercorp has close relationships with the local Song County and Luoyang City, evidenced by the following:

 The company consults with the Song County on local issues.

 Relations with statutory bodies are also reported to be positive. This is evidenced by no notices of breach of environmental conditions.

20.6.4 Labour Practices

Silvercorp’s production activities in the Property are in compliance with the Chinese and International Labour regulations. Formal contracts were signed for all the full time employees. Employees are paid well above minimum wages and are compensated for over-time. Annual medical checks are conducted for employees before and during employment, as well as when they leave the company. No child labour or under-aged labour is used.

20.6.5 Remediation and Reclamation

Remediation and reclamation plans were developed during the project approval stage. Before a mining permit is granted, studies must be submitted to the relevant authorities. The studies outline what will happen during, project construction, operation and mine closure. Silvercorp has spent approximately RMB 9.18m (approximately $1.5m) on environmental protection, including dust control measures, wastewater treatment, solid waste disposal, underdrainage tunnel, soil and water conservation, noise control, ecosystem rehabilitation and emergency response plans. It is estimated that a total of 8,000 m2 disturbed and barren area will be re-vegetated as planned in the EIA for the Songxian Property. Table 20.1 details expenditures for environmental protection, rehabilitation, reclamation and compensation for land acquisition from 2008 to 2011.

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Table 20.1 Expenditures for Environmental Protections and Land Acquisition

Item 2008 2009 2010 2011 Total EIA 145,000 240,000 1,015,000 137,500 1,537,500 Soil & Water Conservation 224,962 212,520 9,180.00 446,662

Environmental Equipment 99,116.00 94,800 193,916

Tailings Dam 8,941,612 11,323,217 238,231 20,503,060

Land Acquisition 2,748,564 1,594,874 2,045,663 740,280 7,129,381 Wastewater Discharging 10,000 357,500 170,000 537,500

Coordination Fee 81,000 117,700 198,700

Road Maintenance 145,875 3,000 340,113 488,988

Totals 3,118,526 11,225,881 14,852,676 1,838,624 31,035,707 Note: Costs are in RMB. Approximately 6 RMB per 1 Canadian dollar at the time of this report.

20.6.6 Site Closure Plan

Mine closure will comply with the Chinese National requirements. These comprise Article 21 (Closure Requirements) of the Mineral Resources Law (1996), and Articles 33 and 34 of the Rules of Implementation Procedures of the Mineral Resources Law of the People's Republic of China (2006).

The site closure planning process will include the following components:

 Identify all site closure stakeholders (e.g. government, employees, community etc.).

 Undertake stakeholder consultation to develop agreed site closure criteria and post operational land use.

 Maintain records of stakeholder consultation.

 Establish a site rehabilitation objective in line with the agreed post operational land use.

 Describe/define the site closure liabilities (i.e. determined against agreed closure criteria).

 Establish site closure management strategies and cost estimates (i.e. to address/reduce site closure liabilities).

 Establish a financial accrual process for site closure.

 Describe the post site closure monitoring activities/program (i.e. to demonstrate compliance with the rehabilitation objective/closure criteria). Based on the Chinese National requirements, a site decommissioning plan will be produced at least one year before mine closure. Detailed cost estimated will be budgeted at this time.

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21 CAPITAL AND OPERATING COSTS

Silvercorp has only recently taken over the operations at the XBG and XHP projects. Both projects are still in the pre-production period and plans for future excavation are currently under development. AMC considers that an integral part of the planning process should be the projection of capital and operating costs after a Mineral Resource is estimated.

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22 ECONOMIC ANALYSIS

As there are no Mineral Resource or Reserve estimates for the Property an economic analysis has not been done.

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23 ADJACENT PROPERTIES

The Property is located in one of the major gold-polymetallic metallogenic belts in West Henan Province as shown in Figure 23.1. There are a number of small and medium-sized gold deposits in the area adjacent to the Property, including Qianhe, Dianfang, Jiuzhanggou, Xiaonangou, Miaoling, and Dongwan gold deposits most of which have been in production for more than two decades (Pang and Zin, 2011).

The main types of gold mineralization in the adjacent areas are structurally-controlled, associated with alteration and hosted in breccias and cryptoexplosive breccias. The description of these deposits here does not imply that material of similar quantity or grade may be found on the Property.

Figure 23.1 Distribution of Major Gold Deposits in the West Henan Province

The medium-sized Dianfang mine is located directly adjacent to the West XHP area. Gold mineralization at the Dianfang mine is closely associated with an explosive breccia pipe 700 m in length and 500 m in width. The breccias are genetically related to Middle Mesozoic granitic and monzonitic intrusions (Yanshanian). A gray-colored breccia is mainly composed of Proterozoic rhyolite, dacite and marble, and a minor amount of calcareous slate, tuff, quartz sandstone and granite porphyry. Alteration types observed within the breccia pipe include carbonatization, sericitization, kaolinitization, silicification, potash, chloritization and limonitization. Gold mineralization mainly occurs as a mineralized breccia along the south margin of the breccia pipe.

At the Dianfang mine, 22 parallel, mineralized, gold zones were delineated along the contacts between the breccia pipe and the Proterozoic rhyolite. The mineralized zones dip

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59 to 66 degrees to the southeast with a dip direction of 152 degrees. They have a strike length between 88 to 300 m and an average width of 6.13 m (maximum width 39.95 m). The average gold grade at the Dianfang gold deposit is 2.67 g/t Au. The mine has been in production since the mid 1980s.

This information has been taken from Pang and Zin, 2011. However the Qualified Person has been unable to verify the information and advises that the information is not necessarily indicative of the mineralization on the Property.

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24 OTHER RELEVANT DATA AND INFORMATION

AMC is not aware of any additional information or explanation that is necessary to make the technical report understandable and not misleading.

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25 INTERPRETATION AND CONCLUSIONS

The Property consists of the XHP and XBG projects. Each project has a mining and exploration license. At each project, there is a mill (plant), underground workings, associated infrastructure and a tailings dam. The Property was in production up to the time of the acquisition by Silvercorp in late 2011. Plant 1 at XHP, which has undergone refurbishment, is currently operating and Plant 2 at XBG is currently closed. At the time of the AMC visit, mineralized material from the XHP project at Plant 1 was being stockpiled for later processing. The changes to Plant 1 have added a zinc flotation circuit to the existing lead flotation circuit. There are no Mineral Reserves or Mineral Resources, although some ongoing production has come from the Property. Silvercorp’s main focus since acquiring the Property has been to conduct exploration on the known mineralized trends.

Silvercorp’s exploration program on each of the projects has consisted of tunnelling, drilling, and surface and underground sampling. At the XHP project, numerous mineralized trends were targeted and initial drilling and underground sampling returned significant results on enough targets to encourage further exploration. Similarly at the XBG project, additional exploration was deemed to be warranted. Exploration is ongoing at both projects. Silvercorp’s exploration focus is reasonable, but is lacking a comprehensive QA/QC program, which needs to be implemented.

There are no metallurgical testwork results available for XBG and the plant has been shut down for over 12 months, so AMC is unable to provide guidance on expected metallurgical performance.

The main focus of recent testwork at XHP has been on the lead-zinc mineralization. To handle this, the plant has recently been modified. AMC's opinion is that the ore is difficult to treat due to it having a significant oxide component and having fine galena/sphalerite intergrowths. Notwithstanding the intrinsic metallurgical difficulties, the grade-recovery projections are reasonable and consistent with the testwork results. The modifications to the plant to allow a differential flotation of lead and zinc are fit-for-purpose for lead-zinc ore, but will still enable any future lead-gold ore to be satisfactorily treated.

Mining methods currently employed are appropriate relative to vein geometry and observed ground conditions, and are similar to those used at Silvercorp’s Ying operations. Opportunity may exist for some longhole mining to be done in future.

As appears to be typical in narrow vein mining in China, rock transportation is achieved by both manual and mechanized means. A shaft to surface is under construction at XBG, where construction of a surface decline is also planned. A new adit and an internal decline are being developed at XHP. These initiatives will facilitate rock transportation as well as provide better access for exploration and mining activities in general.

The Property is easily accessible by road for people, materials and supplies. Site camps and accommodations that may be typical for China would be considered sub-standard on a

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more international basis. Each site has tailings management facilities that will accommodate approximately five to seven years of mining tails. There appears to be adequate power from the grid, with some emergency backup.

Some operating practices and procedures at XHP and XBG that are probably within Chinese safety standards fall short of common international norms. AMC notes that Silvercorp’s intention is to elevate safety practices and procedures.

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26 RECOMMENDATIONS

(Costs are estimated for those recommendations not covered by current development activities.)

26.1 General

AMC recommends that Silvercorp include formal recognition of local geotechnical conditions and make specific reference to ground support requirements within its mine planning process.

AMC considers that an integral part of the planning process should be the projection of capital and operating costs after a Mineral Resource is estimated.

26.2 Exploration

The estimated exploration cost at XHP is RMB 14.1m (approximately $2.3m). The program consists of 8,050 m surface drilling and 10,475 m underground drilling, including:

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The estimated exploration cost at XBG is RMB 11.0m (approximately $1.8m). The recommended diamond drilling program includes 11,055 m surface drilling and 8,945 m underground drilling.

 Underground drilling is to be carried out on veins with accessible mining tunnels. Veins for test drilling include X8, X9, X10, X11, and X12. XBG exploration tunnelling is planned for vein structures X1, X8, X9, X10, X11, X12 and X13, where mining activities were carried out by previous operators. Total 2012 proposed tunnelling is 3,500 m at the XBG area.

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27 REFERENCES

Engineering Design of Shi-Tong-Gou tailings pond, by San-Dong Ying-Tai Gold Mine Engineering Inc, Dec.2008 洛阳矿业集团嵩县黄金矿业有限公司下蒿坪金矿选厂及尾矿库项目可行性研究报告.

Dam Assessment Study for Shi-Tong-Gou Tailings Pond, by Henan Zhengzhou Ai-Wei Risk Assessment Inc., May 2012. 洛阳矿业集团嵩县黄金矿业有限公司下蒿坪金矿石洞沟尾矿库建设项目安全验收评价报告.

Henan Found Mining Co. Ltd., July 2011: Report on site investigation of XBG mining permit and NTM exploration permit areas.

Kaufman, A, and Stoker, P. 2009, Improving quality assurance and quality control practices – Basic Methodology using worked examples. The AusIMM New Leaders’ Conference. Brisbane, Queensland, 29-30th April 2009.

Liu, H.Y., et al, 1998: A study of rock-controlling and ore-controlling roles of the Machaoying fault in Western Henan. Mineral Deposits, 1998, Vol.17, 70-81.

Long, S.D., Parker, H.M. and Françis-Bongarçon, D. 1997. Assay quality assurance-quality control programme for drilling projects at the prefeasibility to feasibility report level, prepared by Mineral Resources Development Inc. (MRDI) August 1997.

Pang, X.C., and Zin, Z.G. 2011: Study on the metallogenic characteristics and prediction for exploration targets in the XHP area (unpublished research report).

Songxian Gold Mining Company, December 2011: Summary on exploration conducted in 2011 on Songxian Property.

Stoker, P.T. 2006, Newmont Australia technical services sampling notes, AMC report to Newmont Australia Technical Services. January 2006, pp 3-5.

UIM, 2010 Mineral flotation lab test study for Songxian Pb-Zn sulphide ore processing, Aug 27, 2010.

YTJMT, 2008, Mineral processing lab test study on “Songxian Gold Ore Sample”, July 2008.

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28 QUALIFIED PERSONS`CERTIFICATES

A Riles

1. I, Alan Riles, MAIG, BMet (Hons), Grad Dipl Professional Management, do hereby certify that I am Associate Principal Consultant Metallurgist with AMC Mining Consultants (Canada) Ltd, Suite 1330, 200 Granville Street, Vancouver, British Columbia V6C 1S4, Canada. 2. The Technical Report to which this certificate applies is entitled “Technical Report for Songxian Property, Henan Province, China” and is effective 30 June 2012 (the “Technical Report”). 3. I graduated with a Bachelor of Metallurgy (Hons Class 1) from Sheffield University, UK in 1974. I am a registered member of the Australian Institute of Geoscientists. I have practiced my profession continuously since 1974, with particular experience in study management and both operational and project experience in precious and base metal deposits. I fulfill the requirements to be a “Qualified Person” for the purposes of NI 43- 101. 4. I visited the Songxian property in February 2012 for two days. 5. I am responsible for the preparation of Sections 13, 17, part of 18, 19, 21 and 22 of the Technical Report. 6. I am independent of the issuer as described in Section 1.5 of NI 43-101. 7. I have had no prior involvement with the Songxian property. 8. I have read NI 43-101 and certify that the parts of the Technical Report for which I am responsible have been prepared in compliance with the Instrument. 9. As at the effective date of the Technical Report, to the best of my knowledge, information, and belief, the parts of the Technical Report for which I am responsible contain all scientific and technical information that is required to be disclosed to make the Technical Report not misleading.

Dated this 23rd day of October 2012

Original signed by

______Alan Riles, B.Met, MAIG

142 AMC 712020 : 30 October 2012 SILVERCORP METALS INC Technical Report Songxian Property

M Molavi

1. I, Mo Molavi P.Eng., M.Eng., B.Eng., of Vancouver, British Columbia do hereby certify that I am a Principal Mining Engineer with AMC Mining Consultants (Canada) Limited, Suite 1330, 200 Granville Street, Vancouver, British Columbia V6C 1S4. 2. The Technical Report to which this certificate applies is entitled “Technical Report for Songxian Property, Henan Province, China” and is effective 30 June 2012 (the “Technical Report”). 3. I graduated with a B.Eng. in Mining Engineering from the Laurentian University in Sudbury Ontario in 1979 and an M.Eng. in Mining Engineering specializing in Rock Mechanics and mining methods from the McGill University of Montreal in 1987. I am a registered member in good standing of the Association of Professional Engineers and Geoscientists of Saskatchewan and a Member of the Canadian Institute of Mining, Metallurgy and Petroleum. I have worked as a Mining Engineer for a total of 30 years since my graduation from university and have relevant experience in project management, feasibility studies and technical report preparations for mining projects in North America. I fulfill the requirements to be a “Qualified Person” for the purposes of NI 43-101. 4. I visited the Songxian property in February 2012 for two days. 5. I am responsible for the preparation of parts of Sections 18 of the Technical Report. 6. I am independent of the issuer as described in Section 1.5 of NI 43-101. 7. I have had no prior involvement with the Songxian property. 8. I have read NI 43-101 and certify that the part of the Technical Report for which I am responsible has been prepared in compliance with the Instrument. 9. As at the effective date of the Technical Report, to the best of my knowledge, information, and belief, the part of the Technical Report for which I am responsible contains all scientific and technical information that is required to be disclosed to make the Technical Report not misleading.

Dated this 23rd day of October 2012

Original signed and sealed by

Mo Molavi, P.Eng.

143 AMC 712020 : 30 October 2012 SILVERCORP METALS INC Technical Report Songxian Property

P R Stephenson

1. I, Patrick R Stephenson, P.Geo., B.Sc. (Hons), FAusIMM (CP), MAIG, MCIM, of Vancouver, British Columbia, do hereby certify that I am General Manager and a Principal Geologist with AMC Mining Consultants (Canada) Limited, Suite 1330, 200 Granville Street, Vancouver, British Columbia V6C 1S4. 2. The Technical Report to which this certificate applies is entitled “Technical Report for Songxian Property, Henan Province, China” and is effective 30 June 2012 (the “Technical Report”). 3. I graduated with a BSc (Hons) in Geology from Aberdeen University in Scotland in 1971. I am a registered member in good standing of the Association of Professional Engineers and Geoscientists of British Columbia. I have worked as a Geologist and Manager for a total of 40 years since my graduation from university and have relevant experience in geology, exploration and mineral resource estimation for base and precious metal deposits and in public reporting of mineral assets. I fulfill the requirements to be a “Qualified Person” for the purposes of NI 43-101. 4. I have not visited the Songxian property. 5. I am responsible for the preparation of Sections 1, 25 and 26 of the Technical Report. 6. I am independent of the issuer as described in section 1.5 of NI 43-101. 7. I have had no prior involvement with the Songxian property. 8. I have read NI 43-101 and certify that the parts of the Technical Report for which I am responsible have been prepared in compliance with the Instrument. 9. As at the effective date of the Technical Report, to the best of my knowledge, information, and belief, the parts of the Technical Report for which I am responsible contain all scientific and technical information that is required to be disclosed to make the Technical Report not misleading.

Dated this 23rd day of October 2012

Original signed and sealed by

Patrick Stephenson, P.Geo.

144 AMC 712020 : 30 October 2012 SILVERCORP METALS INC Technical Report Songxian Property

H A Smith 1. I, Herbert A Smith, P.Eng., B.Sc., M.Sc., of Vancouver, British Columbia do hereby certify that I am a Principal Mining Engineer with AMC Mining Consultants (Canada) Limited, Suite 1330, 200 Granville Street, Vancouver, British Columbia V6C 1S4. 2. The Technical Report to which this certificate applies is entitled “Technical Report for Songxian Property, Henan Province, China” and is effective 30 June 2012 (the “Technical Report”). 3. I graduated from the University of Newcastle Upon Tyne with a B.Sc. in Mining Engineering in 1972 and an M.Sc. in Rock Mechanics and Excavation Engineering in 1983. I am a registered member in good standing of the Association of Professional Engineers and Geoscientists of British Columbia, the Association of Professional Engineers of Ontario, and the Association of Professional Engineers, Geologists and Geophysicists of Alberta. I have worked as a Mining Engineer for a total of 35 years since my graduation and have relevant experience in underground mining, feasibility studies and technical report preparation for mining projects. I fulfill the requirements to be a “Qualified Person” for the purposes of NI 43-101. 4. I visited the Songxian property in February 2012 for two days. 5. I am responsible for the preparation of Sections 15 and 16 of the Technical Report. 6. I am independent of the issuer as described in Section 1.5 of NI 43-101. 7. I have had no prior involvement with the Songxian property. 8. I have read NI 43-101 and certify that the parts of the Technical Report for which I am responsible have been prepared in compliance with the Instrument. 9. As at the effective date of the Technical Report, to the best of my knowledge, information, and belief, the parts of the Technical Report for which I am responsible contain all scientific and technical information that is required to be disclosed to make the Technical Report not misleading.

Dated this 23rd day of October 2012

Original signed and sealed by

Herbert A Smith, P.Eng.

145 AMC 712020 : 30 October 2012