Silvercorp Acquires 70% Stake in Kyrgyzstan Gold Projects for US$162 Million

• Silvercorp to acquire 70% interest in Tulkubash/Kyzyltash gold projects in Kyrgyzstan for US$162 million cash
• Joint venture established with Kyrgyzaltyn holding 30% free-carried interest; Silvercorp to serve as operator
• Phase 1 development at Tulkubash targets 110,000 oz annual gold production from 2027-2028 with US$150 million investment
• Phase 2 development at Kyzyltash targets 190,000-230,000 oz annual production from 2031 with US$400 million investment
• Projects contain measured and indicated resources of 462,200 oz gold at Tulkubash and 3.9 million oz at Kyzyltash

Silvercorp Metals Inc. (TSX: SVM) is a Canadian mining company that produces silver, gold, lead and zinc. The company operates mines in China and South America. Silvercorp's strategy focuses on generating free cash flow from operations, organic growth through exploration, value creation through acquisitions, and responsible mining practices. The Kyrgyzstan acquisition represents the company's entry into a third jurisdiction.

Acquisition Structure And Transaction Terms

Silvercorp has signed a Share Purchase Agreement with Chaarat Gold Holdings Limited to acquire 70% of Chaarat ZAAV CJSC, which holds the mining licence for the Tulkubash/Kyzyltash projects and surrounding exploration licences. The company has also entered into a Cooperation Agreement with the National Investment Agency under the President of the Kyrgyz Republic and a Shareholders Agreement with Kyrgyzaltyn, a wholly-owned subsidiary of the Kyrgyz Republic.

The transaction involves total cash consideration of US$162 million. Silvercorp will pay US$92 million to Chaarat following receipt of the government waiver of pre-emptive rights, which has been issued. The company will pay US$70 million to the National Investment Agency in staged payments: US$60 million upon government waiver and extension of the mining licence from 2032 to 2062, and US$10 million upon achievement of specified milestones.

The projects are located approximately 490 kilometres southwest of Bishkek in the West Tien Shan gold belt. Chaarat has invested US$174 million in the projects since 2002, including US$77 million on drilling, US$40 million on operating expenses, US$36 million on independent studies, and US$22 million on infrastructure including roads and camp facilities.

Two-Phase Development Plan

The joint venture will implement a two-phase development approach. Phase 1 focuses on the Tulkubash oxide deposit, whilst Phase 2 will develop the Kyzyltash sulphide deposit.

Phase 1 Development (2026-2028): Silvercorp will invest US$150 million to construct a 4 million tonne per year open-pit mine and heap leach operation at Tulkubash. The development is based on bankable feasibility studies completed by Tetra Tech in 2018 and updated by LogiProc in 2021. The operation is expected to commence production in 2027-2028 and produce approximately 110,000 oz of gold annually for 3-4 years at a recovery rate of 73-76%. If the Karator exploration licence converts to a mining licence in 2026, the operation could extend for at least two additional years.

Phase 2 Development (2028-2031): The company plans to invest approximately US$400 million to develop the Kyzyltash sulphide deposit into a 3-4 million tonne per year operation combining open-pit and underground mining. The processing route includes flotation, bacterial oxidation (BIOX), and carbon-in-leach (CIL) based on a 2016 pre-feasibility study. Production is expected to start in 2031 and deliver 190,000-230,000 oz of gold annually for over 18 years at a recovery rate of 82-88%.

Dr Rui Feng, Silvercorp's Chair and CEO, stated:

"We are pleased to develop these Projects, the largest undeveloped gold deposits in the West Tien Shan gold belt. All interests are aligned for us to bring the Projects into production. With our 20 years of mining expertise and financial strength, we are confident Silvercorp and Chaarat's well-established local team can work with our Kyrgyz partner to advance ahead on the Projects and unlock value for all stakeholders and shareholders."

Joint Venture Structure

Under the joint venture, Silvercorp holds 70% ownership and operates the projects, whilst Kyrgyzaltyn holds a 30% free-carried interest. Under this structure, Kyrgyzaltyn receives its proportionate share of production and profits without contributing to capital costs. Silvercorp will leverage the existing team established by Chaarat at the project site.

The company will use existing cash and short-term investments to fund the acquisition. Silvercorp stated that remaining cash after the acquisition, combined with cash flow from current operations and financing capacity, will be sufficient to fund Phase 1 development at Tulkubash.

Silvercorp's internal resource estimate, prepared in accordance with National Instrument 43-101, shows Tulkubash contains 8.63 million tonnes at 1.67 g/t gold (measured and indicated) for 462,200 oz, whilst Kyzyltash contains 50.31 million tonnes at 2.44 g/t gold (measured and indicated) for 3.9 million oz gold, plus 21.36 million tonnes at 2.30 g/t gold (inferred) for 1.6 million oz.

Next Steps

Following completion of the acquisition, Silvercorp will engage an independent engineering firm to update the 2021 Tulkubash feasibility study to National Instrument 43-101 standards. The company will pursue local adaptation and expertisation of detailed engineering designs to Kyrgyz national standards, a requirement for construction permits. Silvercorp will also focus on team building and engaging mining and construction contractors for Tulkubash development. For Kyzyltash, the company will commission a preliminary economic assessment and conduct additional drilling to support a future feasibility study. First production from Tulkubash is targeted for 2027-2028.

‍