Silvercorp Reports Record Silver Production, Sales and Cash Flows for Fiscal 2011 Q3: Net Income Up 140% to $29.7 Million or $0.18 Per Share

VANCOUVER, BRITISH COLUMBIA, Feb 08, 2011 (MARKETWIRE via COMTEX News Network) --

Silvercorp Metals Inc. (TSX: SVM)(NYSE: SVM) ("Silvercorp" or the "Company") today reported its unaudited financial and operating results for the third quarter ended December 31, 2010 ("Q3 2011"). Record silver production coupled with increasing silver prices resulted in record quarterly sales, cash flows from operations and net income. Silvercorp also provided its operational and financial outlook for fiscal 2012. The following financial results are expressed in US dollars (US$) unless stated otherwise.

THIRD QUARTER HIGHLIGHTS

--  Record silver production of 1.52 million ounces, a 25% increase compared
    to 1.22 million ounces in the third quarter of fiscal 2010 ("Q3 2010");
--  Record sales of $51.8 million, up 66% from a year ago;
--  Record net income of $29.7 million, or $0.18 per share, a 140% increase
    from a year ago. Excluding all non-operational items, adjusted net
    earnings were $22.2 million, or $0.13 per share;
--  Record cash flows from operations (before non-cash working capital
    changes) of $31.6 million, or $0.19 per share, increased 68% from a year
    ago;
--  Achieved total production cost of negative $5.93 per ounce of silver and
    a cash cost of negative $7.13 per ounce of silver, maintaining
    Silvercorp's position as the lowest cost silver producer among its
    industry peers;
--  Raised $110.5 million net proceeds from an equity financing;
--  Received a mining permit for the GC Silver-Lead-Zinc Project in
    Guangdong Province, China;
--  Acquired a 70% equity interest in BYP Gold-Lead-Zinc mine in Hunan
    Province, China;
--  Dividend payment of $3.2 million, or CAD$0.02 per share; and
--  Total cash, cash equivalents, and short term investments increased to
    $223.7 million.

FINANCIALS

For the third quarter of fiscal 2011, Silvercorp posted record net income of $29.7 million, or $0.18 per share, representing a 140% increase compared to the same quarter last year of $12.4 million or $0.08 per share. Excluding all non-operational items, which mainly consisted of (i) a $3.3 million dilution gain on our investment in New Pacific Metals Corp., an affiliate of the Company and (ii) a $3.7 million gain on our holding of held-for-trading financial assets, the adjusted net earnings were $22.2 million, or $0.13 per share.

For the nine months ended December 31, 2010, net income increased 96% to $56.3 million or $0.34 per share, compared to net income of $28.8 million, or $0.18 per share a year ago. Earnings improved primarily as a result of higher realized selling prices combined with record high metal production.

Sales in the third quarter were a record high of $51.8 million, up 66% from $31.3 million in the same quarter last year. The increase was attributable to higher quantities of metals sold and higher realized selling prices for all metals produced by the Company. In Q3 2011, the Company sold 1.52 million ounces of silver, 18.8 million pounds of lead and 4.8 million pounds of zinc, representing an increase of 25%, 16%, and 8%, respectively, compared to 1.22 million ounces of silver, 16.2 million pounds of lead, and 4.5 million pounds of zinc in Q3 2010. The average realized selling prices for silver, lead, and zinc increased to $20.36/oz., $0.89/lb., and $0.70/lb., respectively, up by 57%, 17%, and 9%, respectively, compared with the metal prices realized in Q3 2010. Higher metal production and realized selling prices also resulted in revenue increasing by 58% to $124.9 million for the nine months period ended December 31, 2010.

Cost of sales for the quarter was $11.8 million, representing a 67% increase as the Company mined 40% more ore and milled 79% more ore compared to the same quarter last year. For the nine months period ended December 31, 2010 and 2009, cost of goods sold were $31.8 million and $19.0 million, respectively. The cost of goods sold increased correspondingly with higher sales.

Gross profit margin for the quarter was 77%, unchanged from the prior year. The gross profit margin did not increase in line with metal prices, mainly due to the change in production mix compared to the same quarter last year. We successfully increased production at the HPG, LM, and TLP mines which have lower head grades relative to the Ying mine. In Q3 2011, 19% of Silvercorp's silver production was from the HPG, LM and TLP mines compared with 11% in Q3 2010. For the nine months ended December 31, 2010 and 2009, gross profit margin was 75% and 76%, respectively.

In Q3 2011, the Company generated $31.6 million of cash flows from operating activities before non-cash working capital changes, representing a 68% increase from Q3 2010. For the nine months ended December 31, 2010, cash flows from operating activities, before changes in non-cash working capital, was $71.9 million, a 58% improvement from the same period last year.

The Company ended the quarter with $223.7 million in cash and short term investments, and working capital of $209.3 million. During the quarter the company paid $3.2 million in dividends, $11.3 million in capital expenditures, and raised $110.5 million net proceeds from an equity financing.

OPERATIONS

In Q3 2011, Silvercorp achieved record silver production of 1.52 million ounces, up 25% from a year ago. Total ore mined also increased 40% to a record 167,213 tonnes. For the nine months ended December 31, 2010, the Company mined 466,639 tonnes of ore, a 43% increase from the same period last year of 325,720 tonnes. Increased production from the TLP, HPG, and LM mines contributed to the record mine production.

A total of 161,528 tonnes of ore was milled in the quarter, representing a 79% increase compared to 90,460 tonnes of ore milled in the same quarter last year. During the nine months ended December 31, 2010, 461,270 tonnes of ore was milled, up 68% compared to 273,974 tonnes last year. The increased mill throughput was achieved as the second mill at the Ying Mining Camp commenced operations at the beginning of 2010, which increased our total milling capacity to 2,500 tonnes per day, providing room to accommodate future mine production growth.

Consolidated total production cost per ounce of silver was negative $5.93 and the cash cost per ounce of silver was negative $7.13, up approximately 10% compared to the total production costs and cash production costs per ounce of silver of negative $6.87 and negative $7.73, respectively, in same quarter last year. Cost increased mainly because of the relatively lower head grades compared to a year ago, offset by higher realized base metal prices. During the nine months ended December 31, 2010, the consolidated total production cost and cash costs per ounce of silver were negative $5.46 and negative $6.60, respectively, compared to negative $5.61 and negative $6.40 a year ago.

On a quarterly basis, cash mining cost decreased from $48.93 per tonne last year to $48.30 per tonne, but increased from $40.36 in Q2 2011. The increase resulted from (i) higher utility costs as diesel was used to generate additional electricity to support the increased production and as backup for power shortages, (ii) higher labour costs from the increase of year-end bonus accrual and (iii) higher material costs as more steel and other supplies were used in mine preparation and development.

Silvercorp's total operational results for the past five quarters are summarized at Table 1 below:

Table 1: Total Operational Results
                        Q3 2011    Q2 2011    Q1 2011    Q4 2010    Q3 2010
                      31-Dec-10 30-Sept-10  30-Jun-10  31-Mar-10  31-Dec-09
Ore Mined (tonne)
 Direct Smelting Ore
  (tonne)                 3,711      3,065      3,426      2,485      3,428
 Ore to be milled
  (tonne)               163,502    151,380    141,556     78,549    115,907
                    -------------------------------------------------------
                        167,213    154,445    144,982     81,034    119,335
---------------------------------------------------------------------------
Run of Mine Ore (tonne)
 Direct Smelting Ore
  (tonne)                 3,711      3,065      3,426      2,485      3,428
 Ore Milled (tonne)     157,817    147,488    145,763    131,436     87,032
                    -------------------------------------------------------
                        161,528    150,553    149,189    133,921     90,460
---------------------------------------------------------------------------
Mining costs per
 tonne of ore
 mined ($)                58.28      49.12      48.61      57.06      57.81
 Cash Mining Cost
  per tonne of ore
  mined ($)               48.30      40.36      40.33      47.36      48.93
 Non Cash Mining
  Cost per tonne of
  ore mined ($)            9.98       8.76       8.28       9.70       8.88
---------------------------------------------------------------------------
Head Grade of Run of
 Mine Ore
 Silver (gram/tonne)      330.0      312.0      326.3      303.8      440.8
 Lead (%)                   5.7        5.6        6.1        5.7        8.3
 Zinc (%)                   1.8        1.9        2.0        1.6        3.0
---------------------------------------------------------------------------
Total Production
 Cost per ounce of
 Silver ($)               (5.93)     (5.17)     (5.21)     (4.61)     (6.87)
---------------------------------------------------------------------------
Total Cash Cost per
 ounce of Silver ($)      (7.13)     (6.30)     (6.31)     (5.64)     (7.73)
---------------------------------------------------------------------------
Metal Sales
 Silver (in
  thousands of ounce)     1,523      1,343      1,387      1,079      1,220
 Lead (in thousands
  of pound)              18,795     17,028     18,803     14,921     16,211
 Zinc (in thousands
  of pound)               4,791      3,869      4,431      2,747      4,454
---------------------------------------------------------------------------

In Q3 2011, 81% of Silvercorp's silver production was from the Ying Mine (89% in Q3 2010). The operational results for the past five quarters at the Ying Mine are summarized at Table 2 below:

Table 2: Ying Mine Operational Results
                        Q3 2011    Q2 2011    Q1 2011    Q4 2010    Q3 2010
                      30-Dec-10 30-Sept-10  30-Jun-10  31-Mar-10  31-Dec-09
Ore Mined (tonne)
 Direct Smelting Ore
  (tonne)                 3,640      3,017      3,339      2,418      3,357
 Ore to be milled
  (tonne)                82,101     82,187     79,873     54,174     82,711
                    -------------------------------------------------------
                         85,741     85,204     83,212     56,592     86,068
---------------------------------------------------------------------------
Run of Mine Ore (tonne)
 Direct Smelting Ore
  (tonne)                 3,640      3,017      3,339      2,418      3,357
 Ore Milled (tonne)      81,700     79,995     81,898     70,214     70,776
                    -------------------------------------------------------
                         85,340     83,012     85,237     72,632     74,133
---------------------------------------------------------------------------
Mining costs per
 tonne of ore mined ($)   64.12      54.79      55.10      57.50      56.90
 Cash Mining Cost
  per tonne of ore
  mined ($)               49.85      42.66      43.83      45.60      45.75
 Non Cash Mining
  Cost per tonne of
  ore mined ($)           14.27      12.13      11.27      11.84      11.15
---------------------------------------------------------------------------
Head Grade of Run of
 Mine Ore
 Silver (gram/tonne)      499.0      461.0      470.5      429.3      488.5
 Lead (%)                   8.3        7.9        8.1        7.6        9.0
 Zinc (%)                   2.9        2.8        2.8        2.8        3.4
---------------------------------------------------------------------------
Total Production
 Cost per ounce of
 Silver ($)               (7.67)     (6.94)     (5.83)     (6.14)     (7.47)
---------------------------------------------------------------------------
Total Cash Cost per
 ounce of Silver ($)      (8.76)     (7.99)     (6.80)     (7.26)     (8.36)
---------------------------------------------------------------------------
Metal Sales
 Silver (in
  thousands of ounce)     1,241      1,095      1,147        836      1,086
 Lead (in thousands
  of pound)              14,862     13,486     14,230     11,097     14,327
 Zinc (in thousands
  of pound)               3,954      3,275      3,605      2,747      4,038
---------------------------------------------------------------------------

EXPLORATION AND PROJECT DEVELOPMENT

Ying Mining Camp, Henan Province, China

In Q3 2011, the Ying Mining Camp incurred exploration and development expenditures of $6.1 million. These expenditures were mainly used to delineate and upgrade mineral resources by tunnelling and diamond drilling, and to build shafts, declines and raises. A total of 18,240 metres of tunnel, 40,386 metres of diamond drilling and 443 metres of shafts, declines and raises were completed.

This underground drilling program discovered 18 new veins at the TLP Mine and 12 new veins at the LM Mine with numerous high grade pockets identified. Furthermore, many existing veins in the Ying Mining Camp were also substantially extended to down dip and along striking directions. It is expected that those new discoveries will add resources/reserves that will either extend the life of the mine or increase the current mining capacity as many of those pockets are close to the existing mining tunnels and can be quickly developed into mining stopes.

GC Project, Guangdong Province, China

In Q3 2011, the GC project in the Guangdong Province received its 30 year mining permit, issued by the Ministry of Land and Resources of China. The permit was issued on the terms applied for, covering the entire 5.52 square kilometre area of the GC Project and allows for the operation of an underground mine to produce silver, lead and zinc ore.

BYP Project, Hunan Province, China

In Q3 2011, Silvercorp announced the acquisition of a 70% equity interest in Yunxiang Mining Co. Ltd. ("Yunxiang"), a private mining company in Hunan Province, China. Yunxiang's primary asset is the BYP Gold-Lead-Zinc mine (the "BYP mine"), located 220 km, or a 3 hour drive, southwest of Changsha, the capital city of Hunan Province, China. The total cost of the share purchase and the joint venture capital investment is approximately US$33 million. The transaction successfully closed subsequent to the end of the quarter.

Silvertip Project, British Columbia, Canada

In Q3 2011, Silvercorp completed the 2010 surface drilling program on the Silvertip silver-lead-zinc project in northern British Columbia, Canada. A total of 10,913 metres has been drilled from 36 holes. The 2010 drilling program has successfully defined and updated the silver-lead-zinc resources on extensions to the east and south of the main ore body. A new resource estimate is currently underway. Silvercorp also conducted a 4,113 line kilometers VTEM airborne geophysical survey over an area of 367 square kilometres and completed certain studies and reports required for a B.C. Small Mine Permit application. A total of $8.3 million in capital expenditures were incurred on the Silvertip project as of December 31, 2010, of which $6.3 million was for exploration and permitting and $2.0 million was for camp and infrastructure.

OUTLOOK FOR THE FORTH QUARTER OF FISCAL YEAR 2011

During the first nine months of fiscal year 2011, Silvercorp produced 4.25 million ounces of silver, at a cash cost of negative $6.60 per ounce, net of by-product credits. The Company also produced 54.6 million pounds of lead and 13.1 million pounds of zinc during the nine month period. Silvercorp expects to meet or exceed its forecast to produce 5.3 million ounces of silver for its fiscal year ending March 31, 2011.

OUTLOOK FOR THE FISCAL YEAR 2012

Production in China

From the four mines at the Ying Mining Camp production is expected to increase to 600,000 tonnes of ore at a grade of 325g/t silver, 0.4g/t gold, 6% lead and 1.9% zinc, yielding 5.6 million ounces of silver, 4,000 ounces of gold, and 90 million pounds of lead and zinc. Total production costs will remain unchanged at approximately $75 per tonne of ore.

The BYP mine is expected to commence production in the first quarter of fiscal year 2012 and is expected to mine and mill 130,000 tonnes of ore at a grade of 7 g/t gold, yielding approximately 26,000 ounces of gold at an estimated total production cost of $28 per tonne of ore.

Budgets for mill construction, mine development and exploration of three projects in China

The total capital expenditures for the three projects in China are estimated at $67 million for fiscal 2012, which include capital expenditures of $53 million for mine development, mill construction, and other capital items (e.g. surface facilities, roads, land usage rights, and reporting) and exploration expenditures of $14 million to complete a 241,000 metre surface and underground drilling program. The budget estimate is based on the contracts on hand, designs by qualified Chinese engineering firms, and the Company's past operation experience in China. The details for each project are as follows:

The Ying Mining Camp
--  The capital expenditures for the Ying, TLP, LM and HPG mines and central
    mill are budgeted at $18.5 million which includes several vertical
    shafts, declines and raises totaling 7,000 metres ($5.6 million), 40,000
    metres of horizontal tunnels for development and mining exploration ($7
    million), 1,500 metres of ramps ($1.2 million), a new tailing facility
    ($2 million), and equipment as well as surface facilities ($2.7
    million).
--  The exploration expenditure for a 171,000 metre underground drilling
    program at the four mines of the Ying Camp is estimated to be $8.5
    million.
The GC Project
--  The capital expenditures for fiscal 2012 are budgeted at $22.5 million,
    which includes a 1,500 tonne per day mill and tailing dam ($12 million),
    land-usage rights ($5 million), a 1,500 metre ramp ($1.2 million), a 500
    metre shaft ($1.5 million) and surface facilities ($2.8 million). By the
    end of fiscal 2012, it is expected that the GC project will achieve a
    700 tonne per day mining capacity and a 1,500 tonne per day milling
    capacity. In order to bring the project into full mining production of
    1,500 tonnes per day, further capital expenditures will be required for
    fiscal 2013 which are expected to be partially financed through cash
    flows generated from the GC project.
--  As the Company has successfully obtained its mining permit for the GC
    project, drilling will resume in fiscal 2012. A 20,000 metre surface
    diamond drilling program is budgeted at $2.5 million.
The BYP Mine
--  The capital expenditures for fiscal 2012 are budgeted at $12 million. In
    order to achieve an initial mining and milling capacity of 400 tonnes
    per day, or a total of 130,000 tonnes of ore for fiscal 2012, the
    Company will upgrade the existing 400 tonne per day floatation mill
    ($1.5 million), build a cement back-filling facility ($1.5 million),
    complete about 7,000 metres of mine development tunnels ($1.5 million),
    and acquire land usage rights and build surface facilities including
    roads, an office, accommodations and a laboratory ($2.5 million), for a
    total of $7 million of capital expenditures. In addition, to achieve a
    production capacity of 1,000 tonnes per day starting in fiscal 2013, the
    Company will spend $5 million to expand the 400 tonne per day mill to a
    1,000 tonne per day capacity ($3.0 million) and develop 1,500 metres of
    ramp and access tunnels ($2 million) to allow mechanized mining in the
    future.
--  The exploration expenditures for a 50,000 metre underground and surface
    drilling program are estimated to cost $3 million.

Silvertip project in Canada

The Company has budgeted $2 million to complete the ongoing environmental assessment study, to prepare and submit an application for a Small Mine Permit, and to complete a feasibility study for the project.

In addition to the aggressive exploration program carried out by the Company to grow the resources and reserves in its operating projects, Silvercorp continually seeks acquisition opportunities in China and other jurisdictions.

CONFERENCE CALL AND WEBCAST INFORMATION

A conference call and live audio webcast to discuss these results is scheduled as follows:

Date:                                 Wednesday, February 9, 2011
Time:                                 8:00 am PT (11:00 am ET)
Dial-In Number:                       1-612-234-9959
Live audio webcast:                   www.silvercorp.ca
                                     (click on the link on the home page)
Playback webcast can be accessed at:  www.silvercorp.ca

About Silvercorp Metals Inc.

Silvercorp Metals Inc. is engaged in the acquisition, exploration, development and mining of high-grade silver-related mineral properties in China and Canada. Silvercorp is the largest primary silver producer in China through the operation of the four silver-lead-zinc mines at the Ying Mining Camp in the Henan Province of China. Silvercorp is currently building the GC silver-lead-zinc project in Guangdong Province as its second China production base and foothold, and this will be followed by the third production foothold at the recently acquired BYP gold-lead-zinc project in Hunan Province. In Canada, Silvercorp is preparing to apply for a Small Mine Permit for the Silvertip high grade silver-lead-zinc mine project in northern British Columbia to provide a further platform for growth and geographic diversification. The Company's shares are traded on the New York Stock Exchange and Toronto Stock Exchange and are included as a component of the S&P/TSX Composite and the S&P/TSX Global Mining Indexes.