SILVER MINES LIMITED — Capital/Financing Update 2007

May 7, 2007

Rule 2.7, 3.10.3, 3.10.4, 3.10.5

Appendix 3B

New issue announcement, application for quotation of additional securities and agreement

Information or documents not available now must be given to ASX as soon as available. Information and documents given to ASX become ASX's property and may be made public.

Introduced 1/7/96. Origin: Appendix 5. Amended 1/7/98, 1/9/99, 1/7/2000, 30/9/2001, 11/3/2002, 1/1/2003, 24/10/2005.

Name of entity

Silver Mines Limited

ACN

107452942

We (the entity) give ASX the following information.

Part 1 - All issues

You must complete the relevant sections (attach sheets if there is not enough space).

	$^{\dagger}$ Class of $^{\dagger}$ securities issued or to be (1) Unlisted Employee Options issued	2) Unlisted Employee Options (Escrowed) (3) Unlisted Director's Options (Escrowed) (4) Unlisted Underwriter's Options (Escrowed)
2	Number of + securities issued or to be issued (if known) or maximum number which may be issued	300,000 (1) 1,000,000 (2) 2,500,000 (3) $(4)$ 2,000,000
3.	Principal terms of the + securities (eg, if options, exercise price and expiry date; if partly paid *securities, the amount outstanding and due dates for payment; if + convertible securities, the conversion price and dates for conversion)	(1) Unlisted Options exercise price 20 cents, expiring 30 Nov 2009. (2) Unlisted Options exercise price 20 cents, expiring 30 Nov 2009. (3) Unlisted Options exercise price 20 cents, expiring 30 Nov 2009. (4) Unlisted Options exercise price 25 cents, expiring 30 Nov 2009.

⁺ See chapter 19 for defined terms.

4	Do the securities rank equally in all respects from the date of allotment with an existing + class of quoted securities?	$(1)$ Yes $(2)$ Yes $(3)$ Yes $(4)$ Yes
	If the additional securities do not rank equally, please state: the date from which they do ٠ extent to which they the participate for the next dividend, (in the case οf $\mathbf{a}$ trust. distribution) or interest payment • the extent to which they do not rank equally, other than in relation to the next dividend, distribution or interest payment
5	Issue price or consideration	$(1)$ Nil $(2)$ Nil $(3)$ Nil $(4)$ Nil
6	Purpose of the issue (If issued as consideration for the acquisition of assets, clearly identify those assets)	Issue of: (1) Employee Options (2) Employee Options (Escrowed) (3) Directors Options (Escrowed) (4) Underwriters Options (Escrowed)
7	Dates of entering + securities into uncertificated holdings or despatch of certificates	10 May 2007
		Number	+ Class
8	Number and + class of all quoted *securities on $\overline{ASX}$	29,962,500	Fully Paid Ordinary Shares
	(including the securities in clause 2 if applicable)	6,466,250	Fully paid shares restricted to 18 Sept 2007
		1,643,750	Fully paid shares restricted to 19 Jan 2009

$+$ See chapter 19 for defined terms.

		Number	+ Class
9	Number class of and аII securities not quoted on ASX (including the securities in clause	5,375,000	Fully paid shares restricted to 30 Jan 2008
	2 if applicable)	11,635,000	Options restricted to 18 Sept 2007, exercise price 20 cents, expiring 30 Nov 2009
		2,185,000	Options restricted to 19 Jan 2009, exercise price 20 cents, expiring 30 Nov 2009
		2,500,000	Options restricted to 19 Jan 2009, exercise price 20 cents, expiring 30 Nov 2009
		1,000,000	Options restricted to 19 Jan 2009, exercise price 20 cents, expiring 30 Nov 2009
		2.000,000	Options restricted to 19 Jan 2009, exercise price 25 cents, expiring 30 Nov 2009
		300,000	Unlisted Options

$10\,$ Dividend policy (in the case of a $\sqrt{\text{N/A}}$ trust, distribution policy) on the increased capital (interests)

L

Part 2 - Bonus issue or pro rata issue

• 11 $_{\rm Is}$ security holder approval required?
• $12\,$ Is the issue renounceable or non- $N/A$ renounceable?

$N/A$

⁺ See chapter 19 for defined terms.

Appendix 3B New issue announcement

13	Ratio in which the "securities will be offered	N/A
$\vert 4 \vert$	+ Class of + securities to which the offer relates	N/A
15.	+ Record determine date tο entitlements	N/A
16.	Will holdings on different registers (or subregisters) be aggregated for calculating entitlements?	N/A
17.	Policy for deciding entitlements in relation to fractions	N/A
18.	Names of countries in which the entity has + security holders who will not sent be new. issue documents	N/A
	Note: Security holders must be told how their entiflements are to be dealt with.
	Cross reference: risfe 7.7.
19.	$\sigma$ f Closing date for receipt acceptances or renunciations	N/A
20.	Names of any underwriters	N/A
21	Amount of any underwriting fee or commission	N/A
22.	Names of any brokers to the issue	N/A
23	Fee or commission payable to the broker to the issue	N/A
24	Amount of any handling fee payable to brokers who lodge acceptances or renunciations on behalf of + security holders	N/A
25	If the issue is contingent on *security holders' approval, the date of the meeting	N/A
26	Date entitlement and acceptance form and prospectus or Product Disclosure Statement will be sent to persons entitled	N/A

$+$ See chapter 19 for defined terms.

27	If the entity has issued options, and the terms entitle option holders to participate on exercise, the date on which notices will be sent to option holders	N/A
28.	Date rights trading will begin (if applicable)	N/A
29.	Date rights trading will end (if applicable)	N/A
30	How do *security holders sell their entitlements in full through $\mathbf{a}$ hroker?	N/A
31	How do *security holders sell part of their entitlements through a broker and accept for the balance?	N/A
32	How do *security holders dispose of their entitlements (except by sale through a broker)?	N/A
33	+Despatch date	N/A

Part 3 - Quotation of securities

You need only complete this section if you are applying for quotation of securities

• 34 Type of securities $(tick one)$
• $(a)$

Securities described in Part 1

$(b)$

All other securities

Example: restricted securities at the end of the escrowed period, partly paid securities that become fully paid, employee
incentive share securities when restriction ends, securities issued on expiry or conversion of conve

Entities that have ticked box 34(a)

Additional securities forming a new class of securities

Tick to indicate you are providing the information or documents

35

If the 'securities are 'equity securities, the names of the 20 largest holders of the additional *securities, and the number and percentage of additional *securities held by those holders

⁺ See chapter 19 for defined terms.

-36	If the securities are equity securities, a distribution schedule of the additional *securities setting out the number of holders in the categories $1 - 1.000$ $1.001 - 5.000$ $5,001 - 10,000$ $10,001 - 100,000$ $100,001$ and over
	A copy of any trust deed for the additional +securities

Entities that have ticked box 34(b)

which 39. Class of + securities for N/A quotation is sought Do the + securities rank equally in all N/A 40 respects from the date of allotment with an existing + class of quoted +securities? If the additional securities do not rank equally, please state: the date from which they do which the extent 10 1 they participate for the next dividend, case of (in the $a -$ trust. distribution) or interest payment the extent to which they do not ٠ rank equally, other than in relation to the next dividend. distribution or interest payment 41 Reason for request for quotation N/A now Example: In the case of restricted securities, end of restriction period upon conversion (if issued) of another security, clearly identify that other security) Number + Class	38	Number of securities for which + quotation is sought	N/A

$+$ See chapter 19 for defined terms.

Number and ⁺class of all ⁺securities | 42 quoted on ASX (including the securities in clause 38)

N/A

Quotation agreement

• $\mathbbm{1}$ *Quotation of our additional *securities is in ASX's absolute discretion. ASX may quote the *securities on any conditions it decides.
• $\overline{2}$ We warrant the following to ASX.
• The issue of the "securities to be quoted complies with the law and is not for an illegal purpose.
• $\bullet$ There is no reason why those *securities should not be granted *quotation.
• An offer of the "securities for sale within 12 months after their issue will not require disclosure under section $707(3)$ or section $1012C(6)$ of the Corporations Act.

Note: An entity may need to obtain appropriate warranties from subscribers for the securities in order to be able to give this warranty

• Section 724 or section 1016E of the Corporations Act does not apply to any applications received by us in relation to any "securities to be quoted and that no-one has any right to return any "securities to be quoted under sections 737, 738 or 1016F of the Corporations Act at the time that we request that the *securities be quoted.
• If we are a trust, we warrant that no person has the right to return the $\bullet$ *securities to be quoted under section 1019B of the Corporations Act at the time that we request that the "securities be quoted.
• $\overline{3}$ We will indemnify ASX to the fullest extent permitted by law in respect of any claim, action or expense arising from or connected with any breach of the warranties in this agreement.
• $\overline{4}$ We give ASX the information and documents required by this form. If any information or document not available now, will give it to ASX before ⁺quotation of the "securities begins. We acknowledge that ASX is relying on the information and documents. We warrant that they are (will be) true and complete.

Sign here:		Date: 8 May 2007
	(Director/Company Secretary)

Print name: Kevin Martin Lynn

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⁺ See chapter 19 for defined terms.