SILVER MINES LIMITED — Capital/Financing Update 2015

Aug 31, 2015

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 01/07/96 Origin: Appendix 5 Amended 01/07/98, 01/09/99, 01/07/00, 30/09/01, 11/03/02, 01/01/03, 24/10/05, 01/08/12, 04/03/13

Name of entity

Silver Mines Limited ( Company )

ABN

45 107 452 942

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).

1 +Class of+securities issued or to be issued 2 Number of+securities issued or to be issued (if known) or maximum number which may be issued 3 Principal terms of the+securities (e.g. 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)	Fully paid ordinary shares in the Company (each, aNew Share) and new quoted options (each,aNew Option)
	Approximately 2,771,770,856 New Shares and 1,385,885,428 New Options will be issued to eligible shareholders under the Company's fully underwritten renounceable rights issue of 4 New Shares for every 1 share in the Company held on the record date of 5pm (AEST) on 7 September 2015 (Record Date) (Rights Issue). New Options over unissued shares in the Company will be granted to eligible shareholders on the basis of 1 New Option for every 2 New Shares subscribed for under the Rights Issue.
	The New Shares are fully paid ordinary shares in the equity capital of the Company. Each New Option will have an exercise price of $0.003 per option, and will be exercisable for a new share in the Company at any time up to and including 5pm (Sydney time) on 13 October 2017.

4 Do the[+] securities rank equally in Yes all respects from the[+] issue date with an existing[+] class of quoted +securities? If the additional[+] securities do not rank equally, please state:  the date from which they do  the extent to which they participate for the next dividend, (in the case of 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 $0.001 per New Share. The New Options will be granted for no additional consideration. 6 Purpose of the issue The Company plans to use the net proceeds of the (If issued as consideration for the Rights Issue to fund completion of the acquisition acquisition of assets, clearly of the Conrad Silver Project, to make an identify those assets) investment in White Rock Minerals Limited, to continue evaluation of additional silver acquisition targets, to meet requisite minimum expenditure on both the Webbs Silver Project and the Conrad Silver Project, reduce debt, pay creditors and to provide working capital. 6a Is the entity an[+] eligible entity that Yes has obtained security holder approval under rule 7.1A? If Yes, complete sections 6b – 6h in relation to the[+] securities the subject of this Appendix 3B , and comply with section 6i 6b The date the security holder 28 November 2014 resolution under rule 7.1A was passed 6c Number of +securities issued N/A without security holder approval under rule 7.1 6d Number of[+] securities issued with N/A security holder approval under rule 7.1A

• See chapter 19 for defined terms.

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6e Number of+securities issued with security holder approval under rule 7.3, or another specific security holder approval (specify date of meeting) 6f Number of+securities issued under an exception in rule 7.2 6g If+securities issued under rule 7.1A, was issue price at least 75% of 15 day VWAP as calculated under rule 7.1A.3? Include the +issue date and both values. Include the source of the VWAP calculation. 6h If+securities were issued under rule 7.1A for non-cash consideration, state date on which valuation of consideration was released to ASX Market Announcements 6i Calculate the entity’s remaining issue capacity under rule 7.1 and rule 7.1A – complete Annexure 1 and release to ASX Market Announcements 7 +Issue dates Note: The issue date may be prescribed by ASX (refer to the definition of issue date in rule 19.12). For example, the issue date for a pro rata entitlement issue must comply with the applicable timetable in Appendix 7A. Cross reference: item 33 of Appendix 3B.	N/A
	N/A
	N/A
	N/A
	N/A
	The issue date under the Rights Issue is expected to be 13 October 2015.

Number +Class

8 Number and +class of all +securities quoted on ASX (_including_the+securities in section 2 if applicable) 9 Number and +class of all +securities not quoted on ASX (_including_the+securities in section 2 if applicable) 10 Dividend policy (in the case of a trust, distribution policy) on the increased capital (interests)	3,464,713,570 1,385,885,428	Fully paid ordinary shares Options (expiry 13/10/2017 with an exercise price of $0.003 each).
	Number	+Class
	5,800,000 8,500,000 83,180,135	Options (expiry 31/05/2017 with an exercise price of $0.043 each). Options (expiry 23/12/2015 with an exercise price of $0.50 each) Options (expiry on 13/12/2015 with an exercise price of $0.01 each)
	Nochange.

Part 2 - Pro rata issue

art 2 - Pro rata issue
11 Is security holder approval required? 12 Is the issue renounceable or non- renounceable? 13 Ratio in which the+securities will be offered 14 +Class of+securities to which the offer relates 15 +Record date to determine entitlements	No
	Renounceable
	4-for-1 in relation to the New Shares. See item 2 above in relation to the New Options.
	Fully paid ordinary shares
	5pm (Sydney time) on 7 September 2015.

• See chapter 19 for defined terms.

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16 Will holdings on different registers (or subregisters) be aggregated for calculating entitlements? 17 Policy for deciding entitlements in relation to fractions 18 Names of countries in which the entity has security holders who will not be sent new offer documents Note: Security holders must be told how their entitlements are to be dealt with. Cross reference: rule 7.7. 19 Closing date for receipt of acceptances or renunciations 20 Names of any underwriters 21 Amount of any underwriting fee or commission 22 Names of any brokers to the issue 23 Fee or commission payable to the broker to the issue 24 Amount of any handling fee payable to brokers who lodge acceptances or renunciations on behalf of security holders	No
	Where fractions arise in the calculation of entitlements, those entitlements will be rounded upto the nearest whole number.
	All countries except for Australia and New Zealand.
	It is expected that the closing date for acceptance of the New Shares and New Options to be issued under the Rights Issue will be 5pm (AEST) on 6 October 2015.
	D.J. Carmichael Pty Ltd and Fern Street Partners Pty Limited.
	The Company has agreed to pay to DJ Carmichael Pty Limited the following remuneration as consideration for underwriting and managing the Rights Issue: a fee of $20,000 plus GST for management of the shortfall placement; a fee of 5% plus GST of the gross amount underwritten by D.J. Carmichael Pty Ltd; 25,000,000 New Shares; and 150,000,000 New Options. The Company has agreed to pay to Fern Street Partners Pty Limited the following remuneration as consideration for underwriting and managing the Rights Issue: a fee of 6% plus GST of the gross amount underwritten by Fern Street Partners Pty Limited.
	N/A
	N/A
	N/A

25 If the issue is contingent on security holders’ approval, the date of the meeting 26 Date entitlement and acceptance form and offer documents will be sent to persons entitled 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 28 Date rights trading will begin (if applicable) 29 Date rights trading will end (if applicable) 30 How do security holders sell their entitlements_in full_through a broker? 31 How do security holders sell_part_of their entitlements through a broker and accept for the balance? 32 How do security holders dispose of their entitlements (except by sale through a broker)? 33 +Issue date	N/A
	The Prospectus (defined below) and a personalised entitlement and acceptance form in respect of the Rights Issue will be sent to eligible shareholders on 10 September 2015.
	1 September 2015.
	10am (Sydney time) on 3 September 2015
	4pm (Sydney time) on 28 September 2015.
	See the 'How to apply' section of the Company's prospectus which was lodged with the Australian Securities and Investments Commission on 1 September 2015 (Prospectus).
	See the 'How to apply' section of the Prospectus.
	See the 'How to apply' section of the Prospectus.
	See item 7 above.

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

• See chapter 19 for defined terms.

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(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 convertible securities

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

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

37 A copy of any trust deed for the additional[+] securities

Entities that have ticked box 34(b)

38 Number of[+] securities for which N/A +quotation is sought 39 +Class of +securities for which N/A quotation is sought 40 Do the[+] securities rank equally in all N/A respects from the[+] issue date with an existing[+] class of quoted[+] securities? If the additional[+] securities do not rank equally, please state:  the date from which they do  the extent to which they participate for the next dividend, (in the case of 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 41 Reason for request for quotation N/A now Example: In the case of restricted securities, end of restriction period (if issued upon conversion of another[+] security, clearly identify that other[+] security) Number +Class 42 Number and[+] class of all[+] securities N/A N/A quoted on ASX ( including the +securities in clause 38)

• See chapter 19 for defined terms.

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Quotation agreement

• 1 +Quotation of our additional +securities is in ASX’s absolute discretion. ASX may quote the[+] securities on any conditions it decides.

• 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.

• 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 +securities to be quoted under section 1019B of the Corporations Act at the time that we request that the[+] securities be quoted.

• 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.

• 4 We give ASX the information and documents required by this form. If any information or document is not available now, we 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: 1/09/2015 Company secretary

Print name: Vazrick Hovanessian

== == == == ==

• See chapter 19 for defined terms.

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