SILVER MINES LIMITED — Capital/Financing Update 2017

Apr 25, 2017

Level 11, 52 Phillip St Sydney NSW 2000 P: +61 2 8316 3997 F: +61 2 8316 3999 Info@silvermines.com.au www.silvermines.com.au

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26[th] April 2017

Company Announcement Officer ASX Limited Exchange Centre 20 Bridge Street SYDNEY NSW 2000

UPDATE – BOWDENS SILVER DRILLING PROGRAM

Highlights

• Wide intervals of silver rich mineralisation intersected on the Bundarra lens, extending Bowdens Silver resource at depth.

• Results include;

• 118.8 metres @ 58g/t silver, 0.51% zinc, 0.49% lead (92g/t silver equivalent) from 76.2 metres down hole including;

• 43 metres @ 112g/t silver, 0.37% zinc, 0.85% lead (152g/t silver equivalent) from 128 metres down hole.

• 36.8 metres @ 78g/t silver, 0.70% zinc, 0.30% lead (111g/t silver equivalent) from 213 metres down hole.

• Intercept extends to approximately 100 metres below the current resource.

• Drilling is on-going with three rigs operational.

Drill Program

Silver Mines Limited (ASX:SVL) (“Silver Mines” or “the Company”) is pleased to advise that it has received drill assay results from a further three holes (BD16010, BD16011 and BD17013) at the Bowdens Silver project located near Mudgee in New South Wales.

BD17013 was designed as both a resource definition and metallurgical test hole in the western part of the Bowdens Silver resource, referred to as “Bundarra”. Holes BD16010 and 011 were primarily designed to test for depth extensions, BD16010 at depth beneath “Main Zone” and BD16011, along strike to the north of “Main Zone”.

The results from BD17013 (76.2 metres to 195 metres and 213 metres to 249.8 metres EOH) confirm and vertically extend higher-grade silver mineralisation to approximately 100 metres below the current resource. This intersection represents one of the thickest high grade silver intersections recorded to date for Bundarra. Assays remain pending for drill hole BD17007 which was completed further west and down dip from BD17013.

Silver Mines Limited ABN: 45 107 452 942

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The mineralisation is hosted within felsic welded tuffs of the Permian aged Rylstone Volcanics, generally consisting of close-spaced base-metal sulphide and silver bearing veins in the order of 1 to 50 millimetres wide and base-metal sulphide breccias.

Please refer to Table 1, Figure 1 and Appendix 1 for further details.

Table 1: Drill hole intersections using 1. a minimum 1% combined lead + zinc cut-of over a minimum 5 metre interval with up to 2 metre internal dilution or 2. a minimum 30g/t silver cut-off over 10 metre interval and up to 10 metre internal dilution or 3. A minimum 60g/t silver cut-off over 5 metre interval and up to 5 metre internal dilution.

Hole ID	Cut off	From	To	Interval	Silver	Zinc	Lead	Gold	Ag Eq
		(metres)	(metres)	(metres)	(g/t)	(%)	(%)	(g/t)	(g/t)1
BD17013	2	76.2	195	118.8	58	0.51	0.49	NA	92
Incl	3	128	171	43	112	0.37	0.85	NA	152
	2	213	249.8	36.8	78	0.70	0.30	NA	111
Incl	3	215	226	11	138	0.86	0.42	NA	181
BD16010	1	28	45	17	14	0.88	0.5	NA	60
	1	116	122	6	17	0.49	0.98	NA	66
	3	158.55	164	5.45	68	0.09	0.17	NA	77
	2	187	257	70	40	0.13	0.07	0.01	46
BD16011	2	76	87	11	30	0.16	0.08	NA	38

1. Bowdens silver equivalent calculated using metal prices of US$20 per ounce silver, US$1.00 per pound zinc and US$1.00 per pound lead and recoveries of 81% for silver, 82% for zinc and 81% for lead. NA=not assayed.

The current drill program involves infill drilling to convert inferred resources to measured and indicated resource categories as well as testing for potential extensions of the known mineralisation. The total program, consisting of 178 holes for 38,000 metres of drilling will be a combination of diamond core and reverse circulation drilling.

Silver Mines Limited ABN: 45 107 452 942

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Figure 1 . Bowdens Silver location of drill holes BD16010, BD160011 and BD17013.

Silver Mines Limited ABN: 45 107 452 942

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Figure 2 . Bowdens Silver cross section of drill hole BD17013.

About the Bowdens Silver Project

The Bowdens Silver Project is located in central New South Wales, approximately 26 kilometres east of Mudgee (Figure 3). The recently consolidated project area comprises 1,654 km[2] (408,000 acres) of titles covering approximately 80 kilometres of strike of the highly mineralised Rylstone Volcanics. Multiple target styles and mineral occurrences have potential throughout the district including analogues to Bowdens Silver, high-grade silver-lead-zinc epithermal and volcanogenic massive sulphide (VMS) systems and copper-gold targets.

Bowdens Silver is the largest undeveloped silver deposit in Australia with substantial resources and a considerable body of high quality technical work already completed. The projects boast outstanding logistics for future mine development.

Silver Mines Limited ABN: 45 107 452 942

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Figure 3 . Bowdens Silver tenement holdings in the Mudgee district.

Yours faithfully Silver Mines Limited Trent Franklin Company Secretary

Silver Mines Limited ABN: 45 107 452 942

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About Silver Mines Limited

The Silver Mines strategy has been to consolidate quality silver deposits in New South Wales and to form Australia’s pre-eminent silver company.

The Company’s goal is to provide exceptional returns to shareholders through the acquisition, exploration and development of quality silver projects and by maximising leverage to an accretive silver price.

Competent Persons Statement

The information in this report that relates to mineral exploration results is based on information compiled or reviewed by Mr Scott Munro who is a full-time employee of the company. Mr Munro is a member of the Australian Institute of Geoscientists (AIG) and has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration, and to the activity being undertaken, to qualify as a Competent Person as defined in the 2012 edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’ (JORC code). Mr Munro consents to the inclusion in this report of the matters based on the information in the form and context in which it appears.

Silver Mines Limited ABN: 45 107 452 942

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Appendix 1 Drill Hole Details

Hole ID	East	North	RL	Dip	Azimuth (mag)	EOH (m)	Comment
BD16001	769092	6385810	640	-75	200	342.9	assays received
BD16002	769084	6385876	631	-75	200	300.9	assays received
BD16003	768640	6385787	629	-70	180	456.7	assays received
BD16004	768647	6385763	626	-70	180	348.9	assays received
BD16005	769045	6385916	643	-75	200	351	assays received
BD16006	768655	6385740	621	-70	180	315	assays received
BD16007	768965	6385795	660	-80	60.5	342.8	assays received
BD16008	768874	6385712	621	-65	40.5	252.6	assays received
BD16009	768895	6385633	614	-65	45.5	162.7	assays received
BD16010	769053	6385578	637	-65	60.5	279.6	assays received
BD16011	768838	6385837	620	-53	53.5	354.7	assays received
BD16012	768838	6385837	620	-61	65.5	279.8	assays pending
BD16013	768948	6385677	636	-70	40.5	249.8	assays pending
BD16014	768948	6385677	636	-55	70	267.6	assays pending
BD16015	769046	6385626	650	-75	60.5	267.7	assays received
BD16016	769079	6385901	635	-65	60.5	192.4	assays pending
BD17001	768925	6385858	651	-85	60.5	210.9	assays pending
BD17002	768753	6385719	609	-70	60.5	261.3	assays received
BD17003	768980	6385737	658	-75	60.5	147.8	assays pending
BD17004	768601	6385602	629	-66	64.5	477.7	assays pending
BD17005	769004	6385715	658	-75	58.5	117.4	assays pending
BD17006	769065	6385844	641	-72	60.5	264.8	assays pending
BD17007	768607	6385724	628	-70	60.5	282.8	assays pending
BD17008	769084	6385876	632	-65	60.5	192.7	assays pending
BD17009	768718	6385628	616	-70	60.5	252.8	partial assays
BD17010	768619	6385518	645	-85	60.5	240.8	assays pending
BD17011	768652	6385581	631	-75	60.5	444.8	assays received
BD17012	768678	6385668	615	-75	60.5	363.7	assays pending
BD17013	768727	6385763	613	-70	60.5	249.8	assays received
BD17014	768606	6385566	633	-78	60.5	516.8	assays pending
BD17015	768615	6385832	637	-74	60.5	339.8	assays pending
BD17016	768720	6385865	614	-70	60.5	210.8	assays pending
BD17017	768621	6385650	618	-75	60.5	414.8	assays pending
BD17018	768690	6385803	619	-74	60.5	219.3	assays pending
BD17019	768671	6385692	612	-75	60.5	309.8	assays pending
BRC17001	769279	6385676	606	-68	60.5	72	assays pending
BRC17002	769277	6385649	604	-65	60.5	84	assays pending
BRC17003	769288	6385626	603	-65	60.5	90	assays pending

Silver Mines Limited ABN: 45 107 452 942

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JORC Code, 2012 Edition – ANNEXURE 1

Section 1 Sampling Techniques and Data

(Criteria in this section apply to all succeeding sections.)

Criteria	JORC Code explanation	Commentary
Sampling	• Nature and quality of sampling (e.g. cut channels, random chips, or	•NQ size core - all samples taken as nominal 1 metre intervals from
techniques	specific specialised industry standard measurement tools appropriate to the minerals under investigation, such as down hole	half-cut core and from the same side of the core. •HQ size core - all samples taken as nominal 1 metre intervals from
	gamma sondes, or handheld XRF instruments, etc). These	quarter-cut core and from the same side of the core.
	examples should not be taken as limiting the broad meaning of	•Each sample represents approximately 2 kilograms of material
	sampling.	•Each sample was sent for multi-element assay using ICP techniques
	• Include reference to measures taken to ensure sample	with the entire sample pulverized and homogenized with a 50g extract
	representivity and the appropriate calibration of any measurement	taken for assay.
	tools or systems used.	•Assays are considered representative of the sample collected.
	• Aspects of the determination of mineralisation that are Material to
	the Public Report.
	• In cases where ‘industry standard’ work has been done this would
	be relatively simple (e.g. ‘reverse circulation drilling was used to
	obtain 1m samples from which 3kg was pulverised to produce a
	30g charge for fire assay.’) In other cases, more explanation may
	be required such as where there is coarse gold that has inherent
	sampling problems. Unusual commodities or mineralisation types
	(e.g. submarine nodules) may warrant disclosure of detailed
	information.
Drilling	• Drill type (e.g. core, reverse circulation, open-hole hammer, rotary	•Drilling undertaken using HQ & NQ diamond core rig with standard
techniques	air blast, auger, Bangka, sonic, etc) and details (e.g. core diameter, triple or standard tube, depth of diamond tails, face-sampling bit or	tube. •All core, where unbroken ground allows, is oriented by drilling team
	other type, whether core is oriented and if so, by what method, etc).	and an orientation line along the base of the hole.
Drill sample	• Method of recording and assessing core and chip sample	•Core recovery is estimated at greater than 95%.
recovery	recoveries and results assessed. • Measures taken to maximise sample recovery and ensure	•Some zones (less than 10%) were broken core with occasional clay zones where some sample loss may have occurred. However this is
	representative nature of the samples.

Silver Mines Limited

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Criteria	JORC Code explanation	Commentary
	• Whether a relationship exists between sample recovery and grade	not considered to have materially affected the results.
	and whether sample bias may have occurred due to preferential
	loss/gain of fine/coarse material.
Logging	• Whether core and chip samples have been geologically and	•All holes are logged using lithology, alteration, veining, mineralization
	geotechnically logged to a level of detail to support appropriate	and structure including geotechnical structure.
	Mineral Resource estimation, mining studies and metallurgical	•All core is photographed using both wet and dry photography.
	studies.	•The entire hole is logged.
	• Whether logging is qualitative or quantitative in nature. Core (or
	costean, channel, etc) photography.
	• The total length and percentage of the relevant intersections
	logged.
Sub-sampling	• If core, whether cut or sawn and whether quarter, half or all core	•Minor selective sub-sampling based on geology to a maximum size of
techniques and sample preparation	were taken. • If non-core, whether riffled, tube sampled, rotary split, etc and whether sampled wet or dry. • For all sample types, the nature, quality and appropriateness of the	1.3m and a minimum of 0.3m. •All core is cut using a Corewise core saw with core rotated 10 degrees to the orientation line to preserve the orientation for future reference.
	sample preparation technique.	•The half (NQ) or quarter (HQ) of the core without the orientation line
	• Quality control procedures adopted for all sub-sampling stages to	is removed, bagged and sent to the laboratory for assay.
	maximise representivity of samples.	•Sample sizes are considered appropriate for the rock type, style of
	• Measures taken to ensure that the sampling is representative of the	mineralisation, the thickness and consistency of the intersections and
	in situ material collected, including for instance, results for field	assay ranges expected at Bowdens.
	duplicate/second-half sampling.
	• Whether sample sizes are appropriate to the grain size of the
	material being sampled.
Quality of	• The nature, quality and appropriateness of the assaying and	•Samples dispatched to ALS Global laboratories in Orange NSW for
assay data and laboratory tests	laboratory procedures used and whether the technique is considered partial or total. • For geophysical tools, spectrometers, handheld XRF instruments, etc, the parameters used in determining the analysis including	sample preparation and gold analysis Au-AA25. 33 multi-element analysis completed at ALS Brisbane using method ME-ICP61. •Site Standards are inserted every 20 samples to check quality control and laboratory standards and blanks every 25 samples to further
	instrument make and model, reading times, calibration factors	check results.
	applied and their derivation, etc.
	• Nature of quality control procedures adopted (e.g. standards,
	blanks, duplicates, external laboratory checks) and whether
	acceptable levels of accuracy (i.e. lack of bias) and precision have
	been established.

Silver Mines Limited

ABN: 45 107 452 942

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Criteria	JORC Code explanation	Commentary
Verification of	• The verification of significant intersections by either independent or	•Significant intersections calculated by site-geologists and verified by
sampling and assaying	alternative company personnel. • The use of twinned holes. • Documentation of primary data, data entry procedures, data	an independent geological consultant. •All geological logging is entered manually onto a log sheet before inputting into a Maxwell Geoservices database schema.
	verification, data storage (physical and electronic) protocols.	•All assays matched with the logging sheets and loaded directly from
	• Discuss any adjustment to assay data.	the output provided by the laboratory with no manual entry of assays
		undertaken.
Location of	• Accuracy and quality of surveys used to locate drill holes (collar	•The collar position is surveyed using hand-held GPS with accuracy of
data points	and down-hole surveys), trenches, mine workings and other locations used in Mineral Resource estimation.	+- 5 metres •Down hole surveys collected every 30 metres using an electronic
	• Specification of the grid system used.	downhole reflex survey camera.
	• Quality and adequacy of topographic control.	•The terrain includes steep hills and ridges and with a topographical
		model on 2 metre accuracy.
		•All collars recorded in MGA94 zone 55 and also re-projected to a
		locally defined mine-grid system.
Data spacing	• Data spacing for reporting of Exploration Results.	•This drilling is designed as both infill and extensional to the overall
and	• Whether the data spacing and distribution is sufficient to establish	mineral resource envelope. The nominal drill hole spacing is 25m
distribution	the degree of geological and grade continuity appropriate for the Mineral Resource and Ore Reserve estimation procedure(s) and	(northing) by 50m (easting) in the core of the deposit. •The current drill program includes extensional and infill drilling and
	classifications applied.	will enable the mineral resource estimate to be updated including
	• Whether sample compositing has been applied.	conversion of inferred resources to indicated resources and new
		zones to be included in inferred resource.
Orientation of	• Whether the orientation of sampling achieves unbiased sampling of	•Drill orientation was designed to intersect the projection of breccia
data in relation	possible structures and the extent to which this is known,	zones and zones of veins within an overall mineralized envelope and
to geological structure	considering the deposit type. • If the relationship between the drilling orientation and the orientation of key mineralised structures is considered to have	based on previous works.
	introduced a sampling bias, this should be assessed and reported if
	material.
Sample	• The measures taken to ensure sample security.	•All samples bagged on site under the supervision of two senior
security		geologists with sample bags tied with cable ties before being driven by site personnel to the laboratory in Orange, NSW (~200km from the
		site)

Silver Mines Limited

ABN: 45 107 452 942

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Criteria	JORC Code explanation	Commentary
Audits or	• The results of any audits or reviews of sampling techniques and	•The drilling campaign and drill work includes on-going internal
reviews	data.	auditing with advice taken on process from external advisors -
		OmniGeox Ltd, GeoSpy Pty Ltd and AMC Consultants.

Section 2 Reporting of Exploration Results

(Criteria listed in the preceding section also apply to this section.)

Criteria	JORC Code explanation	Commentary
Mineral	• Type, reference name/number, location and ownership including	•The Bowdens Resource is located wholly within Exploration Licence
tenement and	agreements or material issues with third parties such as joint	No EL5920, held wholly by Silver Mines Limited and is located
land tenure status	ventures, partnerships, overriding royalties, native title interests, historical sites, wilderness or national park and environmental settings.	approximately 26km east of Mudgee, New South Wales. •The tenement is in good standing. •The project has a 2.0% Net Smelter Royalty which reduces to 1.0%
	• The security of the tenure held at the time of reporting along with	after the payment of US$5 million over 100% of the EL5920.
	any known impediments to obtaining a licence to operate in the	•The project has a 1.85% Gross Royalty over 100% of EL5920.
	area.
Exploration	• Acknowledgment and appraisal of exploration by other parties.	•The Bowdens project was previously managed by Kingsgate
done by other parties		Consolidated and Silver Standard Ltd, however the new drilling reported under this table is based on work conducted solely by Silver Mines/Bowdens Silver.
Geology	• Deposit type, geological setting and style of mineralisation.	•The Bowdens Deposit is a low sulphidation epithermal base-metal
		and silver system hosted in Permian Volcanic rocks.
		•Mineralisation includes veins, shear veins and breccia zones within
		tuff and ignimbrite rocks.
		•Mineralisation is overall shallowly dipping (~15 degrees to the north)
		with high-grade zones preferentially following a volcanic dome. There
		are several vein orientations within the broader mineralized zones
		including some areas of stock-work veins.
Drill hole	• A summary of all information material to the understanding of the	•All information is included in Appendix 1 of this report.
Information	exploration results including a tabulation of the following
	information for all Material drill holes:
	o easting and northing of the drill hole collar;
	o elevation or RL(Reduced Level elevation above sea level in

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Criteria	JORC Code explanation	Commentary
	metres) of the drill hole collar;
	o dip and azimuth of the hole;
	o down hole length and interception depth; and
	o hole length.
	• If the exclusion of this information is justified on the basis that the
	information is not Material and this exclusion does not detract from
	the understanding of the report, the Competent Person should
	clearly explain why this is the case.
Data	• In reporting Exploration Results, weighting averaging techniques,	•Intersection calculations based on 1% combined lead + zinc cut-off
aggregation methods	maximum and/or minimum grade truncations (e.g. cutting of high grades) and cut-off grades are usually Material and should be stated.	for low-grade results or a minimum 30 g/t silver with maximum 10 metre internal dilution and a minimum 60g/t silver with maximum 5 metre internal dilution for high-grade results.
	• Where aggregate intercepts incorporate short lengths of high grade	•The silver equivalent values calculated using metal prices of US$20
	results and longer lengths of low grade results, the procedure used	per ounce silver, US$1.00 per pound zinc and US$1.00 per pound
	for such aggregation should be stated and some typical examples	lead and recoveries of 81% for silver, 82% for zinc and 81% for lead.
	of such aggregations should be shown in detail.	•Ag equivalent formula =Ag g/t + ((Pb% + Zn%)*33.2))
	• The assumptions used for any reporting of metal equivalent values
	should be clearly stated.
Relationship	• These relationships are particularly important in the reporting of	•Mineralisation is both stratabound and vein hosted. The stratigraphy
between	Exploration Results.	dips moderately to the north while the majority of mineralised veins
mineralisation widths and intercept lengths	• If the geometry of the mineralisation with respect to the drill hole angle is known, its nature should be reported. • If it is not known and only the down hole lengths are reported, there should be a clear statement to this effect (e.g. ‘down hole length, true width not known’).	dip west. Some individual veins intersected were sub-parallel (~10 degrees to core axes). The drilling width is estimated to be 120% of true-width for stratabound mineralisation.
Diagrams	• Appropriate maps and sections (with scales) and tabulations of	•Maps and cross-sections provided in the body of this report.
	intercepts should be included for any significant discovery being
	reported These should include, but not be limited to, a plan view of
	drill hole collar locations and appropriate sectional views.
Balanced	• Where comprehensive reporting of all Exploration Results is not	•All results received and compiled to date are reported in this release.
reporting	practicable, representative reporting of both low and high grades and/or widths should be practiced to avoid misleading reporting of	Drilling is ongoing with further results expected to provide a more detailed assessment of the mineralised zones.
	Exploration Results.
Other	• Other exploration data, if meaningful and material, should be	•This report relates to drill data reported from this program.
substantive	reported including but not limited to: geological observations;

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Criteria	JORC Code explanation	Commentary
exploration	geophysical survey results; geochemical survey results; bulk
data	samples – size and method of treatment; metallurgical test results;
	bulk density, groundwater, geotechnical and rock characteristics
	andpotential deleterious or contaminating substances.
Further work	• The nature and scale of planned further work (e.g. tests for lateral	•This report relates to a drill program that totals 38,000 metres of
	extensions or depth extensions or large-scale step-out drilling).	drilling with drilling on-going and further results pending.
	• Diagrams clearly highlighting the areas of possible extensions,
	including the main geological interpretations and future drilling
	areas, provided this information is not commercially sensitive.

Silver Mines Limited

ABN: 45 107 452 942

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