SILVER MINES LIMITED — Capital/Financing Update 2017

Mar 22, 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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23[rd] March 2017

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

ADDITIONAL RESOURCE DRILLING RESULTS CONFIRM CONTINUITY OF HIGH-GRADE SILVER AT THE BOWDENS DEPOSIT

Highlights

• Drilling confirming continuity of high grade silver mineralisation and extending Bowdens Silver resource at depth.

• Results include;

• 129.0 metres @ 89g/t silver, 0.15% zinc and 0.28% lead (103g/t silver equivalent) from 72 metres down-hole including;

• 45.0 metres @ 143g/t silver, 0.20% zinc and 0.50% lead (168g/t silver equivalent) from 103 metres down-hole; and

• 1.0 metre @ 2370g/t silver, 0.89% zinc and 1.90% lead (2465g/t silver equivalent) from 235 metres down-hole.

• 2.2 metres @ 433g/t silver, 5.10% zinc and 2.80% lead (695g/t silver equivalent) from 23.8 metres down-hole.

• Further results are pending.

• Drilling is on-going with two rigs operational.

Drill Program

Silver Mines Limited (ASX:SVL) (“Silver Mines” or “the Company”) is pleased to advise that it has received the drill results from a further four holes (BD16007-009 & BD16015) of a 38,000 metre drill program at the Bowdens Silver project located near Mudgee in New South Wales.

Holes BD16007, 008, 009 and 015 were designed to test both the continuity of high grade silver mineralisation and for depth extensions along the eastern portion of the Bowdens Silver resource. This eastern portion of the deposit is referred to as “Main Zone”.

Silver Mines Limited ABN: 45 107 452 942

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Hole BD17002 was designed to test for the continuity of deeper mineralisation along the western portion of the Bowdens Silver resource. The western portion of the deposit is referred to as “Bundarra”.

The results from BD16007 72 metres to 148 metres down hole confirm the high-grade silver mineralisation from this portion of the resource and in addition, the interval from 148 metres to 201 metres down hole extends the current resource by up to 50 metres vertically. Furthermore, the high-grade interval from 235 metres in BD16007 is among the highest assays received for the project. Such high-grade structures at the Bowdens Silver deposit continue to provide encouragement for potential underground development scenarios in addition to the open pit development subject to the current Definitive Feasibility Study. The results from BD16008 which remain open to end of hole (252.6 metres) indicate that the mineralised system extends for up to 100 metres directly beneath the current resource.

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 and basemetal sulphide breccias.

Please refer to Table 1, Figure’s 1 and 2 and Appendix 1 for further details.

Table 1: Drill hole intersections from BD16003 to BD16006 at the Bowdens Silver Project using a minimum 30g/t silver cut-off over 5 metre width and up to 10 metres internal dilution factor with higher-grade zones using a minimum 60g/t silver cut-off over 5 metre interval and up to 5 metres internal dilution. NSI = no significant intersection.

Hole ID	From	To	Interval	Silver	Zinc	Lead	Ag Eq
	(metres)	(metres)	(metres)	(g/t)	(%)	(%)	(g/t)1
BD16007	72	201	129	89	0.15	0.28	103
Including	82	92	10	77	0.30	0.29	97
	103	148	45	143	0.20	0.50	168
	155	172	17	139	0.07	0.17	147
	235	236	1	2370	0.89	1.90	2465
BD16009	23.8	26	2.2	433	5.10	2.80	695
BD16008	0.7	130	129.3	41	0.33	0.21	59
Including	90	105	15	77	0.20	0.20	90
	142	175	33	30	0.10	0.28	43
	189	252.6	63.6	65	0.07	0.12	71
Including	189	199	10	80	0.08	0.26	91
	217	234	17	79	0.06	0.10	84
	240	248	8	143	0.12	0.26	156
BD16015	27	62	35	46	0.31	0.14	61
Including	52	62	10	95	0.85	0.35	135
BD17002	34.9	48	13.1	83	0.80	1.11	146

Silver Mines Limited ABN: 45 107 452 942

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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.

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.

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Figure 1 . Bowdens Silver location of recent drill holes.

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Figure 2 . Bowdens Silver cross section of drill hole BD16007, 008 & BD17002.

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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.

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

Yours faithfully Silver Mines Limited

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Trent Franklin Company Secretary

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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 pending
BD16011	768838	6385837	620	-53	53.5	354.7	assays pending
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	assays pending
BD17010	768619	6385518	645	-85	60.5	240.8	assays pending
BD17011	768652	6385581	631	-75	60.5	444.8	partial assays
BD17012	768678	6385668	615	-75	60.5	363.7	assays pending
BD17013	768727	6385763	613	-70	60.5	249.8	assays pending
BD17014	768606	6385566	633	-78	60.5	516.8	assays pending
BD17015	768615	6385832	637	-74	60.5	339.8	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	•All samples taken as nominal 1 metre intervals from half-cut core and
techniques	specific specialised industry standard measurement tools appropriate to the minerals under investigation, such as down hole	from the same side of the core. •Each sample represents approximately 2 kilograms of material
	gamma sondes, or handheld XRF instruments, etc). These	•Each sample was sent for multi-element assay using ICP techniques
	examples should not be taken as limiting the broad meaning of	with the entire sample pulverized and homogenized with a 50g extract
	sampling.	taken for assay.
	• Include reference to measures taken to ensure sample	•Assays are considered representative of the sample collected.
	representivity and the appropriate calibration of any measurement
	tools or systems used.
	• 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 NQ diamond core rig with standard tube.
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	•All core, where unbroken ground allows, is oriented by drilling team and an orientation line along the base of the hole.
	_other type, whether core is oriented and if so, by what method, etc). _
Drill sample	• Method of recording and assessing core and chip sample	•Core recovery is estimated at greater than 95%.
recovery	recoveries and results assessed.	•Some zones (less than 10%) were broken core with occasional clay
	• Measures taken to maximise sample recovery and ensure	zones where some sample loss may have occurred. However this is
	representative nature of the samples.	not considered to have materially affected the results.

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Criteria	JORC Code explanation	Commentary
	• Whether a relationship exists between sample recovery and grade
	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, mineralisation
	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	were taken.	1.3m and a minimum of 0.3m.
and sample preparation	• 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	•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 of the core without the orientation line is removed, bagged
	• Quality control procedures adopted for all sub-sampling stages to	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 50 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.

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Criteria	JORC Code explanation	Commentary	Commentary
Verification of	• The verification of significant intersections by either independent or	•	Significant intersections calculated by site-geologists and verified by
sampling and	alternative company personnel.		an independent geological consultant.
assaying	• The use of twinned holes. • Documentation of primary data, data entry procedures, data	•	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.
	• Discuss any adjustment to assay data.
		•	All assays matched with the logging sheets and loaded directly from
			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 mineralised 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 bysitepersonnel to the laboratoryin Orange,NSW(~200km from the

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Criteria	JORC Code explanation	Commentary
		site)
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 mineralised 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:

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Criteria	JORC Code explanation	Commentary
	o easting and northing of the drill hole collar;
	o elevation or RL (Reduced Level elevation above sea level in
	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 previous cut-offs used in mineral
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.	resource estimation and include at minimum of 30 g/t silver with maximum 10 metres internal dilution for low-grade results with a minimum 60 g/t silver with maximum 5 metres internal dilution for
	• Where aggregate intercepts incorporate short lengths of high grade	high-grade results.
	results and longer lengths of low grade results, the procedure used	•The silver equivalent values calculated using metal prices of US$20
	for such aggregation should be stated and some typical examples	per ounce silver, US$1.00 per pound zinc, US$1.00 per pound lead
	of such aggregations should be shown in detail.	and, US$1200 per ounce gold and recoveries of 81% for silver, 82%
	• The assumptions used for any reporting of metal equivalent values	for zinc, 81% for lead.
	should be clearly stated.	•Ag equivalent formula =Ag g/t + ((Pb% + Zn%)*33.2))
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. 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.

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Criteria	JORC Code explanation	Commentary
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;
exploration data	geophysical survey results; geochemical survey results; bulk 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

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