TORONTO, Dec. 2, 2008 (GLOBE NEWSWIRE) -- Silver Dragon Resources Inc. (OTCBB:SDRG) today issued the following letter to shareholders, posting it on its website: http://www.silverdragonresources.com. It follows in its entirety.
Dear Valued Shareholders:
Due to recent declines in the global commodity and capital markets, scores of mining companies have been unable to fund their respective exploration plans. However, Silver Dragon has managed to secure financing at favorable terms in China, and consequently reported a $3.0 million cash balance in our third quarter 10-Q filing. Consequently, the company has significantly advanced its properties during 2008, and appears well-positioned to have an exceptional 2009.
During 2008, Silver Dragon funded an aggressive drilling program in China, purchased a mill in Mexico, and initiated a feasibility study on the Erbahuo mine. Given its current cash reserves, the expectation of bringing two mines into production, and the leadership role being taken by its Chinese partners, the Company expects at least the same level of progress in 2009.
A combination of already announced initiatives and upcoming opportunities should enable Silver Dragon to continue growing during these difficult times, in our view. Below is a list of some of these items:
I. Anticipated 2009 Production in Mexico and China
a) Cerro Las Minitas Silver Project, Durango Mexico (Quarter 1 2009)
In August 2006, Vector Engineering Inc. completed a Canadian National Instrument ("NI") 43-101 report to confirm historical mineral resource estimates at Cerro Las Minitas, calculating the property to have resources of 26.7 million silver equivalent ounces.
By year-end, Vector is expected to complete an update to this report, encompassing five new mineralized zones that were discovered during the Company's 2007 and 2008 exploration programs.
Additionally, in October 2008 the Company purchased a 50 tonne per day mill at what we view to be a favorable price. The mill is expected to commence production in the first quarter of 2009, and thus generate Silver Dragon's first material revenue stream. Mill concentrates will be sold to local silver consumers and smelters.
Importantly, the mill can be upgraded to accommodate significantly higher ore volumes at relatively modest cost. This process will be considered periodically, based on both progress in advancing the Cerro Las Minitas property and prevailing market conditions.
b) Erbahuo Silver Project, Northern China (Quarter 4 2009)
In July 2007, Micromine Pty. Ltd., a geologic consulting company in Perth, Australia, prepared an NI 43-101 report for Erbahuo, the smallest of our nine Chinese properties, yielding a resource estimate of 5.3 million silver equivalent ounces. In October 2008, the Company engaged Ten-Star Consulting of Beijing, China, to prepare a feasibility study for the development of the Erbahuo property, targeting initial production by Q4 2009. This study should be completed before year-end.
During the 2008 exploration season, two new holes were drilled in an attempt to increase Erbahuo's resources and enable an optimized production plan. Assay results from these drill holes are also anticipated to be completed before year-end.
II. Aggressive 2008 Chinese Drilling/Tunneling/Trenching Program
a) Liangdi Silver Project, Northern China
During the 2008 exploration season, Silver Dragon's Chinese subsidiary, Sanhe Sino-Top Resources and Technologies Ltd., conducted an aggressive drilling, tunneling, and trenching campaign at Liangdi to further define the extensions and lengths of its 27 known mineralized bodies. To date, this program has included 1,300 meters of tunnels and six drill holes totaling 2,325 meters, with assay results also anticipated by year end.
In August 2008, the Company released initial assay results at Liangdi showing trenching and sampling assays as high as 663 grams per tonne Silver, 15.69% Lead, and 18.3% Zinc, with horizontal thicknesses averaging 2.0 - 3.6 meters.
b) Laopandao & Dadi Silver Projects, Northern China
One of Silver Dragon's main goals has been to convert its Chinese 122b resource estimates to NI 43-101 compliant estimates as expediently as possible. The aforementioned report on Erbahuo was the first 43-101 report to be completed, and we continue to anticipate the serial completion of such reports on most or all of our nine Northern Chinese properties.
In January 2008, the Company retained Micromine to prepare NI 43-101 reports on the Laopandao and Dadi properties. The 2007 drilling and tunneling program results will be used to establish a mineral base for these properties, as well as additional work that has been completed in 2008. Assay results from this work, too, is anticipated before year-end.
The Laopandao 43-101 report is scheduled to be completed first, currently anticipated in the first quarter of 2009. However, due to the aggressive nature of the 2008 drilling/trenching campaign, the Company is considering moving the Liangdi 43-101 report ahead of Dadi. Notably, at the Dadi property, where a significant trenching discovery was made in 2007, additional trenching and tunneling work was completed in 2008 while a road was built to enable the transportation of drill rigs for the 2009 season. Results from the 2008 Dadi tunneling program are also anticipated in the coming weeks.
c) Drilling Results
Drilling in Northern China is impacted by seasonal weather patterns. Thus, exploration programs are typically carried out between the months of May and November. As noted above, initial results were released in August from Liangdi. However, the majority of results will be released as they are completed, currently anticipated in December and January. During the 2008 exploration season, the majority of work was concentrated on five of the nine properties: Erbahuo, Laopandao, Liangdi, Dadi, and Saihanaobao, with a total of US$1.8 million spent by Silver Dragon and its Chinese partners.
III. Financing
During the third quarter, the Company secured US$5.5 million as part of a US$13.0 million financing package. Of that amount, $1.0 million came from a private placement with an entity designated by our Chinese Partners, HIC, at $0.15/share with no associated warrants.
Consequently, HIC, a wholly-owned subsidiary of the Chinese government, now owns approximately 10% of Silver Dragon's shares outstanding.
Secondly, US$4.5 million was secured through the sale ("the Asset Transfer") of 20% of Erbahuo and 50% of the eight Chinese exploration properties. Final approval for this transaction is anticipated in early 2009, at which point Silver Dragon would officially own 70% of Erbahuo and 40% of the eight exploration properties.
Finally, HIC and Silver Dragon are waiting for Chinese government approval of an additional $7.5 million private placement in Silver Dragon at $0.25/share with no associated warrants. We are hopeful this final transaction will be completed, but irrespective of this possible financing, have enough cash to advance our properties, commence production, and seek additional opportunities to grow the Company in 2009.
Moreover, Silver Dragon announced in November that Gansu Shengda Group Ltd. ("Shengda"), one of the largest private mining companies in China, will be purchasing the 52% stake in Sanhe-Sino Top from HIC, pending Chinese Ministry of Commerce approval of the Asset Transfer noted above. Moreover, Mr. Mantang Zhao, Shengda's Chairman and Chief Executive, was installed in July as the new Chairman of Sanhe Sino-Top.
Given the enormous size of the eight Chinese exploration properties, we believe Silver Dragon's pending minority ownership position will enable a significantly faster pace of development, particularly given that Shengda operates Bairen Daba, one of the largest silver mines in China, which happens to be directly adjacent to the Erbahuo silver district. See the map on the home page of Silver Dragon's website.
IV. Company Disclosure & Commitment Update
Silver Dragon is striving to improve its communication to shareholders. In the coming weeks, the corporate website (www.silverdragonresources.com) will be updated to consolidate and transfer our corporate strategy to new and existing shareholders. Moreover, a new corporate presentation was recently uploaded, viewable on the website's home page. We will be sending updates via email to registered subscribers, and welcome all questions and feedback. If you would like to stay abreast of Silver Dragon's developments, please subscribe to our email list.
On behalf of the Board of Directors, I want to thank our shareholders for their perseverance to date, as well as their continued support during this challenging financial climate. We believe that with two mills planned to commence production, a positive cash reserve, and a commitment to expand the management team, we look forward to a successful 2009.
Sincerely,
/s/ Marc M. Hazout President and CEO Silver Dragon Resources Inc.
About Silver Dragon Resources Inc.:
Silver Dragon Resources Inc. is a mining and metal company focused on the exploration, acquisition, development and operation of silver mines in proven silver districts globally. Silver Dragon's objective is to acquire silver mining assets that contain promising exploration targets, have highly leveraged, out-of-the-money silver deposits, and/or are producing properties with significant untapped exploration potential. It is management's objective to grow Silver Dragon into a significant silver producer by developing the Cerro las Minitas and Erbahuo projects in Mexico and China respectively. For more information, please visit the Company's website at: www.silverdragonresources.com (now available in Chinese).
The Silver Dragon Resources Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=4242
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: The statements contained herein which are not historical, such as statements regarding the exploration and development of the Liangdi Silver Project, outcome and timing for the completion of further assays and metal amounts in partial assay results, are forward-looking statements. Forward looking statements are statements that are not historical facts and are generally, but not always, identified by the words "expects," "plans," "anticipates," "believes," "intends," "estimates," "projects," "aims," "potential," "goal," "objective," "prospective," and similar expressions, or that events or conditions "will," "would," "may," "can," "could" or "should" occur. Information inferred from the interpretation of assay results and information concerning mineralization zones may also be deemed to be forward looking statements, as it constitutes a prediction of what might be found to be present when and if a project is actually developed. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements, including, but not limited to, certain delays beyond the company's control with respect to future assay results, delays in testing and evaluation of assays, and other risks detailed from time to time in the Company's filings with the Securities and Exchange Commission.