Commission File No. 0001340677
Pursuant to Rule 425 under the
United States Securities Act
of 1933, as amended
Dated: June 8, 2009
Important Information
Press Release Not an Offer
This press release does not constitute an offer to purchase or sell or a solicitation of an offer to sell securities. This press release relates to a business combination transaction with Klondex Mines Ltd. (“Klondex”) proposed by Silvercorp Metals Inc. (“Silvercorp”). The Offer will be made solely under the registration statement, offer to purchase, prospectus and other offer documents that Silvercorp expects to file with the United States Securities and Exchange Commission. Investors and security holders are advised to read these documents carefully when they become available, because they will include important information regarding the Offer. At that time, investors and stockholders may obtain a free copy of the offer to purchase, prospectus, the related letter of transmittal and certain other Offer documents from the Securities and Exchange Commission’s website atwww.sec.gov and from Silvercorp’s website or by directing a request to Silvercorp’s investor relations department by telephone at 1-888-224-1881, fax 604-669-9387 or e-mail at info@Silvercorp.ca or by contacting the Information Agent, Kingsdale Shareholder Services Inc. at 1-888-518-6832. SILVERCORP URGES INVESTORS AND SECURITY HOLDERS TO READ THE REGISTRATION STATEMENT, THE OFFER AND TAKE OVER BID CIRCULAR AND ANY OTHER RELEVANT DOCUMENTS TO BE FILED WITH THE SEC AND CANADIAN SECURITIES REGULATORY AUTHORITIES, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. Safe Harbor Statement under the United States Private Securities Litigation Reform Act of 1995:
Safe Harbor Statement under the United States Private Securities Litigation Reform Act of 1995:
Certain of the statements made herein may contain forward-looking statements or information within the meaning of Canadian securities laws and the applicable securities laws of the United States. Such forward looking statements or information include, but are not limited to, statements or information with respect to Silvercorp’s intention with respect to a proposed offer to acquire Klondex; the proposed terms of such an offer; the business, operations and financial performance and condition of each of Silvercorp, Klondex and the proposed combined company and the estimation of mineral resources of Silvercorp, Klondex and the proposed combined company.
Forward-looking statements or information are based on a number of estimates and assumptions and are subject to a variety of risks and uncertainties, which could cause actual events or results to differ from those reflected in the forward-looking statements or information. Should one or more of these risks and uncertainties materialize, or should underlying estimates and assumptions prove incorrect, actual results may vary materially from those described in forward looking statements or information. Factors related to such risks and uncertainties, and underlying estimates and assumptions include, among others, the following: Silvercorp’s assessment of the effect of an offer on Silvercorp and on the shareholders of Klondex, the timing and prospects for shareholder acceptance of an offer and the implementation thereof; the satisfaction of any conditions to an offer; the ability of Silvercorp to advance development of the Fire Creek gold project; gold and silver price volatility; impact of any hedging activities, including margin limits and margin calls; discrepancies between actual and estimated production, between actual and estimated resources, and between actual and estimated metallurgical recoveries; mining operational risk; regulatory restrictions, including environmental regulatory restrictions and liability; risks of sovereign investment; speculative nature of mineral exploration; dilution; competition; loss of key employees; additional funding requirements; and defective title to mineral claims or property, as well as those factors discussed in the section entitled “Risk Factors” in Silvercorp’s most recently filed Annual Information Form and Form 40-F filed with the U.S. Securities and Exchange Commission for the year ended March 31, 2009. Accordingly, undue reliance should not be placed on forward looking statements or information. We do not expect to update forward-looking statements or information continually as conditions change, except as may be required by law, and you are referred to the full discussion of Silvercorp’s business contained in Silvercorp’s reports filed with the securities regulatory authorities in Canada and the United States.
The shares of Silvercorp Metals Inc. trade on the Toronto Stock Exchange (TSX: SVM) and the NYSE Amex (SVM). Neither the TSX nor the NYSE Amex have approved or disapproved the form or content of this release.
Cautionary Note To U.S. Investors Concerning Estimates Of Measured, Indicated And Inferred Resources
This presentation uses the terms “Measured”, “Indicated” and Inferred” Resources. U.S. investors are advised that while such terms are recognized and required by Canadian regulations, the Securities and Exchange Commission does not recognize them. “Inferred Resources” have a great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of an inferred resource will ever be upgraded to a higher category. Under Canadian rules, estimates of Inferred Resources may not form the basis of feasibility or other economic studies.U.S. investors are cautioned not to assume that all or any part of Measured or Indicated Resources will ever be converted into reserves. U.S. investors are also cautioned not to assume that all or any part of an Inferred Mineral Resource exists, or is economically or legally mineable.
601 Moorefield Park Dr.
Richmond, VA 23236
Fax: 804-327-7554
www.vcall.com
www.investorcalendar.com
Silvercorp Metal Inc., (SVM.TO)
Conference Call
June 8, 2009
Dr. Rui Feng, Chairman and Chief Executive Officer
Maria Tang, Acting Chief Financial Officer
Shirley Zhou, Manager of Corporate Communications
Lorne Waldman, Corporate Secretary
Good morning ladies and gentlemen and welcome to Silvercorp Metals Inc. conference call to discuss the announced intentions to make a takeover bid for Klondex Mines, Ltd. [Operator Instructions].
Good morning ladies and gentlemen and welcome to the Silvercorp Metals Inc. conference call. I am Lorne Waldman, Corporate Secretary. I am joined today by Dr. Rui Feng, Chairman and CEO of Silvercorp, Maria Tang our acting Chief Financial Officer and Shirley Zhou, our Corporate Communications Manager.
1
601 Moorefield Park Dr.
Richmond, VA 23236
Fax: 804-327-7554
www.vcall.com
www.investorcalendar.com
2
601 Moorefield Park Dr.
Richmond, VA 23236
Fax: 804-327-7554
www.vcall.com
www.investorcalendar.com
3
601 Moorefield Park Dr.
Richmond, VA 23236
Fax: 804-327-7554
www.vcall.com
www.investorcalendar.com
4
601 Moorefield Park Dr.
Richmond, VA 23236
Fax: 804-327-7554
www.vcall.com
www.investorcalendar.com
[Operator Instructions]. Our first question is coming from Haytham Hodaly with Salman Partners. Please go ahead.
Thank you, operator. Good morning Lorne and everyone else there. Just a couple of quick questions. Rui, we talked just a little bit and just a couple of other things that have come up. Just with regard to costs Rui, what were — was there any technical report cost actually outlined in case they were going to process the material eventually at one of the nearby projects whether it was by a Barrick or a Newmont property?
I just see the 20% deduction by NSR.
Okay so is that something that they’ve done before though Rui?
I think that was like at Great Basin where they have relatively low -grade they pay 25% deduction on NSR right. So hopefully initially we have some high-grade numbers. We can do a 20% reduction on NSR right.
Okay. And then, I guess now this is more of a gold focused property. I know your focus is high-grade, narrow-vein deposits. Are you basically just a precious metals company then or are you just looking — your growth previously and you are getting leverage because of the silver exposure. This is gold. Some would say this could perceived as negative because you are not a silver focus company per se but what is your strategy going forward from here Rui?
I think I look — after this transaction we look at our resources in situ value, right. It is about 21% in gold, 43% in silver, and 11% in zinc and 24% in lead. We are still a silver focus company. But given that silver is tough to find a very high-grade, narrow-vein operation around, I think there is gold situation as part of our strategy of a narrow-vein, high profit margin strategy.
5
601 Moorefield Park Dr.
Richmond, VA 23236
Fax: 804-327-7554
www.vcall.com
www.investorcalendar.com
Okay and Rui, just remind me, you said you needed permitting. How long do you think it will take them to get the exploration permit?
Klondex based on their presentation in AGM meetings and what they are talking about — they have been working on this for almost two years now for all kinds of reports and studies and now they come to the final stage of getting an underground mining — underground exploration permit. So it should be very shortly, right.
Shortly within like within 3-6 months or one year or two? What are we talking?
I think within maybe three or six months, right.
And then you said they also have to put up a reclamation bond was it.
That is what we understand based on a requirement from Nevada state requirement, right.
Okay. Okay. And is there any processing facilities nearby that are just sitting idle right now — nobody operating them?
There is a company called Golden Predator right and they have a 1,300 ton per day floatation mill nearby.
What’s it called? Golden Predator?
[Yah]
Oh, okay. Okay. [overlapping speakers] Thank you Rui.
[overlapping speakers] even Yukon Nevada, they have mill available too.
Okay. No, that’s good. Thank you.
6
601 Moorefield Park Dr.
Richmond, VA 23236
Fax: 804-327-7554
www.vcall.com
www.investorcalendar.com
Thank you.
Our next question is coming from Dan McFadden (ph). Please proceed with your question. Please state your company name sir.
I was just wondering if you guys could provide a little more color on your I guess attempts to engage them in negotiations and I guess if it got anywhere or sort of what your thinking is on why they have not been so receptive to this.
We have been talking to them on and off and apparently they are trying to avoiding us to talking and engaging with them. Now they are looking at different ways of doing things, including private placement, including debt financing and so we also talked to them about doing different things. And apparently we have to make a move because we have not got any conclusive reception from the management of Klondex.
So they have not been so receptive to the sales process but perhaps have —.
We have not been able to get them to sit down and talk to us and negotiate a deal right.
So it is basically nothing with regards to an actual sale. You have not obviously talked about price or anything like that with them prior to this release then.
We tried and apparently this is the way we will have to go right.
All right. Thank you very much for that.
Thank you.
[Operator Instructions]. Our next question is coming from Brad Humphrey with Raymond James. Please go ahead.
Hi guys, it is Brad Humphrey. Rui could you just run us quickly through some of the basic assumptions you used with the bulk sampling permit for your mining? So it is 40,000 tons per day, what kind of grade and what kind of recoveries?
7
601 Moorefield Park Dr.
Richmond, VA 23236
Fax: 804-327-7554
www.vcall.com
www.investorcalendar.com
I look at Klondex’s presentation and I think it is very reasonable and if we ever merge these companies, we feel that is the same way we will do it — follow their proposal. And in their proposal, you are going to do 120,000 tons. Based on Nevada state regulation they can do 40,000 tons per year bulk sampling. They have some kind high grade resource of almost 2 ounces of gold per ton. So essentially all of those are direct shipping ore right. So like based on mining costs, let’s say mining costs of probably $100 per ton, right (and I’m quoting all of their numbers), Mining, milling NSR and everything, costs around $20 US per ton. So like potentially we can have a lot of cash flow from that kind of a company. And based on the regulation you can do that for three years and so the idea is, once you have underground permit as Klondex proposed and which we agree with, is to go underground and make access to that high-grade ore and you do 40,000 tons per year, so over three years to do 120,000 tons, so at 2-ounce of gold that has a lot of gold there. And then we would generate the cash flow every year and then we can use that cash flow to finance your mill. And then the risk will be are those high grade there or not, right? That is the one risk — the risk because it does not drill indicated resource. So it is always a risk and maybe the grade changes. It may be vary spotty, right.
Right. So you are looking initially to be mining at an ounce and a half or —?
Something like that right. We based on that resource and I think it most likely is 1.5 ounce per ton right because 1 or 2 ounces is an extremely high grade to assume so that brings down the whole area grade.
Okay. Thank you.
Thanks.
Our next question is coming from Rafael Muhammad (ph) with Raymond James. Please proceed with your question.
Rui, can you talk about what sort of poison pill they have in place with regard to their shareholders rights plan?
Again Lorne. I’ll answer that. They do have a poison pill in place. When we do come out with our offer, it will set out full details with how we are going to deal with that. But, one of the conditions will be that it has to be waived or set aside.
8
601 Moorefield Park Dr.
Richmond, VA 23236
Fax: 804-327-7554
www.vcall.com
www.investorcalendar.com
Based on Canadian security law I don’t think that we are blocked out from doing anything. Because I would think we would expect in the shareholder rights plan you just buy some time, not block the deal..
Okay. I was just reading, there is a clause in that plan that says they are entitled — the current shareholders to purchase additional common shares at a significant discount to the market price. Is that going to be a problem?
How can you do that? [inaudible]
No, the plan will end up being waived or set aside. That will not be a barrier to the transaction. As Rui said, it is only a question of the number of days that an offer would maybe be left open for.
Okay, thank you.
Our next question is coming from Ted Bleep (ph) — Blackmont Capital. Please go ahead.
Quick question. Have there been any other CAs signed at all or is this the main focus? Thanks.
There have been no CAs signed.
Alight, alright. That’s great, thank you.
Did that answer your question sir?
Yes, that’s great. Thank you.
Okay. Thank you. The next question is from Thomas Tan, Euro Pacific Capital. Please go ahead.
Hi, good morning. Just a couple of quick questions. So you mentioned it could be shortly when you are getting an underground exploration permit. I understand. But what is the timeframe you are looking at when you will start commercial production? And also, for the underground operation, do you expect a lot of capital expenditures to make that to work?
9
601 Moorefield Park Dr.
Richmond, VA 23236
Fax: 804-327-7554
www.vcall.com
www.investorcalendar.com
Regarding that permitting, based on the public disclosure from Klondex, we should get that underground exploration permit before the end of this year. And they have been working on that for the last two or three years so it is almost there. Which I believe that. I believe so. And regarding the capital expenditure, as I stated we are focused to complete this transaction but with the high-grade nature of this deposit and also with the intention of following underground bulk sampling company initially, I think that the capital costs would be will another substantially higher — high. And also based on the public disclosure documents by Klondex they are talking about $10 million to get underground.
I think one of the keys to remember is that this project, we view it as something similar to how we did the Ying Mine where we able to get in there and generate some significant cash flows early on and then use those cash flows to fund further expansion of the mining operation as well as expand the resource through further exploration.
Do you think — I think in my — it is not really capital expensive but kind of labor-intensive. Do you expect based on what you see so far of this project, do you think it is going to be a little bit labor intensive and do you think it will be enough local workforce to get back to work and if so, like how many miners are we talking about here?
This is not going to be labor-intensive; it will be a fully mechanized mine. It is in Nevada, USA. There is a lot of experienced labor available. And also a lot of experienced independent mining contractors. They can take over the whole operation, you know. So, it should be — we can handle that with an independent mine contractor.
Okay, thank you very much.
Thank you.
And our next question is from the line of Bob Craft (ph) — Value Form. Please go ahead.
10
601 Moorefield Park Dr.
Richmond, VA 23236
Fax: 804-327-7554
www.vcall.com
www.investorcalendar.com
Hello Rui, Lorne and Shirley. Can you hear me okay? Okay, good. The previous questioner answered my question. I want to thank you all for your presentation at Value Form. I too was concerned about the fact that your labor-intensive mine in China but you just answered the question about the mechanization in Nevada. We have a bunch of Value Form members that are adding Silvercorp today. Keep us posted and don’t let us down. I thank you very much.
Thank you.
Okay at this time we have no further questions in queue.
Okay. I would like to thank everybody for joining us today to participate on the call. If you have further questions, please feel free to call us at our office here. Thank you again.
Thank you. Ladies and gentlemen that does conclude your conference. We do thank you for joining and using AT&T Executive Teleconference. You may now disconnect. Have good day.
11