U.S. Silver Posts Strong Silver Production,
Poised to Reopen Second Mine In Silver Valley
85% Silver Production Offers Investors a Pure Silver Play in a Dynamic Market
With one operating mine that at one time was thesecond-largest silver producer in the U.S. and two other advanced-stagesilver properties, all encompassing some 14,000 acres in the heart ofnorthern Idaho’s Silver Valley, the world’s most prolific silver belt,U.S. Silver Corporation (OTC QX: USSIF; TSX.V: USA) -- www.us-silver.com-- is consolidating its standing as a “pure silver play” in anincredibly strong year that has seen the price of silver close up 83.8%.
2011 Operating Targets Keep U.S. Silver
On Track to Attain 3 Million Oz. of Silver
U.S.Silver produced 2.275 million ounces of silver, 5.6 million pounds oflead and 1.0 pounds of copper in 2010, slightly below production levelsfor 2009, due primarily to lower head grades and increased regulatoryattention following the death of a contract mine worker. Head gradessubsequently improved in December 2010, resulting – the second highestever level of monthly production.
In the fourthquarter alone, the Company produced 670,000 equivalent ounces of silver,using metals prices of $28/oz for silver, $1.10/lb for lead and$4.25/lb for copper.
In 2011, U.S. Silverexpects to produce 2.4- 2.6 million ounces of silver, 5.8 millionpounds of lead and nearly 1 million pounds of copper.
“U.S. Silver hashistorically delivered long term production consistency and willcontinue to do so,” says CEO Thomas Parker. “We are solidly on a path toreach a target of 3 million ounces of silver a year.”
Drilling Planned to Define, Expand 5.9 Million Oz
Silver Resource at Coeur Mine
U.S.Silver is moving closer to restarting production at the Coeur Mine,which contains an estimated 5.9 million ounce silver equivalentresource. A tentative mine plan is targeting initial mining of deeperresources. A scheduled 20-hole underground drilling program will furtherdefine resources at depth.
Historically, theCoeur Mine produced some 39 million ounces of silver and 33 millionpounds of copper, operating until mid-1998. The mine has a flotationmill that now processes lead-silver ores from the Galena Mine. Both theCoeur and Caladay Mines flank the Galena Mine property and providetremendous growth potential for the Galena mine complex. The Coeur andGalena Mines are connected underground by a rail tunnel at the 3,700foot level, while the Caladay property is connected to the Galena Mineby an underground tunnel at the 4,900 foot level. Both tunnels are usedto exhaust ventilation air. The 3,700 level tunnel also allows for theunderground movement of lead-silver ore to the operational Coeur Mill.
Once a mining planis in place, production could start fairly rapidly, according to Parker.No additional permitting or acquisition costs are required. Between theoperating Galena and the Coeur mills, up to 1,400 tons of ore could beprocessed per day at recovery rates of 96% for silver-copper and 92% forsilver-lead ores. Silver-copper concentrates are now sent to Quebec byrail and silver-lead concentrates are trucked to British Columbia.
Improving Ore Grades Boost Production at Galena Mine
Historically,U.S. Silver’s Galena Mine produced as much as 5 million ounces ofsilver annually, totaling over 175 million ounces since 1953. The Galenastill has about 21 million ounces of proven and probable silverreserves and significant potential for resource expansion. The SilverValley’s Coeur d’Alene Mining District, where the Galena is located, hasproduced about 1.2 billion ounces of silver.
U.S. Silver acquired100% of the Galena Mine, as well as the adjacent Coeur Mine and CaladayProject in 2006 from Coeur d’Alene Mines for a mere $15 million. TheCompany subsequently acquired the historic Dayrock Mine and Mill,creating a land package over 11 miles long and 4 miles wide. Thecombined properties include four shafts, two operating flotation mills,and extensive surface and underground mining works and equipment. Morethan 250 employees work at the Galena Mine, which produces 800-1000 tonsof ore per day, five days a week. U.S. Silver hopes to improve headgrades to 14 opt in 2011, as well as develop more places to mine andcontinue an aggressive program of infrastructure improvements.
“We are investing alot of money in infrastructure, including over $10 million into thecaved Galena Shaft,” says Parker. “By the end of the year we will beable to hoist ore up the rehabilitated Galena Shaft.”
Highly Experienced Management Team
U.S.Silver Corporation is led by a management team that collectively hasover 100 years of management experience in the mining sector.
President and CEOTom Parker, is a professional mining engineer with over 45 years in topmanagement with such companies as Gold Crest Mines, High Plains Uranium,Costain Minerals, Thunder Basin Coal, Kerr McGee Coal, Conoco and ARCOwhere he was President of Beaver Creek Coal Mines and General Managerof Nevada Moly.
Chairman Bobby E.Cooper has 42 years experience, including serving as Chairman of HighPlains Uranium and President and CEO of Kennecott Corporation. CFO ChrisJ. Hopkins is a Chartered Accountant with over 25 years experience infinancial management, strategic planning, mergers and acquisitions,corporate finance and financing and management reporting.
Investment Considerations
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 U.S. Silver Corporation is in the enviable position of holding no long-term debt and, unlike many other producers who frequently must pay out royalties, retains all profits from production. The Company has also locked in current silver values for 20% of its 2011 production through a hedging program with Auramet Trading LLC. U.S. Silver will receive a minimum price of $27.50 per ounce on production of 500,000 troy ounces of silver. The program covers equal quantities of silver for each calendar month throughout 2011.
“The hedge guarantees U.S. Silver will achieve a meaningful positive cash flow above current production costs at the Galena Mine,” says Parker. “With the volatility in silver prices, this move will guarantee a portion of our future cash flow. While U.S. Silver has historically been an un-hedged silver play, securing a high selling price for approximately 20% of our 2011 production is a prudent thing to do.”
With $6 million in capital spending planned for 2011, the hedging program allows U.S. Silver to protect a portion of its silver production at high price levels. However, the Company retains full upside potential for 80% of its 2011 silver production to benefit from an expected rising silver market.
With nearly $9 million in cash, another $8 million worth of copper-silver concentrate on its way to smelters, and at least $2 million more anticipated for each rail car of concentrate produced, U.S. Silver can virtually self-fund expanding its silver resource at its Galena Silver Mine and complete development of its Coeur and Caladay Mines.
Twenty-four analysts surveyed by the London Bullion Market Association predict all precious metals will rise in 2011. Most were bullish on silver, predicting a 48% rise over 2010.
“I don’t believe that there is any better silver investment available than U.S. Silver and I believe that silver’s cycle won’t play out for at least another nine years,” writes one noted precious metals analyst, who publishes a top-rated private advisory, and founded and managed a precious metals mutual fund and successfully launched two mining companies. “I’ve been trading stocks for over 45 years and I can truthfully state that U.S. Silver Corporation is the most undervalued issue that I’ve ever laid my eyes on.”
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