Arian Silver's MD&A and Results for the Financial Year Ended 31 December 2010

April 27th, 2011

London, England, Arian Silver Corporation (“Arian” or the “Company”) (TSXV: AGQ) (AIM: AGQ) (FRANKFURT: I3A), a silver exploration, development and production company with a focus on projects in the silver belt of Mexico, today announced the release of its Management’s Discussion and Analysis (“MD&A”) and audited Financial Statements (“Financials”) for the financial year ended 31 December 2010.

The MD&A and audited Financials will be available at SEDAR at and on the Company’s website at These documents can also be obtained on application to the Company. The following information has been extracted from the MD&A and Financials. The financial information in this announcement does not constitute full statutory accounts.

Arian’s Chief Executive Officer, Jim Williams, commented today, “This time last year we reported that post-year activity was the significant driver of the Company. We had, at this stage strengthened the balance sheet. Since then, Arian has re-strengthened the balance sheet with an additional financing, comprising a brokered and non-brokered financing during October 2010, and at the very end of the reporting period successfully delivered the first batch of silver-bearing concentrate to the end-user. The Company is now going from strength to strength, with fine-tuning of both mining, and specifically the milling operation, and this, combined with the rapid rise of the silver price, has enabled Arian to improve the bottom line revenue margins during the first quarter of 2011.

“Furthermore, during the final quarter of 2010, Arian embarked on yet another detailed exploration programme comprising 10,000 metres of core/diamond drilling, which is nearing completion, and which to date has confirmed the presence of significant silver-bearing mineralization more than six kilometres west of the previous drilling and resource areas.

“On the conclusion of this current drilling phase, which should now be expedited due to the recent successful installation and commissioning of Arian’s wholly-owned analytical laboratory, the Board is now forecasting an updated resource estimation for the Company’s San José property during the summer months of this year.

“To conclude, during the reporting period, the Company successfully concluded a transaction on our Tepal gold-copper property with Geologix Explorations. Arian can now focus exclusively on our silver (and base metal) properties in Zacatecas State.”


Financial (all amounts expressed in US dollars unless otherwise stated)

• Total assets of $18.9 million, including intangible assets of $1.2 million, property, plant and equipment of $5.4 million, assets held for sale of $2.9 million and cash of $8.3 million, as at 31 December 2010.

• Consolidated pre-tax loss for the year was $1.7 million.

• Working capital was $10.2 million, as at 31 December 2010.

• During 2010 the Company’s funding increased significantly enabling the commencement of contract mining and processing of ore from the San José mine and subsequent production of silver concentrate.

• In January 2010 the final instalment of $500,000 was paid to the vendor giving the Company 100% ownership of the San José mineral concessions.

• In October 2010, production at the San José mine commenced and the first batch of silver concentrate was delivered to the smelter at the end of December 2010. The Group reported revenue of $184,000 and a gross profit of $9,000 at the 31 December 2010 for this operation.

• Issue of common shares through private placements in January 2010 raising Cdn$3.5 million and in October 2010 raising £3.9 million. In addition, Cdn$1.8 million was raised through the exercise of share purchase warrants and £0.4 million through the exercise of share purchase options during the year.

• In February 2010, Geologix Explorations Inc (“Geologix”) made a payment of $1.45 million, $725,000 in cash and $725,000 in Geologix shares for the first instalment under the option to acquire the Tepal project. The disposal of Geologix shares raised approximately Cdn$1.17 million in cash and resulted in a gain of $0.4 million above the initial book value, including a $0.2 million foreign exchange gain.

• In January 2010, the Company completed the reversal and cancellation of the share exchange transactions with Grafton Resource Investments Ltd. (“Grafton”) that took place in 2009.

• During the year the Company repaid all current borrowings from new funds received.

Post 31 December 2010

• In February 2011, Geologix exercised the Tepal option and the final instalment of $1.55 million was paid as to $775,000 in cash and $775,000 in Geologix shares.

• Further exercise of share purchase warrants and options generated Cdn$1.7 million and £90,000.


• Arian’s key project is the San José property which lies 55km to the southeast of Zacatecas City and covers 11 mining concessions totalling approximately 6,300 hectares. The property has significant infrastructure, including a 4 x 4 metre main haulage ramp, which extends for nearly 3.2km along the footwall of the San José Vein (“SJV”) system and a 350m deep, 500 tonne per day (“tpd”), vertical shaft with operational hoist. In addition, a number of shallower vertical shafts exist westerly along the SJV.

• During the year Arian paid the final instalment of $500,000 to the vendor, to acquire the remaining 33.33% interest in the San José property mineral concessions, to give it 100% control of the San José Project.

• In September 2010 contracts were completed for a mining and milling operation at the San José Project. It was projected that the milling operation would initially handle up to 400 tpd. The Company then planned to increase the throughput with an upgraded crusher. The operation has potential to increase target production of Run Of Mine (“ROM”) material at San José from 500 tpd up to 1,500 tpd.

• Mining and production commenced at San José mine in October 2010.

• A new 10,000m drilling programme commenced in November 2010 at San José.

• The first delivery and sale of approximately 14 tonnes of silver in concentrate took place in December 2010.

Post 31 December 2010

• A new dedicated laboratory facility at San José was commissioned and became operational in April 2011.

• Results to date from the drilling programme continue to confirm the presence of significant silver mineralisation and that the SJV remains completely open along strike and to depth.

• The mining operation has produced approximately 200 tonnes of silver in concentrate with a composite grade of approximately 550 ounces per tonne.

• Upgrades to the custom mill are continuing.

• An independent update of resource estimates is planned for mid-2011 following completion of current drill programme.


In the financial year ended 31 December 2010, the Company incurred a pre-tax loss of $1.7 million (2009 - $2.1 million) which includes expensing the fair value of share purchase options vesting of $15,000 (2009 — $0.4 million) and other administrative expenses of $2.1 million (2009 - $1.7 million). The Company commenced production at its San José mine during the last quarter of 2010 that contributed a gross profit of $9,000. Interest income from cash resources was $11,000 (2009 - $nil). Investment income was $0.4 million (2009 - $nil), including a $0.2 million foreign exchange gain, which relates to the profit on disposal of the Company’s holding of Geologix shares, received in connection with the grant of the Tepal option.

As at 31 December 2010 the Company had working capital of approximately $10.2 million (31 December 2009 - $4.0 million). Intangible assets amounted to $1.2 million (31 December 2009 - $7.7 million) which relate to deferred exploration and evaluation costs in respect of the Company’s Mexican projects, excluding the San José and the Tepal projects. The carrying value for the San José project has been transferred to mine development costs, in property, plant and equipment as a result of the commencement of production at the San José mine. Property, plant and equipment amounted to $5.4 million (31 December 2009 - $0.1million); $5.3 million of this relates to the San José mine development costs comprising a transfer of $4.7 million of deferred exploration costs, $0.2 million provision for mine closure costs and $0.4 million of further commissioning and development costs capitalised. The carrying value of the Tepal project has been transferred from intangible assets and is accounted for in current assets as assets held for sale valued at $2.9 million (31 December 2009 - $nil) as a result of the grant of the Tepal option. The first instalment of the Tepal option consideration from Geologix, which is non-refundable, is accounted for as a deferred income item of $1.5 million (31 December 2009 - $nil) in current liabilities pending exercise or termination of the Tepal option. Share capital increased by $7.2 million to $45.4 million (31 December 2009 - $38.2 million) largely as a result of the issue of common shares in connection with share placements, the exercise of share purchase warrants and options, and the issue to Grafton of common shares for debt offset by the redemption and cancellation of the common shares issued in 2009 by the Company to Grafton. During the period the Company repaid all current borrowings from new funds received.


The Company currently owns 32 mineral concessions in Mexico totalling approximately 8,038 hectares.

San José Project, Zacatecas State

The San José property lies 55 kilometres to the southeast of Zacatecas City and covers 11 mining concessions totalling approximately 6,300ha. The property has significant infrastructure, including a 4 x 4 metre (“m”) main haulage ramp (“SJ Ramp”), which extends for nearly 3.2km along the footwall of the San José Vein (“SJV”) system, and a 350m deep, 500 tonne per day (“tpd”), vertical shaft with operational hoist. In addition, a number of shallower vertical shafts are located in a westerly direction along the SJV.

During the year Arian paid the final instalment of $500,000 to the vendor, to acquire the remaining 33.33% interest in the San José mineral concessions, to give it 100% control of the San José Project.

In September 2010, the Company announced that all necessary contracts were in place for the proposed silver production operation at the San José mine and that it was moving into production (see the Company’s press release dated 22 September 2010 entitled “Arian Silver Commences Silver Production”).

The initial mining operation is limited to the Ramal Norte/Sur, San José 75m Level Central Zone and Santa Ana resource blocks, selected by Arian from seven delineated resource blocks to support an initial four-year mining operation with the potential to increase the mining rate to 1,500 tpd subject to milling capacity being available.

In October 2010, mining and production at the San José mine commenced. Following the installation of various pieces of mechanised mining equipment, the main focus at first was to intercept the main SJ Ramp, via a circa 30m cross-cut, with the old Santa Ana shaft; this was to significantly increase the amount of natural ventilation without the need for additional ventilation ducting, thereby enabling the preparation and extension of the SJ Ramp in a westerly direction. A combination of payable and non-payable material was being extracted during the development work with payable ROM material being deposited on the stockpile pad outside the main SJ Ramp. The accumulation of this ROM material on the stockpile pad was designed to ensure a smooth and constant supply of material to the mill.

Milling commenced in December 2010 and the first shipment of approximately 14 tonnes of dry concentrate (zero moisture content) was produced before the year-end.

From January to the end of March 2011 approximately 120m were developed along the main westerly strike of the SJ Ramp in a combination of ROM and waste material. In addition, some 73m were developed off the main SJ Ramp, initially in a northerly direction before running parallel and with a steeper decline; this was to access deeper seated sulphide—rich material of the Santa Ana Block (less oxidation) which should further increase recoveries at the mill. Anticipated grades of silver in this area, based on diamond drilling information, are in the order of 450 g/t.

Additional mining equipment is being sourced from the mining contractor to increase daily throughput and to more rapidly access known higher grade areas.

The mill, even though rated at 400 tpd throughput, only started with a daily throughput of 120 tonnes; this was essentially due to the hardness and abrasiveness of the San José ROM material causing excessive wear and tear on the milling components. This was partially overcome with the installation of a reconditioned impact crusher in the circuit to finer grind the ROM material before the ground rock entered the flotation stage of the plant. Currently the milling throughput is in the order of 300 tpd. The Company continues to test various reagents in the flotation part of the plant with a view to further increasing recovery.

The mill and plant both require additional improvements and work is currently being undertaken on the Filter to dry the concentrate much more rapidly than natural drying. Meanwhile, an additional 200 tpd mill is currently being installed to further increase mill throughput. Discussions are progressing with the mill owner to extend the lease term for an additional two years beyond the current term that expires in June 2011.

During March 2011 934 kg of silver in concentrate was produced and it is anticipated that this rate of production will increase going forward. To date, approximately 200 tonnes of silver in concentrate, with a composite grade of approximately 550 ounces per tonne, has been produced.

Arian’s major drill programmes from 2006 along the SJV delineated a JORC Code compliant resource estimate of approximately 33.8 million ounces of silver, 95.5 million pounds of lead and 205 million pounds of zinc in the “inferred” mineral resource category and 9.0 million ounces of silver, 24.6 million pounds of lead and 42.2 million pounds of zinc in the “indicated” mineral resource category from seven delineated resource blocks. The NI 43-101 compliant mineral resources mentioned above for these same seven blocks are summarized in the table below:
Resource Category Grade Contained Metal
Tonnes Ag Pb Zn Ag Pb Zn
g/t % % (Moz) (t) (t)
Indicated 2,196,000 127.7 0.51 0.88 9.02 11,200 19,200
Inferred 11,190,000 93.8 0.39 0.83 33.76 43,400 93,200

1. Geological characteristics and +30 ppm grade envelopes used to define resource volumes.
2. The mineral resource estimates are in accordance with CIM and JORC standards.
3. The effective date of the mineral resource estimates is 15 August 2008.
4. The estimates are based on geostatistical data assessment and computerised IDW3, Ag grade wireframe restricted, linear block modelling.
5. The resource was estimated using 830 drill hole samples and 1122 underground samples.
6. Resource figures were prepared by Galen White, Qualified Person and author of the August 2008 report.
7. Tonnage figures have been rounded up or down to the nearest 1000 t.
8. Ag ounces have been calculated using 31.1035 g = 1oz.
9. Pb and Zn tonnes have been calculated using 2204.622 lbs = 1 tonne.

It is important to note that the seven resource blocks that comprise these estimates represent only approximately 10% of the known strike length of the SJV within Arian’s concession area. For this reason, Arian’s Management considers the upside for material additional resources along the remaining 90% of the SJV system to be significant.

In November 2010, a new 10,000m drill programme was commenced in order to, initially, delineate additional areas of high grade mineralisation and to upgrade existing resources, between the Santa Ana and Guanajuatillo resource areas along the SJV. The drill programme also started to explore in detail the SJV system that lies to the west of the village of Guanajuatillo, which collectively accounts for approximately 90% of the known strike length of the SJV system. Two “Longyear 44” drilling rigs continue to operate on this latest programme. The results to date from the drilling continue to confirm the presence of significant silver and, in places lead and zinc mineralisation and that the SJV remains completely open along strike and to depth. In April 2011 the latest drilling results from the current drilling programme were released (see the Company’s press release dated 4 April 2011 entitled “Arian Silver’s continuing exploration drilling intercepts high-grade silver at San José”).

The current 10,000m phase of diamond drilling is nearing completion. It is anticipated that a resource estimation update will be completed during the summer months of 2011 and this process has already begun with the recent site visit by an independent consultant. On completion of the current drilling programme it is also proposed to immediately follow up with another drill programme, details of which will be announced in due course.

Also in November 2010, Arian contracted to purchase a semi-mobile laboratory from Stewart Group’s Geochemical & Assay Division (the “Stewart Group”). The laboratory comprises a comprehensive sample preparation facility, a fire assay laboratory and a wet chemistry laboratory with Atomic Absorption Spectrometry (“AAS”). The laboratory was commissioned and became operational in April 2011 and should significantly increase the turnaround times for analysis of Arian’s sampled cores. The laboratory is operated under the sole control and management of professional personnel from the Stewart Group in order that results are fully compliant with Arian’s quality assurance and quality control (QA/QC) programme. The Stewart Group, headquartered in the United Kingdom, operates a network of accredited laboratories and metallurgical services to mining and exploration companies.

Arian’s overall objective is to develop additional resources on the San José property concurrently with the mining operation, complete a full feasibility study, and move to large-scale independent commercial production.


In management’s view, the most meaningful information concerning the Group relates to its current liquidity and solvency.

During the year the Group received new funding from:

• a private placement financing in January 2010 of units (“Units”) each consisting of one common share of the Company and one-half of a common share purchase warrant (the “Placement”). The Placement raised Cdn$3,499,857 through the issue of 69,997,139 Units at Cdn$0.05 per Unit. In addition 600,000 Units were issued in satisfaction of Cdn$30,000 of finder’s fees payable in connection with the Placement. As part of the Placement, 35,298,569 “F” share purchase warrants were issued.

• a brokered and non-brokered private placement in October 2010 that raised gross proceeds of £3,888,800 and comprised the issue of 21,604,435 common shares of the Company at £0.18 per common share.

• the first instalment of $1.45 million under the Tepal option granted to Geologix. Settlement was effected by way of a cash payment of $725,000 and the balance through the issue of 3,434,193 Geologix shares at a price of Cdn$0.22 per share. The Company’s holding of Geologix shares was subsequently sold in tranches at prices varying between Cdn$0.23 and Cdn$0.57, which generated Cdn$1,167,000 and a book profit of $369,000.

• the exercise of 7,475,000 share purchase options and 17,957,199 “F” share purchase warrants which generated £420,875 and Cdn$1,785,720 respectively.

Also during the year:

• the share exchanges in 2009 with Grafton were reversed and the Company redeemed and cancelled the 109,090,909 common shares issued to Grafton at the original issue price of Cdn$0.055 per share in consideration for the redemption of the 128,591 Grafton participating shares issued to the Company.

• the Company issued to Grafton 15,762,000 common shares at Cdn$0.05 per common share in settlement of $750,000 of outstanding loans and repaid to Grafton the $300,000 balance of the loans.

• following receipt of the first instalment under the Tepal option, the Company repaid to Geologix a loan of $518,000.

Since the year end the Group has received further funding from:

• the exercise of 1,400,000 share purchase options and 17,342,000 “F” share purchase warrants which generated £90,000 and Cdn$1,734,200 respectively.

• the exercise of the Tepal option by Geologix which resulted in the receipt of a final instalment of $1.55 million, satisfied as to $775,000 in cash and the issue of to the Company of 1,089,318 common shares of Geologix at a price of approximately Cdn$0.70. The Geologix shares are subject to a four-month hold period expiring in June 2011.

The following share purchase options are currently outstanding, each entitling the holder to acquire one common share of the Company:

• 18,185,000 share purchase options with exercise prices in the range £0.055/£0.4925 or Cdn$0.10/ Cdn$0.79 expiring on various dates up to January 2016.

As at 31 December, 2010, the Company had working capital of approximately $10.2 million (31 December, 2009 — $4.0 million).
In relation to funding the Company’s future operations, it is currently anticipated that this will be largely financed from existing working capital as well as from cash flow from the mining operation at the San José project.
Qualified Person
Mr. Jim Williams, Eur Ing, Eur Geol, BSc, MSc, D.I.C., FIMMM, the Chief Executive Officer of Arian, a “Qualified Person” as defined in the AIM guidelines of the London Stock Exchange, and a “Qualified Person” as such term is defined in Canadian National Instrument 43-101 (“NI 43-101”), has reviewed and approved the technical information in the Review of Operations other than the mineral resource estimates.

For further information please contact:

Arian Silver Corporation
Berkeley Square House
Berkeley Square
London, England


Arian Silver Corporation
Jim Williams
(London) +44 (0)20 7887 6599


Arian Silver Corporation
Graham Potts
Corporate Secretary
(London) +44 (0)20 7887 6599


Grant Thornton Corporate Finance
Gerry Beaney
(London) +44 (0)20 7383 5100


XCAP Securities PLC
John Grant / Karen Kelly
(London) +44 (0)20 7101 7070 /


Yellow Jersey PR Limited
Dominic Barretto
(London) +44 (0)7768537739


CHF Investor Relations
Cathy Hume
(Canada) +1 416 868 1079 x 231

About the Company

Arian is a silver exploration and development company and is listed on London’s AIM; trades on London’s “PLUS” market; is listed on Toronto’s TSX Venture Exchange and on the Frankfurt Stock Exchange. Arian is active in Mexico, the world’s second largest silver producing country. The Company’s main project is the San José project in Zacatecas State. Part of Arian’s forward-looking strategy lies in the envisaged use of large scale mechanized mining techniques over wider mineralized structures, which reduces the overall unit operating cost of metals, and to build up NI 43-101 compliant resources.

Further information can be found by visiting Arian’s website: or the Company’s publicly available records at

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) and no stock exchange, securities commission or other regulatory authority accepts responsibility for the adequacy or accuracy of this release nor approved or disapproved of the information contained herein.


This press release does not constitute an offer to sell or a solicitation of an offer to buy any of the securities of the Company in the United Sates. The securities of the Company have not been and will not be registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”) or any state securities laws and may not be offered or sold within the United States or to U.S. persons unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available.

Forward-Looking Statements
This press release contains certain “forward-looking statements”. All statements, other than statements of historical fact, that address activities, events or developments that the Company believes, expects or anticipates will or may occur in the future (including, without limitation, statements relating to the mineral resource estimates, statements regarding the contract mining and milling operation at the San José Project (the “SJ Mining Operation”), the ability of the Company to achieve, maintain and possibly increase planned levels of production from the SJ Mining Operation, the ability of the Company to generate positive cash flow from the SJ Mining Operation, the ability to continue or implement proposed drilling programmes on the SJV system and the Company’s exploration, development and production plans and objectives) are forward-looking statements. These forward-looking statements reflect the current expectations or beliefs of the Company based on information currently available to the Company. Forward-looking statements are subject to a number of risks and uncertainties that may cause the actual results of the Company to differ materially from those discussed in the forward-looking statements, and even if such actual results are realised or substantially realised, there can be no assurance that they will have the expected consequences to, or effects on the Company. Factors that could cause actual results or events to differ materially from current expectations include, among other things, the performance of the contractors and plant and equipment engaged in relation to the SJ Mining Operation, failure to achieve anticipated production levels and mineral grades for ore from the SJ Mining Operation, failure to establish estimated mineral reserves, the possibility that future exploration results will not be consistent with the Company’s expectations, uncertainties relating to the availability and costs of financing needed in the future, changes in the silver commodity price, changes in equity markets, political developments in Mexico, changes to regulations affecting the Company’s activities, delays in obtaining or failures to obtain required regulatory approvals, the uncertainties involved in interpreting exploration results and other geological data, and the other risks involved in the mineral exploration and development industry. Any forward-looking statement speaks only as of the date on which it is made and, except as may be required by applicable securities laws, the Company disclaims any intent or obligation to update any forward-looking statement, whether as a result of new information, future events or results or otherwise. Although the Company believes that the assumptions inherent in the forward-looking statements are reasonable, forward-looking statements are not guarantees of future performance and accordingly undue reliance should not be put on such statements due to the inherent uncertainty therein.

The mineral resource figures disclosed in this press release are estimates and no assurances can be given that the indicated levels of minerals will be produced. Such estimates are expressions of judgment based on knowledge, mining experience, analysis of drilling results and industry practices. Valid estimates made at a given time may significantly change when new information becomes available. While the Company believes that the resource estimates included in this press release are well established, by their nature resource estimates are imprecise and depend, to a certain extent, upon statistical inferences, which may ultimately prove unreliable. If such estimates are inaccurate or are reduced in the future, this could have a material adverse impact on the Company.

Mineral resources are not mineral reserves and do not have demonstrated economic viability. There is no certainty that mineral resources can be upgraded to mineral reserves through continued exploration.