Arian Silver's MD&A and Results for the Three Months Ended 31 March 2013

May 23rd, 2013

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 unaudited Financial Statements (“Financials”) for the three months ended 31 March 2013.

The MD&A and Financials are 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, “Today’s results reflect the resumption of milling at the third-party-owned, Juan Reyes toll mill. Whilst initial recovery rates are encouraging, the Board is mindful of the current silver price and is keeping this under close review.

Progress continues to be made in respect of the intended acquisition of a company-owned, custom processing plant, which has a crushing and milling capacity of up to 1,500 tonnes per day, and I look forward to providing an update in the coming weeks.”



First Quarter 2013 First Quarter 2012 Change

$000s $000s $000s
Revenue - 2,314 (2,314)
Gross (loss)/profit (206) (65) (141)
Net (loss)/ profit for the period (935) 866 (1,801)
Cash and cash equivalents 497 491 6
Total assets 15,154 14,119 1,035

The decrease in revenues and increase in the gross loss and the net loss of Q1 2013 was a result of the suspension of milling operations following a dispute with the owner of the former processing plant. Trial production resumed in February 2013 at the Beneficiadora de Jales y Minerales Juan Reyes SA de CV (“Juan Reyes”) processing plant on a small scale.

Cash remained in-line with the previous quarter. Further drawdowns on the Standby Equity Distribution Agreement (“SEDA”) facility funded working capital requirements.


First Quarter 2013 First Quarter 2012 Change
Head grade - Ag grams per tonne 174 173 1%
Tonnes mined 0 21,553 (100%)
Tonnes milled 258 24,394 (99%)
Silver concentrate tonnes produced 4 302 (99%)
Silver ounces produced 878 66,688 (99%)
Silver ounces per concentrate tonne produced 251 221 14%
Silver ounces sold 0 75,911 (100%)
Silver concentrate tonnes sold 0 330 (100%)

Trial production resumed during the quarter at the Juan Reyes plant.


The preparation and exploring of mining blocks continued in order to verify the continuity of mineralisation. Level 150 was dewatered and rehabilitated, and sampling took place obtaining new accessible mining blocks that were included in the resource estimate. The preparation and exploring of mining blocks continued in order to verify the continuity of mineralisation.

Subsequent Events

The Company is currently evaluating a number of indicative financing packages, which, if successful, could enable, subject to satisfactory due diligence, significant investment in the purchase and re-commissioning of a custom-built processing plant, and additional required mine development.

This investment should allow the Company to realise a significant increase in production concurrent with a significant decrease in operating costs.

Since 31 March 2013, the Company has issued 2,493,212 common shares at £0.1050805 and a further 4,403,160 common shares at a price of £0.068133 in relation to the drawdown of the SEDA, generating funding of £262,000 and £300,000 respectively.

Following this share issue the Company has in issue 318,491,926 common shares with voting rights.

  • Obtain advanced and low-cost (acquisition cost) silver projects and rapidly build up resources in the ground. Arian is focusing its exploration efforts in one of the richest known silver-bearing districts in the world - the Zacatecas State of Mexico.
  • Focus on projects with prior exploration and production history, thereby reducing risks and capital costs.
  • Develop projects towards production through a combination of company development and/or Joint Venture (JV) and acquisition opportunities.
  • Build shareholder value by expanding silver resources and reserves, and increasingly efficient production.

Q1 Q4 Q3 Q2 Q1
2013 2012 2012 2012 2012
Head grade - Ag grams per tonne (g/t) 174 - - 181 173
Tonnes mined - - 4,072 26,268 21,553
Tonnes milled 258 - - 28,903 24,394

Silver concentrate tonnes produced 4 - - 298 302
Recovery % 60.90 - - 58.74 49.01
Silver ounces produced 878 - - 98,616 66,688
Silver ounces per concentrate tonne produced 251 - - 331 221

Silver ounces sold - - 8,937 93,112 75,911
Silver concentrate tonnes sold - - 32 286 330
Quarter end inventory balances

Mined tonnes stockpile 17,935 18,192 18,204 15,003 17,637
Silver concentrate inventory tonnes 4 - - 36 24
Silver ounces included in concentrate inventory 878 - - 11,276 5,772

Head Grade
The head grade of 174 is in-line with previous quarters.

Tonnes mined
No ore was mined in the quarter.

Tonnes milled
258 tonnes of stockpiled ore were milled in the quarter as processing commenced at the Juan Reyes mill.

Silver concentrate produced
The silver concentrate inventory balance at the end of Q1 2013 was 4 tonnes compared to nil tonnes at the end of Q4 2012. This follows the suspension of processing at the plant owned by Contracuña SA de CV (“Contracuña”) and the subsequent commencement of production at the Juan Reyes plant.

% Recovery
The initial recovery rate of 60.9% is significantly higher than at the former third-party processing plant owned by Contracuña, and was obtained by processing only a small amount of ore.

Mined tonnes stockpile
The stockpile of mined ore was 17,935 tonnes at the end of Q1 2013 compared to 18,192 tonnes at the end of Q4 2012.

Mining Operations

All figures in this table are quoted in metres 2013 2012
Q1 Q4 Q3 Q2 Q1
Exploration Drilling - - 12 121 120
Ramp development 107 81 68 242 98
Preparation 0 - 8 151 179
Raises 0 - 33 31 32

Mining focussed on the Ramal Norte/Sur, San José 75 m Level Central Zone and Santa Ana resource blocks. These were selected from several delineated resource blocks to support an initial pilot scale mining operation with the potential to increase the mining rate to circa 1,500 tpd subject to milling capacity availability.

The preparation and exploring of mining blocks continued in order to verify the continuity of mineralisation. Level 150 was dewatered and rehabilitated, and sampling took place obtaining new accessible mining blocks that were included in the resource estimate. During this sampling, 46.9 m of ramp was developed and 60.1m of exploration drifts. Development continues at the mine, but on a reduced scale to meet obligations to keep the mine operational until mining is resumed.

Milling Operations

The construction of the Juan Reyes processing plant continued during Q1 2013. The Company played an important role in managing and completing this process. This included the identification of milestones, critical paths, task management, supervision and the completion of the Lead circuit and testing of the crushing section. We are confident that further improvements will be achieved during the next quarter.

Water is scarce owing to low levels of rainfall in Zacatecas state. Efforts are being made to ensure a reliable source of water for the Juan Reyes processing plant. Water is now being sourced from the Calicanto mine, less than 1km away. This has the advantage of reducing the water levels in the mine, which will improve access to mining blocks.

Processing at Juan Reyes has continued into Q2 2013, albeit on a small scale. A total of 1,823 tonnes have been processed during the first seven weeks of Q2, 2013. This is more conservative than initial estimates, and reflects the on-going adjustments to refine the operations and processes, as well as the volatility of the silver price and management’s future expectations.

An agreement was reached for the acquisition of a processing plant currently located close to Zacatecas City, with a capacity to treat up to 1,500 tonnes per day of silver-lead-zinc ore (“El Bote Mill”).

Title for the land purchased was completed and the application for an environmental permit submitted for the processing plant construction, including a proposed tailings dam.

Exploration Drilling

The phase 5 exploration drilling program has been prepared and it is anticipated that it will begin once additional funding has been secured.


The independent on-site laboratory operated by the Stewart Group (a subsidiary of the ALS Chemex Group) continues to operate. This is a valuable service which provides timely analysis of samples and critical information to improve the decision making process of mining and milling staff. In addition the laboratory provides an invaluable tool during drilling programmes which has significantly decreased the turnaround times for analysis of Arian’s sampled drill cores.

Calicanto Project, Zacatecas State

Arian owns 100% of the Calicanto Project which consists of seven adjacent mining concessions totalling 75.5ha, namely: Calicanto, Vicochea I, Vicochea II, Misie 1 and Misie 2, and Missie 1 and Missie 2 properties, collectively known as the “Calicanto Group”. The concessions are located in the historic mining district of Zacatecas. The Calicanto Group of concessions comprises at least four main mineralised vein systems.

Further underground evaluation of the deeper levels of the Calicanto Vein can begin once the water has receded to the appropriate level. This will include mapping and underground sampling and subsequent analyses. There has been no significant expenditure on the Calicanto Project during the past two years.

Additional information in respect of the Calicanto Project is contained in a technical report prepared by A.C.A. Howe International Limited dated 20 March 2006 and entitled “Technical Report on the Calicanto and San Celso Projects, Zacatecas, Mexico”. A copy of this report is available on the Company’s website or on SEDAR at


The Company currently owns 31 mineral concessions in Mexico totalling 7,900 hectares as set out below.

Project Name No. of Concessions Area in hectares (“ha”)
San José 11 6,279.5
Calicanto 7 84.0
Others 13 1,536.5

Qualified Person

Mr. Jim Williams, Eur Ing, Eur Geol, BSc, MSc, DIC, 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 this Review of Operations other than the mineral resource estimates referred to below.

San José Project, Zacatecas State

The 100%-owned San José property is located approximately 55 kilometres (“km”) to the southeast of Zacatecas City and comprises 11 mining concessions totalling approximately 6,300ha. The property has significant infrastructure, including a 4.5 x 5 metre (“m”) main haulage ramp extending more than 4.0km along 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 along the SJV.

A 2% NSR (net smelter royalty) on SJV revenue is payable to the vendor of the San José property.

Mineral Resource

Arian’s resource estimate includes all drilling programmes from 2006 along the SJV which has a delineated NI 43-101 and a JORC-compliant resource estimate of approximately 30.61 million ounces of silver, 67.02 million pounds of lead and 149.91 million pounds of zinc in the “indicated” mineral resource category, and 88.65 million ounces of silver, 205.25 million pounds of lead and 410.50 million pounds of zinc in the “inferred” mineral resource category. These NI 43-101 and JORC-compliant mineral resources are summarised in the table below:

Resource Category Average Grade Contained Metal
Tonnes Ag Pb Zn Ag Pb Zn
(t) (g/t) % % (Moz) (Mlb) (Mlb)
Indicated 8,000,000 119 0.38 0.85 30.61 67.02 149.91
Inferred 24,500,000 110 0.38 0.76 86.65 205.25 410.50
  1. Geological characteristics and +30 ppm grade envelopes used to define resource volumes.
  2. Each mineral resource estimate is in accordance with CIM standards.
  3. The effective date of each mineral resource estimate is 12 March 2012.
  4. The estimates are based on geological, statistical and geostatistical data assessment and computerised IDW3, Ag grade wireframe restricted, linear block modelling.
  5. The resource was estimated using 188 drill holes and more than 38,000 metres.
  6. Resource figures were prepared under the supervision of Malcolm Titley who is a Qualified Person (as defined in Canadian National Instrument 43-101).
  7. Tonnage figures have been rounded to reflect this as an estimate.
  8. Ag (silver) ounces have been calculated using 31.1035 g = 1 oz.
  9. Pb (lead) and Zn (zinc) tonnes have been calculated using 2204.622 lbs = 1 tonne.
  10. The mineral resource is 100% owned by Arian.
The following reports prepared by A.C.A. Howe International Limited relating to the San José project are available on the Company’s website or on SEDAR at :-

a) Report dated 22 September 2009 and entitled “Preliminary Economic Assessment Report (PEAR) on the San José Silver-Lead-Zinc Deposit, Zacatecas, Mexico”; and

b) Report dated 15 August 2008 and entitled “Resource Estimation Update for the San José Silver-Lead-Zinc Deposit, Zacatecas, Mexico”.

Readers are reminded that mineral “resources” are not mineral “reserves” as they have not yet demonstrated economic viability. There is no certainty that mineral resources can be upgraded to mineral reserves through continued exploration.



Mining and milling continued to be interrupted by the suspension of milling since July 2012. Milling re-commenced in February 2013. These factors have had a significant impact on the comparability of quarter-on-quarter figures set out below:

Unaudited 2013 2012 2011

Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000
Revenue - 34 136 2,104 2,314 2,314 2,367 2,434
Cost of sales 206 256 475 2,242 2,379 2,379 1,921 1,914
Gross (loss) / profit (206) (222) (339) (138) (65) (65) 446 520
Operating (loss) / profit (935) (1,072) (1,025) (1,006) (855) (855) (393) (486)
Net investment (loss)/profit (21) (84) 57 (127) 81 81 (50) (116)
Net (loss)/profit for the period (956) (1,156) (968) (1,133) (774) (774) (443) (602)
Basic and diluted loss per share $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Total assets 15,154 14,119 14,409 15,021 16,732 16,732 16,250 16,894
Total non-current financial liabilities 186 177 175 172 171 171 170 168
Shareholders’ equity 13,971 13,003 13,464 13,647 15,370 15,370 14,909 15,806



There were no revenues on account of the suspension of production since July 2012.

Cost of sales

Cost of sales related to mining costs to keep the mine operational and milling costs to oversee the commissioning of the new mill.

Gross (loss)/profit

A gross loss of $0.2m (2012: $0.2m) was incurred primarily on account of no revenue.

Operating loss

The operating loss of $0.9m was primarily on account the gross loss of $0.2m, and administrative expenses of $0.7m, which remained in line with previous periods.

Loss for the period

Net loss of $1m comprised the operating loss of $0.9m and a loss on the investment in Geologix Explorations, Inc. (“Geologix”) shares, which were received as part payment for the final instalment for the sale of the Tepal concession.

Total assets

Total assets of $15.2m increased by $1.1 compared with Q4’s $14.1m, primarily due to mine development in the San José mine and favourable foreign exchange movements on the value of mining assets.

Total non-current financial liabilities

Total non-current financial liabilities were $186,000 This amount would only be payable if the mine were closed; it covers decommissioning, reclamation and rehabilitation at the end of the initial mining period of approximately 4 years and is based on an estimated cost of $206,000 and discount rate of 5%.

Shareholders’ equity

Shareholders’ equity increased by $1m compared to Q4 2012. This increase was a result of share capital issued of $1.3m and favourable gains in foreign exchange reserves of $0.6m, offset by the quarterly loss of $0.9m.

As at 31 March 2013 the Company had working capital of $1.7m (31 December 2012: $1.6m).
See Liquidity, Capital Resources and Working Capital for the items of working capital.

Intangible assets amounted to $1.2m (31 December 2012: $1.2m) which relate to deferred exploration and evaluation costs in respect of the Company’s Mexican projects. Property, plant and equipment amounted to $11.2m (31 December 2012: $10.4m); $11.0m of this relates to the San José mine development costs. Share capital increased by $1.3m to $49.5m (31 December 2012: $48.2m) as a result of the issue of common shares in connection with the drawdown of the standby equity distribution agreement (“SEDA”), see Liquidity, capital resources and working capital.

First quarter 2013 vs. first quarter 2012

The loss for the quarter was $1.0m (2012: $0.9m profit). This included a gross loss of $0.2m (2012: $0.1m) generated by the San José mining operation, the expensing of the fair value of share purchase options vesting of $nil (2012: expense of $0.1m, and credit of $1.7m for the reversal of a charge made to earlier periods in respect of the fair value of share purchase options vesting that lapsed in the period), and other administrative expenses of $0.7m (2012: $0.9m), and a net investment loss of $22,000 (2012: net investment income of $0.1m).

First quarter 2013 vs. fourth quarter 2012

The Q1 2013 gross loss of $0.2m was in line with the gross loss reported in the previous quarter, Q4, 2012. The net loss for Q1 2103 of $1m was $0.2m lower than that for Q4 2012 due to administrative expenses being $0.1m lower and the investment loss being $0.1m lower. Cash available at the end of the Q1 2013 of $0.5m remained in line with the previous quarter. The increase in shareholders’ equity of $1m was attributable to the increase of $1.3m in share capital resulting from the SEDA drawdown, an increase of $0.6m in the value of the foreign exchange reserve, offset by the net loss of $0.9m for the.


As announced on 27 September 2012, the Company entered into a 3 year £5 million SEDA with YA Global Master SPV Ltd (“Yorkville”), an investment fund managed by YA Global LP. The SEDA allows the company to draw down funds in exchange for the issue of shares in the Company.

Under the terms of the SEDA, any equity issued shall be priced at 95 per cent of the prevailing market price over a pricing period of between 5 and 20 days, in accordance with the agreement. The amount of each advance may not exceed, an amount not more than 400 per cent of the average daily trading volume of shares multiplied by the volume weighted average price on AIM for the five trading days prior to the drawdown request.

Use of the facility is entirely at the discretion of the Company and there are no penalties for not drawing down on the facility.

The following share purchase options were outstanding as of May 21, 2013, each entitling the holder to acquire one common share of the Company: 15,360,000 share purchase options with exercise prices ranging from £0.055 to £0.4925 (Cdn$0.10 to Cdn$0.79) and expiring on various dates up to May 2017.

Working Capital — 31 March 2013

As at 31 March 2013, the Company had working capital of approximately $1.7m (31 December, 2012: $1.6m). The items of working capital and changes compared to 31 December 2012 are as follows:

Current assets
  • cash and cash equivalents of $0.5m (31 December 2012: $0.5m);
  • trade and other receivables of $1.3m (31 December 2012: $1.2m) — the outstanding balance relates to the IVA (government sales tax) debtor owed to Arian which is in the process of being recouped;
  • inventories of $0.7m (31 December 2012: $0.6m) — relates to stockpile held at cost relating to production at the San José mine; and
  • financial assets held at fair value through profit or loss of $0.2m (31 December 2012: $0.2m) — relates to the Geologix shares received as part consideration for the final instalment for the sale of the Tepal project.
Current liabilities
  • trade payables of $1.0 million (31 December 2012: $0.9 million).
Off-balance sheet arrangements

The Company has no off-balance sheet arrangements.


During the three months ended 31 March 2013 the group entered into the following transactions involving related parties:

Transactions with key management personnel

The Dragon Group Ltd charged the Company a total of $30,161 (31 March 2012: $30,495) which relates to the reimbursement of Tony Williams’ remuneration paid on behalf of the Company. Tony Williams, Chairman and a director of the Company, beneficially owns the Dragon Group. At 31 March 2012 $9,831 (31 December 2012: $20,910) was outstanding.

Key management personnel participate in the Company’s share option programme.


The commencement of processing at the Juan Reyes toll mill puts Arian back into the ranks of silver producers. However, this new toll mill arrangement should be regarded as only a stepping-stone towards the Company acquiring its own processing plant. A plant has been identified and the Company is in discussions regarding its acquisition, which, if successful should eventually allow the Company to realise economies of scale in both mining and milling operations, resulting in greater production and increased operating efficiencies.


The preparation of financial statements in conformity with IFRS requires the Company to select from possible alternative accounting principles and to make estimates and assumptions that determine the reported amount of assets and liabilities at the balance sheet date and reported costs and expenditures during the reporting period. Estimates and assumptions may be revised as new information is obtained and are subject to change. The Company’s accounting policies are considered appropriate in the circumstances, but are subject to judgements and uncertainties inherent in the financial reporting process.

The following section discusses the critical accounting estimates and assumptions that management has made and how they affect the amounts reported in the consolidated financial statements. We consider these estimates to be an important part of understanding our consolidated financial statements.

Going Concern

The directors regularly review cash flow forecasts to determine whether the Company and its subsidiaries (together referred to as the “Group”) have sufficient cash reserves to meet future working capital requirements and commitments, and to fund future exploration projects and business opportunities. Exchange rates and the price of silver have a significant impact on the Group’s cash flow.

Toll milling fully resumed on 16 February 2013 at a mill operated by Beneficiadora de Jales y Minerales Juan Reyes SA de CV. Under present market conditions and volatile prices for silver, the Company is closely monitoring production and its associated impact on profit and cash resources.

In September 2012, the Group entered into a £5 million Standby Equity Distribution Agreement (“SEDA”) with YA Global Master SPV Ltd (“Yorkville”). This facility was to provide working capital funding to initiate the P5 drilling programme, milling and mining studies. The SEDA entitles the Group to drawdown funds in exchange for the issue of shares at a price based on the Company’s market price over the previous 5 to 20 days period. At 31 March 2013, the Group had drawn down an amount of £1,371,800 against this facility.

This facility has been utilised to meet working capital requirements and for continued development and mining work at the San Jose mine.

The Group is also considering a number of funding options including the issue of new equity, project and debt finance to provide additional funding for future growth and expansion.

In the past the Group has been successful at raising equity funds, however there can be no assurance that the Group will be able to raise funds for future development.

The directors currently believe that the Group has adequate financial resources or access to such resources in order to continue to prepare the Company’s financial statements on a going concern basis. However if the Company is unsuccessful in raising future funding it may not be able to meet its on-going working capital and project expenditure requirements. If these circumstances arose then there would be significant doubt on the Company’s ability to continue as a going concern and the carrying value of the Group’s exploration and other assets would be required to be reviewed.

Resource Properties, Deferred Exploration and Development Costs

All costs related to the exploration of mineral properties are capitalised until either the properties are brought into production, at which time they are amortised over the estimated life of the project, or until the properties are sold, or title rights allowed to lapse, or are abandoned or determined not to be commercially viable, at which time they are charged to the income statement.

The amounts capitalised at any time represent costs to be charged to operations in future and do not necessarily reflect the present or future values of particular properties. The recoverability of the carrying values of exploration properties is dependent upon the discovery of economically recoverable reserves, the ability of the Company to obtain necessary financing to complete development and future profitable production therefrom, or alternatively, upon the Company’s ability to dispose of its interests on an advantageous basis.

Management is of the view that the current policy is appropriate for the Company at this time and is consistent with many other public mineral exploration and development companies in the UK and Canada. Shareholders are advised that carrying values are not necessarily indicative of present or future values. The Company assesses whether impairment exists in any of its exploration projects and writes down that project to its estimated recoverable value when such impairment is found to exist. Any write-down is recorded as an expense in the Company’s income statement in the financial statements for the relevant period.

Share-based Payments

The share option programme allows group directors, officers, employees and consultants to acquire shares of the Company. The fair value of share purchase options granted is recognised as an expense with a corresponding increase in equity. The fair value is measured at the grant date and spread over the period until the share purchase options vest unconditionally. The fair value of the share purchase options granted is measured using the Black-Scholes model, taking into account the terms and conditions upon which the share purchase options were granted. The amount recognised as an expense is adjusted to reflect the actual number of share purchase options that vest, except if the change is due to market based conditions not being satisfied.

Revenue Recognition

Revenue from sales of metal concentrate is recognised when title transfers and the rights and obligations of ownership pass to the customer. The Company’s sales of concentrate are made under pricing arrangements where final sales prices are determined by quoted market prices in a period subsequent to the date of sale. In these circumstances, revenue from sales is recorded at the time of the sale based on forward prices for the expected date of final settlement. Subsequent variations in prices are recognised as revenue adjustments as they occur.

In a period of extreme and unusual price volatility, the effect of mark-to-market price adjustments related to the quantity of metal which remains to be settled with independent smelters could be significant.


Concentrates and stockpile ore are valued at the lower of the average production costs or net realisable value. The assumptions used in the valuation of those inventories included estimates of metal contained in stockpiled ore, assumptions of the amount of metal that is expected to be recovered, assumptions of the smelting terms as well as assumptions of the metal prices and exchange rates expected to be realised when the metals are recovered. If these estimates or assumptions prove to be inaccurate the Company could be required to write-down the recorded value of its inventories, which would reduce the Company’s earnings and working capital. Net realisable value is determined with reference to market prices.


Market Risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk for Arian comprises two types of risk: currency risk and price risk.

Price Risk

The price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices, whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments in the market.

Currency Risk

The Company’s exploration expenditure is made in Mexico in Mexican Peso and head office expenses are predominantly made in the UK in Pounds Sterling, United States Dollars and Canadian dollars. The Company is therefore exposed to the movement in exchange rates for these currencies.

The Company does not currently hedge foreign exchange risk.

The majority of the Company’s cash resources were held in US Dollars. The Company therefore also has downside exposure to any strengthening of Pound Sterling, the Mexican Peso, or the Canadian Dollar against the US dollar as this would increase expenses in US Dollar terms and accelerate the depletion of the Company’s cash resources. Any weakening of Pound Sterling, the Mexican Peso, or the Canadian Dollar against the US Dollar would, however, result in a reduction in expenses in US Dollar terms and preserve the Company’s cash resources.

In addition, any movements in Pound Sterling or Mexican Peso would affect the presentation of the consolidated statement of financial position when the net assets of the Mexican subsidiary and parent company in the UK are translated from their functional currencies into United States Dollars.

Liquidity Risk

The Company’s approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due. As at 31 March 2013, the Company had cash of $497,000, financial assets of $172,000, and receivables of $1,342,000 to settle accounts payable of $997,000. The Company’s accounts payable have contractual maturities of less than 30 days and are subject to normal trade terms.

Credit Risk

Credit risk is the risk of loss associated with a counterparty’s inability to fulfil its payment obligations. The Company’s credit risk is attributable to cash and trade receivables. The credit risk on cash is limited because the Company invests its cash in deposits with well capitalised financial institutions with strong credit ratings.


The financing, exploration, development and exploitation of the Company’s properties and the operations of the Company’ business are subject to a number of factors, including metal prices, laws and regulations, political conditions, currency fluctuations, hiring qualified people and obtaining necessary services in jurisdictions where the Company operates.

The Company is subject to a number of risk factors due to the nature of the mining business in which it is engaged, not least are adverse movements in commodity prices, which are impossible to forecast. The Company seeks to counter this risk, as far as possible, by selecting exploration areas on the basis of their recognised geological potential to host economic deposits.

The following is a brief discussion of those distinctive or special characteristics of the Company’s operations and industry that may have a material impact on, or constitute risk factors in respect of the Company’s future financial performance.

Requirement of Additional Financing

The exploration and development of the Company’s concessions, including continuing exploration projects, and the construction of larger scale mining facilities and commencement of larger scale mining operations, will require substantial additional financing. However, if the required funding is not forthcoming on a timely basis the Company may not be able to meet its on-going working capital and project expenditure requirements. No assurance can be given that the Company will be able to raise the additional financing necessary to continue its production activities or to explore and/or develop its concessions. Failure to obtain sufficient financing for any projects will result in a delay or indefinite postponement of exploration, development or production on properties covered by the Company’s concessions or even the loss of a concession. The only sources of funds currently available to the Company are through the sale of product from production activities, the issue of equity capital, the sale of concessions or other assets, royalty interests or the entering into of joint ventures. In addition, the Company’s ability to obtain further financing will depend in part on the price of silver and the industry’s perception of its future price and other factors outside the Company’s control. Additional financing may not be available when needed, or if available, the terms of such financing might not be favourable to the Company and might involve substantial dilution to shareholders. In the absence of adequate funding the Company may not be able to continue as a going concern in which event the carrying value of the Company’s projects would be required to be reviewed.

Volatility of Metal Prices

The value of the Company’s resources and financial results of operations will be affected by fluctuations in metal prices over which the Company has no control. A reduction in the metal prices may prevent the Company’s properties from being economically mined or result in curtailment of existing production activities or result in the impairment and write-off of assets.

The price of silver, which is affected by numerous factors including inflation levels, fluctuations in the US Dollar and other currencies, supply and demand and political and economic conditions, may have a significant influence on the market price of the Company’s common shares.

Mining concessions and Title

In relation to mining concessions over which the Company holds legal rights, if the Company fails to fulfil the specific terms of any of its concessions or operates in the concession areas in a manner that violates Mexican law, regulators may impose fines, suspend or revoke the concessions, any of which could have a material adverse effect on the Company’s operations and proposed operations.

Whilst the Company has received legal opinions in respect of title to its properties there is no guarantee that title to such properties will not be challenged or impugned by third parties. The Company’s concessions may be subject to prior unregistered agreements, transfers or other claims and title may be affected by unidentified or unknown defects or government actions.

Nature of Mineral Exploration and Mining

Any exploration programme entails risks relating to the location of economic ore bodies, the development of appropriate metallurgical processes, the receipt of necessary governmental permits and the construction of mining and processing facilities. Save in respect of the San José project, the Company’s projects are not in production and no assurance can be given that any exploration programme will result in any new commercial mining operation or in the discovery of new resources.

The exploration and development of mineral deposits involves significant financial risks over a prolonged period of time, which even a combination of careful evaluation, experience and knowledge may not eliminate. While discovery of a mineral structure may result in substantial rewards, few concessions which are explored are ultimately developed into producing mines. Major expenditures may be required to establish reserves by drilling and to construct mining and processing facilities at a site. It is impossible to ensure that preliminary feasibility studies or full feasibility studies on the Company’s projects or the current or proposed exploration programmes on any of the concessions in which the Company has rights or is negotiating rights will result in a profitable commercial mining operation.

The Company’s operations are subject to all of the hazards and risks normally incidental to exploration, development and the production of minerals. These could result in damage to or destruction of the Company’s facilities, damage to life or property, environmental damage or pollution and possibly legal liability for any or all damage which could have a material adverse impact on the business, operations and financial performance of the Company. The Company’s activities may be subject to prolonged disruptions due to weather conditions depending on the location of operations in which the Company has interests. Hazards, such as unusual or unexpected geological formations, rock falls, flooding or other climatic conditions may be encountered in the drilling and removal of material. Although precautions to minimise risk will be taken, even a combination of careful evaluation, experience and knowledge may not eliminate all of the hazards and risks.

Whether a mineral deposit will be or will continue to be commercially viable depends on a number of factors, some of which are the particular attributes of the deposit, such as its size and grade, proximity to infrastructure, financing costs and governmental regulations, including regulations relating to prices, taxes, royalties, infrastructure, land use, importing and exporting of silver, changes in the silver price, and environmental protection. The effect of these factors cannot be accurately predicted, but the combination of these factors may result in the Company not receiving an adequate return on invested capital.

The Company is transitioning from an exploration company to a producer. In the mining industry such a transition is sometimes a difficult and challenging exercise due to operational issues and risks.

Limited Operating History

The Company has a limited history of producing revenue and its ultimate success will depend on its ability to generate cash flow from its concessions in the future. The Company has not earned any material profits to date and there is no assurance that it will do so in the future. A major portion of the Company’s activities will be directed to the development of the SJV as well as the search for and the development of new silver deposits. Significant capital investment will be required for exploration at the concessions and to achieve commercial production from the Company’s existing projects and from successful exploration efforts. There is no assurance that the Company will be able to raise the required funds to continue these activities.

Mineral Resource Estimates

The mineral resource figures disclosed in this MD&A 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 MD&A 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.

No Reserves

The Company does not hold any concessions in respect of which mineral reserves estimates have been established that comply with CIM Standards and Guidelines or other similar recognised industry standards.

Insurance and Uninsured Risks

The mining industry is subject to significant risks that could result in damage to, or destruction of, mineral properties or producing facilities, personal injury or death, environmental damage, delays in mining or monetary losses and possible legal liability.

The Company’s insurance policies may not provide adequate coverage for losses related to these or other risks. The Company’s insurance policies do not cover all possible risks that may arise in relation to the Company’s exploration activities and production facilities and as a result the Company may incur losses or damages that could have a material and adverse effect on the Company’s operations and finances.

In the course of the Company’s activities certain risks or unexpected or unusual geological conditions both underground and on surface may occur. It is not always possible to insure against such risks due to the absence of available cover or the Company may decide not to insure due to costs considerations of available cover. As a result the Company could incur losses or damages that could have a material and adverse effect on the Company’s operations and finances.

Reliance on Contractors in Mexico

The Company relies on contractors to implement the Company’s exploration and development programmes as well as its current mining operation at the San José project. The failure of a contractor to perform properly its services to the Company could delay or inconvenience the Company’s operations, and have a materially adverse effect on the Company.

Key Personnel

The Company’s business is dependent on retaining the services of a small number of key personnel of the appropriate calibre as the business develops. The Company has entered into employment agreements with certain key managers. The success of the Company is, and will continue to be to a significant extent, dependent on the expertise and experience of the directors and senior management. The loss of one or more of these individuals could have a materially adverse effect on the Company. The Company does not currently have any insurance in place with respect to key personnel.

Environmental Factors

The Company’s operations are subject to environmental regulation in the jurisdictions in which the Company operates. Such regulation covers a wide variety of matters, including, without limitation, prevention of waste, pollution and protection of the environment, labour regulations and health and safety. The Company may also be subject under such regulations to clean-up costs and liability for toxic or hazardous substances, which may exist on or under any of the properties covered by its concessions, or which may be produced as a result of its operations.

If the Company does not comply with environmental regulations or does not file environmental impact statements in relation to each of its concessions, it may be subject to penalties, its operations may be suspended, closed and/or its concessions may be revoked.

Environmental legislation and permit requirements are likely to evolve in a manner which will require stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects and a heightened degree of responsibility for companies and their directors and employees.

Political Risk

The Company is conducting its exploration activities in the Republic of Mexico. The Company may be adversely affected by changes in economic, political, judicial, administrative or other regulatory factors such as taxation in the Republic of Mexico, where the Company will operate and holds its major assets. The Republic of Mexico may have a more volatile political environment and/or more challenging trading conditions than in some other parts of the world. The Directors believe the government of Mexico supports the development of natural resources by foreign operators. There is no assurance that future political and economic conditions in Mexico will not result in the government of Mexico adopting different policies in respect of foreign development and ownership of mineral resources. Any such changes in policy may result in changes in laws affecting ownership of assets, taxation, rates of exchange, environmental protection, labour relations, and repatriation of income and return of capital. These changes may affect both the Company’s ability to undertake exploration and development activities in respect of future properties in the manner currently contemplated, as well as its ability to continue to explore and develop those properties, in respect of which it has obtained exploration and development rights to date.

Payment Obligations

Under the mineral property concessions and certain other contractual agreements to which a member of the Company is, or may in the future become, a party, any such company is, or may become, subject to payment and other obligations. If such obligations are not complied with when due, in addition to any other remedies which may be available to other parties, this could result in dilution or forfeiture of interests held by such companies. The Company may not have, or be able to obtain, financing for all such obligations as they arise.

Regulatory Approvals

The operations of the Company require approvals, licenses and permits from various regulatory authorities, governmental and otherwise. The Board believes that the Company holds or will obtain all necessary approvals, licenses and permits under applicable laws and regulations in respect of its current projects. There can be no guarantee that the Company will be able to obtain or maintain all necessary approvals, licenses and permits that may be required to explore and develop its various projects and/or commence construction or operation of mining facilities that economically justify the cost.


The Company competes with numerous other companies and individuals in the search for and acquisition of mineral claims, leases and other mineral interests, as well as for the recruitment and retention of qualified employees. There is significant competition for the silver opportunities available and, as a result, the Company may be unable to acquire further silver concessions on terms it considers acceptable.

Conflicts of Interest

Certain directors and officers of the Company also serve as directors and/or officers of other companies involved in mineral exploration and development and consequently there is the potential for conflicts of interest. The Company expects that any such director or officer shall disclose such interest in accordance with its articles of association or his contractual obligations to the Company and any decision made by any of such directors and officers involving the Company will be made in accordance with their duties and obligations to deal fairly and in good faith with a view to the best interests of the Company and its shareholders.

Other risks and uncertainties have been detailed in the Company’s 2012 Annual MD&A which can be accessed on SEDAR at or the Company’s website at

Forward-Looking Statements

This MD&A 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 MD&A 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 MD&A 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.


Additional Information

Additional information relating to the Company may be accessed through SEDAR on the internet at or the Company’s website,

Disclosure of Outstanding Share Data

The following table sets out the outstanding securities of the Company as at 21 May, 2013:-

Number in issue
Common shares of no par value 318,491,926
Share purchase options 15,360,000

Each share option and share purchase warrant entitles the holder thereof to purchase one common share of the Company.

For further information please contact:

Arian Silver Corporation
Jim Williams
(London) +44 (0)20 7887 6599
Arian Silver Corporation
David Taylor
Company Secretary
(London) +44 (0)20 7887 6599
Grant Thornton Corporate Finance
Gerry Beaney / Philip Secrett / David Hignell
(London) +44 (0)20 7383 5100
Yellow Jersey PR Limited
Dominic Barretto
(London) +44 (0)7768537739
XCAP Securities PLC
Jon Belliss
(London) +44 (0)20 7101 7070
CHF Investor Relations
Juliet Heading
(Canada) +1 416 868 1079 x 239

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.

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.