First Quarter Production Results and Corporate Update

TORONTO, April 24, 2013 /PRNewswire/ - U.S. Silver & Gold Inc. (TSX: USA) (OTCQX: USGIF) ("U.S. Silver & Gold" or the "Company") today announced production figures for its two 100% owned operating mines, the high-grade silver Galena Mine Complex in Idaho and the high-grade gold and silver Drumlummon Mine in Montana.

First Quarter Highlights

  • Consolidated production of 598,139 silver ounces and 2,161 gold ounces during the first quarter, which was budgeted to be the lowest production and highest cost quarter of the year.
  • Galena Mine Complex production of approximately 577,000 silver ounces at cash costs of $20.48 per ounce.
  • Management has taken immediate measures to reduce and manage costs, and has implemented further productivity measures to protect the balance sheet:
      • a total of $10 million in exploration, capital projects and development will be cut from the 2013 budget;
      • a further $1 million in savings will be achieved by reducing general and administrative costs at the corporate office and the Galena Mine Complex;
      • capital development resources will be re-deployed to profitable mining areas; and
      • mining in the Caladay Zone will be fast-tracked to commence in the third quarter of the year.
  • Given the recent decline in silver and gold prices, production at the Drumlummon Mine will be discontinued at the end of the second quarter when the mine will be put on care and maintenance.
  • As a result of the Drumlummon closure and cost initiatives, silver production for the year has been re-forecasted to 2.6 to 3.0 million ounces (from 2.7 to 3.0 million ounces), at lower projected silver cash costs of $16.00 to $18.00 per ounce.
  • The March 31, 2013 cash balance was approximately $11 million. Non-cash working capital was approximately $8.7 million exclusive of $7.9 million in debt. The Company is currently in discussions with various lenders to re-finance the debt on more favourable terms.
  • Full quarterly results and further details on cost reductions will be communicated to shareholders during the first quarter earnings release and conference call scheduled for Monday May 13, 2013.

Galena First Quarter Production Details

The Galena Mine produced 577,095 ounces of silver during the first quarter of 2013 at a grade of 9.6 ounces per ton and silver cash costs of $20.48 per ounce.  The first quarter was expected to be the lowest production quarter of the year with mined grade slightly below the expected 2013 annual silver grade of 11.4 ounces per ton.  Overall tonnage for the quarter was up 3 percent when compared with the first and fourth quarters of 2012.

Table 1
Galena Production Highlights
  Q1 2013 Q1 2012 Change Q4 2012
  Processed Ore (tons milled) 62,826    61,073    +3% 60,597   
  Production (ounces) 577,095    551,228    +5% 625,604   
  Grade (ounces per ton) 9.6    9.4    +2% 10.7   
  Cash Costs $   20.48    $   19.37    +6% $   18.54   
  Lead (pounds)  1,772,256     1,584,143    +12%  1,403,981   
  Copper (pounds) 261,618    232,478    +13% 298,241   

"Silver production at the Galena Mine got off to a solid start in 2013 following a record fourth quarter in 2012," stated Darren Blasutti, President and CEO of U.S. Silver and Gold. "Although we mined 16 percent below the expected average grade for the year and our move to a 24/7 schedule took slightly longer than planned, we are on track to meet our 2013 guidance for the Galena Mine Complex. We began seeing productivity improvements from the new schedule in March and April, and the grade for the second quarter is meeting expectations.  Our focus going forward will be on implementing stringent cost-saving measures in the short term, and executing our plans to fast-track the Caladay Zone for production of higher-grade, lower cost areas beginning in the third quarter of the year. "

Cost Controls and Productivity Measures

Drumlummon Closure

Given current gold prices and recent mine performance, production at the Drumlummon Mine near Helena Montana, is being discontinued and the mine will be put on care and maintenance.  An orderly shutdown will begin immediately and is expected to be completed by the end of the second quarter.  A small, ongoing exploration program will be maintained and the Company will move equipment, inventory, and supplies to the Galena Mine Complex in Idaho. During the first quarter of the year, Drumlummon produced 21,044 ounces of silver and 2,161 ounces of gold at a by-product cash cost of $2,288.73 per ounce gold. Although management reduced operating costs for the quarter by over $1.5 million, Drumlummon Mine gold and silver production was materially lower and gold cash costs were materially higher than what was budgeted.  This was principally due to chronic issues with mine equipment availability and servicing, and lower than anticipated gold and silver grades. As a result of equipment issues, the Company milled approximately 35 percent fewer tons than what was budgeted at gold and silver grades that were approximately 25 percent below budget estimates.

"Unfortunately production at the Drumlummon Mine is not economically viable at current gold prices," stated U.S. Silver & Gold President & CEO Darren Blasutti. "We have been working very hard since the beginning of the year to reduce costs and increase productivity at the mine, and while we expected to see improvements over the course of 2013, current gold prices and forecast gold production do not warrant continuing our operations there. The Board of Directors and Management Team have a responsibility to safeguard the business and assets of the Company.  With that in mind, we made the difficult decision to put the mine on care and maintenance.  We very much appreciate the commitment and outstanding contributions made by our employees at Drumlummon.  We will do our best to help ensure a smooth transition for everyone affected by this changeFrom now until closing, we will be eliminating all non-essential capital and operating spending while focusing on mining areas already developed to maximize cash flow generation. The shutdown is prudent to preserve Drumlummon's gold and silver resources until economic circumstances merit their extraction."

Immediate Cost Reductions

As a result of the Company's portfolio review and cost control focus, $10 million in exploration, capital projects and capital development costs will be cut from the 2013 budget.  The Company has also begun reducing general and administrative costs at the corporate office and the Galena Mine Complex, targeting a minimum of $1 million in savings for the year. In addition, the Galena Mine site has initiated a hiring freeze and will eliminate any non-budgeted overtime.

Re-deployment of Capital Development Employees

Management has been re-evaluating its capital development and rehabilitation needs at the Galena Mine Complex and will re-focus these efforts on mining the most profitable stope targets. Assets and employees will be re-deployed to priority stopes in the second quarter. The Galena Mine has stopes available for this transition due to the shift to a 24/7 schedule and several of the development and rehabilitation crews have the training required for this type of work.

Caladay Production Plans

Plans to fast track production in the high potential Caladay Zone were initiated in February and will be maintained. Mining will commence in high-grade, silver-copper zones targeting 100 tons per day early in the third quarter of 2013. Targeted stopes at the 4900 level contain silver grades that are considerably higher than the ore currently being mined in the Galena and Coeur areas. Additional development and potential production prior to the end of the year is also planned for high grade silver-lead stopes in the Caladay Zone which are much wider than the current Galena silver-lead areas.  In order to achieve what the Company expects will be more profitable production from the higher grade Caladay areas by the third quarter of the year, production and development miners were re-deployed from the Coeur area late in the first quarter.

Caladay Drilling Update

Drilling in the Caladay Zone continues to uncover wide zones of silver-lead mineralization characterized by higher grade sections. As an example, Hole 49-226 revealed 51 feet of greater than 14 ounces per ton silver equivalent that included two higher grade zones of 12 and 15 feet.  In addition, Hole 52-412 intersected 80 feet of over 12 ounces per ton silver equivalent with a 14.5 foot higher grade zone. The detailing of these higher grade sections within large areas of mineralization typified by the Caladay Zone will assist in mine planning. Ongoing drilling will focus on the 4900 and 5200 Levels.

Drilling in the silver-copper veins on the 4900 and 5200 Levels has extended these veins along strike and down dip.  In addition, new veins continue to be discovered.  In Hole 52-404 for example, 3.2 feet of 42.4 ounces per ton silver equivalent has been intersected in a new vein.  It is quite common to intersect multiple veins while drilling in these areas.  Selected drilling results for the Caladay Zone since the March 28, 2013 press release can be found in the table below.

Table 2
Recent Caladay Zone Mineralization
Hole # From
(ft)
To
(ft)
Width
(ft)
Ag
(oz/ton)
Pb
(%)
Cu
(%)
Ag
Equivalent
(oz/ton)
Ag
Equivalent
(g/t)
49-226 133.0 184.0 51.0 6.82 10.97 -- 14.72 505
Including 141.2 154.0 12.8 9.78 13.58 -- 19.56 671
Including 163.5 180.0 16.5 10.19 19.29 -- 24.08 826
49-235 170.0 250.0 80.0 4.12 4.84 -- 7.60 261
Including 205.0 230.0 25.0 6.91 8.13 -- 12.76 438
52-412 405.0 485.0 80.0 7.60 6.39 -- 12.20 418
Including 462.4 476.9 14.5 15.35 18.19 -- 28.45 975
52-413 372.2 388.0 15.8 10.54 12.29 -- 19.39 665
52-414 168.5 180.0 11.5 12.83 18.91 -- 26.45 907
49-280T 90.0 104.3 14.3 16.00 -- 0.25 16.64 571
52-404 625.0 628.2 3.2 40.13 -- 0.81 42.14 1445
52-418 582.0 620.0 38.0 11.82 -- 0.11 12.09 415
   
Note:  Silver Equivalent calculated using $25.00/oz. Ag, $3.10/lb. Cu and $0.90/lb. Pb.
  Since these drill holes were completed from different drill stations and intersect the veins at various angles
the recovered intersections may not reflect true widths. Please refer to www.us-silver.com for all drilling results.
   

Quality Assurance / Quality Control ("QA/QC")

U.S. Silver & Gold maintains a QA/QC Program for all assays, whether completed at the Drumlummon laboratory or at a contract laboratory including the use of standards, blanks and duplicates. All QA/QC results are evaluated using a program of QA/QC monitoring.  Both the contract laboratory and the Drumlummon laboratory maintain programs of QA/QC as well.  Assays for the Caladay Zone were prepared by a commercial laboratory located in Osburn, Idaho.

About U.S. Silver & Gold Inc.

U.S. Silver & Gold Inc. is a newly formed silver and gold mining company focused on growth from its existing asset base and the execution of targeted accretive acquisitions. U.S. Silver & Gold owns and operates the Galena Mine Complex in the heart of the Silver Valley/Coeur d'Alene Mining District, Shoshone County, Idaho and the Drumlummon Mine in Lewis and Clark County, Montana. Within the Galena Mine Complex, the Galena Mine produces high-grade silver and is the second most prolific silver mine in U.S. history, delivering over 200 million ounces to date, the Coeur Mine is under re-development with first production having been achieved in late 2012 and the Caladay Zone is being evaluated for bulk mining development.

Mr. Jim Atkinson, Vice President, Exploration and a Qualified Person under Canadian Securities Administrators guidelines, has approved the contents of this news release.

For further information please see SEDAR or www.us-silver.com for the NI 43-101 compliant Technical Report on the Galena Project dated March 22, 2013.

Cautionary Statement Regarding Forward Looking Information:

This news release contains "forward‐looking information" within the meaning of applicable securities laws. Forward‐looking information includes, but is not limited to, the Company's expectations intentions, plans, and beliefs with respect to, among other things, the Galena Complex and the Drumlummon Mine. Often, but not always, forward‐looking information can be identified by forward‐looking words such as "anticipate", "believe", "expect", "goal", "plan", "intend", "estimate", "may", and "will" or similar words suggesting future outcomes, or other expectations, beliefs, plans, objectives, assumptions, intentions, or statements about future events or performance. Forward‐looking information is based on the opinions and estimates of the Company as of the date such information is provided and is subject to known and unknown risks, uncertainties, and other factors that may cause the actual results, level of activity, performance, or achievements of the Company to be materially different from those expressed or implied by such forward looking information. This includes the ability to develop and operate the Galena and Drumlummon properties, risks associated with the mining industry such as economic factors (including future commodity prices, currency fluctuations and energy prices), failure of plant, equipment, processes and transportation services to operate as anticipated, environmental risks, government regulation, actual results of current exploration activities, possible variations in ore grade or recovery rates, permitting timelines, capital expenditures, reclamation activities, social and political developments and other risks of the mining industry. Although U.S. Silver and Gold has attempted to identify important factors that could cause actual results to differ materially from those contained in forward‐looking information, there may be other factors that cause results not to be as anticipated, estimated, or intended. Readers are cautioned not to place undue reliance on such information. By its nature, forward‐looking information involves numerous assumptions, inherent risks and uncertainties, both general and specific those contribute to the possibility that the predictions, forecasts, and projections of various future events will not occur. The Company undertakes no obligation to update publicly or otherwise revise any forward‐looking information whether as a result of new information, future events or other such factors which affect this information, except as required by law.

SOURCE U.S. Silver & Gold Inc.




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