SUNSHINE MINING AND REFINING COMPANY

SUNSHINE MINING AND REFINING COMPANY

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Company Overview
Sunshine Mining & Refining Company, with registered head office located in Dallas, Texas, is primarily engaged in mining silver, and in owning properties in Argentina, Mexico and the United States. The company has significant silver reserves and silver resource potential. It owns the Sunshine Mine located in the Coeur d’Alene Mining District near Kellogg, Idaho and the Pirquitas Mine in the Jujuy Province of northwest Argentina. Sunshine Mining & Refining Company operates through its subsidiary Sunshine Precious Metals Inc. The Sunshine Mine produced 3.9 million and 5.2 million ounces of silver in 1999 and 2000.
Business Summary
Sunshine Mining and Refining Company is primarily engaged in mining silver, and owns properties in Argentina, Mexico and the United States with significant silver reserves and silver resource potential. The Company owns the Sunshine Mine located in the Coeur d’Alene Mining District near Kellogg, Idaho and the Pirquitas Mine in the Jujuy Province of northwest Argentina. The Sunshine Mine produced 3.9 million and 5.2 million ounces of silver in 2000 and 1999, respectively. On August 23, 2000, Sunshine and its wholly owned subsidiaries, Sunshine Argentina, Inc., Sunshine Precious Metals, Inc. and Sunshine Exploration, Inc., all filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code. In March 2002, Sunshine Argentina, Inc. was sold. In February 2003, the Company sold approximately 79% of its stock in Sunshine Precious Metals, Inc. to American Reclamation Incorporated.
Description and history
Sunshine Mining and Refining Company is primarily engaged in mining silver, and owns properties in Argentina, Mexico and the United States with significant silver reserves and silver resource potential. The Company owns the Sunshine Mine located in the Coeur d’Alene Mining District near Kellogg, Idaho, and the Pirquitas Mine in the Jujuy Province of northwest Argentina. The Sunshine Mine produced 3.9 million and 5.2 million ounces of silver in 2000 and 1999, respectively.

On August 23, 2000, Sunshine and its wholly owned subsidiaries, Sunshine Argentina, Inc., Sunshine Precious Metals, Inc. and Sunshine Exploration, Inc., all filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. The Company is engaged in a review of its strategic options in order to address its financing difficulties. Among these options is the consideration of a sale of some or all of its assets, the merger of the Company with another company, or a joint venture arrangement on some of its properties, including Pirquitas. Stonehill Capital Management, LLC and Highwood Partners, L.P. are providing the Company an Exit Financing Facility, which will fund the Company upon its initial emergence from bankruptcy. In March 2002, Sunshine Argentina, Inc. was sold. In February 2003, the Company sold approximately 79% of its stock in Sunshine Precious Metals, Inc. to American Reclamation Incorporated.

Sunshine’s principal asset is the Pirquitas Mine. Pirquitas contains 129 million ounces of silver reserves, as well as significant tin and zinc by-products. The mine is planned as an open-pit operation to produce 11 million ounces of silver, 3,200 metric tons of tin and 16,300 metric tons of zinc per year. A feasibility study on the economics of developing the property was initially completed in 1999, and enhancements to the initial study were completed in 2000.

Argentina Operations

In 1994, the Company commenced operations in Argentina and, in 1995, the Pirquitas property was acquired. Pirquitas is located in the Puna de Atacama in the Argentinean province of Jujuy, at an elevation of over 13,000 feet. The nearest major city is the provincial capital, San Salvador de Jujuy, which is about 220 miles southeast of Pirquitas. The Chilean and Bolivian borders lie about 31 miles west and 37 miles to the north, respectively.

The Company has assigned proven and probable reserves to Pirquitas totaling 129.6 million ounces of silver, along with 59 thousand tons of tin and 273 thousand tons of zinc. The Company has invested a total of approximately $20 million in the acquisition and evaluation of the property.

Sunshine owns or controls a significant land package at the property. The Company holds title to 6,500 acres of mining concessions and owns approximately 18,500 acres of surface lands, upon which all facilities will be built. Most of the property remains unexplored. Significant resources above and beyond those identified in the feasibility study are believed to exist at the property. Based on the Company’s exploration, as well as a review of previous development work, mineral resources surrounding the identified reserve may be substantially increased.

The Sunshine Mine and Refinery Complex

The Sunshine Mine and Refinery Complex, located in the Coeur d’Alene Mining District near Kellogg, Idaho, is comprised of the Sunshine Mine, a 1,000-ton-per-day concentrator, an antimony refinery, a silver refinery and associated facilities. The facility is an integrated operation that can produce refined silver with 99.99% purity. The silver refinery has a capacity to recover up to eight million ounces of silver and four million pounds of copper annually. The Company’s wholly owned subsidiary, SPMI, owns substantially all of the mining claims comprising the Sunshine Mine.

Sunshine’s share of silver reserves at the Sunshine Mine, as of December 31, 2000, were estimated to be 1.1 million tons of ore with an average grade of 23.6 ounces of silver per ton (after adjustment for mining dilution), containing 25.9 million ounces of silver. Metallurgical recoveries at the Sunshine Mine have typically approximated 97% of the contained silver. The proven and probable reserves at the Sunshine Mine have historically totaled approximately four to seven years of annual production. Historically, exploration and development activities have maintained reserves by finding new ore to replace what was produced each year. Due to cash constraints, planned exploration and development has been significantly curtailed since the end of 1999, resulting in a reduction in proven and probable reserves. If the mine is reopened and an adequate exploration and development funded in the future, new reserves may be identified, as studies have delineated several areas of favorable geologic conditions that may host significant deposits. These areas are contiguous to delineated mineralization and the ore-bearing structures project into favorable lithologic units. Further exploration is necessary to establish the existence of and quantify the additional mineralized material, but potentially it could exceed 100 million ounces.

The ore extracted from the Sunshine Mine was processed by a 1,000-ton-per-day flotation concentrator, which produced two concentrates, a high-grade silver concentrate that was transferred to the antimony refinery for antimony removal and a lead concentrate that was shipped directly to a smelter for further processing. The Company’s technical personnel estimated the Sunshine Mine’s proven and probable ore reserves at January 1, 2001, to be 1.1 million tons of ore, containing 26.8 million ounces of silver and 10.4 million pounds of copper. The weighted average ore grades, adjusted for mining dilution, but not adjusted for metallurgical recoveries, are 23.6 ounces per ton silver and 0.46% copper. During the three years ended December 31, 2000, the Sunshine Mine accounted for all of the Company’s silver production, and approximately 16% of the Company’s silver reserves.

Mexican Operations

The Company acquired its first Mexican property, Juanicipio, in 1999. The property is located adjacent to the Fresnillo Mine in the state of Zacatecas. The district has reportedly produced more than one billion ounces of silver dating to colonial times. The Company’s mapping and geophysical work has demonstrated that structures similar to those containing mineralization at the Fresnillo Mine may exist at Juanicipio. The surface reflection of such structures appears to strike from Fresnillo into the Juanicipio property. The next logical step in the evaluation of the property would be a drilling program to quantify potential mineralization in these structures. The Company will be reviewing options to enable such a program to go forward.

The Company’s mining concession at the property is quite large, approximately 28,100 hectares (69,400 acres). Because of its proximity to the Fresnillo Mine, and the evidence of the structures that are present on the property, Juanicipio may present an attractive joint venture opportunity.

Other Exploration

The Revenue-Virginius Mine is an underground silver mine located eight miles southwest of the town of Ouray in southwestern Colorado. The mine also contains significant gold and base metals. The mine has been largely inactive since a mill fire in 1912 resulted in the closure of the operation. Most production records on the property are missing; however, records that remain indicate production between 1895 and 1906 totaling 14.5 million ounces of silver, 123 thousand ounces of gold and 63 million pounds of lead from one series of veins. Sunshine controls the property under a mining lease calling for minimal property payments and work commitments. The property reserves are estimated to be approximately 6.2 million ounces of silver.

Business Line
Primarily engaged in mining silver, and in owning properties in Argentina, Mexico and the United States
Subsidiary

Advisor
GRANT THORNTON INTERNATIONAL
IPO date

US SIC Code
1044
Company Address
Suite 1621
5956, Sherry Lane
City province or state postal code
75225, DALLAS, TX
Phone: +1 214 265 1377
Fax: +1 214 265 0324
Country address: UNITED STATES OF AMERICA
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