Silver Dragon Resources Inc. today announced the signing of a Letter of Intent with Hubei Silver Mine Co., Ltd. ("Hubei Silver") and Cistex Global Investment Inc., ("Cistex") relating to the acquisition by Silver Dragon of a 60% equity interest in Hubei Silver which holds the exploration and mining rights to the Hubei Silver Mine located in Zhushan County, Shiyan City, Hubei Province, China.
 
The acquisition is subject to a number of conditions including, but not limited to, the delivery by Hubei Silver of all geological and technical data related to the mine, an audit of Hubei Silver and an evaluation of its assets based on U.S. GAAP valuation methods and the execution of a definitive agreement. A due diligence and feasibility study period of 60 days has commenced and, subject to satisfactory findings, it is intended that a formal equity transfer agreement will be entered into within 90 days of the signing of the Letter of Intent. The purchase price, subject to confirmation of the value of Hubei Silver's assets, is approximately US$1.5 Million along with shares of restricted common stock of Silver Dragon valued at US$1.5 million on closing.

Hubei Silver Mine Co., Ltd. is a large, non-ferrous metal enterprise, and was the first among China's 10 largest independent silver mines to engage in both mining and ore dressing operations. Hubei Silver holds the exploration and mining rights to the Hubei Silver Mine, which began production in 1992.

According to Hubei Silver, the current annual production of the Hubei Silver Mine is 240,000 tons (daily ore treatment of over 800 tons). The annual production includes 30 tons of silver (close to 1 million ounces) and 250 kilograms of gold (8,000 ounces). Mining is conducted in the mode of underground mining by way of combined gallery and vertical shaft development. Currently, there are six underground production sections, each of which is 40 - 50 meters high. The geological grade of the original ore of the mine is 174 g/t silver; the ore dressing cutoff grades are 125-130 g/t silver; the mining dilution rate is 25% silver; the mine room recovery rate is 86%; the floatation recovery rates are 90% silver and 90% gold and the combined floatation and cyanide recovery rates are 80% silver and 82% gold.

The mining area currently has a total of 27 ore bodies, most of which are concealed at lengths from 10 to 600 meters, depths from 50 to 250 meters, average thickness of 2 meters and average grades of Ag110 - 507.9g/t and Au0.93 - 6.88g/t. The deposits have average grades of Ag176.5g/t and Au1.80g/t. In addition, the lead and zinc ore at depths have average grades of Pb1.75% and Zn2.42%. Silver is positively correlative with gold in the ore bodies with a ratio of 100:1. The existing non-compliant resources are as follows: 3,437,000 tons of silver ore with a metal content of 600.14 tons (20 million ounces) and 3,437,000 tons of associate gold ore with a metal content of 6.0861 tons (200,000 ounces).

"We have been approached by several publicly traded companies that were interested in acquiring an equity interest in the Hubei Silver Mine but chose Silver Dragon because of its formidable team here in China. We are very committed to finalizing this transaction with Silver Dragon, which will result in Hubei Silver having an equity stake in their common stock. We intend to introduce Silver Dragon to other properties and operating mines once the transaction is completed," said Hua Fukui, Chairman of the Board of Hubei Silver Mine Co., Ltd.

"Silver Dragon's intention to acquire the 60% equity interest in Hubei Silver is a major step in our plan to build a revenue generating, diversified portfolio of silver mining interests in China and Mexico," said Marc Hazout, President and CEO of Silver Dragon. "Completing this transaction would result in Silver Dragon becoming a Silver producer in China, with all the upside leverage and profit potential that being a producer entails. This exciting project launches us into the select club of foreign silver producers in low-cost China. Silver Dragon has strong relationships with key partners in China, and is currently in the process of securing exploration and mining interests in the Erbahuo silver district. China's appetite for silver, combined with the potential for rising silver prices, make this another exciting opportunity for Silver Dragon and our shareholders. Our immediate objective is to commence a due diligence review and a feasibility study with a view to finalizing the transaction within the next 90 days."

"This transaction is a win-win venture for both companies," said Howard Lai, Executive President of Cistex Global Investment Inc. "There are numerous advantages for Silver Dragon being an equity partner with Hubei Silver in China, not the least of which is having one of China's largest leading silver producers as the operator of 30 proven tons of high grade silver production per year. We are very excited about our ongoing relationship with Silver Dragon and believe they will also contribute as an operator and play a key role in the Hubei Silver Mine. "

About Silver Dragon

Silver Dragon Resources Inc. is a mining and metal company focused on the exploration, acquisition, development and operation of silver mines in proven silver districts globally. Silver Dragon's objective is to acquire silver mining assets that contain promising exploration targets, have highly leveraged, out-of-the-money silver deposits, and/or are producing properties with significant untapped exploration potential. It is management's objective to grow Silver Dragon into a significant silver producer by developing the Cerro las Minitas and the Erbahuo projects in Mexico and China. For more information, please visit the Company's website at: www.silverdragonresources.com (now available in Chinese).

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: The statements contained herein which are not historical are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements, including, but not limited to, certain delays beyond the company's control with respect to market acceptance of new technologies or products, delays in testing and evaluation of products, and other risks detailed from time to time in the Company's filings with the Securities and Exchange Commission.