Arian Silver's MD&A and Results for the Three and Six Months Ended 30 June 2012

NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES NOT FOR DISTRIBUTION IN THE
UNITED STATES


Arian Silver Corporation ("Arian" or the "Company") (TSX
VENTURE: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 and six months ended
30 June 2012.


The MD&A and Financials are available at SEDAR at www.sedar.com and on the
Company's website at www.ariansilver.com. 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, "It has been an
active quarter for the Company, and I am pleased to report that discussions in
connection with the alternative 500 tpd toll mill are progressing well. We hope
to be able to provide a further update on this in the coming weeks in addition
to an update on the independent mining and mill studies."


OVERVIEW OF SECOND QUARTER AND SIX MONTHS OF 2012 AND SUBSEQUENT EVENTS

Financial 



--  Revenue increased 38% to $2.1 million compared to Q2 2011 
    
--  Gross loss of $0.1 million in Q2 2012 compared to $0.1 million gross
    profit for Q2 2011 
    
--  Consolidated pre-tax loss has decreased by $0.4 million from $1.5
    million in Q2 2011 (including a non-cash employees share options expense
    of $0.7 million for options vesting) to $1.1 million (including a non-
    cash employee share options expense of $0.2 million for options vesting)
    
--  Working capital decreased from $5.9 million at end of Q4 2011 to $3.4
    million at end of Q2 2012. 
    
--  Total assets decreased from $16.3 million at end of Q4 2011 to $15.0
    million in Q2 2012 which includes intangible assets of $1.1 million,
    property, plant and equipment of $9.3 million, trade and other
    receivables of $2.3 million, inventories $0.8 million, financial assets
    $0.2 million and cash of $1.3 million



Operations 



--  San Jose production Q2 2012 
    --  26,268 tonnes mined representing an increase of 17% from Q2 2011 
    --  28,903 tonnes milled representing an increase of 58% from Q2 2011 
    --  298 silver concentrate tonnes produced representing an increase of
        107% from Q2 2011 
    --  98,616 silver ounces produced representing an increase of 66% from
        Q2 2011 
    --  286 silver concentrate tonnes sold representing an increase of 144%
        from Q2 2011 
    --  93,112 silver ounces sold representing an increase of 122% from Q2
        2011 

--  San Jose production six months 2012 
    --  47,821 tonnes mined representing an increase of 14% from 2011 
    --  53,297 tonnes milled representing an increase of 35% from 2011 
    --  600 silver concentrate tonnes produced representing an increase of
        107% from 2011 
    --  165,304 silver ounces produced representing an increase of 56% from
        2011 
    --  616 silver concentrate tonnes sold representing an increase of 153%
        from 2011 
    --  169,023 silver ounces sold representing an increase of 110% from
        2011 



Post 30 June 2012



--  On 16 July 2012 Arian announced a dispute between its wholly owned
    subsidiary Arian Silver de Mexico SA de CV ("Arian Mexico") and
    Contracuna I SA de CV ("Contracuna"), from whom the mill was contracted.
    This dispute resulted in the suspension of milling operations. 
    
--  On 9 August 2012 Arian announced that it had signed a letter of intent,
    which reflects the Company's intent to negotiate a definitive contract
    for the exclusive hire of a newly refurbished and soon to be re-
    commissioned 500 tpd mill.



THE STRATEGY

Arian's overall objective is to develop additional resources on the San Jose
property concurrent with the existing contract mining and milling operations,
and complete an independent detailed metallurgical and mill study with a view to
building our own bespoke mill for larger-scale and envisaged more efficient
production.


REVIEW OF FINANCIAL PERFORMANCE

In the six months ended 30 June 2012, the Company made a pre-tax loss of $0.2
million (30 June 2011: $9.9 million) which comprised a gross loss for the San
Jose mine of $0.2 million (30 June 2011: $0.2 million), recognising the fair
value non-cash expense of share purchase options vesting of $0.2 million (30
June 2011: $8.0 million), a credit of $1.7 million (30 June 2011: $nil) for the
reversal of the fair value of share purchase options vesting that lapsed in the
period and other administrative expenses of $1.4 million (30 June 2011: $1.4
million). Investment loss of $0.1 million (30 June 2011: $0.3 million).


As at 30 June 2012, the Company had working capital of approximately $3.4
million (31 December 2011: $5.9 million). See Liquidity, Capital Resources and
Working Capital for the items of working capital. Intangible assets amounted to
$1.1 million (31 December 2011: $1.1 million) which relate to deferred
exploration and evaluation costs in respect of the Company's Mexican projects.
Property, plant and equipment amounted to $9.3 million (31 December 2011: $8.1
million); $9.2 million of this relates to the San Jose mine development costs.
Share capital increased by $0.1 million to $47.4 million (31 December 2011:
$47.3 million) as a result of the issue of common shares in connection with the
exercise of share options. 


REVIEW OF OPERATIONS

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


Property Summary



----------------------------------------------------------------------------
Project Name                    No. of Concessions   Area in hectares ("ha")
----------------------------------------------------------------------------
San Jose                                        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 Jose Project, Zacatecas State

The 100%-owned San Jose 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 ("SJ Ramp") extending more than 4.0km
along the San Jose 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.


Production Information

Production information summary for San Jose mine is as follows:



----------------------------------------------------------------------------
                             Q2 2012 Q1 2012 Q4 2011 Q3 2011 Q2 2011 Q1 2011
----------------------------------------------------------------------------
Head grade (mill) - Ag grams                                                
 per tonne (g/t)                 181     173     201     199     178     178
Tonnes mined                  26,268  21,553  24,433  33,941  22,387  19,462
Tonnes milled                 28,903  24,394  22,971  21,512  18,348  21,128
Ag concentrate tonnes                                                       
 produced                        298     302     256     204     144     146
Recovery %                     58.74   49.01   51.68   47.76   56.66   38.08
Ag ounces produced            98,616  66,688  76,618  65,804  59,568  46,236
Ag ounces per concentrate                                                   
 tonne produced                  331     221     300     323     412     316
Ag ounces sold                93,112  75,911  77,738  77,587  41,868  38,772
Ag concentrate tonnes sold       286     330     242     221     117     126
                                                                            
Quarter end inventory                                                       
 balances                                                                   
Mined tonnes stockpile        15,003  17,637  20,478  19,016   9,972   2,549
Ag concentrate inventory                                                    
 tonnes                           36      24      52      39      57      29
Ag ounces included in                                                       
 concentrate inventory        11,276   5,772  14,995  14,118  23,075  10,195
----------------------------------------------------------------------------



Head grade

The head grade remained in line from Q2 2011 to Q2 2012. The increase in head
grade from Q1 2012 to Q2 2012 by 5% is a result of minor inconsistencies with
the mineralogy of the vein.


Tonnes mined

The increase in tonnes mined from Q2 2011 to Q2 2012 of 3,881 tonnes (17%) and
increase in tonnes mined from Q1 2012 to Q2 2012 of 4,715 tonnes (22%) was made
to ensure that there was enough San Jose run of mine ("ROM") material for the
extra milling capacity.


Tonnes milled

The increase in tonnes milled from Q2 2011 to Q2 2012 of 10,555 tonnes (58%) and
tonnes milled from Q1 2012 to Q2 2012 of 4,509 tonnes (18%) were largely a
result of an increase in efficiency as a result of production improvements made
at the mill as well as the commencement of the 4th ball mill in Q2 2012.


Ag ounces per concentrate tonne produced

The decrease in ounces per concentrate tonne produced from Q2 2011 to Q2 2012 of
81 ounces per tonne (20%) was as a result of a change of the ratio of milled ore
to concentrate produced which decreased as the plant became more efficient.


The increase in ounces per concentrate tonne produced from Q1 2012 to Q2 2012 of
110 ounces (50%) were a result of increased milling recovery.


% Recovery

The increase in recovery of 20% from 49.01% in Q1 2012 to 58.74% Q2 2012 and
increase of 4% from 56.66% in Q2 2011 to 58.74% Q2 2012 was a result of further
improvements made to the mill.


Ag concentrate ounces produced

The increase in ounces produced from Q2 2011 to Q2 2012 of 39,047 ounces (66%)
and ounces produced from Q1 2012 to Q2 2012 of 31,928 ounces (48%) were a result
of the installation of the new 4th ball mill combined with metal (as opposed to
rubber) liners, which contributed to the increased milling throughput and
subsequent higher recoveries.


Mining Operations

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


Arian continued preparing and exploring mining blocks to verify continuity of
mineralisation to ensure production to the plant, ready for the increase in
milling capacity due to the operation of the 4th ball mill which commenced
operation in May 2012. In particular, in Q1 2012 Arian developed 429m which
includes 98m on the ramp, 179m preparation, 32m on raises and 120m exploration.
Additionally in Q2 2012 Arian developed 545.41m which includes 242.17m on the
ramp, 150.59m preparation, 31.41m on raises and 121.24m exploration.


Recent ramp development in the Santa Ana area provided access to blocks
indicated by diamond drilling on level 70, enabling further verification of
resource for further exploitation and extraction below this level. The ramp
continues development below level 120 to explore continuity of blocks as there
is evidence of mineralisation at 300m depth.


Contract mining will be reduced to reflect the halting of the processing
facility. Total costs to mine whilst there is no processing is approximately
$40/tonne. Should Arian successfully negotiate a new milling contract and
recommence processing, the total costs to mine are estimated at $30/tonne.


Milling Operations

During Q1 and Q2 2012 Arian contracted its milling operations on a fixed monthly
fee basis.


On 16 July 2012 Arian announced a dispute had arisen between its wholly owned
subsidiary Arian Silver de Mexico SA de CV ("Arian Mexico") and Contracuna I SA
de CV ("Contracuna"), from whom the mill was contracted. This dispute resulted
in the suspension of milling operations, and on 9 August 2012, Arian announced
that its wholly owned Mexican subsidiary Arian Mexico SA de CV would be
implementing the necessary procedures against Contracuna to recover all losses
and damages resulting from an alleged illegal termination, and breaches of
contract, which led to the suspension of milling.


It should be noted that this contracted mill had a maximum rating of 400 tpd but
it was not designed for the hardness and abrasiveness of the San Jose ROM
material. Significant improvement had been made to this mill that allowed it to
increase to over 400 tpd during May 2012, partly as a result of the installation
of the 4th in-line ball mill and other modifications.


On 9 August 2012 Arian announced that it had signed a letter of intent, which
reflects the Company's intention to negotiate a definitive contract for the
exclusive hire of a newly refurbished and soon to be re-commissioned 500 tpd
mill. This mill, which is located nearby on the outskirts of the city of
Zacatecas, is currently expected to become operational during Q4 2012.


Arian believes that this new re-commissioned mill will enable the continuation
of its trial milling operation, which forms part of the requisite set of studies
necessary to design a fully bespoke and optimised mill.


Based on a contained silver content of 300 ounces per tonne ("opt") at a spot
price of $28/oz silver, a concentrate value of $7,300/tonne, after deductions,
is forecast.


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


Exploration Drilling

In January 2012, Arian released further interim drill results relating to the
Phase 4 Drilling programme which continued to show continuity of the vein
thickness, silver mineralisation and grade along the SJV. Also announced were
the results of the geophysical Induced Polarisation ("IP") survey which
identified the areas of probable vein displacements and provided targets for
some of the last holes to be drilled in the Phase 4 Drilling programme (see the
Company's press release dated 16 January 2012 entitled "Arian Silver Reports
Further Encouraging Exploration Progress at San Jose").


On 12 March 2012 the Company announced the conclusions of an independent
resource update by CSA Global (UK) Limited which took into account all the Phase
1, 2, 3 and 4 Drilling programmes; the Technical Report was filed with
regulators on 25 April 2012. 


Mineral Resource 

On 12 March 2012, Arian reported a significant resource estimate upgrade (see
the Company's press release entitled "Arian Silver Increases Contained Silver at
San Jose by 32% to More Than 117 Million Ounces in Updated Mineral Resource
Estimate").


The highlights of this announcement were:



--  29% increase in resource tonnage along the San Jose Vein ("SJV") from
    the July 2011 mineral resource estimate; 
    --  Contained ounces of silver have increased by 32%; 
    --  Contained pounds of lead have increased by 29%; and 
    --  Contained pounds of zinc have increased by 30%; 
--  Mineralisation remains open along the western and eastern strikes of the
    SJV and to depth; and 
--  Further drilling is planned to infill the current resources, step out
    along the remaining SJV structure in both directions, and to drill at
    depth on the SJV. 



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 Jose project are available on the Company's website www.ariansilver.com
or on SEDAR at www.sedar.com :-




a)  Report dated 22 June 2009 and entitled "Preliminary Economic Assessment 
    Report (PEAR) on the San Jose Silver-Lead-Zinc Deposit, Zacatecas,      
    Mexico"; and                                                            
                                                                            
b)  Report dated 15 August 2008 and entitled "Resource Estimation Update for
    the San Jose 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.


Laboratory 

Arian has an independently operated sample preparation and analytical laboratory
on site at San Jose which has been operational since April 2011; it is operated
by the Stewart Group which is now a subsidiary of the ALS Chemex Group. This is
a valuable asset for Arian because it allows for the rapid turnaround of samples
and provides vital information to our operational personnel to ensure that
decisions are made at the operation in a timely manner. In addition the
laboratory provides an invaluable tool during drilling programmes which again
has significantly decreased the turnaround times for analysis of Arian's drill
samples.


The laboratory comprises a comprehensive sample preparation facility, wet
chemistry facility, and Atomic Absorption Spectrometry ("AAS") and fire-assay
("FA") in use for final determinations of silver, lead and zinc. It is operated
under the sole control and management of professional personnel from the Stewart
Group who ensure the results are fully compliant with Arian's quality assurance
and quality control (QA/QC) programme. 


Calicanto Project, Zacatecas State

Arian owns 100% of the Calicanto Project which consists of seven adjacent mining
concessions totalling 75ha, 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. 


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
www.ariansilver.com or on SEDAR at www.sedar.com.


RESULTS OF OPERATIONS

Three months ended 30 June 2012 compared to three months ended 30 June 2011 

The pre-tax loss for the quarter was $1.1 million (2011: $1.5 million). This
includes a gross loss of $0.1 million (2011: gross profit $0.1 million)
generated by the San Jose mining operation, the expensing of the fair value of
share purchase options vesting of $0.2 million (2011: $0.6 million), and other
administrative expenses of $0.7 million (2011: $0.8 million), finance loss of
$0.1 million (2011: $0.2 million) which includes interest income of $4,000
(2011: $13,000), and a fair value adjustment loss for Geologix shares held of
$0.1 million (2011: $0.2 million). 


Six months ended 30 June 2012 compared to six months ended 30 June 2011 

The pre-tax loss for the period was $0.2 million (2011: $9.9 million). This loss
includes a gross loss of $0.2 million (2011: $0.2 million) generated by the San
Jose mining operation, the expensing of the fair value of share purchase options
vesting of $0.2 million (2011: $8.0 million), a credit of $1.7 million (2011:
$nil) for the reversal of the fair value of share purchase options vesting that
have lapsed in the period, and other administrative expenses of $1.4 million
(2011: $1.5 million), finance losses of $0.1 million (2011: $0.3 million profit)
which includes interest income of $10,000 (2011: $24,000), offset mainly by a
fair value adjustment loss for the Geologix shares held of $0.1 million (2011:
$0.3 million).


SUMMARY OF QUARTERLY RESULTS



----------------------------------------------------------------------------
                                              Q2       Q1       Q4       Q3 
----------------------------------------------------------------------------
Unaudited                                   2012     2012     2011     2011 
                                           $'000    $'000    $'000    $'000 
----------------------------------------------------------------------------
Revenue from sale of silver concentrate    2,104    2,314    2,367    2,434 
----------------------------------------------------------------------------
Cost of sales                              2,242    2,379    1,921    1,914 
----------------------------------------------------------------------------
Gross profit / (loss)                       (138)     (65)     446      520 
----------------------------------------------------------------------------
Net profit/(loss) before finance                                            
 revenue/costs                            (1,006)     866     (411)    (484)
----------------------------------------------------------------------------
Finance revenue                                4        6        9       11 
----------------------------------------------------------------------------
Net profit/(loss) for the period          (1,133)     947     (443)    (602)
----------------------------------------------------------------------------
Basic and diluted (loss) per share         $0.00    $0.00    $0.00    $0.00 
----------------------------------------------------------------------------
Total assets                              15,021   16,732   16,250   16,894 
----------------------------------------------------------------------------
Shareholders' equity                      13,647   15,370   14,909   15,806 
----------------------------------------------------------------------------
Cash dividend declared per share               -        -        -        - 
----------------------------------------------------------------------------
                                                                            
----------------------------------------------------------------------------
                                              Q2       Q1       Q4       Q3 
----------------------------------------------------------------------------
Unaudited                                   2011     2011     2010     2010 
                                           $'000    $'000    $'000    $'000 
----------------------------------------------------------------------------
Revenue from sale of silver concentrate    1,529    1,137      184        - 
----------------------------------------------------------------------------
Cost of sales                              1,470    1,350      175        - 
----------------------------------------------------------------------------
Gross profit /(loss)                          59     (213)       9        - 
----------------------------------------------------------------------------
Net profit/(loss) before finance                                            
 revenue/costs                            (1,358)  (8,275)     936      411 
----------------------------------------------------------------------------
Finance revenue                               13       11      141      144 
----------------------------------------------------------------------------
Net profit/(loss) for the period          (1,535)  (8,390)     991      267 
----------------------------------------------------------------------------
Basic and diluted loss per share          $(0.01)  $(0.03)  $(0.01)   $0.00 
----------------------------------------------------------------------------
Total assets                              18,843   19,631   18,876   12,362 
----------------------------------------------------------------------------
Shareholders' equity                      17,764   18,342   16,744   10,099 
----------------------------------------------------------------------------
Cash dividend declared per share               -        -        -        - 
----------------------------------------------------------------------------



Second quarter 2012 vs. first quarter 2012

A gross loss of $0.1 million was reported in the second quarter broadly in line
with the first quarter. The net loss in the period was $2.0 million higher than
for the previous quarter mainly due to a credit of $1.7 million for the reversal
of the fair value of share purchase options vesting that lapsed was recorded in
the first quarter, an additional $0.1 million and was non-cash charge for the
fair value of share options vesting that were issued in the quarter and $0.2
million for the reduction in value of the Geologix shares held received as
partial payment for the disposal of the Tepal property. Cash decreased by $1.5
million to $1.4 million largely as a result of investment in the development of
the San Jose mine. The decrease in shareholders' equity was largely attributable
to the movement in the foreign exchange reserve and the loss for the period.


LIQUIDITY, CAPITAL RESOURCES AND WORKING CAPITAL

During the period, the Company received new funding from:



--  the exercise of 525,000 share purchase options which generated GBP
    61,375 



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




--  15,960,000 share purchase options with exercise prices ranging from GBP
    0.055 to GBP 0.4925 (Cdn$0.10 to Cdn$0.79) and expiring on various dates
    up to May 2017. 



Working Capital - 30 June 2012

As at 30 June 2012, the Company had working capital of approximately $3.4
million (31 December, 2011: $5.9 million). The items of working capital and
changes compared to 31 December 2011 are as follows: 


Current assets



--  cash and cash equivalents of $1.3 million (31 December 2011: $4.0
    million); 
--  trade and other receivables of $2.3 million (31 December 2011: $1.9
    million) - increase due to the trade debtor for the sale of silver
    concentrate from the San Jose mining operation; 
--  inventories of $0.8 million (31 December 2011: $0.9 million) - relates
    to stockpile held at cost relating to production at the San Jose mine;
    and 
--  financial assets held at fair value through profit or loss of $0.2
    million (31 December 2011: $0.3 million) - 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 $1.2 million (31 December 2011: $1.2 million). 



Off-balance sheet arrangements

The Company has no off-balance sheet arrangements.

TRANSACTIONS WITH RELATED PARTIES

During the three months ended 30 June 2012 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 $61,234 (30 June 2011:
$62,757) 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 30 June 2012 $10,107 (30 June 2011: $nil)
was outstanding.


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

FUTURE OUTLOOK

Management anticipates, subject to the successful negotiation of a new milling
contract the profitability of the operations would increase to a sustainable
level generating cash flow to be used for further mining exploration and
development programmes. This is based on the assumption that silver prices will
remain at least around its current level of $28 per ounce, although some price
volatility is expected. The preliminary results of the detailed mill and
metallurgical studies are expected to be received during the third quarter. It
is anticipated these studies will eventually enable greater efficiencies with
milling and ultimately reduce Arian's silver production cost per ounce. 


CRITICAL ACCOUNTING ESTIMATES

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 

Since the Company is still at a relatively early stage of development with trial
mining, it will require additional funding for projects which may comprise debt,
equity or a combination of the two. Although the Company has been successful in
the past in raising equity finance, there can be no assurance that the funding
required by the Company will be made available to it when needed or, if such
funding were to be available, that it would be offered on reasonable terms. The
terms of such financing might not be favourable to the Company and might involve
substantial dilution to existing shareholders. 


The directors of the Company currently believe it appropriate to prepare the
Company's financial statements on a going concern basis. However, if the
required funding is not forthcoming, the Company 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.


Inventories

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.


FINANCIAL RISK FACTORS 

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 Canadian dollars. The
Company therefore also has downside exposure to any strengthening of the United
States Dollar, Pound Sterling or the Mexican Peso against the Canadian dollar as
this would increase expenses in Canadian dollars terms and accelerate the
depletion of the Company's cash resources. Any weakening of the United States
Dollar, Pound Sterling or the Mexican Peso against the Canadian Dollar would,
however, result in a reduction in expenses in Canadian 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 30 June 2012, the
Company had cash of $1,338,000, financial assets of $218,000, and receivables of
$2,255,000 to settle accounts payable of $1,202,000. 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. Credit risk attributable to trade
receivables is managed in offtake agreements. The Company receives advances of
70% of the estimated value of the concentrate shipped the previous month and the
remainder within three months of delivery. A new offtake agreement started in Q2
2012 on a trial period has allowed Arian to receive a fixed silver price and
100% of the value of the concentrate shipped two days after final assays, which
are usually 10 to 12 working days after delivery, this will significantly reduce
the credit risk of Arian going forward assuming that production re-commences. 


OTHER RISK FACTORS

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.


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 Jose 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.


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.


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.


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 Sub-Contractors in Mexico

The Company will rely on sub-contractors to implement the Company's exploration
and development programmes as well as its current mining operation at the San
Jose project. The failure of a sub-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.


Competition

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 2011 Annual
MD&A which can be accessed on SEDAR at www.sedar.com or the Company's website at
www.ariansilver.com. Such risks have not changed materially during the reporting
period to 30 June 2012.


OTHER INFORMATION

Additional Information

Additional information relating to the Company may be accessed through SEDAR on
the internet at www.sedar.com or the Company's website on www.ariansilver.com.


Disclosure of Outstanding Share Data

The following table sets out the outstanding securities of the Company as at 21
August, 2012:-




                                                             Number in issue
Common shares of no par value                                    301,714,112
Share purchase options                                            15,960,000



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


About the Company

Arian is a silver exploration and development company and is listed on London's
AIM, 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 Jose 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:
www.ariansilver.com or the Company's publicly available records at
www.sedar.com.


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 Jose 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.


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.