Mr. Lorne Waldman reports
SILVERCORP REPORTS Q2 FISCAL 2016 FINANCIAL AND OPERATING RESULTS
Silvercorp Metals Inc. has released its financial and operating results for the second quarter ended Sept. 30, 2015. (All amounts are expressed in U.S. dollars.)
Second quarter highlights:
- Cash flows from operations of $4.6-million, or three cents per share;
- Repurchased 1,638,252 common shares of the company;
- Ended the quarter with $70.7-million in cash and short-term investments;
- Net income attributable to equity shareholders of $2.2-million, or one cent per share;
- Silver sales of 1.3 million ounces, lead sales of 13.2 million pounds and zinc sales of 4.6 million pounds, down 7 per cent, 7 per cent and 11 per cent, respectively, from the prior-year quarter;
- Realized selling price for silver, lead and zinc at the Ying mining district dropped by 26 per cent, 8 per cent and 19 per cent, respectively, compared with the same prior-year quarter;
- Sales of $27.2-million, down 27 per cent from the prior-year quarter;
- Significant increase of silver-lead concentrate inventory from 430 tonnes to 2,228 tonnes (containing approximately 200,000 ounces of silver and 2.0 million pounds of lead) at the Ying mining district, compared with the prior-year quarter;
- Gross margin of 32 per cent compared with 49 per cent in the prior-year period;
- Cash cost per ounce of silver, net of byproduct credits, of $1.52, compared with negative 98 cents in the prior-year quarter;
- All-in sustaining cost per ounce of silver, net of byproduct credits, of $12.40, compared with $9.68 in the prior-year quarter.
Financials
Net income attributable to the shareholders of the company in second quarter fiscal 2016 was $2.2-million, or one cent per share, compared with $7.2-million, or four cents per share, for the three months ended Sept. 30, 2014.
In the current quarter, the company's financial results were mainly impacted by the following: (i) lower metal prices, as the realized selling price for silver, lead and zinc at the Ying mining district dropped by 26 per cent, 8 per cent and 19 per cent, respectively, compared with the same prior-year quarter; (ii) lower gold production and sales as operations at the BYP mine have been suspended since August, 2014; (iii) higher production costs; and (iv) lower amount of metals sold as increase in silver-lead and zinc concentrate inventory.
Sales in second quarter fiscal 2016 were $27.2-million compared with $37.3-million in second quarter fiscal 2015. Silver and gold sales represented $14.7-million and $500,000, respectively, while base metals represented $12.0-million of total sales in this quarter compared with silver, gold and base metal sales of $21.7-million, $700,000 and $14.9-million, respectively, in second quarter fiscal 2015.
Cost of sales in second quarter fiscal 2016 was $18.4-million compared with $18.9-million in second quarter fiscal 2015. The cost of sales included $14.4-million (second quarter fiscal 2015: $14.2-million) cash costs and $4.0-million (second quarter fiscal 2015: $4.7-million) depreciation, amortization and depletion charges. The decrease in cost of sales is mainly due to lower amount of metals sold in the quarter, offset by the increase in per-tonne mining production costs.
Gross profit margin in second quarter fiscal 2016 was 32 per cent compared with 49 per cent in second quarter fiscal 2015. The decrease in gross profit margin is mainly due to the decline of metal prices, increases in smelter charges and increased per-tonne production costs.
Cash flows provided by operating activities were $4.6-million or three cents per share in second quarter fiscal 2016 compared with $20.1-million or 12 cents per share in second quarter fiscal 2015.
Operations and development
In second quarter fiscal 2016, the company sold 1.3 million ounces of silver, 13.2 million pounds of lead and 4.6 million pounds of zinc, compared with 1.3 million ounces of silver, 14.1 million pounds of lead and 5.2 million pounds of zinc, respectively, in second quarter fiscal 2015. The decrease of metal sales is mainly due to the company intentionally increasing its inventory of concentrates in reaction to lower metal prices. As at Sept. 30, 2015, the Ying mining district had 2,228 tonnes of lead concentrates and 260 tonnes of zinc concentrates in inventory, 1,798 and 220 tonnes higher, respectively, compared with 430 tonnes of lead concentrates and 40 tonnes of zinc concentrates in stock as at Sept. 30, 2014. The estimated metals contained in the concentrates inventory as at Sept. 30, 2015, are approximately 200,000 ounces of silver, 2.0 million pounds of lead and 200,000 pounds of zinc higher, respectively, compared with the metals contained in concentrates inventory as at Sept. 30, 2014.
For the six months ended Sept. 30, 2015, the company sold 2.6 million ounces of silver, 27.5 million pounds of lead and 9.0 million pounds of zinc, compared with 2.5 million ounces of silver, 25.6 million pounds of lead and 6.4 million pounds of zinc, respectively, in the same prior-year period.
Ying mining district, Henan province, China
In second quarter fiscal 2016, the total ore mined at the Ying mining district was 171,014 tonnes compared with total ore production of 197,135 tonnes in second quarter fiscal 2015. Silver and lead head grades improved by 10 per cent and 15 per cent, respectively, to 246 grams per tonne for silver and 3.8 per cent for lead from 223 g/t for silver and 3.3 per cent for lead, respectively, in second quarter fiscal 2015.
In second quarter fiscal 2016, the Ying mining district sold 1.1 million ounces of silver, 700 ounces of gold, 11.5 million pounds of lead and 1.5 million pounds of zinc, compared with 1.3 million ounces of silver, 788 ounces of gold, 12.7 million pounds of lead and 1.9 million pounds of zinc in second quarter fiscal 2015. The decrease of metal sales is mainly due to the company intentionally increasing its inventory of concentrates in reaction to the low metal prices.
As disclosed in the prior quarter, the mining contractor changeover disruptions have impacted not only the production but also resulted in additional costs at the SGX mine, including approximately $500,000 in the current quarter and $1.5-million in total. In second quarter fiscal 2016, the cash mining costs at the Ying mining district were $10.6-million or $62.15 per tonne, compared with $8.6-million or $43.62 per tonne in second quarter fiscal 2015. The increase in cash mining costs was mainly due to: (i) $500,000 or $2.60 per tonne arising from the mining contractor changeover interruption; (ii) $2.1-million or a $14.50-per-tonne increase in mining preparation costs as approximately 22,846 metres of underground diamond drilling and 6,507 m of preparation tunnelling were conducted in the current quarter, compared with 7,104 m of underground diamond drilling and 4,503 m of preparation tunnelling expensed in second quarter fiscal 2015; (iii) a $100,000 or 80-cent-per-tonne increase in mine administration costs; offset by: (iv) $300,000 or 90-cent-per-tonne decrease in labour costs; and (v) a $200,000 decrease in mining contractor costs, but lower production output resulting in a higher per-tonne costs.
Compared with the cash mining cost of $9.5-million or $56.65 per tonne in first quarter fiscal 2016, the cash mining cost increased by $1.1-million or $5.50 per tonne in second quarter fiscal 2016. Excluding the additional costs arising from the mining contractor interruption, the increase in cash mining costs was mainly due to: (i) a $1.4-million increase in mining preparation costs as 22,846 m of underground diamond drilling and 6,507 m of preparation tunnelling were completed, and (ii) a $200,000 or 60-cent increase in mining contractor costs as more mining methods were employed.
In second quarter fiscal 2016, total ore milled at the Ying mining district was 176,936 tonnes, a decrease of 7 per cent compared with 190,831 tonnes in second quarter fiscal 2015. Cash milling costs were $2.0-million or $11.55 per tonne, a decrease of $400,000 or $1.22 per tonne, compared with $2.4-million or $12.77 per tonne in second quarter fiscal 2015.
All-in sustaining costs and all-in costs, net of byproduct credits, at the Ying mining district in second quarter 2016, were $9.88 and $12.06 per ounce of silver compared with $7.68 and $23.49, respectively, in second quarter fiscal 2015.
For the six months ended Sept. 30, 2015, the total ore mined at the Ying mining district was 338,120 tonnes compared with 370,619 tonnes in the same prior-year period. Correspondingly, total ore milled was 337,213 tonnes compared with 360,311 tonnes. Head grades were 252 grams per tonne for silver and 3.7 per cent for lead compared with 225 g/t for silver and 3.3 per cent for lead, respectively.
During the same time periods, the Ying mining district sold 2.3 million ounces of silver, 1,500 ounces of gold, 23.5 million pounds of lead and 2.8 million pounds of zinc, compared with 2.4 million ounces of silver, 1,610 ounces of gold, 24.2 million pounds of lead and 3.2 million pounds of zinc in the prior year.
For the six months ended Sept. 30, 2015, the cash mining costs at the Ying mining district were $20.1-million or $59.43 per tonne, compared with $16.7-million or $45.18 per tonne in the same prior-year period. The increase in cash mining costs per tonne was mainly due to: (i) a $1.5-million or $4.50-per-tonne increase arising from the mining contractor changeover interruption; (ii) a $2.4-million or $9.60-per-tonne increase in mining preparation costs as approximately 39,212 m of underground diamond drilling and 12,563 m of preparation tunnelling were conducted in the current period, compared with 15,709 m of underground diamond drilling and 9,251 m of preparation tunnelling expensed in the same prior-year period; and (iii) lower production output resulting in a higher per-unit fixed costs allocation.
All-in sustaining costs and all in costs, net of byproduct credits, at the Ying mining district for the six months ended Sept. 30, 2015, was $9.52 and $10.86 per ounce of silver compared with $8.44 and $17.79, respectively, in same prior-year period.
In second quarter fiscal 2016, in addition to approximately 22,846 m of underground diamond drilling and 6,507 m of preparation tunnelling, which were expensed and included in the mining preparation costs, Ying mining district completed and capitalized approximately 17,271 m of horizontal tunnels, raises and declines. Total exploration and development expenditures capitalized for the Ying mining district were $5.7-million compared with $9.0-million in second quarter fiscal 2015.
For the six months ended Sept. 30, 2015, in addition to approximately 39,212 m underground diamond drilling and 12,563 m preparation tunnelling, which were expensed and included in the mining preparation costs, Ying mining district completed and capitalized approximately 35,790 m of horizontal tunnel, raises and declines. Total exploration and development expenditures capitalized for the Ying mining district were $11.8-million in the six months ended Sept. 30, 2015, compared with $17.1-million in the same prior-year period.
The operational results at the Ying mining district for the past five quarters are summarized in the attached Ying mining district operational results table.
OPERATIONAL RESULTS -- YING MINING DISTRICT
Q2 2016 Q1 2016 Q4 2015 Q3 2015 Q2 2015
Sept. 30, June 30, March 31, Dec. 31, Sept. 30,
2015 2015 2015 2014 2014
Ore mined (tonne) 171,014 167,107 112,327 175,782 197,135
Ore milled (tonne) 176,936 160,277 99,478 187,154 190,831
Head grades
Silver (gram/tonne) 246 250 268 253 223
Lead (%) 3.8 3.6 3.7 3.6 3.3
Zinc (%) 0.7 0.8 0.8 1.0 0.7
Recovery rates
Silver (%) 94.8 94.7 94.8 94.7 94.4
Lead (%) 95.0 94.9 95.3 95.9 95.2
Zinc (%) 55.1 53.5 52.4 66.8 56.7
Metal sales
Silver (in thousands of ounces) 1,132 1,190 822 1,421 1,251
Gold (in thousands of ounces) 0.7 0.9 0.6 0.9 0.8
Lead (in thousands of pounds) 11,529 12,454 8,312 14,168 12,665
Zinc (in thousands of pounds) 1,459 1,529 875 2,531 1,944
Cash mining cost ($ per tonne) $62.15 $56.65 $53.25 $57.79 $43.62
Total mining cost ($ per tonne) 86.29 75.00 74.84 73.28 55.41
Cash milling cost ($ per tonne) 11.55 12.98 16.20 13.63 12.77
Total milling cost ($ per tonne) 13.70 15.40 20.09 15.77 14.85
GC mine, Guangdong province, China
Commercial production at the GC mine commenced on July 1, 2014, and the trial mining operation results in first quarter fiscal 2015 have been excluded from the consolidated operation results discussed above, and revenue realized from metal sales during the trial period was offset against costs capitalized.
The operational results at the GC mine for the past five quarters are summarized in the attached GC mine production results table.
PRODUCTION RESULTS -- GC MINE
Q2 2016 Q1 2016 Q4 2015 Q3 2015 Q2 2015
Sept. 30, June 30, March 31, Dec. 31, Sept. 30,
2015 2015 2015 2014 2014
Ore mined (tonne) 69,546 66,727 46,111 87,916 70,898
Ore milled (tonne) 68,465 66,679 46,100 90,287 69,144
Head grades
Silver (gram/tonne) 107 93 107 104 107
Lead (%) 1.4 1.7 1.2 1.3 1.4
Zinc (%) 2.8 2.5 2.6 2.6 2.8
Recovery rates
Silver (%) 77.0 79.3 76.1 75.9 79.4
Lead (%) 89.5 89.7 84.9 85.9 88.1
Zinc (%) 82.7 85.1 80.0 80.6 81.0
Metal sales
Silver (in thousands of ounces) 128 181 99 251 97
Lead (in thousands of pounds) 1,632 2,420 867 2,500 1,428
Zinc (in thousands of pounds) 3,172 3,029 1,668 4,452 3,259
Cash mining cost ($ per tonne) $36.49 $48.74 $86.35 $33.11 $29.25
Total mining cost ($ per tonne) 44.68 56.83 132.41 55.20 51.69
Cash milling cost ($ per tonne) 15.81 15.52 42.70 15.82 17.59
Total milling cost ($ per tonne) 18.05 17.83 58.58 19.88 22.81
Total ore mined at the GC mine in second quarter fiscal 2016 was 69,546 tonnes at a total mining cost and cash mining cost of $44.68 and $36.49, compared with 70,898 tonnes mined in second quarter fiscal 2015 at a total mining cost and cash mining cost of $51.69 and $29.25. The increase in cash mining cost was mainly due to a $600,000 or $8.50-per-tonne increase in mining preparation cost offset by $100,000 or $1.70 per tonne in mining contractor cost.
Total ore milled at the GC mine in second quarter fiscal 2016 was 68,465 at a total milling cost and cash milling cost of $18.05 and $15.81, compared with 69,144 tonnes milled in second quarter fiscal 2015 at a total milling cost and cash milling cost of $22.81 and $17.59.
The head grades at the GC mine were 107 g/t for silver, 1.4 per cent for lead and 2.8 per cent for zinc in second quarter fiscal 2016, which are comparable with the head grades in second quarter fiscal 2015.
Recovery rates at the GC mine were 77 per cent for silver, 89.5 per cent for lead and 82.7 per cent for zinc in second quarter fiscal 2016 compared with 79.4 per cent for silver, 88.1 per cent for lead and 81.0 per cent for zinc, respectively, in second quarter fiscal 2015.
In second quarter fiscal 2016, in addition to approximately 6,882 m of underground diamond drilling and 677 m of preparation tunnelling, which were expensed and included in the mining preparation costs, the GC mine completed and capitalized approximately 3,090 m of horizontal tunnels, raises and declines. Total exploration and development expenditures capitalized at the GC mine were $300,000 compared with $1.9-million in second quarter fiscal 2015.
For the six months ended Sept. 30, 2015, in addition to approximately 14,298 m of underground diamond drilling and 1,962 m of preparation tunnelling, which were expensed and included in the mining preparation costs, the GC mine completed and capitalized approximately 6,459 m of horizontal tunnel, raises and declines. Total exploration and development expenditures capitalized at the GC mine were $500,000 in the six months ended Sept. 30, 2015, compared with $2.3-million in the same prior-year period.
Alex Zhang, PGeo, vice-president, exploration, is the qualified person for Silvercorp under NI 43-101 and has reviewed and given consent to the technical information contained in this news release.
This earnings release should be read in conjunction with the company's management's discussion and analysis, financial statements, and notes to financial statements for the corresponding period, which have been posted on SEDAR and are also available on the company's website. All figures are in U.S. dollars unless otherwise stated.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF INCOME
(expressed in thousands of U.S. dollars, except for per-share figures)
Three months ended Six months ended
Sept. 30, Sept. 30,
2015 2014 2015 2014
Sales $ 27,213 $ 37,333 $ 59,433 $ 67,949
Cost of sales 18,385 18,894 39,149 33,857
Gross profit 8,828 18,439 20,284 34,092
General and administrative 4,907 6,099 10,251 10,867
Government fees and other taxes 1,847 1,396 3,196 2,977
Foreign exchange gain (1,984) (1,594) (1,397) (469)
(Gain) loss on disposal of plant and equipment (22) 14 (15) 14
Share of (gain) loss in associate (179) (90) (101) 42
Loss on investments -- -- -- 15
Other income (124) (891) (114) (1,047)
Income from operations 4,383 13,505 8,464 21,693
Finance income 264 268 541 432
Finance costs (139) (39) (471) (71)
Income before income taxes 4,508 13,734 8,534 22,054
Income tax expense 1,529 4,120 1,784 7,805
Net income $ 2,979 $ 9,614 $ 6,750 $ 14,249
Attributable to
Equityholders of the company $ 2,234 $ 7,228 $ 4,530 $ 9,972
Non-controlling interests 745 2,386 2,220 4,277
Total $ 2,979 $ 9,614 $ 6,750 $ 14,249
Earnings per share attributable to the equityholders
of the company
Basic and diluted earnings per share $ 0.01 $ 0.04 $ 0.03 $ 0.06
We seek Safe Harbor.
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