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Silvercorp Metals Inc
Symbol SVM
Shares Issued 169,991,268
Close 2019-08-08 C$ 4.69
Recent Sedar Documents

Silvercorp Metals earns $17.3-million (U.S.) in Q1 2020

2019-08-08 16:53 ET - News Release

Mr. Lon Shaver reports

SILVERCORP REPORTS NET INCOME OF $12.6 MILLION, $0.07 PER SHARE, AND $19.9 MILLION CASH FLOW FROM OPERATIONS FOR Q1 FISCAL 2020

Silvercorp Metals Inc. has released its financial and operating results for the first quarter ended June 30, 2019. All amounts are expressed in U.S. dollars.

Q1 FISCAL YEAR 2020 HIGHLIGHTS:

  • Ore production up 9 per cent compared to the prior year quarter;
  • Silver produced and sold up 27 per cent to approximately 1.9 million ounces, gold produced and sold up 43 per cent to 1,000 ounces, lead produced and sold up 20 per cent to 17.8 million pounds, and zinc produced and sold up 15 per cent to 7.3 million pounds, compared to the prior year quarter;
  • Revenue up 1 per cent to $45.6 million compared to $45.1 million in the prior year quarter, primarily due to the increase in metals sold and offset by 6 per cent decrease in silver, 25 per cent decrease in lead, and 40 per cent decrease in zinc realized selling prices;
  • Net income attributable to equity shareholders of $12.6 million, or $0.07 per share, compared to $10.9 million or $0.06 per share in the prior year quarter;
  • Cash production cost per tonne of ore processed1 of $68.85, compared to $69.05 in the prior year quarter;
  • Cash cost per ounce of silver1, net of by-product credits, of negative $2.17, compared to negative $7.54 in the prior year quarter;
  • All-in sustaining cost per ounce of silver1, net of by-product credits, of $5.69, compared to $0.41 in the prior year quarter;
  • Cash flow from operations of $19.9 million, compared to $21.1 million in the prior year quarter;
  • Paid dividend of $2.1 million, or $0.0125 per share, to equity shareholders; and,
  • Strong balance sheet with $121.0 million in cash and cash equivalents and short-term investments, an increase of $5.7 million or 5 per cent compared to March 31, 2019.

FINANCIALS

Net income attributable to equity shareholders of the company in Q1 fiscal 2020 was $12.6 million, or $0.07 per share, compared to $10.9 million, or $0.06 per share in the three months ended June 30, 2018.

In Q1 fiscal 2020, the company's financial results were mainly impacted by the following: i) an increase of 27 per cent, 20 per cent, and 15 per cent in amount of silver, lead, and zinc metals sold, respectively; offset by ii) a decrease of 6 per cent, 25 per cent and 40 per cent in the net realized selling price for silver, lead and zinc.

Sales in Q1 fiscal 2020 were $45.6 million, up 1 per cent compared to $45.1 million in the prior year quarter. Silver, gold and base metal sales represented $23.6 million, $1.1 million, and $20.9 million, respectively, compared to silver, gold and base metals sales of $19.8 million, $0.7 million, and $24.6 million, respectively, in the prior year quarter. The increase of volume of metals sold resulted in an increase of approximately $8.9 million in revenue, while the decrease of net realized selling prices resulted in a decrease of approximately $8.4 million in revenue in the current quarter.

Cost of sales in Q1 fiscal 2020 was $25.1 million compared to $20.3 million in Q1 fiscal 2019. The cost of sales included $18.0 million cash production costs (Q1 fiscal 2019 - $14.3 million), $1.3 million mineral resources tax (Q1 fiscal 2019 - $1.2 million), and $5.9 million depreciation and amortization charges (Q1 fiscal 2019 - $4.7 million). The increases in cash production costs and depreciation and amortization expensed were mainly due to more metals sold. The increase in mineral resources tax was associated with the increase in revenue.

Gross profit margin in Q1 fiscal 2020 of 45 per cent, compared to 55 per cent in Q1 fiscal 2019. Ying Mining District's gross profit margin was 48 per cent compared to 59 per cent in the prior year quarter, while GC Mine's gross profit margin was 31 per cent compared to 39 per cent in the prior year quarter. The decrease of gross margin was mainly due to the decrease in metal prices.

General and administrative expenses in Q1 fiscal 2020 were $4.5 million, compared to $4.5 million in Q1 fiscal 2019.

Income tax recovery in Q1 fiscal 2020 was $0.5 million compared to an income tax expense of $6.5 million in Q1 fiscal 2019. In Q1 fiscal 2020, the company recorded current income tax expenses of $1.8 million (Q1 fiscal 2019 -- $5.9 million), and a deferred income tax recovery of $2.2 million (Q1 fiscal 2019 -- expense of $0.5 million). The deferred income tax recovery was mainly related to the tax benefit recognized arising from the disposal of the XHP Project.

Cash flows provided by operating activities in Q1 fiscal 2020 were $19.9 million, slightly lower than the $21.1 million in Q1 fiscal 2019.

The company ended the quarter with $121.0 million in cash and cash equivalents and short-term investments, an increase of $5.7 million or 5 per cent compared to $115.3 million as at March 31, 2019.

Working capital as at June 30, 2019 was $110.8 million, an increase of $13.8 million or 14 per cent, compared to $96.9 million working capital as at March 31, 2019.

OPERATIONS AND DEVELOPMENT

In Q1 fiscal 2020, on a consolidated basis, the company mined 257,392 tonnes of ore, an increase of 9 per cent compared to 236,697 tonnes in Q1 fiscal 2019. The increase in ore mined was mainly due to an increase of 13 per cent or 19,854 tonnes of ore mined at the Ying Mining District. Correspondingly, ore milled also increased by 9 per cent to 259,542 tonnes, compared to 237,740 tonnes in Q1 fiscal 2019.

In Q1 fiscal 2020, the company sold 1.9 million ounces of silver, 1,000 ounces of gold, 17.8 million pounds of lead, and 7.3 million pounds of zinc, up 27 per cent, 43 per cent, 20 per cent, and 15 per cent, respectively, compared to 1.5 million ounces of silver, 700 ounces of gold, 14.9 million pounds of lead, and 6.3 million pounds of zinc in Q1 fiscal 2019. As at June 30, 2019, the company had inventories of 4,247 tonnes of silver-lead concentrate and 285 tonnes of zinc concentrate, compared to 3,248 tonnes of silver-lead concentrate and 368 tonnes of zinc concentrate as at March 31, 2019.

In Q1 fiscal 2020, the consolidated total mining and cash mining costs were $77.40 and $55.45 per tonne, up 4 per cent and 2 per cent compared to $74.39 and $54.47 per tonne, respectively in Q1 fiscal 2019. The increase in cash mining costs was mainly due to i) an overall 3 per cent increase in the mining contractors' rate when two-year term mining contracts renewed at the Ying Mining District in the current quarter, and ii) more ore mined using resuing mining method at the GC Mine. The consolidated total milling and cash milling costs in Q1 fiscal 2020 were $12.49 and $10.63 per tonne, down by 12 per cent and 9 per cent compared to $14.16 and $11.73 per tonne, respectively, in Q1 fiscal 2019.

Correspondingly, the consolidated cash production cost per tonne of ore processed in Q1 fiscal 2020 was $68.85, a slight decrease compared to $69.05 in the prior year quarter, and below the company's fiscal 2020 annual guidance of $$71.80.

In Q1 fiscal 2020, the consolidated cash cost per ounce of silver, net of by-product credits, was negative $2.17, compared to negative $7.54, in the prior year quarter. The increase in cash cost per ounce of silver, net of by-product credits, was mainly due to a decrease of $5.42 per ounce of silver in by-product credits resulting from lower by-product metal prices and more volume of silver sold. The consolidated all-in sustaining cost per ounce of silver, net of by-product credits, was $5.69 compared to $0.41 in Q1 fiscal 2019. The increase was mainly due to i) the increase of cash cost per ounce of silver, net of by-product credits as discussed above, and ii) a $3.0 million increase in sustaining capital expenditures.

In Q1 fiscal 2020, on a consolidated basis, approximately 31,618 metres or $0.9 million worth of diamond drilling (Q1 fiscal 2019 -- 34,848 metres or $1.0 million) and 12,656 metres or $3.1 million worth of preparation tunnelling (Q1 fiscal 2019 -- 10,782 metres or $3.2 million) were completed and expensed as mining preparation costs. In addition, approximately 21,392 metres or $7.4 million worth of horizontal tunnels, raises, ramps and declines (Q1 fiscal 2019 -- 17,466 metres or $6.5 million) were completed and capitalized.

In Q1 fiscal 2020, the total ore mined at the Ying Mining District was 176,584 tonnes, up 13 per cent compared to 156,730 tonnes mined in the prior year quarter. Ore milled was 177,681 tonnes, up 14 per cent compared to 155,929 tonnes in Q1 fiscal 2019.

Head grades were 330 grams per ton ("g/t") for silver, 4.6 per cent for lead, and 0.9 per cent for zinc, compared to 323 g/t for silver, 4.5 per cent for lead, and 1.1 per cent for zinc in the prior year quarter. The company continues to achieve improvements in dilution control using its "Enterprise Blog" to assist and manage daily operations.

In Q1 fiscal 2020, the Ying Mining District sold approximately 1.7 million ounces of silver, 14.8 million pounds of lead, and 2.1 million pounds of zinc, compared to 1.3 million ounces of silver, 13.3 million pounds of lead, and 2.1 million pounds of zinc in the prior year quarter. As at June 30, 2019, Ying Mining District had inventories of 4,208 tonnes of silver-lead concentrate and 200 tonnes of zinc concentrate, compared to 3,150 tonnes of silver-lead concentrate and 250 tonnes of zinc concentrate as at March 31, 2019.

Total and cash mining costs per tonne at the Ying Mining District in Q1 fiscal 2020 were $91.47 and $63.05 per tonne, respectively, compared to $89.57 and $63.49 per tonne in the prior year quarter. The decrease in the per tonne cash mining cost was mainly due to i) lower per tonne fixed costs allocation resulting from the increase in ore mined, offset by ii) an overall 3 per cent increase in mining contractors' rate when the two-year term mining contracts were renewed in the current quarter.

Total and cash milling costs per tonne at the Ying Mining District in Q1 fiscal 2020 were $10.93 and $9.15, compared to $12.60 and $10.30 in Q1 fiscal 2019. The decrease of per tonne milling costs was mainly due to lower per tonne fixed costs allocation resulting from the increase in ore milled.

Correspondingly, the cash production cost per tonne of ore processed in Q1 fiscal 2020 at the Ying Mining District was $76.24, compared to $78.10 in the prior year quarter.

Cash cost per ounce of silver, net of by-product credits, in Q1 fiscal 2020 at the Ying Mining District, was negative $1.44 compared to negative $6.25 in the prior year quarter. The increase was mainly due to a decrease of $4.53 per ounce of silver in by-product credits resulting from the decrease in metal prices and more silver sold. All-in sustaining cost per ounce of silver, net of by-product credits, in Q1 fiscal 2020 at the Ying Mining District was $4.82 compared to negative $0.28 in the prior year quarter. The increase was mainly due to higher cash cost per ounce of silver, net of by-product credits and an increase of $2.5 million in sustaining capital expenditures.

In Q1 fiscal 2020, approximately 23,648 metres or $0.6 million worth of diamond drilling (Q1 fiscal 2019 -- 26,849 metres or $0.6 million) and 6,395 metres or $1.7 million worth of preparation tunnelling (Q1 fiscal 2019 -- 5,541 metres or $1.6 million) were completed and expensed as mining preparation costs at the Ying Mining District. In addition, approximately 20,895 metres or $7.1 million worth of horizontal tunnels, raises, ramps and declines (Q1 fiscal 2019 -- 16,928 metres or $6.0 million) were completed and capitalized.

In Q1 fiscal 2020, the total ore mined at the GC Mine was 80,808 tonnes compared to 79,967 tonnes in the prior year quarter. Ore milled was 81,861 tonnes compared to 81,811 tonnes in the prior year quarter.

Average head grades of ore processed at the GC Mine were 95 g/t for silver, 1.9 per cent for lead, and 3.4 per cent for zinc, compared to 87 g/t for silver, 1.3 per cent for lead, and 2.9 per cent for zinc in the prior year quarter. Recovery rates of ore processed were 76.8 per cent for silver, 88.7 per cent for lead, and 85.7 per cent for zinc, compared to 75.3 per cent for silver, 87.1 per cent for lead, and 84.8 per cent for zinc in Q1 fiscal 2019.

In Q1 fiscal 2020, GC Mine sold approximately 193,000 ounces of silver, 3.0 million pounds of lead, and 5.2 million pounds of zinc, compared to 150,000 thousand ounces of silver, 1.6 million pounds of lead, and 4.2 million pounds of zinc in the prior year quarter.

Total and cash mining costs per tonne at the GC Mine in Q1 fiscal 2020 were $46.64 and $38.83 per tonne, an increase of 5 per cent and 6 per cent respectively, compared to $44.62 and $36.78 per tonne, respectively, in Q1 fiscal 2019. The increase in the cash mining cost was mainly due to an increase of $2.63 per tonne in mining contractors' cost resulting from more ore mined using re-suing mining method. Total and cash milling cost per tonne at the GC Mine in Q1 fiscal 2020 were $15.88 and $13.85, a decrease of 7 per cent and 4 per cent, respectively, compared to $17.14 and $14.46, respectively, in Q1 fiscal 2019.

Correspondingly, the cash production cost per tonne of ore processed in Q1 fiscal 2020 at the GC Mine was $52.68, an increase of 3 per cent compared to $51.24 in the prior year quarter.

Cash cost per ounce of silver, net of by-product credits, at the GC Mine, was negative $8.38 compared to negative $18.81 in the prior year quarter. The increase was mainly due to a decrease of $13.61 per ounce of silver in by-product credits resulting from the decrease in metal prices and more silver sold. All-in sustaining cost per ounce of silver, net of by-product credits, in Q1 fiscal 2020 at the GC Mine was negative $0.96 compared to negative $11.36 in the prior year quarter. The increase was mainly due to the increase in the cash cost per ounce of silver, net of by-product credits, as discussed above.

In Q1 fiscal 2020, approximately 7,970 metres or $0.3 million worth of underground diamond drilling (Q1 fiscal 2019 -- 7,999 metres or $0.4 million) and 6,261 metres or $1.4 million worth of tunnelling (Q1 fiscal 2019 -- 5,241 metres or $1.6 million) were completed and expensed as mining preparation costs at the GC Mine. In addition, approximately 497 metres or $0.3 million worth of horizontal tunnels, raises, ramps and declines (Q1 fiscal 2019 -- 538 metres or $0.5 million) were completed and capitalized.

XHP Project, Henan Province, China

In April 2019, Henan Found, the company's 77.5 per cent owned subsidiary, entered into a share transfer agreement (the "Agreement") with an arm's-length private Chinese company to dispose of the XHP Project. Pursuant to the Agreement, Henan Found sold its 100 per cent equity interest in SX Gold, the holding company of the XHP Project, for $7.3 million (RMB yen50 million), and forgave the amount of $1.1 million (RMB yen7.5 million ) SX Gold owes to Henan Found. The transaction was completed and a gain of $1.5 million was recognized in Q1 fiscal 2020.

Mr. Guoliang Ma, P.Geo., Manager of Exploration and Resources of the company, is the Qualified Person as defined by National Instrument 43-101 -- Standards of Disclosure for Mineral Projects ("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 Discussion & Analysis, Financial Statements and Notes to Financial Statements for the corresponding period, which have been posted on SEDAR under the company's profile at www.sedar.com and are also available on the company's website at www.silvercorp.ca.

About Silvercorp

Silvercorp is a profitable Canadian mining company producing silver, lead and zinc metals in concentrates from mines in China. The company's goal is to continuously create healthy returns to shareholders through efficient management, organic growth and the acquisition of profitable projects. Silvercorp balances profitability, social and environmental relationships, employees' wellbeing, and sustainable development.

CONSOLIDATED STATEMENTS OF INCOME                                                   
(in thousands of U.S. dollars, except per-share figures)  
                                                                                    
                                                        Three Months Ended June 30, 
                                                                  2019         2018 
                                                                                    
Sales                                                  $        45,576 $     45,125 
Cost of sales                                                                       
Production costs                                                18,000       14,277 
Mineral resource taxes                                           1,251        1,249 
Depreciation and amortization                                    5,869        4,748 
                                                                25,120       20,274 
Gross profit                                                    20,456       24,851 
                                                                                    
General and administrative                                       4,548        4,472 
Government fees and other taxes                                    594          802 
Foreign exchange loss (gain)                                       854         (788)
Loss on disposal of plant and equipment                            142           10 
Gain on disposal of mineral rights and properties               (1,477)           - 
Share of loss in associate                                         281          279 
Dilution gain on investment in associate                          (723)           - 
Reclassification of other comprehensive loss upon                                   
ownership dilution of investment in associate                      (21)           - 
Other expense (income)                                             199           63 
Income from operations                                          16,059       20,013 
                                                                                    
Finance income                                                     929          796 
Finance costs                                                     (175)        (134)
Income before income taxes                                      16,813       20,675 
                                                                                    
Income tax expense                                                (488)       6,498 
Net income                                             $        17,301 $     14,177 
                                                                                    
Attributable to:                                                                    
Equity holders of the company                          $        12,607 $     10,921 
Non-controlling interests                                        4,694        3,256 
                                                       $        17,301 $     14,177 
                                                                                    
Earnings per share attributable to the equity holders of the company                
Basic earnings per share                               $          0.07 $       0.07 
Diluted earnings per share                             $          0.07 $       0.06 

We seek Safe Harbor.

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