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Silvercorp Metals Inc
Symbol SVM
Shares Issued 174,870,964
Close 2020-11-05 C$ 10.36
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Silvercorp Metals earns $19.55-million (U.S.) in Q2

2020-11-05 17:57 ET - News Release

Mr. Lon Shaver reports

SILVERCORP REPORTS NET INCOME OF $15.5 MILLION, $0.09 PER SHARE, AND CASH FLOW FROM OPERATIONS OF $29.6 MILLION FOR Q2 FISCAL 2021

Silvercorp Metals Inc. has released its financial and operating results for the second quarter ended Sept. 30, 2020 (Q2 fiscal 2021). All amounts are expressed in U.S. dollars.

Q2 fiscal year 2021 highlights:

  • Mined 267,853 tonnes of ore, up 3 per cent compared with the prior-year quarter;
  • Sold approximately 1.7 million ounces of silver, 2,200 ounces of gold, 18.6 million pounds of lead and 7.4 million pounds of zinc, representing an increase of 100 per cent and 11 per cent in gold and zinc sold, and a decrease of 8 per cent and 3 per cent in silver and lead sold, compared with the prior-year quarter;
  • Revenue of $56.4-million, up 13 per cent or $6.5-million compared with $49.9-million in the prior-year quarter;
  • Net income attributable to equity shareholders of the company of $15.5-million or nine cents per share, up 27 per cent compared with $12.2-million or seven cents per share in the prior-year quarter;
  • Cash cost per ounce of silver, net of byproduct credits, of negative $2.09, compared with negative $2.72 in the prior-year quarter;
  • All-in sustaining cost (AISC) per ounce of silver, net of byproduct credits, of $6.99, compared with $4.15 in the prior-year quarter;
  • Cash flow from operations of $29.6-million, up 13 per cent compared with $26.2-million in the prior-year quarter;
  • Gain of $2.8-million on equity investments;
  • Invested $5.6-million in two Canadian junior exploration companies;
  • Investment in New Pacific Metals Corp. with market value of $212.0-million and other investments of $16.4-million;
  • Strong balance sheet with $200.1-million in cash and cash equivalents and short-term investments, an increase of $21.7-million or 12 per cent compared with $178.4-million as at June 30, 2020.

Financials

Net income attributable to equity shareholders of the company in Q2 fiscal 2021 was $15.5-million or nine cents per share, compared with $12.2-million or seven cents per share in the three months ended Sept. 30, 2019 (Q2 fiscal 2020).

Compared with Q2 fiscal 2020, the company's financial results in Q2 fiscal 2021 were mainly impacted by the following: (i) an increase of 31 per cent, 15 per cent and 16 per cent in the net realized selling prices for silver, gold and zinc, offset by a decrease of 8 per cent in the net realized selling price for lead; (ii) an increase of 100 per cent and 11 per cent in the amount of gold and zinc sold, offset by a decrease of 8 per cent and 3 per cent in the amount of silver and lead sold; (iii) a gain of $2.8-million on equity investments reported in profit; and offset by (iv) $1.3-million in foreign exchange loss.

Revenue in Q2 fiscal 2021 was $56.4-million, up 13 per cent or $6.5-million compared with $49.9-million in Q2 fiscal 2020. The increase was mainly due to: (i) an increase of $9.4-million in revenue arising from the increase in the net realized selling prices for silver, gold and lead; and (ii) an increase of $2.0-million in revenue arising from the increase in the amount of gold and zinc sold; offset by (iii) a decrease of $1.4-million arising from the decrease in the net realized selling price for lead; (iv) a decrease of $3.3-million arising from the decrease in the amount of silver and lead sold; and (v) a decrease of $200,000 in revenue from other metals. Silver, gold and base metal sales represented $33.0-million, $3.0-million and $20.3-million, respectively, compared with silver, gold and base metals sales of $27.4-million, $1.3-million and $21.1-million, respectively, in Q2 fiscal 2020. Revenue from the Ying mining district in Q2 fiscal 2021 was $45.7-million, up 8 per cent compared with $42.3-million in Q2 fiscal 2020. Revenue from the GC mine in Q2 fiscal 2021 was $9.2-million, up 21 per cent compared with $7.6-million in Q2 fiscal 2020. Revenue from the BYP mine was $1.5-million, compared with nil in Q2 fiscal 2020, as the company sold all remaining gold concentrate inventories produced by the mine before it was placed on care and maintenance in 2014.

Production costs expensed in Q2 fiscal 2021 were $19.7-million, an increase of $2.4-million compared with $17.3-million in Q2 fiscal 2020. The production costs expensed represent approximately 281,980 tonnes of ore processed and expensed at a cost of $69.82 per tonne, compared with approximately 263,050 tonnes at $65.73 per tonne in Q2 fiscal 2020.

Income from mine operations in Q2 fiscal 2021 was $26.7-million or 47 per cent of revenue, compared with $22.7-million or 45 per cent of revenue in Q2 fiscal 2020. Income from mine operations at the Ying mining district was $23.1-million or 51 per cent of revenue, compared with $20.5-million or 49 per cent of revenue in Q2 fiscal 2020. Income from mine operations at the GC mine was $2.9-million or 32 per cent of revenue, compared with $2.2-million or 29 per cent of revenue in Q2 fiscal 2020.

General and administrative expenses in Q2 fiscal 2021 were $5.1-million, an increase of $300,000 compared with $4.8-million in Q2 fiscal 2020. The increase was mainly due to an increase of $300,000 in share-based compensation. General and administrative expenses included corporate administrative expenses of $2.8-million (Q2 fiscal 2020 -- $2.6-million) and mine administrative expenses of $2.3-million (Q2 fiscal 2020 -- $2.2-million).

Foreign exchange loss in Q2 fiscal 2021 was $1.3-million, compared with a gain of $800,000 in Q2 fiscal 2020. The foreign exchange loss is mainly driven by the appreciation of the Canadian dollar against the U.S. dollar.

Share of loss in an associate in Q2 fiscal 2021 was $300,000 (Q2 fiscal 2020 -- $200,000), representing the company's equity share of the loss in New Pacific Metals.

Gain on equity investments recorded in profit in Q2 fiscal 2021 was $2.8-million, compared with nil in Q2 fiscal 2020. A total gain of $4.8-million on equity investments was reported in Q2 fiscal 2021, of which $2.0-million was recorded in other comprehensive income as the company made elections to account for equity investments on an instrument-by-instrument basis.

Income tax expenses in Q2 fiscal 2021 were $5.9-million, compared with $5.1-million in Q2 fiscal 2020. The income tax expenses comprised current income tax expenses of $5.2-million (Q2 fiscal 2020 -- $1.0-million) and deferred income tax expenses of $700,000 (Q2 fiscal 2020 -- $4.2-million).

Cash flow provided by operating activities in Q2 fiscal 2021 was $29.6-million, an increase of $3.4-million compared with $26.2-million in Q2 fiscal 2020.

For the six months ended Sept. 30, 2020, net income attributable to equity shareholders of the company was $31.0-million or 18 cents per share, an increase of $6.2-million compared with $24.8-million or 14 cents per share in the same prior-year period; revenue was $103.1-million, up 8 per cent or $7.6-million compared with $95.5-million in the same prior-year period; income from mine operations was $46.0-million or 45 per cent of revenue, compared with $40.4-million or 42 per cent of revenue in the same prior-year period; gain on equity recorded in profit was $8.2-million, compared with nil in the same prior-year period; foreign exchange loss was $4.0-million, compared with $100,000 in the same prior-year period; and cash flow from operating activities was $59.7-million, up 30 per cent from $46.1-million in the same prior-year period.

The company ended the period with $200.1-million in cash and short-term investments, an increase of $21.7-million or 12 per cent compared with $178.4-million as at June 30, 2020, and an increase of $57.6-million or 40 per cent compared with $142.5-million as at March 31, 2020. Working capital as at Sept. 30, 2020, was $169.3-million, an increase of $15.6-million or 10 per cent compared with $153.7-million as at June 30, 2020, and an increase of $39.0-million or 30 per cent compared with $130.4-million as at March 31, 2020.

Operations and development

Q2 fiscal 2021 versus Q2 fiscal 2020

In Q2 fiscal 2021, on a consolidated basis, the company mined 267,853 tonnes of ore, up 3 per cent or 8,596 tonnes compared with 259,257 tonnes in Q2 fiscal 2020. Ore milled was 263,933 tonnes, a slight decrease of 1 per cent or 1,348 tonnes compared with 265,281 tonnes in Q2 fiscal 2020.

In Q2 fiscal 2021, the company sold approximately 1.7 million ounces of silver, 2,200 ounces of gold, 18.6 million pounds of lead and 7.4 million pounds of zinc, an increase of 100 per cent and 11 per cent in gold and zinc sold, and a decrease of 8 per cent and 3 per cent in silver and lead sold, compared with 1.9 million ounces of silver, 1,100 ounces of gold, 19.1 million pounds of lead and 6.7 million pounds of zinc in Q2 fiscal 2020.

In Q2 fiscal 2021, the consolidated total mining and cash mining costs were $76.95 and $57.61 per tonne, up 6 per cent and 10 per cent compared with $72.85 and $52.37 per tonne, respectively, in Q2 fiscal 2020. The increase in per-tonne cash mining costs was mainly due to an increase of $1.4-million in drilling and related expenses arising from an increase of 38,326 metres of diamond drilling.

The consolidated total milling and cash milling costs were $11.11 and $9.64 per tonne, down 11 per cent and 10 per cent compared with $12.46 and $10.76 per tonne, respectively, in Q2 fiscal 2020. The decrease in per-tonne cash milling costs was mainly due to a decrease of $200,000 in raw material costs.

Correspondingly, the consolidated cash production cost per tonne of ore processed in Q2 fiscal 2021 was $69.82, up 6 per cent compared with $65.73 in Q2 fiscal 2020. The consolidated all-in sustaining production cost per tonne of ore processed was $124.24, up 13 per cent compared with $109.51 in Q2 fiscal 2020 but within the company's annual cost guidance. The increase was mainly due to the increase in cash mining costs and a $2.3-million increase in sustaining capital expenditures.

In Q2 fiscal 2021, the consolidated cash cost per ounce of silver, net of byproduct credits, was negative $2.09, compared with negative $2.72 in Q2 fiscal 2020. The consolidated all-in sustaining cost per ounce of silver, net of byproduct credits, was $6.99, compared with $4.15 in Q2 fiscal 2020. The increase was mainly due to: (i) an increase of 6 per cent in per tonne production costs; (ii) a decrease of $900,000 in byproduct sales; (iii) a decrease of 8 per cent in silver sold; and (iv) an increase of $2.3-million in sustaining capital expenditures.

In Q2 fiscal 2021, on a consolidated basis, approximately 71,274 metres or $2.5-million worth of diamond drilling (Q2 fiscal 2020 -- 32,948 metres or $1.1-million) and 7,693 metres or $1.9-million worth of preparation tunnelling (Q2 fiscal 2020 -- 11,656 metres or $3.1-million) were completed and expensed as mining preparation costs. In addition, approximately 25,678 metres or $8.5-million worth of horizontal tunnels, raises, ramps and declines (Q2 fiscal 2020 -- 20,107 metres or $7.1-million) were completed and capitalized.

Six months ended Sept. 30, 2020, versus six months ended Sept. 30, 2019

For the six months ended Sept. 30, 2020, on a consolidated basis, the company mined 522,408 tonnes of ore, up 1 per cent or 5,759 tonnes compared with 516,649 tonnes mined in the same prior-year period. Ore milled was 526,259 tonnes, a slight increase of 1,435 tonnes compared with 524,824 tonnes in the same prior-year period.

The company sold approximately 3.6 million ounces of silver, 3,300 ounces of gold, 39.4 million pounds of lead and 14.4 million pounds of zinc, an increase of 57 per cent, 7 per cent and 3 per cent in gold, lead, and zinc sold, and a decrease of 4 per cent in silver sold, compared with 3.7 million ounces of silver, 2,100 ounces of gold, 36.9 million pounds of lead and 14.0 million pounds of zinc sold in the same prior-year period.

For the six months ended Sept. 30, 2020, the consolidated total mining cost and cash mining cost were $75.46 and $56.32 per tonne, respectively, compared with $75.12 and $53.91 per tonne in the same prior-year period. The increase in per-tonne cash mining cost was mainly due to an increase of $2.5-million in drilling and related expenses arising from an increase of 43,405 metres of diamond drilling.

The consolidated total milling cost and cash milling cost were $11.08 and $9.61, respectively, compared with $12.47 and $10.69 per tonne in the same prior-year period.

Correspondingly, the consolidated cash production cost per tonne of ore processed was $68.47, up 2 per cent compared with $67.29 in the same prior-year period. The all-in sustaining production cost per tonne of ore processed was $118.46, up 3 per cent compared with $114.80 in the same prior-year period. The increase was mainly due to the increase in per-tonne cash mining costs and an increase of $700,000 in sustaining capital expenditures.

For the six months ended Sept. 30, 2020, the consolidated cash cost per ounce of silver, net of byproduct credits, was negative $1.77, compared with negative $2.45 in the same prior-year period. The consolidated all-in sustaining cost per ounce of silver, net of byproduct credits, was $6.28, compared with $4.91 in the same prior-year period. The increase was mainly due to: (i) an increase of 2 per cent in per-tonne production costs; (ii) a decrease of $600,000 in byproduct sales; (iii) an increase of $700,000 in sustaining capital expenditures; and (iv) a decrease of 4 per cent in silver sold.

For the six months ended Sept. 30, 2020, on a consolidated basis, approximately 107,971 metres or $4.5-million worth of diamond drilling (same prior-year period -- 64,566 metres or $2.0-million) and 17,358 metres or $3.6-million worth of preparation tunnelling (same prior-year period -- 24,312 metres or $6.2-million) were completed and expensed as mining preparation costs. In addition, approximately 52,053 metres or $17.5-million worth of horizontal tunnels, raises, ramps and declines (same prior-year period -- 41,499 metres or $14.5-million) were completed and capitalized.

Outlook

Based on the year-to-date production levels, production costs, capital expenditures, and the expected production and costs for the remainder of the year, the company is on track to meet its annual production and cost guidance.

Based on the year-to-date drilling completed, the company expects its fiscal 2021 drilling program to exceed its annual guidance. The company is currently undertaking extensive drill programs at the Ying mining district and GC mine with two main objectives: (i) areas with existing development and access are being re-examined to potentially define additional resources and reserves, which may lead to a substantial reduction in mining and sustaining capital costs associated with the tonnes identified; and (ii) areas that may have been overlooked for potential gold mineralization are being tested for different alteration styles from the typical silver-lead zones.

Scientific and technical information contained in this news release has been reviewed and approved by Guoliang Ma, PGeo, manager of exploration and resources of the company and a qualified person as such the term is defined in National Instrument 43-101, Standards of Disclosure of Mineral Projects.

This earnings release should be read in conjunction with the company's management's discussion and analysis (MD&A), financial statements and notes to financial statements for the corresponding period, which have been posted on SEDAR under the company's profile and are also available on the company's website.

About Silvercorp Metals Inc.

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' well-being, and sustainable development.

                                  CONSOLIDATED STATEMENT OF INCOME
                     (in thousands of U.S. dollars, except for per-share figures)

                                            Three months ended Sept. 30,      Six months ended Sept. 30, 
                                                   2020            2019            2020            2019 

Revenue                                      $   56,372      $   49,886      $  103,077      $   95,462 
Cost of mine operations                       
Production costs                                 19,688          17,290          37,435          35,290 
Depreciation and amortization                     5,592           5,814          11,332          11,683 
Mineral resource taxes                            1,433           1,408           2,769           2,659 
Government fees and other taxes                     648             496           1,188           1,090 
General and administrative                        2,339           2,211           4,396           4,340 
                                                 29,700          27,219          57,120          55,062 
Income from mine operations                      26,672          22,667          45,957          40,400 
Corporate general and administrative              2,784           2,583           5,471           4,936 
Property evaluation and business development        126             107          (3,659)            173 
Foreign exchange loss (gain)                      1,349            (797)          4,019              57 
Loss on disposal of plant and equipment              19             121             211             263 
(Gain) on disposal of mineral 
rights and properties                                 -               -               -          (1,477)
Share of loss in associate                          319             244             480             525 
Dilution gain on investment in associate              -               -               -            (723)
Reclassification of other 
comprehensive income upon ownership
dilution of investment in associate                   -               -               -             (21)
Gain on equity investments 
designated as FVTPL (fair value through
profit or loss)                                  (2,771)              -          (8,237)              - 
Other expense (income)                               69             291            (179)            490 
Income from operations                           24,777          20,118          47,851          36,177 
Finance income                                      741             818           1,688           1,747 
Finance costs                                       (84)           (136)           (231)           (311)
Income before income taxes                       25,434          20,800          49,308          37,613 
Income tax expense                                5,877           5,139          11,259           4,651 
Net income                                       19,557          15,661          38,049          32,962 
Attributable to                                 
Equityholders of the company                     15,472          12,221          30,963          24,828 
Non-controlling interests                         4,085           3,440           7,086           8,134 
                                                 19,557          15,661          38,049          32,962 
Earnings per share attributable to 
the equityholders of the company         
Basic earnings per share                     $     0.09      $     0.07      $     0.18      $     0.15 
Diluted earnings per share                   $     0.09      $     0.07      $     0.18      $     0.14 

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