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Silvercorp Metals Inc
Symbol SVM
Shares Issued 175,349,046
Close 2021-02-04 C$ 8.16
Recent Sedar Documents

Silvercorp Metals earns $12.28-million (U.S.) in Q3

2021-02-04 17:26 ET - News Release

Mr. Lon Shaver reports

SILVERCORP REPORTS NET INCOME OF $8.4 MILLION, $0.05 PER SHARE, AND CASH FLOW FROM OPERATIONS OF $23.9 MILLION FOR Q3 FISCAL 2021

Silvercorp Metals Inc. has released its financial and operating results for the third quarter ended Dec. 31, 2020 (Q3 fiscal 2021). All amounts are expressed in U.S. dollars.

Q3 fiscal year 2021 highlights:

  • Mined 279,445 tonnes of ore, up 6 per cent compared with the prior-year quarter, with ore milled of 260,648 tonnes, a decrease of 2 per cent compared with the prior-year quarter;
  • Sold approximately 1.6 million ounces of silver, 800 ounces of gold, 16.8 million pounds of lead and 9.0 million pounds of zinc, representing increases of 14 per cent and 7 per cent in gold and zinc sold, and decreases of 4 per cent and 11 per cent in silver and lead sold compared with the prior-year quarter;
  • Revenue of $53.3-million, up 20 per cent or $8.8-million compared with $44.5-million in the prior-year quarter;
  • Net income attributable to equity shareholders of $8.4-million or five cents per share, up 33 per cent compared with $6.3-million or four cents per share in the prior-year quarter;
  • Cash cost per ounce of silver, net of byproduct credits, of negative $2.76, compared with negative $1.21 in the prior-year quarter;
  • All-in sustaining cost per ounce of silver, net of byproduct credits, of $6.92, compared with $7.21 in the prior-year quarter;
  • Gain on equity investments of $600,000;
  • Cash flow from operations of $23.9-million, compared with $24.9-million in the prior-year quarter;
  • Paid dividends of $2.2-million or 1.25 cents per share to equity shareholders;
  • Acquired a 26.99-per-cent interest in Whitehorse Gold Corp. at total cost of $1.3-million, having a fair market value of $35.5-million as at Dec. 31, 2020, as result of: (a) receiving 5,740,286 Whitehorse Gold common shares under a spinout transaction completed by New Pacific Metals Corp.; and (b) subscribing for 5,774,000 Whitehorse Gold common shares under a private placement;
  • Won an on-line auction to acquire the exploration rights to the Zhonghe silver project from the Henan provincial government of China, with the mineral rights transfer contract pending the clearance of the project area as not being in a military area by the related authorities;
  • Acquired a 45-per-cent interest in the La Yesca silver project in Mexico for approximately $7.6-million as announced on Feb. 2, 2021;
  • Investment in New Pacific Metals with a carrying value of $50.8-million and market value of $277.0-million, and other investments of $18.8-million as at Dec. 31,2020;
  • Strong balance sheet with $204.1-million in cash and cash equivalents and short-term investments, an increase of $4.0-million or 2 per cent compared with $200.1-million as at Sept. 30, 2020. This does not include the investments in associates and equity investments in other companies having a total market value of $331.3-million as at Dec. 31, 2020.

Financials

Net income attributable to equity shareholders of the company in Q3 fiscal 2021 was $8.4-million or five cents per share, up 33 per cent compared with $6.3-million or four cents per share in Q3 fiscal 2020.

Compared with Q3 fiscal 2020, the company's financial results in Q3 fiscal 2021 were mainly impacted by the following: (i) an increase of 33 per cent, 20 per cent, 1 per cent and 47 per cent in the net realized selling prices for silver, gold, lead and zinc; and (ii) an increase of 14 per cent and 7 per cent in the amount of gold and zinc sold, offset by: (i) a decrease of 4 per cent and 11 per cent in the amount of silver and lead sold; (ii) a $3.0-million in foreign exchange loss; and (iii) a $1.4-million finance costs.

Revenue in Q3 fiscal 2021 was $53.3-million, up 20 per cent or $8.8-million compared with $44.5-million in Q3 fiscal 2020. The increase was mainly due to: (i) an increase of $10.5-million arising from the increase in the net realized selling prices for silver, gold, lead and zinc; and (ii) an increase of $700,000 arising from the increase in the amount of gold and zinc sold, offset by a decrease of $2.6-million arising from the decrease in the amount of silver and lead sold. Silver, gold and base metal sales represented $30.7-million, $1.2-million and $21.4-million, respectively, compared with silver, gold and base metals sales of $24.0-million, $900,000 and $19.6-million, respectively, in Q3 fiscal 2020. Revenue from the Ying mining district in Q3 fiscal 2021 was $42.5-million, up 19 per cent compared with $35.7-million in Q3 fiscal 2020. Revenue from the GC mine in Q3 fiscal 2021 was $10.8-million, up 22 per cent compared with $8.8-million in Q3 fiscal 2020.

Production costs expensed in Q3 fiscal 2021 were $18.0-million, a decrease of $400,000 compared with $18.4-million in Q3 fiscal 2020. The production costs expensed represent approximately 247,000 tonnes of ore processed and expensed at a cost of $73.04 per tonne, compared with approximately 255,000 tonnes at $72.16 per tonne in Q3 fiscal 2020.

Income from mine operations in Q3 fiscal 2021 was $24.8-million or 47 per cent of revenue, compared with $15.8-million or 35 per cent of revenue in Q3 fiscal 2020. Income from mine operations at the Ying mining district was $21.7-million or 51 per cent of revenue, compared with $14.5-million or 41 per cent of revenue in Q3 fiscal 2020. Income from mine operations at the GC mine was $3.3-million or 31 per cent of revenue, compared with $1.4-million or 16 per cent of revenue in Q3 fiscal 2020.

General and administrative expenses in Q3 fiscal 2021 were $6.3-million, an increase of $1.4-million compared with $4.9-million in Q3 fiscal 2020. General and administrative expenses included corporate administrative expenses of $3.5-million (Q3 fiscal 2020 -- $2.6-million) and mine administrative expenses of $2.8-million (Q2 fiscal 2020 -- $2.3-million). The increase was mainly due to an increase of $700,000 in salaries and benefits and $300,000 in share-based compensation.

Foreign exchange loss in Q3 fiscal 2021 was $3.0-million, an increase of $1.7-million compared with $1.3-million in Q3 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 associates in Q3 fiscal 2021 was $600,000 (Q3 fiscal 2020 -- $300,000), representing the company's equity share of the loss in New Pacific Metals and Whitehorse Gold.

Gain on equity investments recorded in profit in Q3 fiscal 2021 was $600,000, compared with nil in Q3 fiscal 2020.

Income tax expenses in Q3 fiscal 2021 was $6.0-million, compared with $3.7-million in Q3 fiscal 2020. The income tax expenses comprised current income tax expenses of $4.5-million (Q3 fiscal 2020 -- $2.8-million) and deferred income tax expenses of $1.5-million (Q3 fiscal 2020 -- $900,000). The increase was mainly due to an increase of $9.0-million in income from mine operations.

Cash flow provided by operating activities in Q3 fiscal 2021 was $23.9-million, a decrease of $1.0-million compared with $24.9-million in Q3 fiscal 2020. The decrease was mainly due to: (i) higher income taxes paid; and (ii) a negative impact from the change in non-cash working capital, offset by higher operating income.

For the nine months ended Dec. 31, 2020, net income attributable to equity shareholders of the company was $39.4-million or 23 cents per share, an increase of $8.2-million compared with $31.1-million or 18 cents per share in the same prior-year period; revenue was $156.4-million, up 12 per cent or $16.4-million, compared with $140.0-million in the same prior-year period; income from mine operations was $70.8-million or 45 per cent of revenue, compared with $56.2-million or 40 per cent of revenue in the same prior-year period; gain on equity investments recorded in profit was $8.8-million, compared with nil in the same prior-year period; foreign exchange loss was $7.0-million, compared with $1.3-million in the same prior-year period; and cash flow from operating activities was $83.7-million, up 18 per cent from $71.0-million in the same prior-year period.

The company ended the period with $204.1-million in cash and short-term investments, an increase of $4.0-million or 2 per cent compared with $200.1-million as at Sept. 30, 2020, and an increase of $61.6-million or 43 per cent compared with $142.5-million as at March 31, 2020.

Working capital as at Dec. 31, 2020, was $168.7-million, an increase of $38.4-million or 29 per cent compared with $130.4-million as at March 31, 2020.

Operations and development

Q3 fiscal 2021 versus Q3 fiscal 2020

In Q3 fiscal 2021, on a consolidated basis, the company mined 279,445 tonnes of ore, up 6 per cent or 16,859 tonnes compared with 262,586 tonnes in the three months ended Dec. 31, 2019 (Q3 fiscal 2020). Ore milled was 260,648 tonnes, a decrease of 2 per cent or 4,212 tonnes compared with 264,860 tonnes in Q3 fiscal 2020. The decrease was mainly due to a 7-per-cent decrease in the ore milled at the Ying mining district caused by power rationing in December, 2020, as the local government is subject to an annual environmental emissions KPI (key performance indicator) assessment.

In Q3 fiscal 2021, the company sold approximately 1.6 million ounces of silver, 800 ounces of gold, 16.8 million pounds of lead and 9.0 million pounds of zinc, an increase of 14 per cent and 7 per cent in gold and zinc sold, and a decrease of 4 per cent and 11 per cent in silver and lead sold, compared with 1.7 million ounces of silver, 700 ounces of gold, 18.8 million pounds of lead and 8.4 million pounds of zinc in Q3 fiscal 2020.

In Q3 fiscal 2021, the consolidated total mining and cash mining costs were $78.90 and $58.79 per tonne, up 0 per cent and 2 per cent compared with $78.65 and $57.54 per tonne, respectively, in Q3 fiscal 2020. The increase in per-tonne cash mining cost was mainly due to an increase of $400,000 in labour costs and $900,000 in mining contractor costs.

The consolidated total milling and cash milling costs in Q3 fiscal 2021 were $13.23 and $11.66 per tonne, down 3 per cent and 3 per cent compared with $13.58 and $12.01 per tonne, respectively, in Q3 fiscal 2020. The decrease in per-tonne cash milling cost was mainly due to a decrease of $200,000 in mill administration costs.

Correspondingly, the consolidated cash production cost per tonne of ore processed in Q3 fiscal 2021 was $73.04, up 1 per cent compared with $72.16 in Q3 fiscal 2020. The consolidated all-in sustaining production cost per tonne of ore processed was $129.09, up 6 per cent compared with $121.49 in Q3 fiscal 2020 but within the company's annual cost guidance. The increase in all-in sustaining production cost per tonne was mainly due to an increase of $1.4-million in mine and corporate general and administrative expenses, and a $300,000 increase in sustaining capital expenditures.

In Q3 fiscal 2021, the consolidated cash cost per ounce of silver, net of byproduct credits, was negative $2.76, compared with negative $1.21 in Q3 fiscal 2020. The decrease in cash cost per ounce of silver, net of byproduct credits, was mainly due to an increase of $2.1-million in byproduct sales, offset by an increase of 1 per cent in per-tonne production costs.

In Q3 fiscal 2021, the consolidated all-in sustaining cost per ounce of silver, net of byproduct credits, was $6.92, compared with $7.21 in Q3 fiscal 2020. The decrease was mainly due to the decrease in cash cost per ounce of silver, net of byproduct credits as discussed above, offset by an increase of $300,000 in sustaining capital expenditures.

In Q3 fiscal 2021, on a consolidated basis, approximately 74,070 metres or $1.8-million worth of diamond drilling (Q3 fiscal 2020 -- 32,948 metres or $1.1-million) and 10,624 metres or $3.8-million worth of preparation tunnelling (Q3 fiscal 2020 -- 11,656 metres or $3.1-million) were completed and expensed as mining preparation costs. In addition, approximately 24,916 metres or $1.0-million of surface diamond drilling (Q3 fiscal 2020 -- nil) and 21,829 metres or $9.4-million worth of horizontal tunnels, raises, ramps and declines (Q3 fiscal 2020 -- 20,107 metres or $7.1-million) were completed and capitalized.

Nine months ended Dec. 31, 2020, versus nine months ended Dec. 31, 2019

For the nine months ended Dec. 31, 2020, on a consolidated basis, the company mined 801,853 tonnes of ore, up 3 per cent or 22,618 tonnes, compared with 779,235 tonnes mined in the same prior-year period. Ore milled was 786,907 tonnes, a slight decrease of 2,777 tonnes, compared with 789,684 tonnes in the same prior-year period.

The company sold approximately 5.3 million ounces of silver, 4,100 ounces of gold, 56.2 million pounds of lead and 23.3 million pounds of zinc, an increase of 46 per cent, 1 per cent and 4 per cent in gold, lead and zinc sold, and a decrease of 4 per cent in silver sold, compared with 5.5 million ounces of silver, 2,800 ounces of gold, 55.7 million pounds of lead and 22.3 million pounds of zinc sold in the same prior-year period.

For the nine months ended Dec. 31, 2020, the consolidated total mining costs and cash mining costs were $76.66 and $57.18 per tonne, respectively, compared with $76.31 and $55.13 per tonne in the same prior-year period. The increase in per-tonne cash mining cost was mainly due to: (i) an increase of $400,000 in labour costs; (ii) an increase of $600,000 in raw material costs; and (iii) an increase of $1.3-million in mining contractor costs.

For the nine months ended Dec. 31, 2020, the consolidated total milling cost and cash milling cost were $11.79 and $10.29, respectively, compared with $12.85 and $11.14 per tonne in the same prior-year period.

Correspondingly, the consolidated cash production cost per tonne of ore processed for the nine months ended Dec. 31, 2020, was $70.02, up 2 per cent compared with $68.93 in the same prior-year period. The all-in sustaining production cost per tonne of ore processed was $122.02, up 4 per cent compared with $117.12 in the same prior-year period. The increase was mainly due to the increase in per-tonne cash mining costs as discussed above and an increase of $1.0-million in sustaining capital expenditures.

For the nine months ended Dec. 31, 2020, the consolidated cash cost per ounce of silver, net of byproduct credits, was negative $2.08, compared with negative $2.06 in the same prior-year period. The consolidated all-in sustaining cost per ounce of silver, net of byproduct credits, was $6.48, compared with $5.64 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) an increase of $1.0-million in sustaining capital expenditures; and (iii) a decrease of 4 per cent in silver sold.

For the nine months ended Dec. 31, 2020, on a consolidated basis, approximately 154,748 metres or $4.2-million worth of diamond drilling (same prior-year period -- 93,544 metres or $3.0-million) and 27,622 metres or $7.4-million worth of preparation tunnelling (same prior-year period -- 37,224 metres or $9.6-million) were completed and expensed as mining preparation costs. In addition, approximately 63,400 metres or $2.9-million worth of surface diamond drilling (same prior-year period -- nil) and 74,418 metres or $26.7-million worth of horizontal tunnels, raises, ramps and declines (same prior-year period -- 63,736 metres or $22.0-million) were completed and capitalized.

Fiscal 2022 production, cash cost and capital expenditure guidance

In fiscal 2022, the company expects to process approximately 960,000 to 1.01 million tonnes of ore, yielding 6.4 million to 6.7 million ounces of silver, 65.7 million to 68.9 million pounds of lead and 26.9 million to 28.5 million pounds of zinc. Fiscal 2022 production guidance represents an anticipated increase of approximately 3 per cent in silver production and 7 per cent to 10 per cent in zinc production compared with the current fiscal 2021 guidance. In fiscal 2022, lead production is expected to be similar to the current fiscal 2021 guidance.

The company has been consistently active in exploring its existing mining permit areas through drilling and tunnelling, with the objective of replacing the depleted ore. In recent years, the company has embarked on a capital investment program at both of its mining operations with the objective of adding facilities and infrastructure that will enhance the environmental friendliness, safety, efficiency and future profitability of the mines. This program includes the excavation of additional access ramps and tunnels, which are expected to facilitate the efficient movement of ore, equipment and personnel within the mines, as well as provide access to new areas of mineralization that may be suitable for mining in current and future periods. Depending on the extent of each project and the rate of development progress, the spending associated with these projects may be spread across several reporting periods until they are complete.

For fiscal 2022, the company plans to: (i) complete 6,600 metres of ramp development tunnelling at estimated capitalized expenditures of $5.6-million, representing a 20-per-cent decrease in meterage and a 19-per-cent decrease in total cost compared with fiscal 2021 guidance; (ii) complete 62,500 metres of exploration and other development tunnelling at estimated capitalized expenditures of $21.8-million, representing a 32-per-cent decrease in meterage and a 28-per-cent decrease in total cost compared with fiscal 2021 guidance; and (iii) spend $7.3-million on equipment and facilities, an increase of 35 per cent compared with fiscal 2021 guidance. In addition, the company plans to complete 50,000 metres of surface diamond drilling at estimated capitalized expenditures of $3.5-million. The total capital expenditures are budgeted at $38.2-million, representing a decrease of 10 per cent compared with fiscal 2021 annual guidance. The company also plans to complete and expense 33,600 metres of mining preparation tunnelling and 206,900 metres of underground diamond drilling. The attached table summarizes the work plan and estimated capital expenditures in fiscal 2022.

In fiscal 2022, the company plans to mine and process 670,000 to 700,000 tonnes of ore at the Ying mining district, averaging 290 g/t silver, 4.2 per cent lead, and 0.9 per cent zinc with expected metal production of 5.8 million to 6.0 million ounces of silver, 57.2 million to 59.8 million pounds of lead and 7.8 million to 8.1 million pounds of zinc. Fiscal 2022 production guidance at the Ying mining district represents increases of approximately 4 per cent to 6 per cent in ore production, 3 per cent to 4 per cent in silver production, 1 per cent to 3 per cent in lead production and 1 per cent to 11 per cent in zinc production, compared with its fiscal 2021 guidance.

The cash production costs are expected to be $87.1 to $91.7 per tonne of ore and the all-in sustaining costs are estimated at $134.2 to $141.2 per tonne of ore processed.

In fiscal 2022, the Ying mining district plans to: (i) complete 6,100 metres of ramp development tunnelling at estimated capital expenditures of $5.2-million, representing a 9-per-cent decrease in meterage and 5-per-cent decrease in total cost compared with its fiscal 2021 guidance; (ii) complete 52,200 metres of exploration and other development tunnelling at estimated capital expenditures of $18.8-million, representing a 36-per-cent decrease in meterage and 30-per-cent decrease in total cost compared with its fiscal 2021 guidance; and (iii) spend $6.3-million on equipment and facilities, an increase of 37 per cent compared with its fiscal 2021 guidance. In addition, the company plans to complete 50,000 metres of surface diamond drilling at estimated capitalized expenditures of $3.5-million. The total capital expenditures at the Ying mining district are budgeted at $33.8-million, a decrease of 9 per cent compared with its fiscal 2021 guidance. The Ying mining district also plans to complete and expense 23,400 metres of mining preparation tunnelling and 148,400 metres of diamond drilling, representing an increase of 11 per cent and 87 per cent, respectively, compared with fiscal 2021 guidance.

GC mine

In fiscal 2022, the company plans to mine and process 290,000 to 310,000 tonnes of ore at the GC mine, averaging 86 grams per tonne (g/t) silver, 1.5 per cent lead and 3.6 per cent zinc with expected metal production of 600,000 to 700,000 ounces of silver, 8.5 million to 9.1 million pounds of lead and 19.1 million to 20.4 million pounds of zinc. Fiscal 2022 production guidance at the GC mine represents similar ore production and silver production, an increase of approximately 9 per cent in zinc production, but a 10-per-cent to 13-per-cent decrease in lead production due to lower head grade compared with its fiscal 2021 annual guidance.

The cash production costs are expected to be $55.7 to $59.6 per tonne of ore and the all-in sustaining costs are estimated at $81.3 to $85.6 per tonne of ore processed.

In fiscal 2022, the GC mine plans to: (i) complete 500 metres of ramp development tunnelling at estimated capital expenditures of $400,000, representing a 69-per-cent decrease in meterage and a decrease of 71 per cent in total cost compared with its fiscal 2021 guidance; (ii) complete 10,300 metres of exploration and development tunnelling at estimated capital expenditures of $3.0-million, a 6-per-cent decrease in meterage and total cost; and (iii) spend $1.0-million on equipment and facilities, an increase of 70 per cent compared with its fiscal 2021 guidance. The total capital expenditures at the GC mine are budgeted at $4.4-million, a decrease of 19 per cent compared with its fiscal 2021 guidance. The GC mine also plans to complete and expense 10,200 metres of mining preparation tunnelling and 58,500 metres of underground diamond drilling.

Other development plans

In fiscal 2022, the company plans to commence a phase I 10,000-metre drilling program at the La Yesca silver project in Mexico, which drill program is pending receipt of the necessary drilling permits from the respective Mexican government agencies. As a result, the budget for the drill program has not yet been finalized.

The company plans to initiate an extensive drilling campaign at the Zhonghe silver project, located approximately 75 kilometres northeast of the Ying mining district. The company will formalize the plan and provide an update on the cost estimates with respect to the Zhonghe silver project once the mineral rights transfer contract is executed.

The company is in the process of applying for permits to build a third tailings facility near the existing tailings facilities at the Ying mining district. The company is also considering plans to expand the current milling capacity or build a new mill for future production expansion at the Ying mining district. There is potential to consolidate mineral properties near the Ying mining district or to process ore from the Zhonghe silver project during its development stage. The company will provide further updates when plans and cost estimates are formalized.

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. For more information, please visit the company's website.

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