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Silvercorp Metals Inc
Symbol SVM
Shares Issued 172,285,458
Close 2019-11-07 C$ 5.48
Recent Sedar Documents

Silvercorp earns $15.66-million (U.S.) in Q2

2019-11-07 16:55 ET - News Release

Mr. Lon Shaver reports

SILVERCORP REPORTS NET INCOME OF $12.2 MILLION, $0.07 PER SHARE, AN INCREASE OF 52 per cent COMPARED TO THE PRIOR YEAR QUARTER

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

Second quarter fiscal year 2020 highlights:

  • Ore milled up 11 per cent compared with the prior-year quarter;
  • Produced and sold approximately 1.9 million ounces of silver, 1,100 ounces of gold, 19.1 million pounds of lead and 6.7 million pounds of zinc, compared with 1.9 million ounces of silver, 1,000 ounces of gold, 19.4 million pounds of lead and 4.9 million pounds of zinc in the prior-year quarter;
  • Revenue up 4 per cent to $49.9-million compared with the prior-year quarter;
  • Net income attributable to equity shareholders of $12.2-million, or seven cents per share, up 52 per cent compared with $8.0-million, or five cents per share, in the prior-year quarter;
  • Cash production cost per tonne of ore processed (1) of $65.73, down 1 per cent, compared with $66.33 in the prior-year quarter;
  • Cash cost per ounce of silver (1), net of byproduct credits, of negative $2.72, up 20 per cent compared with negative $3.37 in the prior-year quarter;
  • All-in sustaining cost per ounce of silver (1), net of byproduct credits, of $4.15, up 63 per cent compared with $2.54 in the prior-year quarter;
  • Cash flow from operations of $26.2-million, up 24 per cent compared with $21.1-million in the prior-year quarter;
  • Strong balance sheet with $135.2-million in cash and cash equivalents and short-term investments, an increase of $19.9-million or 17 per cent, compared with $115.3-million as at March 31, 2019;
  • Ended the quarter with inventories of 4,176 tonnes of silver-lead concentrate and 586 tonnes of zinc concentrate, up 28 per cent and 59 per cent, respectively, compared with 3,248 tonnes of silver-lead concentrate and 586 tonnes of zinc concentrate as at March 31, 2019.

(1) Non-international financial reporting standard measure. Please refer to Section 10 of the corresponding management's discussion and analysis for reconciliation.

Financials

Net income attributable to equity shareholders of the company in second quarter fiscal 2020 was $12.2-million, or seven cents per share, an increase of $4.2-million, compared with $8.0-million, or five cents per share, in the three months ended Sept. 30, 2018.

Compared with second quarter fiscal 2019, the company's financial results in second quarter fiscal 2020 were mainly impacted by: (i) increases of 18 per cent and 17 per cent in the average realized selling prices for silver and gold; (ii) increases of 10 per cent and 36 per cent in gold and zinc sold; offset by: (iii) decreases of 12 per cent and 31 per cent in the average realized selling prices for lead and zinc; and (iv) a decrease of 2 per cent in lead sold.

Sales in second quarter fiscal 2020 were $49.9-million, up 4 per cent or $1.8-million, compared with $48.1-million in second quarter fiscal 2019. Silver, gold and base metal sales represented $27.4-million, $1.3-million and $21.1-million, respectively, compared with silver, gold and base metal sales of $23.4-million, $1.0-million and $23.6-million, respectively, in second quarter fiscal 2019.

Cost of sales in second quarter fiscal 2020 was $24.5-million, a decrease of $900,000 or 4 per cent, compared with $25.4-million in second quarter fiscal 2019. The cost of sales included $17.3-million (second quarter fiscal 2019: $18.2-million) in cash production costs, $1.4-million in mineral resources tax (second quarter fiscal 2019: $1.4-million) and $5.8-million (second quarter fiscal 2019: $5.8-million) in depreciation and amortization charges. The decrease in cash production costs expensed was mainly due to a decrease of 1 per cent in cash production costs per tonne of ore processed and less silver and lead sold.

Gross profit margin in second quarter fiscal 2020 was 51 per cent, compared with 47 per cent in second quarter fiscal 2019. Ying mining district's gross profit margin was 53 per cent compared with 50 per cent in second quarter fiscal 2019. GC mine's gross profit margin was 37 per cent compared with 29 per cent in second quarter fiscal 2019.

General and administrative expenses in second quarter fiscal 2020 were $4.9-million, an increase of $300,000, compared with $4.6-million in second quarter fiscal 2019. The increase was mainly due to higher labour costs resulting from an increase in employee pay rates and non-cash share-based compensation expenses.

Share of loss in an associate in second quarter fiscal 2020 was $200,000, compared with $100,000 in second quarter fiscal 2019. The loss represents the company's equity pickup in New Pacific Metals Corp. (NUAG).

Income tax expenses in second quarter fiscal 2020 were $5.1-million compared with $5.8-million in second quarter fiscal 2019. The income tax expense recorded in second quarter fiscal 2020 included current income tax expense of $1.0-million (second quarter fiscal 2019: $5.1-million) and deferred income tax expense of $4.1-million (second quarter fiscal 2019: $700,000).

Cash flow provided by operating activities in second quarter fiscal 2020 was $26.2-million, an increase of $5.1-million, compared with $21.1-million in second quarter fiscal 2019.

For the six months ended Sept. 30, 2019, net income attributable to equity shareholders of the company was $24.8-million or 14 cents per share, an increase of $5.8-million, compared with $19.0-million or 11 cents per share in the same prior-year period. Sales were $95.5-million, up 2 per cent from $93.2-million in the same prior-year period. Share of loss in NUAG was $500,000, compared with $400,000 in the same prior-year period. Cash flow from operating activities was $46.1-million, up 9 per cent from $42.2-million in the same prior-year period.

The company ended the period with $135.2-million in cash and short-term investments, an increase of $19.9-million or 17 per cent, compared with $115.3-million as at March 31, 2019.

Working capital as at Sept. 30, 2019, was $125.0-million, an increase of $28.0-million or 29 per cent, compared with $97.0-million as at March 31, 2019.

Operations and development

(i) Second quarter fiscal 2020 versus second quarter fiscal 2019

In second quarter fiscal 2020, on a consolidated basis, the company mined 259,257 tonnes of ore, an increase of 4 per cent or 10,838 tonnes, compared with 248,419 tonnes in second quarter fiscal 2019. Ore mined at the GC mine increased by 23 per cent or 15,415 tonnes, while the ore mined at the Ying mining district decreased by 3 per cent or 4,577 tonnes. Ore milled was 265,281 tonnes, up 11 per cent compared with 239,728 tonnes in second quarter fiscal 2019.

In second quarter fiscal 2020, the company sold approximately 1.9 million ounces of silver, 1,100 ounces of gold, 19.1 million pounds of lead and 6.7 million pounds of zinc, compared with 1.9 million ounces of silver, 1,000 ounces of gold, 19.4 million pounds of lead and 4.9 million pounds of zinc in second quarter fiscal 2019. As at Sept. 30, 2019, the company had inventories of 4,176 tonnes of silver-lead concentrate and 586 tonnes of zinc concentrate, up 28 per cent and 59 per cent, respectively, compared with 3,248 tonnes of silver-lead concentrate and 368 tonnes of zinc concentrate as at March 31, 2019.

In second quarter fiscal 2020, the consolidated total mining costs and cash mining costs were $72.85 and $52.37 per tonne, compared with $72.71 and $53.90 per tonne, respectively, in second quarter fiscal 2019. The consolidated total milling costs and cash milling costs in second quarter fiscal 2020 were $12.46 and $10.76 per tonne, compared with $11.60 and $9.36 per tonne, respectively, in second quarter fiscal 2019. The increase in the cash milling cost was mainly due to an increase of $300,000 in material costs resulting from the timing difference of maintenance and prevention work performed at the mills.

The consolidated cash production cost per tonne of ore processed in second quarter fiscal 2020 was $65.73, down 1 per cent compared with $66.33 in second quarter fiscal 2019, and below the company's fiscal 2020 annual guidance of $71.80. The consolidated all-in sustaining production cost per tonne of ore processed was $109.51, an increase of 2 per cent compared with $107.51 in second quarter fiscal 2019, but below the company's fiscal 2020 annual guidance of $125.50. The increase was primarily due to an increase of $1.7-million in sustaining capital expenditures.

In second quarter fiscal 2020, the consolidated cash cost per ounce of silver, net of byproduct credits, was negative $2.72, compared with negative $3.37 in the prior-year quarter. The increase was mainly due to a decrease of $1.11 in byproduct credits per ounce of silver mainly resulting from the decrease in the realized selling prices for lead and zinc. Sales from lead and zinc in the current quarter amounted to $20.2-million, a decrease of $2.9-million, compared with $23.2-million in the prior-year quarter. In second quarter fiscal 2020, the consolidated all-in sustaining costs per ounce of silver, net of byproduct credits, were $4.15 compared with $2.54 in second quarter fiscal 2019. The increase was mainly due to the decrease in byproduct credits and the increase in sustaining capital expenditures as discussed herein.

In second quarter fiscal 2020, on a consolidated basis, approximately 32,948 metres or $1.1-million worth of diamond drilling (second quarter fiscal 2019: 30,027 metres or $800,000) and 11,656 metres or $3.1-million worth of preparation tunnelling (second quarter fiscal 2019: 10,619 metres or $3.1-million) were completed and expensed as mining preparation costs. In addition, approximately 20,107 metres or $7.1-million worth of horizontal tunnels, raises, ramps and declines (second quarter fiscal 2019: 18,875 metres or $6.2-million) were completed and capitalized.

(ii) Six months ended Sept. 30, 2019, versus six months ended Sept. 30, 2018

For the six months ended Sept. 30, 2019, on a consolidated basis, the company mined 516,649 tonnes of ore, an increase of 6 per cent or 31,532 tonnes, compared with 485,117 tonnes mined in the same prior-year period. Ore milled was 524,824 tonnes, up 10 per cent compared with 477,468 tonnes in the same prior-year period.

The company sold approximately 3.7 million ounces of silver, 2,100 ounces of gold, 36.9 million pounds of lead and 14.0 million pounds of zinc, increases of 11 per cent, 24 per cent, 8 per cent and 24 per cent, respectively, compared with 3.4 million ounces of silver, 1,700 ounces of gold, 34.3 million pounds of lead and 11.3 million pounds of zinc sold in the same prior-year period.

For the six months ended Sept. 30, 2019, the consolidated total mining costs and cash mining costs were $75.12 and $53.91 per tonne, respectively, compared with $74.40 and $55.05 per tonne in the same prior-year period. The consolidated total milling costs and cash milling costs were $12.47 and $10.69, respectively, compared with $12.87 and $10.54 per tonne in the same prior-year period.

Correspondingly, the consolidated cash production costs per tonne of ore processed for the six months ended Sept. 30, 2019, were $67.29, down 2 per cent compared with $68.55 in the same prior-year period. The all-in sustaining production costs per tonne of ore processed were $114.89, up 4 per cent compared with $110.91 in the same prior-year period mainly due to an increase of $4.7-million in sustaining capital expenditures. However, both the cash production costs and all-in sustaining production costs per tonne were lower than the company's fiscal 2020 annual guidance

For the six months ended Sept. 30, 2019, the consolidated cash cost per ounce of silver, net of byproduct credits, was negative $2.45, compared with negative $5.18 in the same prior-year period. The increase was mainly due to a decrease of $2.99 in byproduct credits per ounce of silver mainly resulting from decreases in realized selling prices for lead and zinc. Sales from lead and zinc for the six months ended Sept. 30, 2019, amounted to $40.6-million, a decrease of $7.0-million, compared with $47.6-million in the same prior-year period. The consolidated all-in sustaining costs per ounce of silver, net of byproduct credits, were $4.91 compared with $1.61 in the same prior-year period. The increase was mainly due to the decrease in byproduct credits and the increase in sustaining capital expenditures.

For the six months ended Sept. 30, 2019, on a consolidated basis, approximately 64,566 metres or $2.0-million worth of diamond drilling (same prior-year period: 64,295 metres or $1.8-million) and 24,312 metres or $6.2-million worth of preparation tunnelling (same prior-year period: 21,401 metres or $6.3-million) were completed and expensed as mining preparation costs. In addition, approximately 41,499 metres or $14.5-million worth of horizontal tunnels, raises, ramps and declines (same prior-year period: 36,341 metres or $13.2-million) were completed and capitalized.

Outlook

The company expects its consolidated production in fiscal 2020 will exceed its annual guidance and-production costs will be within the budget. Due to soft demand for lead battery arising from weak automobile market and the winter season environmental control measures in China, smelters are reducing their silver-lead concentrates purchase and increasing their smelter charges from last quarter's 2,200-renminbi-per-tonne lead metal to 2,700-renminbi-per-tonne lead metal currently. Accordingly, the company plans to build up its silver-lead concentrate inventories over the next two quarters for better price.

Guoliang Ma, PGeo, manager of exploration and resources of the company, is the qualified person for Silvercorp under National Instrument 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 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 STATEMENTS OF INCOME
                     (expressed in thousands of U.S. dollars, except for per-share figures)

                                                           Three months ended Sept. 30,      Six months ended Sept. 30,
                                                                  2019            2018             2019           2018
                                                                                                                      
Sales                                                          $49,886         $48,091          $95,462        $93,216
Cost of sales                                                                                                          
Production costs                                                17,290          18,238           35,290         32,515
Mineral resource taxes                                           1,408           1,392            2,659          2,641 
Depreciation and amortization                                    5,814           5,761           11,683         10,509 
                                                              --------        --------         --------       --------
                                                                24,512          25,391           49,632         45,665
                                                              --------        --------         --------       --------
Gross profit                                                    25,374          22,700           45,830         47,551 
General and administrative                                       4,901           4,605            9,449          9,077 
Government fees and other taxes                                    496             767            1,090          1,569 
Foreign exchange loss (gain)                                      (797)            708               57            (80)
Loss on disposal of plant and equipment                            121             124              263            134 
Gain on disposal of mineral rights and properties                    -               -           (1,477)             - 
Share of loss in associate                                         244             105              525            384 
Dilution gain on investment in associate                             -               -             (723)             - 
Reclassification of other comprehensive (loss) upon                                                                   
ownership dilution of investment in associate                        -               -              (21)             - 
Other expense (income)                                             291             213              490            276 
                                                              --------        --------         --------       --------
Income from operations                                          20,118          16,178           36,177         36,191 
Finance income                                                     818             825            1,747          1,621 
Finance costs                                                     (136)           (163)            (311)          (297)
                                                              --------        --------         --------       --------
Income before income taxes                                      20,800          16,840           37,613         37,515 
Income tax expense                                               5,139           5,763            4,651         12,261
                                                              --------        --------         --------       -------- 
Net income                                                      15,661          11,077           32,962         25,254
                                                              --------        --------         --------       -------- 
Attributable to                                                                                                       
Equity holders of the company                                   12,221           8,037           24,828         18,958 
Non-controlling interests                                        3,440           3,040            8,134          6,296 
                                                              --------        --------         --------       --------
                                                                15,661          11,077           32,962         25,254
                                                              --------        --------         --------       --------
Earnings per share attributable to the equity holders 
of the company                                                   
Basic earnings per share                                          0.07            0.05             0.15           0.11 
                                                              --------        --------         --------       --------
Diluted earnings per share                                        0.07            0.05             0.14           0.11
                                                              --------        --------         --------       --------

We seek Safe Harbor.

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