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Silvercorp Reports Adjusted Net Income of $11.7 Million, $0.07 per Share, and Cash Flow from Operations of $28.8 Million for Q2 Fiscal 2024

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Silvercorp Reports Adjusted Net Income of $11.7 Million, $0.07 per Share, and Cash Flow from Operations of $28.8 Million for Q2 Fiscal 2024

 

 

 

 

 

Silvercorp Metals Inc. (TSX: SVM) (NYSE American: SVM) reports its financial and operating results for the three months ended September 30, 2023. All amounts are expressed in US dollars, and figures may not add due to rounding.

 

HIGHLIGHTS FOR Q2 FISCAL 2024 

  • Mined 273,465 tonnes of ore, milled 261,107 tonnes of ore, and produced approximately 2,458 ounces of gold, 1.6 million ounces of silver, or approximately 1.8 million ounces of silver equivalent, plus 16.1 million pounds of lead and 4.6 million pounds of zinc;
  • Sold approximately 2,515 ounces of gold, 1.6 million ounces of silver, 15.2 million pounds of lead, and 4.6 million pounds of zinc, for revenue of $54.0 million;
  • Reported net income attributable to equity shareholders of $11.1 million, or $0.06 per share;
  • Realized adjusted earnings attributable to equity shareholders of $11.7 million, or $0.07 per share;
  • Generated cash flow from operating activities of $28.8 million;
  • Cash costs per ounce of silver, net of by-product credits, of negative $1.00;
  • All-in sustaining costs per ounce of silver, net of by-product credits, of $11.50;
  • Spent and capitalized $2.0 million on exploration drilling, $10.6 million on underground development, and $2.5 million on equipment and facilities, including $1.7 million on construction of the new tailings storage facility;
  • Invested an additional $5.0 million in New Pacific Metals Corp. (TSX: NUAG) an associate of the Company;
  • Entered into a binding agreement to acquire all fully paid ordinary shares of OreCorp Limited (ASX: ORR) and thereby its Nyanzaga gold project in Tanzania, and in conjunction therewith invested $18.5 million (A$28.0 million) in OreCorp to finance continued development. The acquisition has been approved by the Tanzanian government and is subject to final OreCorp shareholder approval expected in early December 2023;
  • Spent $0.6 million to buy back 196,554 common shares of the Company under its Normal Course Issuer Bid; and
  • Strong balance sheet with $189.1 million in cash and cash equivalents and short-term investments. The Company holds a further equity investment portfolio in associates and other companies with a total market value of $124.0 million as at September 30, 2023.

 

CONSOLIDATED FINANCIAL RESULTS

 

Three months ended September 30, Six months ended September 30,
2023 2022 Changes 2023 2022 Changes
Financial Results
Revenue (in thousands of $)  $                      53,992 $         51,739 4 % $                    113,998 $          115,331 -1 %
Mine operating earnings (in thousands of $)  20,943 14,361 46 % 44,244 39,263 13 %
Net income (loss) attributable to equity holders (in thousands of $)  11,050 (1,712) 745 % 20,267 8,457 140 %
 Earnings (loss) per share – basic ($/share) 0.06 (0.01) 700 % 0.11 0.05 120 %
Adjusted earnings attributable to equity holders (in thousands of $)  11,677 6,752 73 % 24,046 20,281 19 %
Adjusted earning per share – basic ($/share) 0.07 0.04 73 % 0.14 0.11 19 %
Net cash generated from operating activities (in thousands of $)  28,844 14,064 105 % 57,725 54,240 6 %
Capitalized expenditures (in thousands of $)  15,058 17,354 -13 % 30,974 32,882 -6 %
Metals sold
 Gold (ounces)  2,515 1,200 110 % 4,010 2,300 74 %
 Silver (in thousands of ounces)  1,578 1,789 -12 % 3,393 3,704 -8 %
 Lead (in thousands of pounds)  15,175 17,268 -12 % 32,505 36,393 -11 %
 Zinc (in thousands of pounds)  4,578 5,940 -23 % 11,498 12,868 -11 %
 Average Selling Price, Net of Value Added Tax and Smelter Charges 
Gold ($/ounce) 1,815 1,316 38 % 1,766 1,449 22 %
Silver ($/ounce) 19.74 15.50 27 % 19.54 16.78 16 %
Lead ($/pound) 0.87 0.85 2 % 0.85 0.88 -3 %
Zinc ($/pound) 0.79 1.08 -27 % 0.81 1.16 -30 %
 Financial Position as at  September 30, 2023 June 30, 2023 September 30, 2023 March 31, 2023
Cash and cash equivalents and short-term investments (in thousands of $)  189,091 200,600 -6 % 189,091 203,323 -7 %
Working capital (in thousands of $)  154,330 169,531 -9 % 154,330 177,808 -13 %

 

Net income attributable to equity shareholders of the Company in Q2 Fiscal 2024 was $11.1 million or $0.06 per share, compared to a net loss of $1.7 million or loss of $0.01 per share in the three months ended September 30, 2022.

 

Compared to Q2 Fiscal 2023, the Company’s consolidated financial results in the current quarter were mainly impacted by i) increases of 38%, 27%, and 2%, respectively, in the realized selling prices for gold, silver, and lead, and a decrease of 27% in the realized selling price for zinc; ii) an increases of 110% in gold sold and decreases of 12%, 12% and 23% respectively, in silver, lead and zinc sold ; iii) a dilution gain of $0.7 million arising from the investment in NUAG; iv) a decrease of $1.0 million in the loss on the mark-to-market investments; v) a decrease of $3.0 million in foreign exchange gain; and vi) no impairment charges while a total of $20.2 million impairment charges against the mineral rights and properties were recorded in Q2 Fiscal 2023

 

Revenue in Q2 Fiscal 2024 was $54.0 million, up 4% compared to $51.7 million in Q2 Fiscal 2023. The increase is mainly due to the increase in net realized selling prices for silver, gold and lead offset by the decreases in silver, lead and zinc sold.

 

Income from mine operations in Q2 Fiscal 2024 was $20.9 million, up 46% compared to $14.4 million in Q2 Fiscal 2023. Income from mine operations at the Ying Mining District was $21.8 million, compared to $12.9 million in Q2 Fiscal 2023. Loss from mine operations at the GC Mine was $0.7 million, compared to income of $1.5 million in Q2 Fiscal 2023.

 

Cash flow provided by operating activities in Q2 Fiscal 2024 was $28.8 million, up $14.7 million, compared to $14.1 million in Q2 Fiscal 2023.

 

The Company ended the quarter with $189.1 million in cash, cash equivalents and short-term investments, down 6% compared to $200.6 million as at June 30, 2023, which is due to total investments of $23.5 million in NUAG and OreCorp and payment of $15.4 million on capital expenditures, offset by a $28.8 million in cash generated from operations.

 

Working capital as at September 30, 2023 was $154.3 million, down 9% compared to $169.5 million as at June 30, 2023.

 

CONSOLIDATED OPERATIONAL RESULTS

 

Three months ended September 30, Six months ended September 30,
2023 2022 Changes 2023 2022 Changes
Ore Production (tonne)
Ore mined 273,465 290,981 -6 % 576,685 591,085 -2 %
Ore milled 261,107 291,643 -10 % 556,202 589,819 -6 %
Metal Production
 Gold (ounces)  2,458 1,200 105 % 4,010 2,300 74 %
 Silver (in thousands of ounces)  1,590 1,798 -12 % 3,370 3,658 -8 %
    Silver equivalent (in thousands of ounces)  1,815 1,898 -4 % 3,725 3,853 -3 %
 Lead (in thousands of pounds)  16,065 17,983 -11 % 33,881 37,071 -9 %
 Zinc (in thousands of pounds)  4,601 5,986 -23 % 11,422 12,912 -12 %
Cash Costs
Production costs per tonne of ore processed ($) 80.53 86.07 -6 % 79.53 84.50 -6 %
All-in sustaining costs per tonne of ore processed ($) 149.94 127.48 18 % 141.53 137.48 3 %
Cash costs per ounce of silver, net of by-product credits ($) (1.00) 0.77 -230 % (0.63) (0.44) -43 %
All-in sustaining costs per ounce of silver, net of by-product credits ($) 11.50 8.25 39 % 10.41 8.77 19 %

 

In Q2 Fiscal 2024, the Company mined 273,465 tonnes of ore, down 6% compared to 290,981 tonnes in Q2 Fiscal 2023. Ore milled in Q2 Fiscal 2024 was 261,107 tonnes, down 10% compared to 291,643 tonnes in Q2 Fiscal 2023, due to lower production at the GC Mine caused by a production disruption of five weeks. (refer to the Company’s news release dated September 5, 2023).

 

In Q2 Fiscal 2024, the Company produced approximately 2,458 ounces of gold, 1.6 million ounces of silver, or approximately 1.8 million ounces of silver equivalent, plus 16.1 million pounds of lead and 4.6 million pounds of zinc, representing an increase of 105% in gold production, and decreases of 12%, 11% and 13%, respectively, in silver, lead and zinc production over Q2 Fiscal 2023. The decreases in silver, lead and zinc production were mainly due to lower production achieved at the GC Mine and lower heads grades achieved due to mining sequences and more gold ore mined and processed at the Ying Mining District.

 

In Q2 Fiscal 2024, the consolidated mining costs were $64.77 per tonne, down 8% compared to $70.60 per tonne in Q2 Fiscal 2023. The consolidated milling costs were $13.10 per tonne, up 4% compared to $12.59 per tonne in Q2 Fiscal 2023. Correspondingly, the consolidated production costs per tonne of ore processed were $80.53, down 6% compared to $86.07 in Q2 Fiscal 2023. The decrease was attributed to less drilling expensed and approximately 6% depreciation of the Chinese yuan against the US dollar.

 

The all-in sustaining production costs per tonne of ore processed in Q2 Fiscal 2024 were $149.94, up 18% compared to $127.48 in Q2 Fiscal 2023. The increase is mainly due to increases of $5.4 million in sustaining capital expenditures and $0.7 million in general administrative expenses and government fees and other taxes.

 

In Q2 Fiscal 2024, the consolidated cash costs per ounce of silver, net of by-product credits, were negative $1.00, compared to $0.77 in the prior year quarter. The improvement was mainly due to the decrease in per tonne production costs contributing to a decrease of $4.1 million in expensed production costs.

 

The consolidated all-in sustaining costs per ounce of silver, net of by-product credits, were $11.50 compared to $8.25 in Q2 Fiscal 2023. The increase was mainly due to the increase in all-in sustaining production costs per tonne.

 

EXPLORATION AND DEVELOPMENT

 

 Capitalized Development and Expenditures   Expensed 
 Ramp Development   Exploration and
Development Tunnels 
 Drilling   Equipment &
Mill and TSF 
 Total   Mining Preparation
Tunnels 
 Drilling 
 (Metres)   ($ Thousand)   (Metres)   ($ Thousand)   (Metres)   ($ Thousand)   ($ Thousand)   ($ Thousand)   (Metres)   (Metres) 
 Q2 Fiscal 2024 
Ying Mining District 2,703 $        1,943 20,147 $        8,042 40,854 $        1,481 $        2,266 $      13,732 9,460 22,968
GC Mine 248 195 1,629 428 5,782 420 193 1,236 1,408 6,580
Corporate and other 76 14 90
Consolidated 2,951 $        2,138 21,776 $        8,470 46,636 $        1,977 $        2,473 $      15,058 10,868 29,548
Q2 Fiscal 2023
Ying Mining District 1,744 $        1,439 16,122 $        6,934 31,642 $        1,374 $        4,558 $      14,305 8,912 33,446
GC Mine 3,321 985 5,974 173 536 1,694 1,428 11,919
Corporate and other 5,525 1,344 11 1,355
Consolidated 1,744 $        1,439 19,443 $        7,919 43,141 $        2,891 $        5,105 $      17,354 10,340 45,365
 Variances (%) 
Ying Mining District 55 % 35 % 25 % 16 % 29 % 8 % -50 % -4 % 6 % -31 %
GC Mine 100 % 100 % -51 % -57 % -3 % 143 % -64 % -27 % -1 % -45 %
Corporate and other -100 % -94 % 27 % -93 %
Consolidated 69 % 49 % 12 % 7 % 8 % -32 % -52 % -13 % 5 % -35 %

 

Total capital expenditures in Q2 Fiscal 2024 were $15.1 million, down 13% compared to $17.4 million in Q2 Fiscal 2023. Capital expenditures incurred to construct the new tailing storage facility (“TSF”) in Q2 Fiscal 2024 were $1.7 million (Q2 Fiscal 2023 – $1.3 million). As of September 30, 2023, total expenditures incurred on the construction of the TSF were approximately $8.9 million, and the Company remains on track to complete the TSF in 2024.

 

In Q2 Fiscal 2024, on a consolidated basis, a total of 76,184 metres or $2.6 million worth of diamond drilling were completed (Q2 Fiscal 2023 – 88,506 metres or $4.2 million), of which approximately 29,548 metres or $0.6 million worth of underground drilling were expensed as part of mining costs (Q2 Fiscal 2023 – 45,365 metres or $1.3 million) and approximately 46,636 metres or $2.0 million worth of drilling were capitalized (Q2 Fiscal 2023 – 43,141 metres or $2.9 million). In addition, approximately 10,868 metres or $4.1 million worth of preparation tunnelling were completed and expensed as part of mining costs (Q2 Fiscal 2023 – 10,340 metres or $4.0 million), and approximately 24,727 metres or $10.6 million worth of tunnels, raises, ramps and declines were completed and capitalized (Q2 Fiscal 2023 – 21,187 metres or $9.4 million).

 

INDIVIDUAL MINE OPERATING PERFORMANCE

 

The table below summarizes the operating results at the Ying Mining District for the past five quarters and for the six months ended September 30, 2023 and 2022.

 

Ying Mining District Q2 F2024 Q1 F2024 Q4 F2023 Q3 F2023 Q2 F2023 Six months ended September 30,
September 30, 2023 June 30, 2023 March 31, 2023 December 31, 2022 September 30, 2022 2023 2022
Ore Production (tonne)
Ore mined 220,636 213,748 132,205 206,854 215,927 434,384 429,965
Ore milled 212,868 208,809 130,910 213,830 216,262 421,677 428,317
Head grades
Silver (grams/tonne) 235 254 255 262 257 244 262
Lead (%) 3.5 3.6 3.6 4.0 3.7 3.5 3.8
Zinc (%) 0.7 0.7 0.6 0.7 0.7 0.7 0.7
Recovery rates
Silver (%) 95.0 95.1 95.2 95.7 95.5 95.0 95.6
Lead (%) 95.0 95.5 95.3 95.4 94.1 95.3 94.8
Zinc (%) 71.1 69.6 68.3 66.4 62.5 70.3 60.3
Cash Costs
Cash production cost per tonne of ore processed ($) 83.53 102.42 88.66 95.23 93.04 84.54 94.14
All-in sustaining cost per tonne of ore processed ($) 142.84 170.69 141.21 127.89 156.07 138.42 141.84
Cash cost per ounce of Silver, net of by-product credits ($) (1.37) 1.37 0.24 1.86 0.28 (0.52) 1.05
All-in sustaining cost per ounce of silver, net of by-product credits ($) 8.06 11.33 7.66 6.82 8.60 7.58 7.73
Metal Production
 Gold ( ounces)  2,458 1,552 1,000 1,100 1,200 4,010 2,300
 Silver (in thousands of ounces)  1,506 1,597 997 1,674 1,657 3,129 3,408
 Lead (in thousands of pounds)  15,018 15,382 9,688 17,647 16,201 29,277 32,347
 Zinc (in thousands of pounds)  2,197 2,113 1,164 2,082 1,976 4,295 3,917

 

The table below summarizes the operating results at the GC Mine for the past five quarters and for the six months ended September 30, 2023 and 2022.

 

GC Mine Q2 F2024 Q1 F2024 Q4 F2023 Q3 F2023 Q2 F2023 Six months ended September 30,
September 30, 2023  June 30, 2023  March 31, 2023  December 31, 2022  September 30, 2022 2023 2022
Ore Production (tonne)
Ore mined 52,829 89,472 49,643 89,196 75,054 142,301 161,120
Ore milled 48,239 86,286 48,483 89,612 75,381 134,525 161,502
Head grades
Silver (grams/tonne) 66 80 88 75 72 75 72
Lead (%) 1.1 1.4 1.3 1.4 1.2 1.3 1.3
Zinc (%) 2.5 2.7 2.5 2.8 2.7 2.7 2.8
Recovery rates
Silver (%) 82.7 82.7 78.9 83.0 81.0 82.7 82.3
Lead (%) 90.2 90.7 90.9 90.3 88.5 90.6 89.3
Zinc (%) 89.8 90.4 89.3 90.1 89.6 90.2 90.0
Cash Costs
Cash production cost per tonne of ore processed ($) 68.18 67.34 52.35 59.84 57.92 64.25 58.81
All-in sustaining cost per tonne of ore processed ($) 99.75 84.79 88.26 78.31 81.68 94.12 80.10
Cash cost per ounce of Silver, net of by-product credits ($) 5.64 (3.10) (13.72) (12.13) (22.42) (1.99) (17.55)
All-in sustaining cost per ounce of silver, net of by-product credits ($) 25.95 5.93 5.02 (0.73) (7.48) 14.49 (4.29)
Metal Production
 Silver (in thousands of ounces)  84 183 109 179 141 264 296
 Lead (in thousands of pounds)  1,047 2,434 1,250 2,412 1,782 3,228 4,046
 Zinc (in thousands of pounds)  2,404 4,708 2,413 4,892 4,010 7,203 8,951

 

About Silvercorp

 

Silvercorp is a Canadian mining company producing silver, gold, lead, and zinc with a long history of profitability and growth potential. The Company’s strategy is to create shareholder value by 1) focusing on generating free cashflow from long life mines; 2) organic growth through extensive drilling for discovery; 3) ongoing merger and acquisition efforts to unlock value; and 4) long term commitment to responsible mining and ESG.

 

Posted November 10, 2023

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