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Silvercorp Reports Adjusted Net Income of $13.6 Million, $0.08 Per Share, and Cash Flow From Operations of $30.9 Million for Q2 Fiscal 2022

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Silvercorp Reports Adjusted Net Income of $13.6 Million, $0.08 Per Share, and Cash Flow From Operations of $30.9 Million for Q2 Fiscal 2022

 

 

 

 

 

Silvercorp Metals Inc. (TSX: SVM) (NYSE American: SVM) reported its financial and operating results for the second quarter ended September 30, 2021. All amounts are expressed in US Dollars, and figures may not add due to rounding.

 

Q2 FISCAL 2022 HIGHLIGHTS  

 

  • Mined 292,468 tonnes of ore and milled 271,816 tonnes of ore, up 9% and 3% compared to the prior year quarter.
  • Sold approximately 1.7 million ounces of silver, 800 ounces of gold, 17.3 million pounds of lead, and 7.6 million pounds of zinc, representing decreases of 1%, 64%, and 7% in silver, gold and lead sold, and an increase of 3% in zinc sold, compared to the prior year quarter.
  • Revenue of $58.4 million, up 4% compared to $56.4 million in the prior year quarter.
  • Net income attributable to equity shareholders of $9.4 million, or $0.05 per share, compared to $15.5 million, or $0.09 per share in the prior year quarter. The decrease was mainly due to an unrealized loss of $4.1 million on investments in the current quarter compared to a gain of $2.8 million in the prior year quarter.
  • Adjusted earnings attributable to equity shareholders of $13.6 million, or $0.08 per share, compared to $15.4 million, or $0.09 per share in the prior year quarter. The adjustments were made to remove impacts from non-recurring items, share-based compensation, foreign exchange gain/loss, gain/loss on investments, and the share of associates’ operating results.
  • Cash flow from operations of $30.9 million, up 4% or $1.3 million compared to $29.6 million in the prior year quarter.
  • Cash cost per ounce of silver, net of by-product credits, of negative $1.65 compared to negative $2.09 in the prior year quarter.
  • All-in sustaining cost per ounce of silver, net of by-product credits, of $7.35, compared to $6.99 in the prior year quarter.
  • Strong balance sheet with $221.1 million in cash and cash equivalents and short-term investments, up $6.7 million or 3% compared to $214.4 million as at June 30, 2021 and up $22.0 million or 11% compared to $199.1 million as at March 31, 2021. This does not include the investments in associates and equity investment in other companies, having a total market value of $172.8 million as at September 30, 2021 ($243.2 million as at June 30, 2021).

 

CONSOLIDATED FINANCIAL RESULTS

 

Three months ended September 30, Six months ended September 30,
2021 2020 Changes 2021 2020 Changes
Financial
Revenue (in thousands of $)  $ 58,435 $ 56,372 4% $ 117,254 $ 103,077 14%
Mine operating earnings (in thousands of $)  23,612 26,672 -11% 49,116 45,957 7%
Net income attributable to equity shareholders 9,393 15,472 -39% 21,605 30,963 -30%
 Earnings per share – basic ($/share) 0.05 0.09 -44% 0.12 0.18 -33%
Adjusted earnings attributable to equity shareholders 13,609 15,385 -12% 29,380 24,951 18%
Adjusted earning per share – basic ($/share) 0.08 0.09 -11% 0.17 0.14 21%
Net cash generated from operating activities (in thousands of $)  30,854 29,601 4% 67,306 59,743 13%
Capitalized expenditures (in thousands of $)  14,151 11,098 28% 25,323 21,318 19%
Cash and cash equivalents and short-term investments (in thousands of $)  221,050 200,056 10% 221,050 200,056 10%
Working capital (in thousands of $)  193,306 169,336 14% 193,306 169,336 14%
Metals sold
 Silver (in thousands of ounces)  1,729 1,740 -1% 3,371 3,612 -7%
 Gold (in thousands of ounces)  0.8 2.2 -64% 1.8 3.3 -45%
 Lead (in thousands of pounds)  17,319 18,551 -7% 34,129 39,436 -13%
 Zinc (in thousands of pounds)  7,626 7,411 3% 14,881 14,369 4%
 Average Selling Price, Net of Value Added Tax and Smelter Charges 
Silver ($/ounce) 18.97 18.99 0% 19.82 16.40 21%
Gold ($/ounce) 1,483 1,371 8% 1,497 1,362 10%
Lead ($/pound) 0.89 0.78 14% 0.87 0.73 19%
Zinc ($/pound) 1.03 0.71 45% 1.02 0.65 57%

 

Net income attributable to equity shareholders of the Company in Q2 Fiscal 2022 was $9.4 million or $0.05 per share, compared to $15.5 million or $0.09 per share in the three months ended September 30, 2020.

 

Adjusted earnings attributable to equity shareholders of the Company in Q2 Fiscal 2022 was $13.6 million, or $0.08 per share, compared to $15.4 million, or $0.09 per share Q2 Fiscal 2021. The adjustments were made to remove the impacts from non-cash and unusual items, including elimination of share-based compensation, foreign exchange loss, share of loss in associates, gain or loss on investments, and one-time items.

 

Compared to Q2 Fiscal 2021, the Company’s consolidated financial results in the current quarter were mainly impacted by i) an increase of 8%, 14%, and 45%, respectively, in the realized selling prices for gold, lead and zinc; offset by ii) a decrease of 1%, 64%, and 7%, respectively, in silver, gold, and lead sold; iii) a loss of $4.1 million on investments reported in profit; iv) an average 8% appreciation of the Chinese yuan against the US dollar, resulting in higher costs presented in US dollar; v) an overall 14.5% increase in mining contractors’ fee rate at the Ying Mining District as previously reported in the Company’s news release on May 20, 2021; and vi) an average 7% increase in employees’ pay rate and the contribution rate to employees’ social welfare funds in China returned to the normal rate from a reduced rate granted by the Chinese government in Fiscal 2021 due to Covid-19.

 

Revenue in Q2 Fiscal 2022 was $58.4 million, up 4% or $2.0 million compared to $56.4 million in Q2 Fiscal 2021. The increase was mainly due to an increase of $4.7 million arising from the increase in the gold, lead and zinc net realized selling metal prices; offset by a decrease of $3.3 million arising from the decrease in the quantities of silver, gold, and lead sold. Revenues from silver, gold, and base metal were $32.8 million, $1.2 million, and $24.4 million, respectively, compared to $33.0 million, $3.0 million, and $20.3 million in Q2 Fiscal 2021. Revenue from the Ying Mining District was $47.1 million, up 3%, compared to $45.7 million in Q2 Fiscal 2021. Revenue from the GC Mine was $11.3 million, up 24%, compared to $9.2 million in Q2 Fiscal 2021. Revenue from the BYP Mine was $nil, compared to $1.5 million in Q2 Fiscal 2021 as the Company sold all remaining gold concentrate inventories produced by the mine before it was placed on care and maintenance in 2014 in prior year quarter.

 

Income from mine operations in Q2 Fiscal 2022 was $23.6 million, down 11% compared to $26.7 million in Q2 Fiscal 2021. Income from mine operations at the Ying Mining District was $19.3 million, down 16% compared to $23.1 million in Q2 Fiscal 2021. Income from mine operations at the GC Mine was $4.5 million, up 55% compared to $2.9 million in Q2 Fiscal 2021.

 

Cash flow provided by operating activities in Q2 Fiscal 2022 was $30.9 million, up 4% or $1.3 million, compared to $29.6 million in Q2 Fiscal 2021.

 

The Company ended the quarter with $221.1 million in cash, cash equivalents and short-term investments, up $6.7 million or 3% compared to $214.4 million as at June 30, 2021 and up 11% or $22.0 million, compared to $199.1 million as at March 31, 2021.

 

Working capital as at September 30, 2021 was $193.3 million, up 5% or $9.3 million, compared to $184.0 million as at March 31, 2021.

 

 

CONSOLIDATED OPERATIONAL RESULTS

 

Three months ended September 30, Six months ended September 30,
2021 2020 Changes 2021 2020 Changes
Ore Production (tonne)
Ore mined 292,468 267,853 9% 523,703 522,408 0%
Ore milled 271,816 263,933 3% 514,893 526,259 -2%
Metal Production
 Silver (in thousands of ounces)  1,696 1,707 -1% 3,169 3,459 -8%
 Gold (in thousands of ounces)  0.8 1.1 -27% 1.8 2.2 -18%
 Lead (in thousands of pounds)  17,613 19,086 -8% 33,491 39,163 -14%
 Zinc (in thousands of pounds)  7,483 7,133 5% 14,681 14,666 0%
Cash Costs
Cash cost per ounce of Silver, net of by-product credits($) (1.65) (2.09) 21% (1.54) (1.77) 13%
All-in sustaining cost per ounce of silver, net of by-product credits ($) 7.35 6.99 5% 7.41 6.28 18%
Cash production cost per tonne of ore processed ($) 84.75 69.82 21% 81.60 68.47 19%
All-in sustaining cost per tonne of ore processed ($) 135.76 124.24 9% 133.90 118.46 13%

 

In Q2 Fiscal 2022, on a consolidated basis, the Company mined 292,468 tonnes of ore, up 9% or 24,615 tonnes, compared to 267,853 tonnes in Q2 Fiscal 2021. Ore milled in Q2 Fiscal 2022 was 271,816 tonnes, up 3% or 7,883 tonnes, compared to 263,933 tonnes in Q2 Fiscal 2021, but 20,832 tonnes lower than mined as a result of transportation interruptions caused by lengthy heavy rains at Ying Mining District in Q2 Fiscal 2022.

 

In Q2 Fiscal 2022, the Company sold approximately 1.7 million ounces of silver, 800 ounces of gold, 17.3 million pounds of lead, and 7.6 million pounds of zinc, representing decreases of 1%, 64%, and 7% in silver, gold and lead sold, respectively, and an increase of 3% in zinc sold, compared to 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 sold in Q2 Fiscal 2021. Gold sold in Q2 Fiscal 2021 included 1,200 ounces from the BYP Mine.

 

In Q2 Fiscal 2022, the consolidated cash production costs per tonne of ore processed was $84.75, up 21% compared to $69.82 in Q2 Fiscal 2021. The consolidated all-in sustaining production cost per tonne of ore processed was $135.76, up 9%, compared to $124.24 in Q2 Fiscal 2021, but within the Company’s current annual cost guidance.

 

In Q2 Fiscal 2022, the consolidated cash cost per ounce of silver, net of by-product credits, was negative $1.65, compared to negative $2.09 in the prior year quarter. The increase was mainly due to the increase in per tonne cash production costs, offset by an increase of $1.42 in by-product credits per ounce of silver. Sales from lead and zinc in Q2 Fiscal 2022 amounted to $23.2 million, up $3.6 million, compared to $19.6 million in Q2 Fiscal 2021.

 

The consolidated all-in sustaining cost per ounce of silver, net of by-product credits, was $7.35, compared to $6.99 in Q2 Fiscal 2021.  The increase was mainly due to the increase of cash cost per ounce of silver, net of by-product credits, offset by a decrease of $2.0 million in sustaining capital expenditures, mainly resulting from less tunneling development.

 

In Q2 Fiscal 2022, on a consolidated basis, a total of 124,544 metres or $6.2 million worth of diamond drilling were completed (Q2 Fiscal 2021 – 71,274 metres or $2.5 million), of which approximately 91,970 metres or $2.4 million worth of underground drilling were expensed as part of mining costs (Q2 Fiscal 2021 – 71,274 metres or $2.5 million) and approximately 32,574 metres or $3.8 million worth of drilling were capitalized (Q2 Fiscal 2021 – nil). In addition, approximately 9,953 metres or $3.4 million worth of preparation tunnelling were completed and expensed as part of mining costs (Q2 Fiscal 2021 – 7,693 metres or $1.9 million), and approximately 20,501 metres or $8.3 million worth of tunnels, raises, ramps and declines were completed and capitalized (Q2 Fiscal 2021 – 25,678 metres or $8.5 million).

 

 

INDIVIDUAL MINE OPERATING PERFORMANCE 

 

Ying Mining District Q2 2022 Q1 2022 Q4 2021 Q3 2021 Q2 2021 Six months ended September 30,
 September 30, 2021   June 30, 2021  March 31, 2021  December 31, 2020  September 30, 2020 2021 2020
Ore Production (tonne)
Ore mined 206,933 142,907 112,561 182,268 181,020 349,840 355,196
Ore milled 182,173 155,407 131,725 162,905 179,083 337,580 356,772
Head grades
Silver (gram/tonne) 283 279 280 297 288 281 290
Lead (%) 4.0 4.2 3.9 4.3 4.4 4.1 4.5
Zinc (%) 0.7 0.8 0.8 0.8 0.7 0.8 0.8
Recovery rates
Silver (%) 95.4 94.7 93.7 93.9 94.4 95.1 94.6
Lead (%) 95.5 95.7 95.1 96.4 96.1 95.6 96.1
Zinc (%) 56.0 59.7 65.0 63.3 57.9 57.8 60.9
Cash Costs
Cash cost per ounce of Silver, net of by-product credits($) 0.71 0.80 1.20 (1.12) (0.14) 0.75 (0.52)
All-in sustaining cost per ounce of silver, net of by-product credits ($) 6.88 6.54 10.00 5.24 6.63 6.71 5.34
Cash production cost per tonne of ore processed ($) 96.59 92.79 98.13 83.09 80.06 95.10 78.18
All-in sustaining cost per tonne of ore processed ($) 141.26 138.55 155.14 133.07 132.36 140.27 124.74
Metal Production
 Silver (in thousands of ounces)  1,517 1,283 1,083 1,464 1,525 2,800 3,068
 Gold (in thousands of ounces)  0.8 1.0 0.3 0.9 1.1 1.8 2.2
 Lead (in thousands of pounds)  14,671 13,278 10,504 14,361 16,080 27,949 33,021
 Zinc (in thousands of pounds)  1,584 1,519 1,496 1,857 1,643 3,103 3,563

 

In Q2 Fiscal 2022, a total of 102,905 metres or $5.0 million worth of diamond drilling were completed (Q2 Fiscal 2021 – 59,540 metres or $2.0 million) at the Ying Mining District, of which approximately 72,844 metres or $2.2 million worth of underground drilling were expensed as part of mining costs (Q2 Fiscal 2021 – 59,540 metres or $2.0 million) and approximately 30,061 metres or $2.8 million worth of drilling were capitalized (Q2 Fiscal 2021 – nil). In addition, approximately 7,528 metres or $2.9 million worth of preparation tunnelling were completed and expensed as part of mining costs (Q2 Fiscal 2021 – 5,316 metres or $1.6 million), and approximately 16,676 metres or $7.1 million worth of horizontal tunnels, raises, ramps, and declines were completed and capitalized (Q2 Fiscal 2021 – 21,278 metres or $7.5 million).

 

 

GC Mine Q2 2022 Q1 2021 Q4 2021 Q3 2021 Q2 2021 Six months ended September 30,
 September 30, 2021   June 30, 2021  March 31, 2021  December 31, 2020   September 30, 2020  2021 2020
Ore Production (tonne)
Ore mined 85,535 88,328 50,511 97,177 86,833 173,863 167,212
Ore milled 89,643 87,670 48,949 97,743 84,850 177,313 169,487
Head grades
Silver (gram/tonne) 73 80 87 82 81 77 87
Lead (%) 1.7 1.5 1.7 1.4 1.8 1.6 1.8
Zinc (%) 3.3 3.3 3.3 3.5 3.4 3.3 3.4
Recovery rates
Silver (%) 84.4 84.1 81.9 82.6 82.5 84.2 82.7
Lead (%) 89.5 89.3 89.7 89.6 89.2 89.4 89.5
Zinc (%) 89.6 89.3 88.2 89.7 87.3 89.5 87.3
Cash Costs
Cash cost per ounce of Silver, net of by-product credits($) (22.51) (17.96) (12.80) (14.43) (12.70) (20.12) (9.52)
All-in sustaining cost per ounce of silver, net of by-product credits ($) (11.61) (7.98) 0.52 (1.05) (1.78) (9.70) 0.40
Cash production cost per tonne of ore processed ($) 55.81 52.90 58.56 54.07 48.47 54.33 47.80
All-in sustaining cost per tonne of ore processed ($) 73.76 71.67 87.69 78.63 69.07 72.69 67.49
Metal Production
 Silver (in thousands of ounces)  179 190 112 212 182 369 384
 Lead (in thousands of pounds)  2,942 2,600 1,652 2,750 3,006 5,542 6,072
 Zinc (in thousands of pounds)  5,899 5,679 3,176 6,816 5,490 11,578 10,948

 

In Q2 Fiscal 2022, approximately 19,126 metres or $0.7 million worth of underground diamond drilling (Q2 Fiscal 2021 – 11,734 metres or $0.5 million) and 2,425 metres or $0.4 million of tunnelling (Q2 Fiscal 2021 – 2,377 metres or $0.3 million) were completed and expensed as mining preparation costs at the GC Mine. In addition, approximately 3,825 metres or $1.2 million of horizontal tunnels, raises, and declines were completed and capitalized (Q2 Fiscal 2021 – 4,400 metres or $1.0 million).

 

Updates

 

In October 2021, the SGX Mine at the Ying Mining District suspended production temporarily as a precautionary measure due to the heavy rainfall experienced in the Yellow River region. The water level at the nearby reservoir that discharges into the Yellow River reached an all time high, causing the operations at the SGX Mine to be suspended for ten days, impacting production and ore head grades. Despite this interruption, the Company expects to maintain a similar mining production rate as achieved in Q2 Fiscal 2022 and increase the milling tonnage at the Ying Mining District in the third quarter of Fiscal 2022.

 

As announced on October 13, 2021, the Company, through a 100% owned subsidiary of Henan Found, won an online auction to acquire the Kuanping Project for a total of $13.5 million (RMB¥86.8 million) (the “Consideration”). The acquisition is not subject to the national security clearance as Henan Found’s subsidiary is considered as a domestic company in China. The Company paid the consideration in October 2021 and expects to complete the acquisition in November 2021.

 

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.

 

Posted November 5, 2021

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