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Silvercorp Reports Adjusted Net Income of $15.8 Million, $0.09 Per Share, and Cash Flow From Operations of $36.5 Million for Q1 Fiscal 2022

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Silvercorp Reports Adjusted Net Income of $15.8 Million, $0.09 Per Share, and Cash Flow From Operations of $36.5 Million for Q1 Fiscal 2022

 

 

 

 

 

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

 

Q1 FISCAL 2022 HIGHLIGHTS  

 

  • Mined 231,235 tonnes of ore and milled 243,077 tonnes of ore, down 9% and 7% compared to the prior year quarter due primarily to slow downs during contract renewal negotiations with mining contractors, which were successfully completed as announced July 13, 2021;
  • Sold approximately 1.6 million ounces of silver, 1,000 ounces of gold, 16.8 million pounds of lead, and 7.3 million pounds of zinc, representing decreases of 12%, 9%, and 20% in silver, gold and lead sold, and an increase of 4% in zinc sold, compared to the prior year quarter;
  • Revenue of $58.8 million, up 26% compared to $46.7 million in the prior year quarter;
  • Net income attributable to equity shareholders of $12.2 million, or $0.07 per share, compared to $15.5 million, or $0.09 per share in the prior year quarter;
  • Adjusted earnings attributable to equity shareholders of $15.8 million, or $0.09 per share, compared to $9.6 million, or $0.05 per share in the prior year quarter. The adjustments were made to remove the impacts from non-recurring items, share-based compensation, foreign exchange, mark-to-market equity investments, and the share of associates’ operating results.
  • Income from mine operations in Q1 Fiscal 2022 was $25.5 million, up 32% compared to $19.3 million in prior year quarter.
  • Cash flow from operations of $36.5 million, up 21% or $6.4 million compared to $30.1 million in the prior year quarter;
  • Cash cost per ounce of silver, net of by-product credits, of negative $1.43 compared to negative $1.48 in the prior year quarter;
  • All-in sustaining cost per ounce of silver, net of by-product credits, of $7.46, compared to $5.61 in the prior year quarter;
  • Paid $2.2 million of dividends to the Company’s shareholders;
  • Invested $5.0 million in Whitehorse Gold Corp. (“WHG”) to increase the Company’s ownership interest in WHG by 2.5% to 29.5%; and,
  • Strong balance sheet with $214.4 million in cash and cash equivalents and short-term investments, up $15.3 million or 8% 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 $243.2 million as at June 30, 2021.

 

CONSOLIDATED FINANCIAL RESULTS 

 

Three months ended June 30,
2021 2020 Changes
Financial
Revenue (in thousands of $)  $ 58,819 $ 46,705 26%
Mine operating earnings (in thousands of $)  25,504 19,285 32%
Net income attributable to equity shareholders 12,212 15,491 -21%
 Earnings per share – basic ($/share) 0.07 0.09 -22%
Adjusted earnings attributable to equity shareholders 15,771 9,566 65%
Adjusted earning per share – basic ($/share) 0.09 0.05 80%
Net cash generated from operating activities (in thousands of $)  36,452 30,142 21%
Capitalized expenditures (in thousands of $)  11,172 10,220 9%
Cash and cash equivalents and short-term investments (in thousands of $)  214,426 178,386 20%
Working capital (in thousands of $)  188,905 153,732 23%
Metals sold
 Silver (in thousands of ounces)  1,642 1,872 -12%
 Gold (in thousands of ounces)  1.0 1.1 -9%
 Lead (in thousands of pounds)  16,810 20,885 -20%
 Zinc (in thousands of pounds)  7,255 6,958 4%
 Average Selling Price, Net of Value Added Tax and Smelter Charges 
Silver ($/ounce) 20.70 13.99 48%
Gold ($/ounce) 1,508 1,343 12%
Lead ($/pound) 0.86 0.69 25%
Zinc ($/pound) 1.02 0.60 70%

 

Net income attributable to equity shareholders of the Company in Q1 Fiscal 2022 was $12.2 million or $0.07 per share, compared to $15.5 million or $0.09 per share in three months ended June 30, 2020.

 

Adjusted earnings attributable to equity shareholders of the Company in Q1 Fiscal 2022 was $15.8 million, or $0.09 per share, compared to $9.6 million, or $0.05 per share Q1 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 mark-to-market equity investments, and one-time items.

 

In Q1 Fiscal 2022, the Company’s consolidated financial results were mainly impacted by i) an increase of 48%, 12%, 25%, and 70%, respectively, in the realized selling prices for silver, gold, lead and zinc; offset by ii) a decrease of 12%, 9%, and 20%, respectively, in silver, gold, and lead sold; iii) lower production; and iv) the depreciation of the US dollar against the Company’s functional currencies, mainly the Chinese yuan and the Canadian dollar.

 

Revenue in Q1 Fiscal 2022 was $58.8 million, up 26% or $12.1 million compared to $46.7 million in Q1 Fiscal 2021. The increase was mainly due to i) an increase of $19.3 million arising from the increase in the net realized selling metal prices; ii) an increase of $1.3 million arising from the increase in the quantities of zinc sold; offset by iii) a decrease of $8.5 million arising from the decrease in the quantities of silver, gold, and lead sold. Revenues from silver, gold, and base metal were $34.0 million, $1.5 million, and $23.3 million, respectively, up 30%, 2%, and 22%, respectively, compared to $26.2 million, $1.5 million, and $19.0 million in Q1 Fiscal 2021. Revenue from the Ying Mining District was $47.4 million, up 19%, compared to $39.7 million in Q1 Fiscal 2021. Revenue from the GC Mine was $11.4 million, up 62%, compared to $7.0 million in Q1 Fiscal 2021.

 

Income from mine operations in Q1 Fiscal 2022 was $25.5 million, up 32% compared to $19.3 million in prior year quarter. Income from mine operations at the Ying Mining District was $21.2 million, up 20% compared to $17.6 million in Q1 Fiscal 2021. Income from mine operations at the GC Mine was $4.4 million, up 144% compared to $1.8 million in Q1 Fiscal 2021.

 

Cash flow provided by operating activities in Q1 Fiscal 2022 was $36.5 million, up 21% or $6.3 million, compared to $30.1 million in Q1 Fiscal 2021.

 

The Company ended the quarter with $214.4 million in cash, cash equivalents and short-term investments, up 8% or $15.3 million, compared to $199.1 million as at March 31, 2021.

 

Working capital as at June 30, 2021 was $188.9 million, up 3% or $4.9 million, compared to $184.0 million as at March 31, 2021.

 

Consolidated OPERATIONAL RESULTS

 

Three months ended June 30,
2021 2020 Changes
Ore Production (tonne)
Ore mined 231,235 254,555 -9%
Ore milled 243,077 262,326 -7%
Metal Proudction
Silver (in thousands of ounces)  1,474 1,752 -16%
Gold (in thousands of ounces)  1.0 1.1 -9%
Lead (in thousands of pounds)  15,878 20,077 -21%
Zinc (in thousands of pounds)  7,198 7,533 -4%
Cash Costs
Cash cost per ounce of Silver, net of by-product credits($) (1.43) (1.48) 3%
All-in sustaining cost per ounce of silver, net of by-product credits ($) 7.46 5.61 33%
Cash production cost per tonne of ore processed ($) 77.55 67.05 16%
All-in sustaining cost per tonne of ore processed ($) 131.48 112.59 17%

 

In Q1 Fiscal 2022, on a consolidated basis, the Company mined 231,235 tonnes of ore, down 9% or 23,320 tonnes, compared to 254,555 tonnes in Q1 Fiscal 2021. Ore milled in Q1 Fiscal 2022 was 243,077 tonnes, down 7% or 19,249 tonnes, compared to 262,326 tonnes in Q1 Fiscal 2021. The decrease was primarily a result of the Company’s mining contract renewal negotiation at the Ying Mining District as reported in the Company’s news releases dated July 13 and April 28, 2021. Contracts were renewed for an additional 2 years in mid May 2021, and  the Company expects to increase production in the remaining three quarters and meet its annual guidance.

 

In Q1 Fiscal 2022, the Company produced approximately 1.5 million ounces of silver, 1,000 ounces of gold, 15.9 million pounds of lead, and 7.2 million pounds of zinc, compared to 1.8 million ounces of silver, 1,100 ounces of gold, 20.1 million pounds of lead, and 7.5 million pounds of zinc sold in Q1 Fiscal 2021.

 

Compared to Q1 Fiscal 2021, the Company’s consolidated per tonne costs in the current quarter were mainly impacted by i) 9% appreciation of the Chinese yuan against the US dollar resulting in higher costs presented in the US dollar; ii) an average 7% increase in frontline workers’ pay rate,  iii) lower production at the Ying Mining District resulting in higher per tonne fixed cost allocation, and iv) an overall of 14.5% increase in mining contractors’ fee rate at the Ying Mining District as reported previously in the Company’s news release dated May 20, 2021. The consolidated cash production cost and all-in sustaining production cost per tonne of ore processed were $77.55 and $131.48, up 16% and 17%, respectively, compared to $67.05 and $112.59 in Q1 Fiscal 2021, but both were in line with the Company’s Fiscal 2022 annual guidance.

 

In Q1 Fiscal 2022, the consolidated cash cost per ounce of silver, net of by-product credits, was negative $1.43, compared to negative $1.48 in the prior year quarter. The increase was mainly due to the increase in per tonne cash production costs as discussed above, offset by an increase of $4.16 in by-product credits per ounce of silver. Sales from lead and zinc in Q1 Fiscal 2022 amounted to $21.8 million, up $3.3 million, compared to $18.5 million in Q1 Fiscal 2021.

 

The consolidated all-in sustaining cost per ounce of silver, net of by-product credits, was $7.46, compared to $5.61 in Q1 Fiscal 2021.  The increase was mainly due to the increase in per tonne all-in sustaining production cost, offset by an increase of $4.16 in by-product credits per ounce of silver.

 

In Q1 Fiscal 2022, on a consolidated basis, a total of 107,913 metres or $4.6 million worth of diamond drilling were completed (Q1 Fiscal 2021 – 36,697 metres or $1.1 million), of which approximately 50,666 metres or $1.3 million worth of underground drilling were expensed as part of mining costs (Q1 Fiscal 2021 – 36,697 metres or $1.1 million) and approximately 57,247 metres or $3.3 million worth of exploration drilling were capitalized (Q1 Fiscal 2021 – nil). In addition, approximately 6,955 metres or $2.8 million worth of preparation tunnelling were completed and expensed as part of mining costs (Q1 Fiscal 2021 – 10,142 metres or $2.6 million), and approximately 17,263 metres or $6.6 million worth of tunnels, raises, ramps and declines were completed and capitalized (Q1 Fiscal 2021 – 26,375 metres or $9.0 million).

 

INDIVIDUAL MINE OPERATING PERFORMANCE 

 

Ying Mining District Q1 2022 Q4 2021 Q3 2021 Q2 2021 Q1 2021
 June 30, 2021   March 31, 2021   December 31, 2020   September 30, 2020   June 30, 2020 
Ore Production (tonne)
Ore mined 142,907 112,561 182,268 181,020 174,176
Ore milled 155,407 131,725 162,905 179,083 177,689
Head grades
Silver (gram/tonne) 279 280 297 288 293
Lead (%) 4.2 3.9 4.3 4.4 4.6
Zinc (%) 0.8 0.8 0.8 0.7 0.8
Recovery rates
Silver (%) 94.7 93.7 93.9 94.4 94.7
Lead (%) 95.7 95.1 96.4 96.1 96.2
Zinc (%) 59.7 65.0 63.3 57.9 63.8
Cash Costs
Cash cost per ounce of Silver, net of by-product credits($) 0.80 1.20 (1.12) (0.14) (0.87)
All-in sustaining cost per ounce of silver, net of by-product credits ($) 6.54 10.00 5.24 6.63 4.14
Cash production cost per tonne of ore processed ($) 92.79 98.13 83.09 80.06 76.21
All-in sustaining cost per tonne of ore processed ($) 138.55 155.14 133.07 132.36 116.99
Metal Production
Silver (in thousands of ounces)  1,283 1,083 1,464 1,525 1,544
Gold (in thousands of ounces)  1.0 0.3 0.9 1.1 1.2
Lead (in thousands of pounds)  13,278 10,504 14,361 16,080 16,941
Zinc (in thousands of pounds)  1,519 1,496 1,857 1,643 1,920

 

In Q1 Fiscal 2022, a total of 89,189 metres or $3.9 million worth of diamond drilling were completed (Q1 Fiscal 2021 – 28,485 metres or $0.8 million) at the Ying Mining District, of which approximately 31,942 metres or $0.7 million worth of underground drilling were expensed as part of mining costs (Q1 Fiscal 2021 – 28,485 metres or $0.8 million) and approximately 57,247 metres or $3.3 million worth of exploration drilling were capitalized (Q1 Fiscal 2021 – nil). In addition, approximately 6,501 metres or $2.5 million worth of preparation tunnelling were completed and expensed as part of mining costs (Q1 Fiscal 2021 – 6,207 metres or $1.8 million), and approximately 12,973 metres or $5.4 million worth of horizontal tunnels, raises, ramps, and declines were completed and capitalized (Q1 Fiscal 2021 – 23,108 metres or $7.8 million).

 

 

GC Mine Q1 2022 Q4 2021 Q3 2021 Q2 2021 Q1 2021
 June 30, 2021   March 31, 2021  December 31, 2020   September 30, 2020   June 30, 2020 
Ore Production (tonne)
Ore mined 88,328 50,511 97,177 86,833 80,379
Ore milled 87,670 48,949 97,743 84,850 84,637
Head grades
Silver (gram/tonne) 80 87 82 81 93
Lead (%) 1.5 1.7 1.4 1.8 1.9
Zinc (%) 3.3 3.3 3.5 3.4 3.4
Recovery rates
Silver (%) 84.1 81.9 82.6 82.5 82.8
Lead (%) 89.3 89.7 89.6 89.2 89.8
Zinc (%) 89.3 88.2 89.7 87.3 87.3
Cash Costs
Cash cost per ounce of Silver, net of by-product credits($) (17.96) (12.80) (14.43) (12.70) (6.59)
All-in sustaining cost per ounce of silver, net of by-product credits ($) (7.98) 0.52 (1.05) (1.78) 2.41
Cash production cost per tonne of ore processed ($) 52.90 58.56 54.07 48.47 47.08
All-in sustaining cost per tonne of ore processed ($) 71.67 87.69 78.63 69.07 65.84
Metal Production
Silver (in thousands of ounces)  190 112 212 182 209
Lead (in thousands of pounds)  2,600 1,652 2,750 3,006 3,136
Zinc (in thousands of pounds)  5,679 3,176 6,816 5,490 5,613

 

In Q1 Fiscal 2022, approximately 18,724 metres or $0.6 million worth of underground diamond drilling (Q1 Fiscal 2021 – 8,212 metres or $0.3 million) and 454 metres or $0.3 million of tunnelling (Q1 Fiscal 2021 – 3,458 metres or $0.8 million) were completed and expensed as mining preparation costs at the GC Mine. In addition, approximately 4,290 metres or $1.2 million of horizontal tunnels, raises, and declines were completed and capitalized (Q1 Fiscal 2021 – 3,267 metres or $1.2 million).

 

This earnings release should be read in conjunction with the Company’s Management Discussion & Analysis Financial Statements and Notes to Financial Statements for the corresponding period, which have been posted on SEDAR under the Company’s profile at www.sedar.com and are also available on the Company’s website at www.silvercorp.ca. This earnings release refers to various alternative performance (non-IFRS) measures, such as adjusted earnings and adjusted earnings per share, cash cost and all-in sustaining cost per ounce of silver, net of by-product credits, cash production cost and all-in sustaining production cost per tonne of ore processed and working capital. These measures are widely used in the mining industry as a benchmark for performance, but do not have standardized meanings under IFRS as an indicator of performance and may differ from methods used by other companies with similar description.  Accordingly, to facilitate a better understanding of these measures as calculated by the Company, please refer to section 10 – Alternative Performance (Non-IFRS) Measures of the corresponding MD&A for detailed description and reconciliation.

 

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 August 6, 2021

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