Silvercorp Metals Inc. (AMEX:SVM) Q3 2024 Earnings Call Transcript
Silvercorp Metals Inc. (AMEX:SVM) Q3 2024 Earnings Call Transcript February 9, 2024
Silvercorp Metals Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Thank you for standing by. Good afternoon. My name is Lesser and I will be your operator for today. At this time, I would like to welcome everyone to Silvercorp's Third Quarter Fiscal 2024 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] I would now like to turn the conference over to Lon Shaver, President of Silvercorp Metals. Please go ahead.
Lon Shaver: Thank you, operator. On behalf of Silvercorp, I'd like to welcome all of you to this call to discuss our third quarter fiscal 2024 financial results. They were released yesterday after market. Copy of the news release, the MD&A and the financial statements for today's call are available on our website and on SEDAR+. Before we get started, I'm required to remind you that certain statements on today's call will contain forward-looking information as it relates to applicable securities laws. Please review the cautionary statements included in our news release and presentation as well as the risk factors described in our most recent 10-Q and Form 40-F and AIF. So turning to the quarterly financial results. With respect to the quarter, we delivered a strong Q3, good financial results, which were underpinned by revenue of $58.5 million, in line with the prior year quarter.
And this number did reflect a number of changes in different parameters. With respect to pricing, we had increases of 11%, 17% and 2% in gold, silver and lead respectively and a decrease of 15% in the realized zinc price. Switching to volume. We had increases of 22% and 3% in gold and zinc sold, respectively, but offset by decreases of 8% and 16% in silver and lead sold. Based on production levels and realized prices this quarter, silver was 59% of revenue on a net realized basis. This is up from 54% in Q3 of fiscal 2023 and almost hit our record in recent years of 60% of revenue. Third quarter net earnings attributable to equity shareholders were $10.5 million, or $0.06 per share, as compared to $11.9 million, or $0.07, for the same period last year.
The main contributors to the slight decrease were the aforementioned factors impacting revenue, an increase of $5 million in the share of loss in associates, an improvement of $4.4 million in mark-to-market – on investments that we hold and a 4% improvement in unit production costs. On an adjusted basis, with adjustments made to remove the impacts of noncash and unusual items, earnings for the quarter were $11.5 million or also $0.06 per share due to rounding. This compared to $11.8 million or $0.07 per share in the same period last year. And just a reminder, this adjusted earnings figure is a supplemental non-GAAP measure to provide investors with another metric to better measure the performance of the underlying business, it's continuing profitability and growth potential.
Our cash flow from operating activities in the quarter was $23.6 million, down very slightly from $25.7 million in the prior year quarter due to the factors mentioned just before, affecting revenue net income, but also $3.2 million increase in cash taxes paid. And also the number in last year's quarter also reflected a positive adjustment of $1.7 million from noncash working capital that did not apply this year. Capital expenditures totaled approximately $19.6 million in this quarter. That was up 26% from $15.6 million in the prior year period due to increased tunnel and ramp development and exploration activities at both operations as well as modestly higher investments in equipment and facilities at Ying. We ended the quarter with $198.2 million in cash and cash equivalents and short-term investments.
That's up 5% compared to the $189 million that we reported as of September 30. And just a reminder, this cash position does not include our investments in associates and other companies, which had a total market value of approximately $140 million on December 31. As we previously reported, in terms of production in the quarter, we mined 345,273 tonnes of ore and milled 312,500 tonnes of ore. Those numbers are up 17% and 3%, respectively, compared to the same quarter last year. The increase in mine tonnage reflects the stockpiling of just over 60,000 tonnes of ore at Ying, which will be processed in the current quarter during the Chinese New Year holiday, which is on right now. We produced on a consolidated basis, approximately 1.7 million ounces of silver, 1,300 ounces of gold, 16.8 million pounds of lead and 7.4 million pounds of zinc in the quarter.
These figures, as mentioned, represented decreases of 9% and 16%, respectively, in silver and lead production compared to last year's Q3. The decrease mainly reflects lower head grades at Ying and GC due to mining sequencing. And also, we did, as mentioned, have increased ore stockpiling at Ying. It also reflected increased gold ore mining and milling at Ying during the quarter, which contributed to a 22% increase in gold production, compared to the prior year quarter. Year-to-date, we've produced 5.1 million ounces of silver, 5,400 ounces of gold, 51 million pounds of lead and 19 million pounds of zinc. In this current Q4, we expect to produce approximately 1.1 million to 1.3 million ounces of silver, between 1,200 and 1,300 ounces of gold, between 11.5 million – approximately 11.5 million pounds of lead and 4.5 million to 5 million pounds of zinc.
Those would be increases of up to 17%, 30%, 20% and 40% for silver, gold, lead and zinc, respectively compared to the Q4 period of last year. The cash costs corporately per ounce of silver, net of byproduct credits was negative $0.96 in the third quarter, compared to a negative $1.15 in the prior year quarter with this increase mainly due to less silver sold, resulting in higher unit production costs before byproduct credits and a decrease of $2.5 million in byproduct credits. But this was offset by a 4% depreciation in the Chinese RMB against the U.S. dollar over the same prior year period. The all-in sustaining cost per ounce of silver net of byproduct credits was $11.33 compared to $9.28 in Q3 of fiscal 2023, with the increase primarily reflecting the same factors impacting the cash cost that I just mentioned, offset by a decrease of $0.5 million in all-in sustaining capital expenditures compared to the prior year period.
Let's turn to our growth projects. To enhance operational efficiencies at Ying, we have previously disclosed our plan to transition certain mining areas from cut-and-fill resuing to shrinkage stoping, which will allow for increased mechanization. We have started to take delivery of 20 new LHDs. So those are the scoop shovels for underground mining, which will be employed in that fashion. And some of our expenditures in this period are related to improving access to these new areas and to shorten travel times to other mining areas. To address the anticipated higher dilution from the shrinkage mining method, we are planning to install three XRT ore sorters, with the first having been installed at the number 2 mill at Ying, and it's currently in trial operation.
As we've previously disclosed, Silvercorp is exploring alternative strategies to expand Ying's processing capacity. Our current plan is to add a new 1,500 tonne per day production line at the number two mill to increase the production capacity at Ying to 4,000 tonnes per day. This expansion is expected to be completed in the upcoming fiscal year. In addition, we spent a total of $9.9 million on the construction of the new tailing storage facility at Ying to date, and construction is on track for completion later this year. We’ll provide additional details on these items in our fiscal 2025 guidance, which will be released along with our fiscal 2024 production results in April. Additionally, we plan to release updated mineral resources and reserve estimates and mine plans for both Ying and GC by the middle of this year.
The updated technical reports will incorporate all technical work programs, including drilling completed up to the end of 2023, and should provide more details on what to expect from both operations near and longer-term. As it relates to Kuanping, the satellite project located north of Ying, the Company has completed environmental, water, and soil assessments. These reports have been approved by the relevant provincial authorities. And updated mineral resource estimate report prepared in accordance with Chinese standards has also been reviewed and approved by the province. Furthermore, a report incorporating the mineral resource development and utilization plan, reclamation plan, and environmental rehabilitation plan has been reviewed and approved by an external expert panel.
A few outstanding approvals are still required before development can begin, and we will provide additional details on Kuanping when they are available. Turning to OreCorp, with respect to our OreCorp acquisition, on December 26, 2023, Silvercorp and OreCorp entered into a bid implementation deed whereby we’ve agreed to acquire by means of an off-market takeover offer, all of the OreCorp shares not already owned by Silvercorp for a consideration comprising 0.0967 common shares of Silvercorp and A$0.19 in cash per OreCorp shares. This was the same consideration that we had in the scheme that OreCorp shareholders would have voted on in early December. The OreCorp Board is again unanimously recommending that OreCorp shareholders accept the offer.
The takeover offer document was dispatched to OreCorp shareholders in mid-January, and on February 1, we received a Merger Clearance Certificate from the Tanzanian Fair Competition Commission providing unconditional merger control approval for the transaction. This approval represents the sole Tanzanian regulatory requirement needed to complete the transaction. Our offer is open for acceptance by OreCorp shareholders until February 23 unless extended, and we look forward to providing the market with updates on the transaction over the coming weeks. And with that, operator, I’d like to open the call for questions.
See also 20 Best English Speaking Countries to Retire, Live, or Visit and 14 Best US Stocks For Foreign Investors.
To continue reading the Q&A session, please click here.
