Silvercorp Metals Q3 2024 Earnings Call Transcript

Quartr
Provided by Quartr
February 9, 2024

There are 5 speakers on the call.

Operator

Thank you for standing by. Good afternoon. My name is Lester and I will be your operator for today. At this time, I would like to welcome everyone to Silber Corp. 3rd Quarter Fiscal 20 24 Financial Results Conference Call.

Operator

All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer I would now like to turn the conference over to Lon Shaver, President of Silver Corp. Metals. Please go ahead.

Speaker 1

Thank you, operator. On behalf of Silver Corp, like to welcome all of you to this call to discuss our Q3 fiscal 2024 financial results. They were released yesterday after market. Copy of the news release, the MD and A and the financial statements for today's call are available on our website and on SEDAR Plus. 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 10Q and Form 40F and AIF.

Speaker 1

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 $58,500,000 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% 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% 16% in silver and lead sold.

Speaker 1

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. 3rd quarter net earnings attributable Equity shareholders were $10,500,000 or $0.06 per share as compared to $11,900,000 or $0.07 The main contributors to the slight decrease were the aforementioned factors impacting revenue, an increase of $5,000,000 in Chair of Lawson Associates, an improvement of $4,400,000 in mark to mark 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 non cash and unusual items, Earnings for the quarter were $11,500,000 or also $0.06 per share due to rounding. This compared to $11,800,000 or $0.07 per share in the same period last year.

Speaker 1

And just a reminder, this adjusted earnings is a supplemental non GAAP measure to provide investors with another metric to better measure the performance of the underlying business, its continuing profitability and growth Our cash flow from operating activities in the quarter was $23,600,000 down very slightly from 25 700,000 in the prior year quarter due to the factors mentioned just before affecting revenue and net income, But also $3,200,000 increase in cash taxes paid and also the number in last year's quarter Also reflected a positive adjustment of $1,700,000 from non cash working capital that did not apply this year. Capital expenditures totaled approximately $19,600,000 in this quarter. That was up 26% from $15,600,000 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 $198,200,000 in cash and cash equivalents and short term investments. That's up 5% compared to the $189,000,000 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 140,000,000 on December 31.

Speaker 1

As we previously reported, in terms of production in the quarter, we mined 345,273 Tons 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 tons of ore at Ying, which will be processed in the current quarter during the Chinese New Year holiday, which We produced on a consolidated basis approximately 1,700,000 ounces of silver, 1,300 ounces of gold, £16,800,000 of lead and £7,400,000 of zinc in the quarter. These figures, as mentioned, represented decreases 9% 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, I 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.

Speaker 1

Year to date, we've produced 5,100,000 ounces Silver, 5,400 ounces of gold, £51,000,000 of lead and £19,000,000 of zinc. In this current Q4, we expect to produce approximately 1,100,000 to 1,300,000 ounces of silver, between 1,200,000 and 1,300,000 ounces of gold, between 11,500,000 1,000 ounces of gold between £11,500,000 of lead and £4,500,000 to £5,000,000 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 cost corporately Per ounce of silver, net of byproduct credits was negative $0.96 in the 3rd 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 $2,500,000 in byproduct credits, but this was offset by 4% depreciation in the Chinese RMB against the U. S.

Speaker 1

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 $928,000,000 in Q3 of fiscal 2023, with the increase primarily reflecting the same factors impacting The cash cost I just mentioned offset by a decrease of $500,000 in all in sustaining capital expenditures compared the prior year period. So 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 restoring to shrinkage stoping, which will allow for increased mechanization. We have started to take delivery of 20 new LHDs.

Speaker 1

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 address the anticipated higher dilution from the shrinkage mining method, we are Planning to install 3 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 previously disclosed, Silvercorp is exploring alternative strategies to expand Ying's processing capacity. Our current plan is to add a new 1500 tonne per day production line at the number 2 mill to increase the production capacity at Ying to 4,000 tons per day. This expansion is expected to be completed in the upcoming fiscal year.

Speaker 1

In addition, we spent a total of $9,900,000 On the construction of the new tailings storage facility at Yang 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 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 Quanping, the satellite project located north of Ying. The company has completed environmental, water and soil assessments.

Speaker 1

These reports have been approved by the relevant provincial authorities. An 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 A few outstanding approvals are still required before development can begin, and we will provide additional details on Kuang Paying when they Turning to ORCORP. With respect to our ORCORP acquisition, on December 26, 2023, Silvercorp and Orcorp entered into a bid implementation deed, whereby we've agreed to acquire By means of an off market takeover offer, all of the ORCORP shares not already owned by Silvercorp for consideration comprising 0.0967 common shares of Silvercorp and AUD0.19 in cash per ORCORP shares. This is the same consideration that we had in the scheme that ORCORP shareholders would have voted on in early December.

Speaker 1

The Orcorp board is again unanimously recommending that Orcorp shareholders accept the offer. The takeover offer document was dispatched commission providing unconditional merger control approval for the transaction. This approval represents the sole Tanzanian regulatory requirement Our offer is open for acceptance by ORCORP shareholders until February 3rd, 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.

Operator

Thank you, sir. Ladies and gentlemen, we will now conduct question and answer session. Your first question comes from Lucas Pamatze from Canaccord Genuity. Your line is now open.

Speaker 2

Hey, Elan, and thanks for taking my question. Yes. Just curious about the bid process so far. I mean, you're both halfway through the bid period for Orocorp. How has the uptake been So far, can you comment on that at all?

Speaker 1

Yes. We've been gaining momentum. I'll See the Board with their recommendation also led to them going through and tendering and as it currently stands and this is We reported filings. We're currently at 20.1%, which includes the shares that we already Prior to commencing. Great.

Speaker 1

And then what strategies are there if you don't get

Speaker 2

to that 50% Just there being 2 weeks left. Do you guys intend to obviously extend it or what other opportunities do you have on the table?

Speaker 1

Well, there's a number of considerations. As you said, 2 weeks to go. A lot can happen in 2 weeks. And with a positive response And our share price like we're experiencing today certainly changed the dynamic. We like the fact that We've got the only open and actionable offer on the table and it's got full board support From ORCORP, a number of shareholders have indicated they're going to be following the Board's recommendation, and we're in touch And in regular dialogue with a number of the key shareholders and understand what their intentions are With respect to tendering and timing leading up to that expiry.

Operator

Your next question comes from Joseph Wieger from Roth MKM. Your line is now open.

Speaker 3

Hey, Lon and team, thanks for taking my questions.

Speaker 1

Hi, Joe. Good to have you.

Speaker 2

So

Speaker 3

On this, the commentary you guys made about the shrink stoping resulting in higher than anticipated Like impact on grade, what can you quantify it like what was the percentage of Diluted, are you expecting

Speaker 1

It's not that that's necessarily playing in right now. This is sort of a gradual process and It's not like we're flipping a switch and saying that we're going from shrinkage sorry, from cut and fill 100% to shrinkage. It's going to be sort of a stope by stope, area by area decision And it's going to be happening over time. So it's not as though this has been factoring in to the results to date that much. Okay.

Operator

I must have misunderstood.

Speaker 3

But What is the expected difference though if you're on any given stope for dilution if you use shrinkage instead of long haul?

Speaker 1

Well, yes, and it's not long haul. So it's cut and fill and I have to check my memory and go back to what was published in the And the previous technical report because it is in there as it relates to how it's operated in the past. If I recall, it's sort of going from a 5 to 10 For cut and fill to sort of 15 to 20 for shrinkage. But forgive me, I'll have to go back and pull the Exact numbers from the technical report. So it is an uptick, but the trade off is that from a labor intensity standpoint And productivity, there are gains to be made on the cost side in terms of unit cost for delivering that.

Speaker 1

And then as mentioned, where you might have that higher dilution from shrinkage, we look to address that With the XRT sorters that are going in at Ying.

Speaker 3

Okay. And then as far as the growth at Ying, The 1500 ton per day new processing line and the timing of that, when do you guys you said Next fiscal year, but is there more precise timing Q4, Q3 that we should expect? And then What do you think the total time to ramp up the additional capacity might look like?

Speaker 1

Well, it's expected that the full increase could be completed over the course of the next fiscal year. In terms of the timing for sort of each additional ton, you don't have that in a plan to provide currently, But we'll have more details in the next couple of months and as well with the reporting for The guidance for fiscal 2025. Okay. But I think what I would add is just that from looking back at what we were contemplating before And just recall that while we're looking at building an entirely new mill At a $30,000,000 cost, this increase will be significantly less in terms of cost And on a net basis, we're going to get to 5,000 tons per day here based on this increase, Keeping Mill Number 1 running and adding this capacity, we would be running at 4,000 tons, but at a much less Cost for that increase.

Operator

Your next question comes from Felix Schaffagullen from 8 Capital. Your line is now open.

Speaker 4

Hi, Lon. Congratulations on a good quarter.

Speaker 1

Thanks, Felix.

Speaker 4

So one thing that really jumped out Yesterday's releases, how much mining and milling costs dropped to GC sort of quarter over quarter? Could you provide a comment on that? Like how was that drop in just 1 quarter achieved?

Speaker 1

Well, if you're referring back to Q2, I mean, obviously, GC has had some hiccups this year and hasn't been running Either full capacity or optimally. And so when you've got that sort of law of small numbers here in place, Any kind of changes in that throughput rates have a big impact when you look at the fixed cost allocation. So now that we're back up running at a more normal and sustainable level, we're seeing the kind of cost that we would look to realize.

Speaker 4

Got you. I understand. And regarding the tailings storage facility, so I think there's been about $15,000,000 spent in it so far. And how much what's the total budget allocated to construction of this thing?

Speaker 1

Well, that's a really good question. We previously reported $38,000,000 as the number. And as of today, we are into it To the tune of about $9,900,000 It's a little premature, but some of the early indications are that we will come in I don't want to get hung out here, but I would say meaningfully below that $38,000,000 number.

Speaker 4

Got you, understood.

Operator

Thank you

Speaker 4

very much, Tom.

Speaker 1

That would be a positive surprise.

Speaker 4

Okay. All right. Looking forward to it. Well, thank you, Lon. Thanks

Operator

This concludes the question and answer session. I would now like to turn the conference over to Lon Schafer for any closing remarks.

Speaker 1

Well, it's great. Thank you, operator, and thanks everyone for joining us today. We'll wrap up the call here. But please, if anyone has any additional questions, Like always, feel free to call or email us. Happy to take your questions and respond in due course.

Speaker 1

Look forward to updating you in a few months on our fiscal 2024 results. Have a great day.

Operator

This concludes today's conference. You may now disconnect your lines. Thank you for participating and have a wonderful day.

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Key Takeaways

  • Silvercorp delivered a strong Q3 with revenue of $58.5 million (flat YoY) and net earnings of $10.5 million (US$0.06/share), with adjusted EPS also US$0.06.
  • Q3 production was ~1.7 million oz silver, 1,300 oz gold, 16.8 M lbs lead and 7.4 M lbs zinc; Q4 guidance projects increases of up to 17% (silver), 30% (gold), 20% (lead) and 40% (zinc) YoY.
  • Cash costs per ounce of silver (net of byproduct credits) were negative $0.96, while all‐in sustaining costs rose to US$11.33/oz reflecting lower volumes and currency effects.
  • Expansion plans at Ying include 20 new underground LHDs, three XRT ore sorters and a 1,500 t/d mill line to boost capacity to 4,000 t/d next fiscal year; the new tailings storage facility remains on track below its $38 million budget.
  • Silvercorp’s off‐market takeover offer for Orcorp comprises 0.0967 Silvercorp shares + AUD 0.19 cash per Orcorp share, has full board support and ~20.1% acceptance to date (offer open until Feb 3).
AI Generated. May Contain Errors.
Earnings Conference Call
Silvercorp Metals Q3 2024
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