Silvercorp Metals Q4 2024 Earnings Call Transcript

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May 24, 2024

There are 4 speakers on the call.

Operator

Thank you for standing by. Good morning. My name is Jenny, and I will be your conference operator today. At this time, I would like to welcome everyone to the Silvert Corp. 4th Quarter and Full Year 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 session. Thank you. I would now like to turn the conference over to Alon Shaver, President of Silver Corp. Please go ahead.

Speaker 1

Thank you, Jenny. On behalf of Silvercorp, I'd like to welcome you all for joining this call to discuss our Q4 and full fiscal 2024 financial results, which were released yesterday after the market closed. A copy of the news release, the MD and A and the financial statements for today's call are available on our Web site. Before we get started, I'm required to remind you that certain statements on today's call will contain forward looking information within the meaning of 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, Form 40F and annual information form.

Speaker 1

Kicking off with the quarterly financial results. With respect to the quarter, despite the regular impact of the Chinese New Year slowdown, our mines operated above expectations as reflected in our previously released production numbers. Revenue in Q4 totaled $43,000,000 marking a 25% increase compared to the same period last year. This growth reflects a $5,400,000 increase from higher volumes of gold, silver and zinc sold as well as a $3,300,000 increase from higher realized prices for silver, gold and lead. Based on the production and realized pricing for the quarter, silver was 55% of revenue on a net basis compared to 57% in Q4 of last year.

Speaker 1

Our 4th quarter net income attributable to equity shareholders was $5,500,000 or 0 point 0 $3 per share and that compared to net income of $200,000 or $0.00 per share for the same period last year. The main contributor to the increase was the previously mentioned factors affecting revenue, a $2,000,000 increase in mark to gain on investments, which offset a $3,200,000 increase in income tax expenses. On an adjusted basis, with adjustments made to remove the impacts of non cash and one time items, earnings for the quarter were $3,800,000 or $0.02 per share compared to 5,000,000 dollars or $0.03 per share for the same period last year. The year over year decrease was due to a $2,500,000 increase in withholding tax paid on funds distributed out of China. Cash flow from operating activities totaled $10,200,000 in Q4 and that compared favorably to $5,700,000 in the prior year quarter.

Speaker 1

The increase was mainly due to the previously mentioned factors impacting revenue and net income. Before changes in non cash operating working capital, our flow was $14,200,000 versus $11,600,000 in Q4 of last year. Capital expenditures totaled approximately $13,400,000 in Q4. That was up from $9,500,000 in the same quarter last year, primarily due to increased tunnel and ramp development activities at Ying. We ended the quarter with $185,000,000 in cash and cash equivalents and short term investments and this figure does not include our investments in associates and other companies, which had a total market value of $112,000,000 on March 31.

Speaker 1

To quickly cover the full year financial results, revenue for fiscal 2024 was $215,000,000 that was up 3% compared to the prior year, and this reflected a $19,900,000 increase due to higher realized silver and gold prices as well as a $5,300,000 increase from more gold sold. This was offset by a 12 $600,000 decrease from lower volumes of silver, lead and zinc and a $5,500,000 decrease from a lower realized zinc price. Net income attributable to Equity shareholders was $36,300,000 or $0.21 per share compared to $20,600,000 or $0.12 per share in the prior year. This increase primarily reflects the factors already mentioned affecting revenue, a $10,000,000 increase in mark to market gains on investments and an offsetting negative impact of $5,200,000 from foreign exchange fluctuations. Our adjusted earnings for the year were $39,300,000 or $0.22 per share compared to $37,000,000 or $0.21 per share in the prior year.

Speaker 1

Our cash flow from operating activities after change in the non cash working capital for the year was $91,600,000 that was up from $85,600,000 in the prior year due to these factors mentioned above affecting revenue and net income. Capital expenditures were approximately $64,000,000 in fiscal 2024. That was up from $58,000,000 in the prior year. And these expenditures were in line with our guidance for the year of $64,700,000 With respect to the quarterly production, as we previously reported, we mined 195,000 tonnes of ore and milled 237,000 tonnes of ore, up 7% 32% respectively, compared to the same quarter last year. We produced on a consolidated basis approximately 1,200,000 ounces of silver, 1900 ounces of gold, £12,500,000 of lead and £4,600,000 of zinc in the quarter, representing increases of 4%, 92%, 15% and 27% respectively in silver, gold, lead and zinc production.

Speaker 1

The cash cost per ounce of silver net of byproduct credits was $1.22 in the 4th quarter compared to $0.92 in the prior year quarter. The increase reflects a $4,800,000 increase in production costs offset by a $4,400,000 increase in byproduct credits. The all in sustaining cost per ounce of silver net of byproduct credits was $14.36 in Q4 compared to $13.85 in Q4 of fiscal 2023. The increase primarily reflects the same factors that impacted the cash costs as well as $1,300,000 increase in sustaining CapEx. The full year production recap, looking at the results for the full year, we mined and milled 1,100,000 tonnes of ore in fiscal 2024.

Speaker 1

That was up 5 percent 3%, respectively, compared to fiscal 2023. Metal production totaled 6,200,000 ounces of silver, 7,300 ounces of gold, £63,000,000 of lead and £23,000,000 of zinc last year. Silver and lead decreased by 6% 7%, respectively, over fiscal 2023 due to lower head grades and the mining of 58,000 tonnes of gold ore, which contributed to a 65% year over year increase in gold production. For the year, the cash cost per ounce of silver net of byproduct credits was at negative $0.38 compared to negative $0.42 in fiscal 2023. The increase reflects a 3 $600,000 decrease in byproduct credits, but that was offset by $3,200,000 decrease in expense production costs.

Speaker 1

The all in sustaining cost per ounce of silver net of byproduct credits in fiscal 2024 was $11.38 compared to $9.73 2023. The increase reflects the same factors that impacted cash costs and a $4,300,000 increase in sustaining CapEx, a $800,000 increase in corporate expenses and overall less silver sold during the year compared to the prior year. Looking ahead to guidance for fiscal 2025, we announced our production and cost guidance in April along with the Q4 production results. We expect to produce between 6,800,000 to 7,200,000 ounces of silver, 7,900 to 9000 ounces of gold, £64,000,000 to £69,000,000 of lead and between £27,000,000 to £30,000,000 of zinc, representing production increases of approximately 9% to 17% in silver, between 8% and 23% in gold, 2% to 10% in lead between 16% 29% increases in zinc compared to our actual fiscal 2024 results. In terms of cost guidance, we are anticipating between $77 $79.7 per tonne on a cash cost basis, which is in line with fiscal 2024's actual figure of $78.86 per tonne.

Speaker 1

On an all in sustaining basis, we're anticipating between a cost between $143.6 100 and $52.3 per tonne. This is higher than last year's figure of $140.4 per tonne as we look to increase spending at Ying this fiscal year. This is a good segue to discuss our growth projects, which we have previously disclosed and relates to our plan to enhance Ying's operational efficiencies by transitioning certain mining areas from cut and fill resume to shrinkage stoping. As part of this initiative, we have budgeted 2025 for ramp and tunnel development, aiming to improve underground access and material handling by replacing existing with a new trackless system. By this weekend, we will have received 14 out of 20 new LHDs, so those are load haul dump shovels for ore handling underground, which will be implemented across Ying in a staged approach.

Speaker 1

In anticipation of the increase in mine productivity, we plan to add 1500 tonnes per day of flotation capacity at the No. 2 mill at a cost of $7,200,000 This expansion is expected to be completed later this year and will boost Ying's total production capacity to 4,000 tonnes per day. Furthermore, we plan to install 2 more XRT ore sorters for less than a $2,000,000 expenditure to address the expected increase in dilution from more shrinkage mining method. Construction on the 3rd tailing storage facility is on track for completion by the Q3 of 2024, with $10,800,000 spent to date and remaining expenditures of $16,000,000 of construction is expected to be below the original estimate. We plan to release an updated mineral resource and reserve estimate and mine plan for Ying in June.

Speaker 1

The upcoming technical report will incorporate all work programs, including drilling completed up to the end of 2023 and provide a life of mine plan reflecting all of these anticipated changes going forward. With regards to Kuangping, the satellite project north of Ying, we expect to receive all permits and licenses for this project in the Q3 of 2024 and have allocated $1,000,000 for mine construction in the fiscal 2025 budget. Turning to the Adventus announcement on April 26, Silvercorp and Adventus jointly announced the signing of a definitive arrangement agreement whereby Silvercorp will have acquired Adventus by way of a plan of arrangement. This is an all share transaction with each Adventus common share exchange for 0.1015 shares of Silvercorp. This implies consideration of $0.54 per Adventist share based on yesterday's closing price for Silvercorp, which was a 28% premium to company's preannouncement closing price.

Speaker 1

Key stakeholders of Adientis, including the company's directors and senior officers, Mr. Ross Beatty and Wheaton Precious Metals, who collectively represent approximately 20% of Adventus shares, have committed to voting in favor of the transaction at the special meeting set for late June. Furthermore, we've secured support from Salazar, who expressed welcoming to us coming in as their new joint venture partner in the transaction. Along with the acquisition, Silvercorp and Adventus completed a private placement whereby we acquired approximately 67,000,000 shares of Adventus at a price of $0.38 per share for aggregate proceeds of approximately $25,600,000 Silvercorp currently holds about 15% of Adventus. This placement was done to help settle debt owed to traffic here in Altius as well as to provide funding for pre development activities at the El Domo project.

Speaker 1

More details are outlined in the news release, but I just want to make some key comments about this transaction. The El Domo project adds meaningful resources to Silvercorp. It is a permitted project that we can apply our development skills and financial capacity to. And once built, El Domo would make a meaningful contribution to our production profile and financial results, while adding country and commodity diversification at the same time. This acquisition takes us into the perspective and mining friendly jurisdiction of Ecuador, company receptive to foreign investment and development.

Speaker 1

We believe the above factors should lead to a rerating for the company, unlocking value for all shareholders. We look forward to providing the market with updates on the progress of the transaction as well as our plans for the El Domo project over the coming months. With that, operator, I'd like to open the call for questions.

Operator

Thank you, sir. Ladies and gentlemen, we will now conduct a question and answer session. Your first question is from Joseph Aregor from Roth Capital Partners. Please ask your question.

Speaker 2

Hey, Elon. Thanks for taking my questions. Can you hear me all right?

Speaker 1

Yes. Hi, Joe. Thanks.

Speaker 2

So firstly, in your early part of your prepared remarks, I didn't catch it perfectly, but there was a comment about, I guess, a repatriation tax on taking some cash out of China. Can you walk us through that comment? I apologize if I didn't hear it correctly.

Speaker 1

Yes. This is a standard tax. It's a 10% withholding tax that applies to dividends that are paid out of China, which applies to us and applies to other foreign entities that are shareholders in a domestic corporation in China.

Speaker 2

Okay. So on that note, of the current cash balance the company has, how much is held in China? Because obviously, you'd have to repatriate a good portion of that to advance the El Domo project?

Speaker 1

Yes, it's roughly a fifty-fifty split between what's held in China at the operations and our subsidiaries as well as outside of China.

Speaker 2

Okay. All right. That's helpful. And then, kind of a big picture question. There's been some news not involving you guys, but other companies, mining companies having issues with taking Chinese investments, Canadian government not approving it, not necessarily denying it, but not approving it for anybody who's Canadian listed.

Speaker 2

Do you see any risk for you guys with the because of the differences between Chinese government and Canadian government right now?

Speaker 1

Well, we don't see any risk because as the way the rules are defined, us as a Canadian company, which is a majority shareholder in a Chinese operation, but with no Chinese ownership or government influence, we don't meet the criteria for a review. So we're not anticipating any impacts from that.

Speaker 2

Okay.

Operator

Your next question is from Felix Stapagoula from 8 Capital. Please ask your question.

Speaker 3

Hi, Lon. Thanks for taking my question.

Speaker 1

Hi, Felix.

Speaker 3

Just a quick question on the outlook. So if we compare it to last year, right, I think we're seeing kind of in the outlook that you provided, we're seeing lower cash costs on Ying. And I think if I'm correct, well, yes, so let's just stick to Ying then. So it's lower cash cost on Ying compared to last year, so fiscal 2024. What's behind this lower cost estimate for Ying for next year?

Speaker 1

Well, a lot of that will be driven by looking at the tonnages that we're anticipating. We're looking at a growth in tonnage out of Ying. And so from a higher tonnage, spreading fixed cost allocation across, that's what's driving the lower cost on a per ton basis.

Speaker 3

So just increasing throughput then? Yes, maybe, yes. Okay. All right. That makes sense.

Speaker 3

Thanks.

Speaker 1

Okay. Thanks,

Operator

There are no further questions at this time. I will now turn the conference back over to Lon Schafer for any closing remarks.

Speaker 1

That's great. Thank you, operator. I'd like to thank everyone for tuning in today. This is the wrap up for the call. As always, if anyone has any additional questions, please don't hesitate to call or email us and we'll be happy to answer those questions in due course.

Speaker 1

Have a great day.

Operator

Thank you. Ladies and gentlemen, the conference has now ended. You may disconnect your lines. Thank you for participating and have a wonderful day.

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Key Takeaways

  • Q4 revenue rose 25% year-over-year to $43 M, driving net income attributable to shareholders of $5.5 M (up from $0.2 M) and operating cash flow of $10.2 M.
  • Fiscal 2024 revenue increased 3% to $215 M, with net income of $36.3 M ($0.21/share) and adjusted earnings of $39.3 M, supported by higher precious metals prices and mark-to-market gains.
  • Q4 production volumes grew, with silver up 4% to ~1.2 M oz and gold up 92% to ~1,900 oz; the cash cost per silver ounce increased to $1.22 and all-in sustaining cost to $14.36.
  • For fiscal 2025, production guidance calls for 9–17% increases in silver and 8–23% in gold, with cash and all-in sustaining costs roughly in line with last year despite higher investment at Ying.
  • Silvercorp is advancing growth projects at the Ying mine (ramp/tunnel development, new LHD fleet, mill expansion), pursuing Kuangping permits, and agreed to acquire Adventus to add the El Domo project and diversify geographically.
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Earnings Conference Call
Silvercorp Metals Q4 2024
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