Silvercorp Metals Q1 Earnings Call Highlights

Key Points

• Strong financial results: Fiscal Q1 2027 revenue rose 70% to C$139 million, while adjusted net income increased to C$53.9 million from C$21 million, driven mainly by a 135% jump in realized silver prices.
• Production disrupted in China: Silver, lead and zinc output fell 17%, 15% and 15%, respectively, as lower grades and safety reviews affected the Ying and GC operations. Ying has restarted at a reduced rate, while GC awaits approval to resume.
• Expansion projects advance: Silvercorp continued construction at Ecuador’s El Domo project, began development at Kyrgyzstan’s Tulkubash gold project and is expanding Ying’s capacity with a new mill expected to start operating in fiscal 2028.

Silvercorp Metals NYSEAMERICAN: SVM reported higher first-quarter fiscal 2027 revenue, earnings and cash flow, aided by a sharp increase in realized silver prices, even as production was affected by lower grades and temporary safety-related disruptions at its Chinese operations.

President Lon Shaver said revenue rose 70% from a year earlier to C$139 million. Cash flow from operating activities reached nearly C$62 million, up 28%, while free cash flow increased 27% to C$29 million. The company reported net income of C$59.4 million, or C$0.27 per share, including an C$11 million gain on investments and a C$6 million gain from the sale of the Santa Barbara project in Ecuador.

Adjusted net income, excluding non-cash and non-recurring items, was C$53.9 million, or C$0.24 per share, compared with C$21 million, or C$0.10 per share, in the comparable prior-year quarter. Operating cash flow before changes in non-cash working capital rose 82% to C$70.4 million.

Silver Prices Drive Revenue Growth

Shaver attributed the quarterly performance primarily to a 135% year-over-year increase in the realized selling price of silver, which averaged above $69 per ounce after smelter deductions. Silver represented 77% of Silvercorp's first-quarter revenue.

The company ended the quarter with C$387 million in cash, excluding investments in associates and other companies that had a combined market value of C$304 million as of June 30. Silvercorp also has approximately US$220 million available through undrawn RMB-denominated term loan facilities.

During the quarter, the company capitalized approximately C$22 million at its Chinese operations, C$12 million at the El Domo project in Ecuador and C$2.6 million at the Chaarat ZAAV project in Kyrgyzstan. In May, Silvercorp made a C$60 million cash payment to the Kyrgyzstan government after receiving a new mining license and license agreement for ZAAV that extends the license term by 20 years, through June 2062.

Chinese Production Affected by Safety Upgrades

First-quarter production totaled approximately 1.5 million ounces of silver, more than 2,500 ounces of gold, 13 million pounds of lead and 4 million pounds of zinc. Gold production increased 24% from the prior year, while silver, lead and zinc output declined 17%, 15% and 15%, respectively.

Production at the Ying operation was affected by lower head grades and higher dilution associated with a shift toward more shrinkage mining. On June 29, Silvercorp voluntarily suspended operations at both Ying and GC to conduct a comprehensive safety review following new nationwide mining-safety requirements in China after a major accident in May.

The company identified upgrades needed for six major underground safety systems and retained five certified vendors to complete the work. Shaver said Ying had restarted production at a reduced rate, while GC was awaiting approvals before resuming operations.

“We are currently comfortable with our projection and our target for Q2 of being sort of a 40%-50% of original plan,” Shaver said in response to an analyst question. He added that the company did not expect the safety-upgrade process to extend into fiscal third quarter based on its current view.

Shaver said it was too early to revise annual production or cost guidance. “One quarter does not make a year,” he said, noting that the company would wait for better visibility through the current quarter before commenting further on full-year guidance.

Ying Costs and Expansion Plans

Consolidated mining operating income was $84.8 million in the quarter, with Ying contributing $80.1 million, or about 95% of the total. Ying production costs averaged $87 per ton, up 5% from a year earlier, primarily because the RMB appreciated 6% against the U.S. dollar. The cost remained below the company’s annual guidance range of $88 to $90 per ton.

Ying’s cash cost per ounce of silver, net of byproduct credits, was $2.45, compared with $1.26 a year earlier. All-in sustaining production costs were $130 per ton, essentially unchanged year over year and below the annual guidance range of $155 to $165 per ton. On a per-ounce basis, all-in sustaining cost net of byproducts rose 38% to $13.94, reflecting lower silver sales, currency effects and a 68% increase in government taxes tied to higher revenue.

Silvercorp spent more than C$16 million at Ying during the quarter on underground development and drilling intended to improve mine access, material handling and productivity. At the nearby Kuanping project, underground development continued to access ore, with nominal development ore expected to be processed at Ying during the fiscal year.

The company is also constructing the No. 3 Mill, which is expected to add 3,000 tons per day of capacity and enter service in the first quarter of fiscal 2028. Combined capacity at Ying’s existing permit areas and Kuanping is expected to reach about 1.5 million tons per year.

Ecuador and Kyrgyzstan Projects Advance

At El Domo in Ecuador, Silvercorp said construction advanced despite unusually heavy rainfall. Work included a non-contact water channel, processing plant foundations, initial tailings-storage-facility dam construction and more than 600,000 cubic meters of earthworks. Open-pit pre-stripping is under way, while major process-plant and water-treatment equipment has been procured and is being shipped to Ecuador.

Shaver said El Domo spending appeared lower during the quarter partly because certain equipment deposits did not flow through reported capital expenditures. He said the project’s construction spending was expected to be more heavily weighted toward the back end of the build, including plant assembly and continued pit stripping.

At the Condor project, Silvercorp expects to receive a small-scale environmental license later in the quarter after completing a formal consultation process with directly impacted communities. The permit would allow the company to begin development of two 1,500-meter exploration tunnels at the Camp and Las Cuevas deposits.

The company is also evaluating an initial 900- to 1,000-ton-per-day surface processing operation and tailings facility that could process high-grade material from its deposits and toll-treat ore from smaller regional miners. Shaver said the approach could provide an initial operating step and potentially support later permit amendments for higher throughput.

In Kyrgyzstan, construction has begun at the fully permitted Tulkubash oxide gold project, including temporary camp facilities, access roads and heap-leach-pad foundation preparation. Silvercorp expects an updated feasibility study later in the month and plans to invest $166 million to develop a four-million-ton-per-year open-pit heap-leach operation, with $42 million of capital spending planned for fiscal 2027.

At the neighboring Kyzyltash sulfide project, the company had completed nearly 13,000 meters of drilling by quarter-end, with 16 rigs active and assays pending. The work is part of a 50,000-meter annual drill program intended to upgrade resources, extend mineralization and support a preliminary economic assessment next year.

About Silvercorp Metals (NYSEAMERICAN:SVM)

Silvercorp Metals Inc is a Canadian-based precious metals company engaged in silver, lead and zinc production. The company's core operations are located in the provinces of Henan and Guangxi in the People's Republic of China, where it operates several underground mining and milling facilities. Silvercorp focuses on low‐cost, high‐grade silver projects, producing concentrates that are sold to smelting partners under long‐term offtake arrangements.

The company's principal assets include the Ying Mining District in Henan Province, which hosts multiple sub‐district mines, and the GC and HPG silver‐lead‐zinc projects in Guangxi Province.

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