Silvercorp Reports Net Income Up 82% to $25.6 Million or $0.15 Per Share and Cash Flow Up 46% to $33.9 Million or $0.19 Per Share for 1st Quarter of Fiscal 2012
8/3/2011 7:00:14 AM - Market Wire
VANCOUVER, BRITISH COLUMBIA, Aug 3, 2011 (Marketwire via COMTEX News Network) --
Silvercorp Metals Inc. (TSX:SVM)(NYSE:SVM) ("Silvercorp" or the "Company") today reported its unaudited financial and operating results for the first quarter ended June 30, 2011 ("Q1 2012"). Record silver production, coupled with increasing silver prices, resulted in record quarterly sales. The following financial results are expressed in US dollars (US$) unless stated otherwise.
FIRST QUARTER HIGHLIGHTS
-- Record sales of $69.7 million, representing a 90% increase compared to $36.7 million in the first quarter of fiscal year 2011 ("Q1 2011");-- Record silver production of 1.6 million ounces, a 15% increase compared to 1.4 million ounces in Q1 2011; and gold production of 1,390 ounces, a 30% increase compared to Q1 2011. Silver and gold sales accounted for 71% of the total sales in the quarter;-- Net income of $25.6 million, or $0.15 per share, an 82% increase compared to $14.1 million, or $0.09 per share, in Q1 2011;-- Cash flow from operations of $33.9 million, or $0.19 per share, increased 46% from $23.2 million, or $0.14 per share, in Q1 2011;-- Silvercorp continues to maintain its low cost producer status with a cash production cost per ounce of silver of negative $6.12;-- Completed reserve and resource updates for the Ying Mining District, the BYP Mine and the Silvertip Project, reporting 24% year over year Measured & Indicated silver equivalent resource growth;-- Paid cash dividends of CAD$0.02 per share, totaling $3.6 million for the quarter; and-- Increased total cash and short term investments to $230.5 million.
FINANCIALS
In Q1 2012, net income attributable to the shareholders of the Company was $25.6 million, or $0.15 per share, an 82% increase from net income of $14.1 million, or $0.09 per share, in the same quarter last year.
The Company achieved record sales of $69.7 million, a 90% increase from $36.7 million in the same quarter last year. The increase in sales was primarily from higher metal prices, combined with an increase in the quantity of metals produced and sold. Gross profit margin improved to 80% from 72% in Q1 2011. Cost of sales was $14.1 million, a 38% increase compared to a year ago, which was mainly due to increased quantities of metals sold.
General and administrative expenses increased by $1.4 million to $6.1 million, compared to the same quarter last year, of which, $1.1 million relates to the VAT surtax, which has been levied since December 1, 2010.
The Company recorded unrealized losses on investments of $1.2 million in Q1 2012, which was related to the change of fair value of warrants.
Income tax expenses increased to $12.6 million from $3.3 million in the same quarter last year. The increase of income tax expense was mainly due to higher taxable income in the quarter and a higher tax rate compared to Q1 2011. The Chinese tax holiday, which allowed the Company's most profitable Chinese subsidiary, Henan Found Mining Co. Ltd. (Ying and TLP mines) to have a preferential 12.5% income tax rate, expired on December 31, 2010, increasing the income tax rate to 25%. The Company's another Chinese subsidiary, Henan Huawei Mining Co. Ltd. (HPG and LM mines), is currently subject to preferential tax rate of 12.5% until December 31, 2011, after which it will be 25%.
Cash flow from operations for the quarter was $33.9 million, or $0.19 per share, a 46% increase from $23.2 million in the same quarter last year. During the quarter, the Company paid $3.6 million in dividends, $10.5 million in capital expenditures, and ended the quarter with $230.5 million in cash and short term investments.
OPERATIONS
In Q1 2012, the Company achieved record silver production of 1.6 million ounces, a 15% increase compared to same quarter last year. The record production was achieved through increased production from the TLP, HPG and LM mines that continued to expand operations.
A total of 182,890 tonnes of ore were milled, a 23% increase compared to 149,189 tonnes in Q1 2011. The increased mill throughput was achieved as the second mill at the Ying Mining District continued to provide additional milling capacity. In addition, 7,964 tonnes of gold ore were milled at the BYP Mine as production commenced in this quarter.
Total cash mining costs increased to $48.66 per tonne from $40.33 per tonne in the same quarter last year. The increase in total cash mining cost was mainly due to (i) higher mining contractor costs as the Company paid approximately $1 per tonne more as compensation for increases in miners' salaries and benefits, (ii) increased materials costs of $2 per tonne as more mining preparation work was conducted during the quarter, and (iii) the impact of US dollar depreciation versus the Chinese Yuan of $2.5 per tonne.
Total cash milling costs increased slightly to $12.42 per tonne from $11.94 per tonne in the same quarter last year, mainly due to the US dollar depreciation versus the Chinese Yuan. The milling costs at the BYP mine was higher than normal as the production was only at one quarter of its normal capacity.
Including by-product credits, total production cost per ounce of silver was negative $4.63 and the cash cost per ounce of silver was negative $6.12, a cost increase of 11% and 3% compared to the total production costs and cash production costs per ounce of silver of negative $5.21 and negative $6.31, respectively, in same quarter last year. The marginal increase is due to higher production costs, partially offset by increased by-product metal prices.
Silvercorp's total operational results for the past five quarters are summarized at Table 1 below:
Table 1: Consolidated Operational Results Q1 2012 Q4 2011 Q3 2011 Q2 2011 Q1 2011 30-Jun-11 31-Mar-11 31-Dec-10 30-Sept-10 30-Jun-10Ore Mined (tonne) Direct Smelting Ore (tonne) 3,108 2,740 3,711 3,065 3,426 Stockpiled Ore (tonne) 176,011 122,951 163,502 151,380 141,556 ------------------------------------------------------- 179,119 125,691 167,213 154,445 144,982----------------------------------------------------------------------------Run of Mine Ore (tonne) Direct Smelting Ore (tonne) 3,108 2,740 3,711 3,065 3,426 Ore Milled (tonne) 179,782 132,924 157,817 147,488 145,763 ------------------------------------------------------- 182,890 135,464 161,528 150,553 149,189----------------------------------------------------------------------------Metal Sales Silver (in thousands of ounce) 1,592 1,047 1,523 1,343 1,387 Gold (in thousands of ounce) 1.4 1.1 0.8 0.3 1.1 Lead (in thousands of pound) 20,621 14,385 18,795 17,028 18,803 Zinc (in thousands of pound) 4,102 3,253 4,791 3,869 4,431----------------------------------------------------------------------------Head Grade of Run of Mine Ore Silver (gram/tonne) 303.0 290.0 330.0 312.0 326.3 Lead (%) 5.5 5.6 5.7 5.6 6.1 Zinc (%) 1.5 1.8 1.8 1.9 2.0----------------------------------------------------------------------------Recovery Rate of Run of Mine Ore Silver (%) 91.3 91.8 92.0 91.6 90.9 Lead (%) 94.7 95.6 95.3 95.1 95.2 Zinc (%) 72.8 67.8 70.1 70.1 69.5----------------------------------------------------------------------------Cash Mining Cost ($ per tonne) 48.66 45.54 48.30 40.36 40.33Total Mining Costs ($ per tonne) 60.07 56.55 58.28 49.12 48.61Cash Milling Cost ($ per tonne) 12.42 15.31 12.11 11.36 11.94Total Milling Cost ($ per tonne) 13.94 17.26 13.69 13.06 13.62----------------------------------------------------------------------------Total Production Cost per Ounce of Silver ($) (4.63) (6.06) (5.93) (5.17) (5.21)Total Cash Cost per Ounce of Silver ($) (6.12) (7.61) (7.13) (6.30) (6.31)----------------------------------------------------------------------------
The Ying Mine continued to be the primary focus and most profitable project of the Company. The operational results for the past five quarters at the Ying Mine are summarized at Table 2 below:
Table 2: Ying Mine Operational Results Q1 2012 Q4 2011 Q3 2011 Q2 2011 Q1 2011 30-Jun-11 31-Mar-11 31-Dec-10 30-Sep-10 30-Jun-10Ore Mined (tonne) Direct Smelting Ore (tonne) 3,062 2,715 3,640 3,017 3,339 Stockpiled Ore (tonne) 78,276 59,650 82,101 82,187 79,873 ------------------------------------------------------- 81,338 62,365 85,741 85,204 83,212----------------------------------------------------------------------------Run of Mine Ore (tonne) Direct Smelting Ore (tonne) 3,062 2,715 3,640 3,017 3,339 Ore Milled (tonne) 79,974 61,173 81,700 79,995 81,898 ------------------------------------------------------- 83,036 63,888 85,340 83,012 85,237----------------------------------------------------------------------------Metal Sales Silver (in thousands of ounce) 1,146 765 1,241 1,095 1,147 Lead (in thousands of pound) 15,419 10,359 14,862 13,486 14,230 Zinc (in thousands of pound) 3,594 2,536 3,954 3,275 3,605----------------------------------------------------------------------------Head Grade of Run of Mine Ore Silver (gram/tonne) 444.0 441.0 499.0 461.0 470.5 Lead (%) 8.6 8.4 8.3 7.9 8.1 Zinc (%) 2.5 2.9 2.9 2.8 2.8----------------------------------------------------------------------------Recovery Rate of Run of Mine Ore Silver (%) 92.1 93.0 92.9 92.3 91.7 Lead (%) 96.1 97.0 96.6 96.3 96.4 Zinc (%) 74.9 67.7 70.1 71.5 69.2----------------------------------------------------------------------------Cash Mining Cost ($ per tonne) 48.27 48.35 49.85 42.66 43.83Total Mining Costs ($ per tonne) 63.27 63.56 64.12 54.79 55.10Cash Milling Cost ($ per tonne) 11.74 15.43 12.22 11.51 12.03Total Milling Cost ($ per tonne) 13.31 17.39 13.89 13.36 13.66----------------------------------------------------------------------------Total Production Cost per Ounce of Silver ($) (7.81) (8.88) (7.67) (6.94) (5.83)Total Cash Cost per Ounce of Silver ($) (9.05) (10.25) (8.76) (7.99) (6.80)----------------------------------------------------------------------------
EXPLORATION AND PROJECT DEVELOPMENT IN THE QUARTER
Ying Mining District, Henan Province, China
The Company is continuing a 40,000 metre tunnelling and 171,000 metre underground drilling program at the Ying Mining District during fiscal year 2012 to further expand resources.
During the quarter a total of 20,452 metres of exploration tunnelling, 48,565 metres of diamond drilling and 243 metres of shafts and declines development were completed. The program incurred expenditures of $5.5 million.
Through extensive exploration program, the Company has successfully maintained 10 years of mine life at the Ying Mining District after 5 year mine operation. According to recently filed NI 43-101 technical updated reports on four mines at the Ying District, the Measured and Indicated in situ metal silver resource has increased at Ying Mining District by 11% to 76.5 million ounces compared to the prior year technical reports, which are currently large enough to support profitable operations for a decade or more.
GC Project, Guangdong Province, China
In December 2010, the GC Project received its mining permit. Since then, the Company has been moving forward with project development. In the quarter, the Company focused on acquisition of land usage rights, construction of the access road and power line, site preparation, negotiating and finalizing mine and mill construction contracts, and completion of a review of safety production measures by Guangdong Provincial Safety Production Bureau. During the quarter, the surface drilling program with three drill rigs continued to perform step-out drilling.
BYP Mine, Hunan Province, China
During the quarter, the Company refurbished and upgraded the existing 400 tonne per day ("t/d") mill to 500 t/d. Production at the BYP Mine commenced in May 2011 with 7,964 tonnes of ore from existing development tunnels being processed, yielding 590 ounces of gold. Mill operation was temporarily halted in June while the Company installed a liner in the tailing pond. Mill production will be resumed in August.
The Company intends to utilize the existing 500 t/d floatation mill to mine and process gold mineralization with an initial focus on higher grade mineralization areas. Concurrently, the Company's engineers are working with a qualified Chinese engineering firm to complete a detailed and staged mining and development plan to fulfill the Company's production goal of expanding the mining and milling capacity to 1,000 t/d gold mineralization for fiscal 2013 and to 2,000 t/d (1,000 t/d gold mineralization and 1,000 t/d lead-zinc mineralization) by fiscal 2014.
Silvertip Project, British Columbia, Canada
During the quarter, the Company continued its effort in completing a Small Mine Permit application. At the same time, the Company initiated the 2011 exploration program to test the DM zone, a new zone of silver-lead-zinc mineralization approximately eight kilometres to the south of Silvertip Mountain.
Reserve and Resource Update
In July 2011, the Company completed its 2011 reserve and resource update on three of its existing projects: the Ying Mining District mines in Henan Province China, the BYP Mine in Hunan Province China, and the Silvertip Project in British Columbia, Canada. The Company reported the total in situ Measured and Indicated silver-equivalent metal resources have increased 24%, from 123 million ounces in the prior year to 153 million ounces based on updated results of NI 43-101 technical reports.
Outlook for the Fiscal Year 2012
Production in China
In Q1 2012, from the four mines at the Ying Mining District, a record 1.6 million ounces of silver were produced and sold, well on track for the fiscal year 2012 Production Guidance, which is to process 600,000 tonnes of ore at grades of 325g/t silver, 0.4g/t gold, 6% lead and 1.9% zinc, yielding 5.6 million ounces of silver, 4,000 ounces of gold, and 90 million pounds of lead and zinc. Total production cost is estimated at approximately $75 per tonne of ore. Guidance remains unchanged.
The fiscal year 2012 Production Guidance for the BYP Mine has been revised down from 26,000 ounces of gold as a result of the delay in the first quarter when the mill was temporarily shut down to allow for improvements to the tailing pond. For fiscal 2012, the BYP Mine is now expected to mine and mill 95,000 tonnes of ore at a grade of 6 g/t gold, yielding approximately 17,000 ounces of gold at an estimated total production cost of $28 per tonne of ore.
Budgets for mill construction, mine development and exploration of three projects in China
The total capital expenditures estimate for the three projects in China remains unchanged at $67 million for fiscal 2012, which includes capital expenditures of $53 million for mine development, mill construction, and other capital items (e.g. surface facilities, roads, land usage rights, and reporting) and exploration expenditures of $14 million to complete a 241,000 metre surface and underground drilling program. The budget estimate is based on the contracts on hand, designs by qualified Chinese engineering firms, and the Company's past operation experience in China. The details for each project are as follows:
The Ying Mining District
-- The capital expenditures for the Ying, TLP, LM and HPG mines and central mill are budgeted at $18.5 million which includes several vertical shafts, declines and raises totaling 7,000 metres ($5.6 million), 40,000 metres of horizontal tunnels for development and mining exploration ($7 million), 1,500 metres of ramps ($1.2 million), a new tailing facility ($2 million), and equipment as well as surface facilities ($2.7 million).-- The exploration expenditure for a 171,000 metre underground drilling program at the four mines of the Ying Mining District is estimated to be $8.5 million.
The GC Project
-- The capital expenditures for fiscal 2012 are budgeted at $22.5 million, which includes a 1,500 tonne per day mill and tailing dam ($12 million), land-usage rights ($5 million), a 1,500 metre ramp ($1.2 million), a 500 metre shaft ($1.5 million) and surface facilities ($2.8 million). By the end of fiscal 2012, it is expected that the GC project will achieve a 700 tonne per day mining capacity and a 1,500 tonne per day milling capacity. In order to bring the project into full mining production of 1,500 tonnes per day, further capital expenditures will be required for fiscal 2013 which are expected to be partially financed through cash flow generated from the GC project.-- The Company is carrying out a 20,000 metre surface diamond drilling program, budgeted at $2.5 million.
The BYP Mine
-- The capital expenditures for fiscal 2012 are budgeted at $12 million, including upgrading the existing 400 tonne per day floatation mill ($1.5 million), build a cement back-filling facility ($1.5 million), complete 7,000 metres of mine development tunnels ($1.5 million), acquire land usage rights and build surface facilities including roads, an office, accommodations and a laboratory ($2.5 million), for a total of $7 million of capital expenditures. In addition, to achieve a production capacity of 1,000 tonnes per day starting in fiscal 2013, the Company will spend $5 million to expand the 500 tonne per day mill to a 1,000 tonnes per day capacity ($3.0 million) and develop 1,500 metres of ramp and access tunnels ($2 million) to allow mechanized mining in the future.-- The exploration expenditures for a 50,000 metre underground and surface drilling program are estimated to cost $3 million.
Silvertip project in Canada
The Company has budgeted $2 million to complete the ongoing environmental assessment study, to prepare and submit an application for a Small Mine Permit, and to complete a feasibility study for the project. Surface drilling of 3,000 metres is budgeted at approximately $1 million.
In addition to the aggressive exploration program carried out by the Company to grow the resources and reserves in its operating projects, Silvercorp continually seeks acquisition opportunities in China and other jurisdictions.
Myles Gao, P.Geo., President of Silvercorp, is the Qualified Person for Silvercorp under NI 43-101 and has reviewed and given consent to this press release.
