Q4 2021 Silvercorp Metals Inc Earnings Call
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And good morning, My name is Sylvia and I will be your conference operator today at this time I would like to welcome everyone to the Silver Corp Metals, Inc. Fiscal 2021, and fourth quarter and full year financial results Conference call and note that all participants lines I've been placed on mute to prevent any background noise. After the speakers.
The remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press Star then the number 1 on the telephone keypad and if you would like to withdraw your question. Please press star followed by 2 thank you and.
And I would like to turn the conference to launch Shaver Vice President for opening remarks. Please go ahead Sir.
Thank you Sylvia and good morning, and welcome everyone on behalf of the CT metals and I'd like to thank you for joining our call today.
And before we get started and required to remind you that certain statements.
On today's call will contain forward looking information.
And within the meaning of Securities laws. Please review the cautionary statements included in our news release and presentation.
All of the risk factors described in our most recent MD&A and financial statements.
Also important to note unless I stated otherwise all references to dollars and this call are U S dollars.
So we're pleased to finish the fiscal 2021 with the solid financial quarter.
As we previously announced in Q4 and we move.
Mind of 163000 tons of ore and milled just over a 180000 tonnes a day.
Those numbers are up 53% and 76% respectively compared to the prior year quarter.
Our Q4 sales were up versus last year.
Sales of the silver and we're just over a million ounces up 32%.
Gold.
700, Oh, sorry, the 7000 ounces for.
40% of led just under 11 million pounds of the.
13% and the zinc just under $4.6 million pounds and that was up 50%. It's important to recall that the Q4 and.
And as always are impacted by the 2 week Chinese new year holiday a mine suspension.
And this makes comparability to the results of the other quarters and the year and the year itself.
Somewhat difficult.
Also this Q4 was better than last year of when we had an extended shut down but.
But this year, we did still experience a slightly slower production resumption. This year due to some of the COVID-19 prevention of restrictions that did affect some of the travel affecting our workers getting back to our site.
But for the quarter, our revenue was $35.7 million and that was up just.
Just under 90%.
Compared to the prior year quarter, and our net earnings to shareholders were $7 million or 4 cents per share.
Our Q4 earnings were impacted by some accounting charges, namely a.
800000.
Foreign exchange loss and of $1.1 million loss on equity investments.
Our cash flow from operations before changes and noncash working capital for the quarter was $11.9 million.
And for the year, we've announced that are we.
And we mined 954925 tons of ore milled 967581 of those numbers up 9 and 8% respectively and in terms of sales, we sold $6.3 million ounces of silver 4007 hundred ounces of gold and 67.
And pounds of lead and just under 28 million pounds of zinc.
Now those production numbers.
The silver up 1% of gold up 42%, but that's a bit of an anomaly because we had a clear out of some concentrates at the mine that's on the care and maintenance.
<unk> was up 3% and zinc was up 10% compared to the prior year silver and lead production and met guidance and the zinc production beat guidance.
Our revenue for the year was $192.1 million that was up 21%.
Compared to $158.8 million and the prior year.
I'd like to note that the silver was 58 per cent of revenues for the year on a net basis compared to 53% and fiscal 2020.
And looking a bit of quickly at the pricing and our realized pricing for us for silver was up 30 per cent for the year, but 64 per cent for Q4 <unk> was in fact down 6% for the year, but up 21% in Q4.
And zinc was up 26 per cent for the year and up 92 per cent for the quarter. It's also important to recall that the.
Covid and the early 2020 did skew the quarterly numbers.
For most of metals.
For this current year and net income to the equity shareholders was $46.4 million and that's up 35 per cent compared to the prior year and this worked out to 'twenty.
The 27 cents per share.
And I should note that in the Q4 of this year Hino and founder of subsidiary was recognized as a high and new technology Enterprise and so this is a classification and at the national level.
And we're proud of and if it's based on the efforts that we've made and mining research and innovation and what it resulted in an effective income tax rate reduction to 15% from the the statutory 25 per cent.
And the supply to taxes are paid for calendar 2020 and led to a $4.3 million tax recovery reflected and the Q4 financials.
And this is the attach rate of incentives the last until December of 2020.2.
At which point, we can and see if the program still active and and reapply.
And as a result of this we have a 4 million the tax refund due at a year and.
The foreign exchange loss and fiscal 'twenty 'twenty, 1 was $7.7 million and that was compared to a gain of $4, 1 and fiscal 2020, and the foreign exchange gain and losses really mainly driven by the exchange rate differences.
And between the U S dollar and the Canadian dollar.
Our cash flow from operations and this is after noncash working capital and fiscal 2020, 1 was $85.9 million up 11% compared.
Compared to a 7.
$77.2 million and the prior year.
And for the fiscal year, our cash cost per ounce of silver net of byproduct credits was negative $1.80.
And in fiscal 2021, and our all in sustaining cost per ounce of silver net of byproduct credits was 749 per ounce.
Yeah, and which is our biggest contributor to our results showed an 8% increase and the cash production cost per ton for the year, but the all in sustaining costs per ton and was flat.
Part of the reason for that is capital expenditures, which totaled $45.6 million, which was $3.2 million of above our guidance as a result of a.
For point of about 4 million of expenditure.
To build a aggregate plant to treat a million tons of year of our waste rock and was not in the previous guidance.
But otherwise capital expenditures at the mining district, and the GC mine were below the annual guidance.
And in fiscal 'twenty, 'twenty, 1 and the silver Corp wasn't undertaking and extensive doing drilling programs are at the end of mining district with 2 main objectives of.
1 was to look at areas with existing development and access and reexamine them to potentially define additional resources and reserves.
And this led to a reduction of about 17000 meters or of $5 million worth of exploration and development of tunneling and fiscal 2020.1.
And this drilling program is also looking at areas, which may have been overlooked for a potential gold mineralization.
And these are being tested for different alterations styles from the the typical of silver lead zones that we're mining and.
And we currently have 70 drill rigs at Ying drilling the across the different mines for both surface and underground.
For the year, we paid for for millions of dividends to our shareholders and.
And in terms of corporate development during the year, we acquired a 27% interest and Whitehorse School and.
This was valued at 19 million of as at March 31st and this is the result of receiving shares and a spin out by the new Pacific and subscribing for additional shares of for.
For a total of $1.3 million under our private placement.
During the year, we also won and online auction to acquire the exploration rights to the zone and the silver project from the Henan provincial government and China and with the mineral rights transfer contract pending a national security clearance by the related authorities.
The acquired a 43, 8% interest and the law you ask of Silver project in Mexico for <unk>.
The $9.1 million and debt, we participated pro rata and a offering by new Pacific to.
And to the tune of of $5.8 million.
And we ended the year with a strong balance sheet with the $199.1 million and cash and cash equivalents.
And this is up $56.6 million from the end of last year and our working capital was up $53.7 million.
And it's important to note that this cash and investments number does not include the equity investments and our other companies.
Had a total market value of 212 million of as at March 31.
In terms of outlook Little quick review on that and looking forward for fiscal 'twenty 'twenty..2 we're expecting production of between 950000, just over a million tons of ore.
The $6.4 and $6.7 million ounces of silver that's up approximately 3 per cent compared to the the guidance for fiscal 2020, 1 between $65.7 and $68.9 million pounds of lead which is essentially flat to the fiscal 2021 guidance.
And between $26.9 to $28.5 million pounds of zinc and that'll be up the between 7% to 10% compared to the guidance.
For fiscal 2020.2 of the total Capex capital expenditures.
Budget at the new mining district, and the GC mine or estimate of around $38.2 million.
And we also plan to complete and expense about 33600 meters of mining preparation of tunneling and 206900 meters of underground diamond drilling.
Further details on these numbers are available and our and DNA.
In terms of other development plans for fiscal 2020.2.
We plan to commence a phase 110000 meter drilling program at the lay ethic of silver project.
Our estimate of costs around $3 million.
We have applied for the necessary drilling permits from the respective of Mexican and government agencies are and are optimistic to receive them soon and and commence drilling here within the next month.
We also plan to initiate and extensive drilling campaign at the Zhong of project will formalize the plan and update the cost estimates with respect of zone at once the mineral rights transfer the contract has been executed.
Looking longer term, we're also and the process of applying for permits to build a third tailings facility near the existing facilities at the game the mining district.
The company is also considering the plans to expand the current milling capacity or to build of new mill for future production expansion at the end of mining district and to potentially accommodate.
Some of the additional material, we anticipate both of them within the Yang mines currently as well as that took the to process ore from the zone project during its development stage.
The previously announced.
And that our 2 year mining contracts with the 8 mining contractors are the new mining district expired at the end of March.
Successfully negotiated a new contract with all of the mining contractors at Yang except for the 1 of the <unk> mine.
Which is actually our smallest mine.
And.
The renewed contracts have terms of 2 to 3 years and represented an overall of 14, 5% increase compared to previous agreements.
And there haven't really been contract renewals are for at least 2 years.
Based on the renewed contracts and assuming the amount of work that was done in fiscal 2020..1 of the total annual increase would've been estimated around $5 million, but we expect to offset this with reduced ton of meterage.
Drilling activities and the previous mining areas.
Our are increasing.
Net of that tunneling and that's as I mentioned previously and in terms of our of our program.
And with that and it would be appropriate to open the call for questions.
Sure Les.
And gentlemen, I stated if you would like to ask the question. Please press star followed by 1 and you touched on the phone. Once you do you will hear a suite of prompt acknowledging your request and if.
And you would like to withdraw your question you will need the press star followed by 2 and if you're using a speakerphone and he will need to please lift the handset before pressing any keys. Please go ahead of the press Star 1 now if you have any questions.
And your first question will be from Dalton Barreto of Canaccord. Please go ahead.
Please on mute Mr Barretto.
Alright, sorry can you hear me now.
Yep Yep.
I don't.
Hey, law and How're, you doing that and thanks for hosting this call I really appreciate it a.
A couple of questions and maybe 1 just kind of housekeeping and then 2 bigger ones.
First just on the quarter.
And I look at the cost per tonne at Yale and mostly but to a lesser extent G C.
And it looked pretty high I mean, they are based on the data I have the they are the highest class of at least going back to the 2010 gig.
Is this kind of a function of the global inflation that we're hearing of bad or is just the instead of a 1 off thing.
Well I think there is some inflation coming in and including in the labor and you can see with these renewals.
Some of it's also the related to that shift in strategy with moving some of the the development work that used to be categorized and and capital and the operating costs.
Got it Okay and then.
And I just wanted to touch on what you were just talk about the journey for the mill expansion and maybe a new mill at Yang.
How far along all of the is the thinking on that and.
And do you plan to put out of new chocolate the report on it and if so when.
Yeah, I mean, it's it's still early days and they say what is being looked at currently right now and more near term is looking at more of a nominal adjustments to our mill number 1 to be able to accommodate both potential of copper of separation as it were.
Seeing some some copper and some of the and some of the results of our hitting but also adding a of gravity concentrate or.
To deal with some of the gold material. So I think that's probably more of the oven and the the nearer term is to see some tweaks there but over the longer haul yes. It is thinking about adding potentially in other you know of million tonne per year type the type of meal.
And to the.
For the heating district for.
And for both Yang proper of mines that we have right now and 1 that we're looking to build on the footprint.
Of both with the the you know the existing silver lead zinc and we're mining and to accommodate the potentially some gold zone a.
But also looking broadly at the district, and and that's clarity to deal with Zhong her but then there are other targets within the game of mining district, and we think of it could be available, but really it's very early days to be you know putting numbers out we kind of do a lot of our internal studies and yes, we'd be wrapping those around the proper technical report.
And that we would run for it.
Got it thanks, and then just 1 final 1 on the kind of Big picture and this of a 2 part question on the on the incubator model up first of all of you.
And you guys happy with the portfolio right now you're still looking out of projects to it and then secondly, just out of new Pacific You know just looking at the progress of those guys have made and there are a bunch of publish of P. A is there is there a natural point, where they don't fit your incubator model anymore.
And I'll answer the second 1 first and pardon me if I didn't catch of a part of the first question. So I'll ask you to repeat it afterwards, but yeah I think it with new Pacific what were having to monitor the progress and the working the work that they're doing and the dirt the developments that are coming for new Pacific are you know, what we and everybody else.
And so we're going to need to evaluate.
You know all of our strategy with respect to that investment and so.
And depending on how things progress both in terms of the the technical results the ability of the company to finance itself.
Its suitability of the target for us or for somebody else I mean that could lead to us monetizing that investment.
And distributing that value to shareholders and some way or potentially if the value is right and it can be justified to silver corp shareholders are acquiring and I mean, but right now it's still it's still open and you know we're not at a point, where we're needing to make those those decisions yet.
Okay and sorry, the the the first part of my question, where I cut out.
Was are you happy with the number of club portfolio of projects, you'll have a couple of days or are you looking to add more.
Well I wouldn't say, it's a matter of being happy with them I think we're out there looking to grow looking to find attractive projects and when projects come into the funnel and we look at them you know they could end up as a full and acquisition targets.
But if the model that's more suitable based on the the project and the strategy and potentially a platform or infrastructure that and you know might be there with existing management that might lead to a strategic investment and.
And if we see a project debt as attractive.
But really it should be.
And sort of a special purpose company then and then we would we would incubate and opportunity and and create a company around that too to incentivize management and to share some of the risks and and maybe an earlier stage project.
And and and go about it that way. So I think it's it's really just a matter of being disciplined looking at and a lot of things and seeing which are you know which opportunities truly meet our criteria.
It makes sense ex law and that's all for me.
Paul.
Thank you next question will be from Brian Thompson at BMO. Please go ahead.
Yeah, Hey, Bob and thanks for the update I was actually going to ask questions along the similar lines of adult, but maybe I'll just ask a couple of follow ups.
Maybe just lots of you ask us and some day can you give us any sort of timelines of when you think you will be able to get the drilling permits for the outskirts and the the <unk>.
Transfer of the title for Zone, and then maybe just a second question on the contract.
Renewal of that you announced can you just give us a little bit more color as to where things are up for <unk>.
I think it was the only 1 that you mentioned, how some of the contract or need for if you could just give us some additional color on that that would be helpful too. Thanks.
Sure. So so in terms of the done the yeah, that's obviously taken a bit longer than anticipated and that sort of caught up and a bit of of bureaucratic process, but we think we see that progressing it's actually been fine in terms of the the timing of taken because it's allowed us to really go for it and you know bill.
Some of the staffing and the management at Yang for both our existing and for this project.
I mentioned, we have 70 drill rigs at year end.
When that is unheard of gets gets executed you know, we'll come back with some more details in terms of budgets and costs and all.
But the anticipation is that we could move maybe 10 of those and those rigs from Yang over to start tackling that that's the 1 of the project. So I would expect we should have some news here in the next and the next month or so.
Similarly on <unk> all the paperwork was put in place and we're anticipating getting those permits here by the end of May and we're targeting to begin drilling mid June and.
And with the drilling program to take us through too.
About the September to get just over 10000 meters.
With respect of the contracts.
Yeah, I mean in terms of Ele me and you know it's important to note that and I said that was the smallest of mine at a roughly 8.
8% of the of the production.
And so.
What has happened there is we couldn't come to agreement with that contractor.
The decision was naval and then if we can't agree then I guess you need to go and they've been ramping down as of the of the end of April.
And so there's been lower activity and the process of moving out of.
But what's the what's great is that the contractors and the subcontractor team leaders want to stay and so are we basically hired back most of previous workers.
To work is internal contractors and I'm, hoping to get restarted here and the next week or so.
Okay. Thanks for that so I guess the bottom line here is that there's.
No no changes to production and cost guidance, and you're you're feeling pretty comfortable with where.
And where those are sitting for the year.
Yeah Yeah.
At this point and like I said, there might be of small disruption with the army, but its the smallest mine and and we're confident we can and we can make that up over the course of the year and and <unk>.
The the shift and activities and the way we're doing things is.
And somebody that has us comfortable with our with our guidance at this point I should also note I mean, you know the the question.
And in terms of looking going forward and part of the reason that the company has as I've gotten the high technology, you got classification, which led to the the reduction of our tax rate.
And we're constantly looking at ways to optimize our production and improve productivity and and so you know where we're looking at different tools and techniques different technology, we can apply even in a narrow vein underground mining to make things run more efficiently and so that's.
And it'd be a big thing going forward 2 of them to help not just deal with the the fact of increased rates, but just also the challenges of getting and human resources for for doing mining or you know of.
Other people are saying and the construction industry, if it's harder and harder to find people for those sectors.
Got it perfect. That's it that's all I had thanks, Budd and I thought for the update.
That's right.
Thank you once again as a reminder, ladies and gentlemen, if you do have the question. Please press star followed by 1 and you touched on the phone.
And your next question will be from Justin Stevens P. I financial Please go ahead.
Hey, guys.
Most of what I was going to ask is it's been covered but I've got a few left on my list here I was just wondering in terms of the the junk of is there going to be the drill permits required once the transfer is done that sort of what's the expected timeline of that.
I know I think once the transfer is done really it's more of just in our court to how quickly we can ramp up and the objective is to get going there and as soon as we can.
Got it and B I guess, the the ground work Youre doing now now it should hopefully.
Make that relatively short and in terms of Taiwan.
Yeah, and and then we've been moving forward and sort of a hand and glove with like local authorities to get sort of other things you know in terms of access rights and other things ironed out and all of that is going very smoothly and this is really more just a hang up at the higher levels in the central government as opposed to the <unk>.
Regional I think everyone's operates the basis. This is going ahead and including the regional authorities and so it's just a matter of waiting for of paperwork and a and a stamp.
Got it.
Sounds good.
And I guess my 1 of the other questions. The Yang I know you guys are looking for the third tailings facility. That's 1 of the day confirmed much but you'll be looking for somebody that would be conventional slurry disposal just in the nearby valley like the other ones.
Yeah, it's it's the anticipated between sort of 500 meters 2 of kilometer north of the existing 1 and there's planning has been you know and progress that here for awhile and and again with all the all of the appropriate you know of regulators and and so there shouldn't be any really any surprises it's just a matter.
And we're going through the process.
To get it set up so that we can accommodate what we see as being oh of longer term operating horizon here and the industry.
Yeah, and I'm, assuming you're at least the keeping and keeping an eye on what your what you might be doing longer term like you say with the other potential in the mill expansion or the.
And the inclusion of extra material, that's the sort of accommodate some of that right.
Yes, yes, that's right I mean, some of these other opportunities even.
And even if not initially would likely have their own milling and disposal facilities down the road.
For Yang and to be able to accommodate some of these opportunities and the earlier the ramp up stages. That's the.
Being factored into this this planning.
Perfect.
Lastly, any updates on the Y P. I know it was mostly of sort of a local government.
You there, but just wondering if there was any any updates you could share.
And not at this point and other that were feeling more confident that the the process has gotten unstuck and that we should see some some resolves hereby I hopefully by the end of the year sort of it.
All of that.
That is moving forward.
And with the with the process following the appropriate steps, which wasn't necessarily are happening, but before it was logged and now we are seeing progress there and are optimistic that.
We will see some are something that we can report on by the end of the year on that 1.
Sounds good alright, that's it for me thanks, so much.
Thanks, Justin.
Thank you.
This concludes the question and answer session and I would like to turn the conference back over to Lon Shaver Vice President for any closing comments.
Well that's great. Thank you Sylvia and thanks, everyone for tuning in today, but please if for any of you have additional questions or new questions like always please.
Feel free to call us and the Investor Relations group or email us and.
We're happy to answer those questions and we look forward to updating you again in August on our Q1 results have a great day.
Thank you, Sir ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending and at this time, we do ask that you. Please disconnect your lines have a good weekend.
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