Q2 2023 Silvercorp Metals Inc Earnings Call
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Good afternoon, ladies and gentlemen, and welcome to the Silver Corp Metals, Inc. Second quarter fiscal results 2023 conference call.
At this time all lines are in listen only mode. Following the presentation. We will conduct a question and answer session. If at any time. During this call you require immediate assistance. Please press star zero for the operator this call's being recorded on Friday November 4th 2022, I would now like to turn the conference over to Lon Shaver.
Please go ahead.
Thank you calling on behalf of a civil court metals I'd like to welcome everyone for joining this call to discuss our second quarter of fiscal 2023 financial results, which we released yesterday after market a copy of the news release MD&A and the financial statements that were talking about on today's call are available on our web.
Right and SEDAR.
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 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 10-Q and our form 40 F and.
Our annual information form.
So getting to the quarterly results with respect to the quarter. Our revenue in Q2 was $51 7 million that was down 11% compared to the prior year quarter.
And mainly due to lower metals prices with the realized selling price of silver gold and lead down 18, 11, and 5% respectively.
Just note the solar price that hit a two year low in September based on production levels and our realized prices this quarter silver was 54% of revenues.
On a net realized basis compared to 56% in Q2 of last year, but Thats <unk> 54 was the same as in Q1 of this year.
Our Q2 net loss attributable to equity shareholders was $1 7 million or one cent per share and that was compared to net income of $9 4 million or <unk> <unk> per share in the same period last year.
And the main contributor to the loss was a $20 million impairment charge.
Yes, Scott project, while we don't currently have any future worth plant.
In addition to the decrease in metals prices sales also decreased 22% and the company booked a $1 6 million mark to market loss on equity investments.
These were partially offset by a 3% and a 50% increase in silver and gold sales respectively.
A 5% increase in the realized zinc price and a foreign exchange gain of $4 3 million.
On an adjusted basis, however, with adjustments made to remove the impacts of noncash and unusual items such as share based compensation foreign exchange loss impairment adjustments and reversals the share of loss in our associates operating results gain or loss on investments and one time items our earnings for the quarter were $6 8 million or <unk>.
<unk> per share and that compared to $13 6 million or <unk> for the same period last year.
And just a reminder, the adjusted earnings as a supplemental non-GAAP measure and Thats to give investors and market followers another metric to better measure the performance of the underlying business, it's continuing profitability and growth potential.
Our cash flow from operations in the quarter was $14 1 million compared to $30 9 million in the prior year quarter the.
The decrease was mainly due to the fact that we're reporting this cash flow after noncash working capital.
And in this quarter, we had a $6 8 million dollar change to the negative and a noncash working capital and that's in addition to the previously mentioned income factors.
Excluding the noncash working capital cash flow was $20 9 million and that compared to $31. Two in Q1 and 31 seven in Q2 of last year.
In Q2, the capital expenditures total around $17 4 million that was up from $14 2 million in the prior year quarter and that was mainly due to increased equipment and facilities investment.
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During this period, we also repurchased under our existing normal course issuer bid.
Just over 500000 shares of the company for a total of $1 2 million.
We ended the quarter with $201 million in cash and cash equivalents and short term investments.
Down $11 9 million from the March number.
Mainly due to a $15 six.
<unk> million dollars negative impact in terms of translation of currencies arising from the appreciation of the U S dollar against the Canadian dollar and the Chinese RMB.
With the cash position doesn't include our investments in associates and other equities, which had a total market value of $111 million as at September 30.
And just note that won 11, new Pacific was $93 million of that.
For our quarterly.
Production review as we previously reported we mined 291000 tonnes of ore and milled 292000 tonnes of ore.
Down, 1% and up 7%, respectively compared to Q2 of fiscal 2022.
Our young mining district delivered another strong quarter in terms of operations with mine and mill productivity up four and 19% respectively.
Compared to the same period last year.
However, at <unk> mine and mill productivity was down, 12% and 16% respectively year over year operations at GC.
Partially affected in August and September as we worked on improving ventilation and electric power facilities to comply with new safety production regulations that were issued by China's National Mine Safety administration.
These came became effective on September one.
The improvements that were required were completed in October and we expect mining in <unk> return to its normal operating levels for the rest of the year.
So for the period, we produced on a consolidated basis of around $1 8 million ounces of silver.
200 ounce.
Sales of gold 18 million pounds of lead and.
6 million pounds of zinc in the quarter that was increases of 6% for silver, 50% for gold and 2% for led.
And a decrease of 20% and zinc over Q2 of last year a.
Year to date, we're at $3 7 million ounces of silver.
2003 hundred ounces of gold 37 million pounds of 13 million pounds of zinc, we're still aiming to hit the lower end of our fiscal 2023 production guidance, but we're recognizing we may come up a bit short in and in silver.
Silver and particularly zinc.
Now the cash cost per ounce of silver net of byproduct credits was <unk> 77.
In the second quarter and that compared to a negative $1 65 in the prior year quarter. The increase was mainly due to safety production requirements to switch to digital detonators that's for.
Blasting in the mine and also inflationary cost pressures are resulting in higher explosives and utility costs.
We also had an average 9% increase in employees pay rates.
As well lower byproduct credits.
Due to the metal prices I discussed earlier.
These were offset by a 4% depreciation in the Chinese RMB against the U S dollar.
The all in sustaining cost per ounce of silver net of byproduct credits was <unk> 25, compared to $7 35 in Q2 of last year and the increase reflects those cash cost impacts I mentioned above.
Offset by a modest decrease in admin expense taxes and sustaining capital.
Now turning to our growth projects, we completed an additional 5500.
25 meters of drilling during the quarter at the <unk> project, which is a satellite property located north of arguing mining district that we acquired last November .
Last quarter, we reported that we have submitted the application for a mining permit at clumping, which is pending review and approval by the provincial government.
Our satellite opportunities like one paying in either recent.
Our recent near mine discoveries such as the new high grade silver lead zinc structures that Ww announced in October were not included in the updated Yang mineral reserve resource and reserve estimate that we announced in September .
That last update which is expected to be published on SEDAR today incorporated results from the 2020 and the 2021 drill program, which showed that most of the major mineralized structures in the district are open for expansion.
During the quarter, we spent a total of $2 $5 million on the construction of a new 3000 ton per day, Floatation mill and the new tailings storage facility at Yang.
A total of 645 meters of drainage holes were completed and site prep for the New mill was also substantially completed. Additionally, the first batch milling equipment has been ordered with regards to permitting the environmental and safety assessment study reports have been revised and are submitted and pending government.
Along.
And with that I'd like to open the call for questions operator.
Thank you, ladies and gentlemen, we will now conduct the question and answer session. If at any time you'd like to ask a question. Please press star followed by one on your telephone keypad, if you'd like to withdraw. Your question. Please press star followed by two if you're using a speaker phone. Please lift the handset before pressing any.
Keith one moment for your first question.
Okay. Your first question comes from Joe with regard <unk> from.
From Roth capital. Please go ahead.
Hey, thanks for taking the questions.
So I guess first thing on those write down other law, yes that was the project that was in the new Infinera subsidiary right.
Yes, that's right Joe.
And are there any other projects still in that subsidiary does that effectively write off that full subsidiary.
Yes that write off was that that full venture on that project.
Oscar in Mexico.
And really I think it's important to note that.
Really from the work that was done we did we did get results.
We did hit mineral mineralization.
But really what we found it didn't really.
With the models that we had and so kind of results inconclusive. So.
There wasn't at this point, we don't have any plans any accountants thought it was prudent given that we're not.
Planning on spending any money in the near future that it was just best to write it off completely but we still we still own the project and at some point, if we have a different view.
What's going on there.
We could go back.
Okay.
And then.
Kind of given.
Some of the some of the other operators have been taking advantage of the current market.
And in buying up some more assets.
Do you see you got you guys doing some M&A in the near future to kind of put that cash balance that you have to work.
Yes, I mean, that's.
That has been and remains our strategy and Thats.
Those activities are ongoing in terms of looking at it.
Projects.
Some of the the turmoil we've seen in the in the equity markets right now has impacted share prices, but some of the companies from the target's.
Still have still have resources still have runway so are not necessarily looking to transact at this point, but yes, we are.
And open door and continue to look at.
A wide range of projects in a range of geographies.
And then one final thing just.
You indicated that you think you.
You guys might be able to still make the low end of guidance.
I guess, the bigger issue seems to be the gcs behind.
Could you guys make up some of the tonnage before the end of the year that you lost in Q2.
I mean, that's certainly that's the only the objective and the team is focused on doing that and I think you know you've followed the company, Florida notice that where we've had disruptions there really is a hard effort to try to make it back.
Yes.
As we said we're back running at more normal levels, but we're going to put a push on to see if we can get.
Get back what we lost.
Okay, I'll turn it over thanks.
Thanks, Joe.
Your next question comes from Gabriel <unk> from Echelon wealth partners Gabriel. Please go ahead.
Thank you very much thank you Ron.
I was just wondering on the subject of the.
The new mill.
Sure with the first batch.
Selling equipment being ordered.
Just wondering what is the timeline for having me.
The bulk or I guess, what functionally BV the completed mill ready on site for installation.
<unk>.
How long after that.
Would it be effectively ready to to put the switch to <unk>.
Turn on.
Yeah.
Sorry Gabriel.
Difficult My line connection, our operator, I'm going to actually try reconnecting.
Can you still hear me.
Yes, I can hear you okay no no it seems to have gotten better sorry Gabriel.
Okay question do you mind repeating it.
My line was cutting out there sure.
Yes, that's what I was just wondering about the domestic equipment that has been ordered.
About how long will it be until.
All of that mining equipment is on site and from there how long will it take to have it all installed and ready to.
To turn on.
Actively flipped the switch on that mill.
Yes, I mean, what where we've gotten to is as I mentioned, all the permitting applications and everything had been submitted in terms of we have largely the the permits to go ahead and what we're waiting on is some of the environmental assessment to reviews that are outstanding.
And so with that we're going to probably take a bit of a pause until we can get that all confirmed.
Confirmed and tucked away.
Before continuing with those purchases and moving ahead with it.
Probably means.
At this point is potentially a six month delay in terms of the mill likely no delay on the tailing storage facility.
At this point, where we're getting sort of prepared for the fact that we might be delayed a bit.
Okay, Alright, thank you very much.
Ladies and gentlemen, as a reminder.
Should you wish to ask a question. Please press star followed by one.
And we have another question from Justin Stevens from Ti financial Please go ahead.
Hello.
Just one question I think really from me. Obviously, you guys are still waiting for the quantum Ping approve.
Approval rate.
The macro scenario sort of are you guys planning to do any more exploration before you receive that permit or is that really going to be a wait till you get the mining permits.
Want to drill from underground before you sort of flush that out further.
Oh, yes.
You can you can hear me properly not again it was a clicking during your question.
Yes, we're continuing the drilling.
Hey.
The.
The permits outstanding I'm, not anticipating any issues, but I think maybe the comment to share you know here in front of this applies to some of the other.
Aspen from administration that.
Alright.
Me, Okay, because they're clicking on the clicking kicked back and it's been coming and going.
Yeah.
Yeah, I don't know something like.
Tried disconnect reconnecting them on another line.
Okay I'll reconnect you as soon as you call back in thanks.
Okay.
Hi, Justin are you still there.
Yes, I'm still here, okay, great sorry about that I don't know what the issue was with with my lines, but seem to be.
Finally, reconnected with a good line.
Yes, so to answer your question Yeah, we're continuing to do the work and really from from a permitting standpoint.
The things that are happening right now as many of you know in terms of of.
The COVID-19 restrictions in China means that travel is a bit of a challenge.
What we've been what we're happy to report is the fact that our operations have been running smoothly. So really you know other than the the GC disruption, which was a completely different issue. Our operations are running smoothly through this this whole situation.
But because of the limitations on travel and the difficulties for people in our operations office in Beijing to get back into Beijing.
Some of the sort of face time needed to move some of these things ahead isn't happening.
So that's why we're seeing some of these are these items that they may drag on a bit longer.
But.
It's just the situation we're dealing with right now.
Hopefully things change hearing some some some chatter out there that are.
Things May may may improve here in terms of from a movement standpoint, and then that would allow for both the.
The colon paying in the mill project to to resume just because of getting like I said that face time with the people and the appropriate departments to to work on in advance advanced those are those items.
Got it no that makes sense.
I guess, Matt the only other thing kind of wondering about is obviously the.
Some of the drilling you guys have been doing.
Modeling around these low angle.
Gold copper veins at gang.
I'm assuming that most of this is probably going to be a lot of hole. The new mill is in place given the addition of the copper circuit makes it I think much more tolerable to to go after some of the stuff.
Is that sort of the right way to think about this.
For the copper I would say, yes for the actual someone the gold only rich zones, we're into those and that's you know you're starting to see some.
That uptick in the gold production because of that it's still early days and working the kinks out of out of.
And just getting a handle on mining a different structure, where the different mining method and also from a processing standpoint, but you know we've been working through the flow sheet and it's mainly a gravity recovery.
For for some of those gold rich areas and so some of that's being put into a gold concentrate to be sold separately some of that.
<unk> included in our lead concentrates where we get pretty good payment terms.
For the Golden that end, but we're also considering things down the road like do we go right to Dore, which would be obviously, a nice feature so yeah. So starting to see that and that ramp up has really been happening.
<unk> late summer and starting to see that now so I think going forward you will see ongoing impact from it from a gold zones in the <unk> and the results.
Got it good to hear because thats all it is a nice little kicker than.
Actually tap some of that.
Yes for sure.
Great and then that's it for me.
Yes.
Your next.
Question comes from Felix Sherpa Golan from eight capital Felix. Please go ahead.
By law.
Just a couple of very quick questions.
The operational disruptions that you had a GC at the end of last quarter ending October of this year this quarter.
Is there any risk that you might run into something similar at Yang.
Just to give a little bit more color on that.
I would say the provinces do operate differently.
And where we are at Yang is a more industrialized area with more mines and I'd say more familiarity with mining activity.
Some of the some of the challenges that are maybe at G. C is that there's not as many operations around so whether that's from an understanding of what's relevant or you know the size of the lobby group you know that's what led to those those.
Those things being implemented also you know being in a in a.
Warmer climate, certainly would have had an impact to some degree on.
So some of the issues we had with.
Ventilation in the the maximum temperature allowable at the workplace that that we reported.
Less of a factor at Yang So we're really not.
Anticipating at this point any any challenges that you.
Okay, Thanks, and I noticed the chore.
Your money market instruments have been declining by about $30 million per quarter for the past two quarters.
Could you just provide just a little bit of color on what's going on there.
Yeah, I mean, it's some of that is it's a it's a bit complicated, but what it relates to is obviously, we've got different currencies and different items in different currencies held both in.
In Canada and.
Through our offices in China, and so where we had RMB denominated instruments from a reporting standpoint, when we converted those to U S dollars.
That would explain why.
Why with the strength of the U S. Dollar some of those numbers are down.
Okay. Thanks, a lot that's it for me.
There are no further questions at this time.
You may make.
To make your closing remarks.
That's great. Thank you Colin and thanks, everyone for joining the call I apologize for the sound issues.
With the call earlier if.
If there are any further questions relate.
Related to the results or anything else about Silver Corp. Please do reach out to us and we look forward to reconnecting with everyone on our next scheduled call.
Before discussing our third quarter results.
Thank you very much.
Ladies and gentlemen, this concludes your conference call for today, we thank you for participating and ask you. Please disconnect your lines.
Yeah.
Yes.