Q1 2024 Silvercorp Metals Inc Earnings Call

Once again, thanks to the standby do not disconnect. Your conference will begin momentarily. Thank you for your patience.

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Thank you for standing by.

Good afternoon, My name is Sylvie and I will be your conference operator today.

At this time I would like to welcome everyone to the Silver Corp, first quarter fiscal 2024 financial results conference call all.

All lines have been placed on mute to prevent any background noise. After the speakers' 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 one on your telephone keypad.

I would like to withdraw your question. Please press Star then the number two thank you.

And I would like to turn the conference over to Lon Shaver Vice President for opening remarks. Please go ahead.

Thank you Sylvia on behalf of Silver Corp, I would like to welcome everyone for joining our call today to discuss our first quarter fiscal 2024 financial results, which were released yesterday after market a copy of the news release MD&A and the financial statements for today's call are available on our website and SEDAR before we.

Get started I'm required to remind you that certain statements on today's call will contain forward looking statements 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.

10-Q, and form 40 F and annual information form.

Yeah.

So we kicked off our fiscal 'twenty 'twenty four with a solid first quarter with our mines delivering a strong performance in line with expectations.

Our revenue in the quarter was $60 million that was down 6% compared to the prior year quarter.

Due to a number of factors, notably a decrease of $3 4 million in silver and lead sales.

Kris was $3 9 million from lower realized lead and zinc prices.

But those were offset by an increase of $2 6 million from a higher realized silver price and increase of 700000 from gold sales.

Based on production levels.

And our realized prices this quarter, our silver was 59% of our revenues on a net basis that was up from 54% in the first quarter of last year.

Our Q1 net earnings attributable to equity shareholders were $9 2 million or five cents per share this compared to $10 2 million or six cents a share for the same period last year.

Main contributors to the slight decrease or a 5% or 9% decrease in silver and lead sold respectively, and a six and three 3% decrease in realized lead and zinc prices.

Also we had a foreign exchange loss of $2 2 million arising from the depreciation of the U S dollar against the Canadian dollar.

These were offset by 6% and 8% increases in realized gold and silver prices as.

As well as a 36% increase in gold sales and a $1 $1 million gain on investments.

Our realized adjusted earnings for the quarter were $12 4 million or seven cents a share.

And this compared to $13 5 million or eight cents a share for the same period last year.

And just for reminder of the adjusted earnings as a supplemental non-GAAP measure.

To provide investors with another metric to better measure the performance of the underlying business, it's continuing profitability and growth potential.

Our cash flow from operating activities in the quarter was $28 9 million down from $40 2 million in the prior year quarter.

Due to the previously mentioned factors impacting revenue and net income.

Also a $4 5 million in cash tax paid versus 2.3 in the prior year quarter and a positive noncash working capital contribution of approximately 5 million.

Compared to $8 9 million in the prior year quarter.

Capital expenditures totaled approximately $15 9 million in the quarter that was up 2% from $15 5 million in the prior year.

Mainly due to increases in ramp development as well as investments in equipment and facilities at both operations.

During this period, we also paid $2 2 million of dividends to shareholders.

We ended the quarter with $206 million in cash and cash equivalents and short term investments down slightly to two from $203 3 million as of March are largely due to a negative translation impact arising from the depreciation of the.

The RMB against the U S dollar.

Just to note. This cash position does not include our investments in associates and other companies, which had a market value of $121 5 million as of June 30th.

Okay.

As previously reported from a production standpoint, we mined 303220 tonnes of ore and milled 295095 tons of ore that was up 1% and down 1%, respectively compared to the same period.

Period last year, and we produced on a consolidated basis, approximately one 8 million ounces of silver.

1006 hundred ounces of gold.

$17 8 million pounds of lead and $6 8 million pounds of zinc in the quarter. These were decreases of 4%, 7% and 2% respectively in silver lead and zinc.

Over Q1 of fiscal 2023.

The decrease in silver and lead production as noted in the previously previously issued news release, primarily reflects a decrease in head grades at King which is in line with the mining sequence and mineral reserves.

At <unk> the production cost per tonne of ore processed was $85 58 per ton. This.

This is down 8% compared to Q1 of fiscal 2023 are the.

The all in sustaining costs per tonne of ore processed at Ying was 133% and 94 cents.

14% compared to Q1 of fiscal 2023.

The decreases were mainly due to a 6% depreciation of the RMB against the U S. Dollar, but also a decrease of $3 2 million in sustaining capital expenditures.

On the other hand, the production cost per ton process at G. C was 60 202, that's up 7% compared to Q1 of last year.

And the all in sustaining cost per tonne of ore processed at G. C was.

$90.94 up 11% compared to Q1 of fiscal 2023.

The increase here was primarily due to more tunneling that was done and expense during the quarter as well as additional cost to run the extra Archie ore sorting system.

Which has recently put in place, but obviously offset by the depreciation of the RMB as mentioned.

Overall, the cash cost per ounce of silver net of byproduct credits was a negative 31 cents U S. In the first quarter compared to a net negative $1 57 in the prior year quarter the.

The increase reflects a decrease of $4 3 million of byproduct credits.

But offset by a 1.8 million decrease in expense production cost.

And the all in sustaining cost per ounce of silver net of byproduct credits.

It was 946 up marginally compared to 925 and Q1 of last year increase primarily reflects the same factors that impacted the cash cost that I just mentioned.

Offset by a $2 7 million decrease in sustaining capital expenditures.

Yeah.

Turning to our growth projects, we spent $2 4 million and the construction of a new tailings storage facility at Yang during the corner and as of June 30th total expenditures incurred on the tailing storage facility and the new mill were $7 2 million.

And construction.

Is in line with the planned schedule and budget.

At the quantity project, which is a satellite property north of Yang environmental water and soil studies were carried out in the quarter reports from these studies are expected to be completed and submitted to the relevant provincial authorities for review later this quarter.

In addition, we completed.

Okay 84 point.

Six kilometers or 2.7 million worth of diamond drilling over the quarter contributing to the steady release of exploration news flow.

For months multiple mines, mainly at Yang over the past few months.

With regards to the proposed acquisition of Celsius Resources Ltd, which we had previously announced on May 15th we put out a news release earlier. This week the exclusivity period, we had with Celsius under the term sheet.

Which had been extended twice expired on July 31st with the two companies unable to negotiate a definitive agreement along the lines of what was contained in the non binding term sheet.

There are no negotiations ongoing.

Turning to the ore Corp announcement on August 7th Silver Corp, and all Corp jointly announced the signing of a definitive scheme implementation deed.

Whereby silver Corp will acquire all Corp. At a total consideration of 60 cents, Australia for or crop share comprised of 15 cents in cash.

And 0.096, adding silver Corp shares worth 45 cents Australian.

The transactional will be completed through in Australia in scheme of arrangement very similar to a plan of arrangement in Canada.

In addition to or cardboard support which represents four 6% of our Corp shares outstanding.

News release also noted the deals received support from rolling out, which controls approximately 12, 3% of the ore Corp shares.

A sudden has provided assigned voting intention statement to or corp, indicating that it intends to vote in favor of the scheme.

Along with the acquisition, we announced this silver Carpenter or Corp entered into a placement agreement whereby a little carpet will acquire approximately 74 million shares or corp. At a price of 40 cents, Australia and for sure.

For aggregate proceeds of approximately 28 million Australia.

After completion of this placement Silver Corp will hold approximately 15% of all Corp.

And as placement was done as a bridge financing to the closing of the acquisition.

Providing funding to commence resettlement activities necessary for the prompt development of the <unk> project.

More details are outlined in the news release I just wanted to make some key comments about this transaction.

And as I got project adds meaningful resources to silver carton and contained in a project that we can apply our development skills too.

Once built nine Zagha will make a meaningful contribution to our production profile and financial results, while adding country and commodity diversification at the same time.

And this acquisition takes us into a highly prospective district, and the Lake Victoria Goldfields and in Tanzania, a country that is receptive to foreign investment and development.

And we think the above factors should lead to a re rate 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 man Zag a project over the coming months.

And with that I'd like to open the call for questions. Thank.

Thank you, Sir ladies and gentlemen, if you would like to ask a question. Please press star followed by one on your Touchtone phone.

Pardon me.

If you would like to withdraw your question. Please press star two and if Youre using a speakerphone you will need to lift the handset before pressing the keys one moment. Please for your first question.

Which will come from Felix staffing Killen at.

Eight capital. Please go ahead Felix.

Thank you.

Congrats on a good quarter just a very quick question for me.

The year over year increase.

Cash costs and all that.

Many of the Juicy line was.

It says that it was driven by additional cost to indeed expertise sorting system.

Could you just give a little bit more color on that that there is some issues with this or just.

Any additional information that will be great. Thank you.

Yeah, Hi, Felix and thanks for your question I wouldn't say necessarily yeah issues, but bringing in something new into the flow sheet getting everybody aligned and understanding how it works and how to.

Incorporated into the end of the flow obviously, you know take some some time in some extra effort.

So I wouldn't you know I wouldn't say there's issues, but just some additional costs that we've incurred from an observation standpoint. It looks like it may have made a contribution now given that the the grade did pick up.

Okay. Thank you.

Thank you.

Once again as a reminder, if you do have a question. Please press star followed by one on your desk telephones.

And your next question will be from Justin Stevens.

Pi financial please go ahead.

Hey, guys.

Good Chad.

Presentation, I think you answered a few of the things anyway, but the lungs that are left over here Yang the particularly the mining cost on a per ton basis dropped pretty.

Pretty considerably.

Is this sort of thing obviously, the RMB devaluation has an impact there, but even beyond that.

Kind of thing that we're seeing the benefit of that so don't focus on lateral development.

The development of that and if so.

Do you think that that's maybe not quite sustainable at these low levels again.

So they come in at the lower end of the guidance number Tom Ridge.

Yeah. Good question, obviously, we're not in the business of forecasting the exchange rates here.

I mean, I think I would go back because theres a lot of a lot of factors that come into play you know from year over year and quarter to quarter in terms of.

Different elements I can't speak specifically to that being a.

A component of our of.

You know going shallower or or following laterally as as you indicated.

I think that may have been part of the contribution to the to the change, but I I mean, I would stick really with what we've put out in terms of guidance.

Like for the quarters going forward and any ear and if if there truly is what I would say a shift in thinking you know we'll update the we'll update the numbers and give you more granularity on that.

Got it and.

No the spin.

But is there a plan for the timing on AR.

Our reserve and resource update broadly speaking for <unk> district.

Yeah.

We haven't discussed that internally obviously, we just did one based off of that are you know the big drilling we did starting in 2020 and that that got published last fall. So I know obviously, we've put some new news out since then.

There haven't been plans from a timing standpoint, and you know typically we've.

Rotated between doing a you know a formal update on Yang one year, and then G C in an accident and going back and forth.

We'll have to have some conversations heritage to determine if the.

The the drilling that's been done.

That did not make it into the last report as well as any of these other changes or warrants an update but at this time you know I don't have any set time and target and we have not started currently.

To do a an updated 43 101 on you.

Got it and then just.

Obviously it was a mill three doesn't come in as the plan just to I guess accelerate.

The previous mine plan, Paul from a few marks.

Stopes in pesos that.

The increased capacity there.

Yeah, well I and obviously with the number three coming on number one gets shut down. So we do lose them you know we do lose that contribution.

But it's definitely a portfolio mix you know I mentioned quantum pang with what's progressing there I mean, I'm I'm hopeful I'm optimistic that we'll have an amount of a of a disclosure you know relative to what we think that can contribute in terms of you know tonnage and grade.

To the centralized milling facility sometime later this year or early next year, so that would be a contributor and yeah. We're working through plans with respect to them, what we can add or increase our update for the you know the existing seven mines.

Across the four mining permits and then again its you know its seven mines across roughly 70 square kilometers. So there's.

I think opportunities to increase production at some of these are our existing ones and potentially looking at bringing on new areas, but a lot of the work has to be done and we you know we put out the disclosure that.

That Oh this work has to get wrapped up into not necessarily the 43 101, you're referring to but more of the Chinese you know resource development.

Development plans that have to get filed to get a permanent approvals for that.

For sure I know exactly that.

That sounds good looking forward to see in the next couple of quarters back.

Well, thanks, gentlemen, I appreciate the questions.

Thank you next question will be from Gabriel Gonzales Echelon capital markets. Please go ahead.

Hi, just a question regarding the ore Corp announcement at the end of <unk> policies exclusivity period, and I apologize if this was already.

Addressed earlier in the call I did jump a few minutes late but I wanted to ask if the company will continue to look for acquisitions or does at the end of the Celsius exclusivity period, and how Quincy for Corp. In that for now it's more core pass or the one and done.

Type situation on the acquisition front for now.

Yeah, I think obviously or Corp had the benefit of seeing what we had disclosed on the Celsius transaction.

And they were aware of our activities. There. They also know that you know we have ambitious growth plans for the company and and you know that's part of the excitement and part of the reason to roll into the Silver Corp story with the transaction that we've announced but you know certainly from a near term standpoint.

You know getting the ore Corp transaction closed and you know being in a position to also post <unk>.

Closing of that deal I'll provide a bit more updates as to the development of <unk> as a key priority.

Okay, Alright, thank you very much.

Thank you.

And this concludes the question and answer session.

I'd like to turn the conference back over to Lon Shaver for any closing remarks.

Well that's great. Thank you Sylvia and thanks, everyone for tuning in today and for the questions.

Please if you have any additional questions.

Yeah happy to address them at that time, and we look forward to updating you again on our next call for a second quarter results have a good day everyone. Thank you.

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