Q2 2024 Silvercorp Metals Inc Earnings Call

Welcome to your conference call discussing the standby your conference will begin naproxen.

[music].

Thank you for standing by good afternoon. My name is Gina and I will be your conference operator today.

This time I would like to welcome everyone to the Silver Corp, second quarter fiscal 2024th quarter Financial results Conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be question and answer session. If you would like Jesse question. During this time simply press Star then the number one on your telephone.

Keypad, if you would like to withdraw your question. Please press Star then the number two thank you I would now like to turn the conference over to Mr. Lon Shaver President of Silver Corp. Metals. Please go ahead.

Thank you Peter on behalf of our Silver Corp, I would like to welcome you all for joining the call today to discuss our second quarter fiscal 2024 financial results.

They were released yesterday after market.

Copy of the news release MD&A financial statements.

Today's call are available on our website.

Before we get started I'm required to remind you that certain statements on today's call may contain forward looking information.

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.

So with respect to the quarter our revenue in Q2 was $54 million that was up 4% compared to the prior year quarter and this increase was due to higher net realized selling prices for silver Golden led which increased to 27%, 38% and 2% respectively.

And also due to a 110% increase in gold sales.

This offset the lower <unk>.

Silver lead and zinc sold.

Based on production levels and realized prices this quarter silver was 58% of revenue on a net basis.

And that's up from 54% in Q2 of fiscal 2023.

Q2, net earnings attributable to equity shareholders were $11 1 million or six cents, a share and that compared to a net loss of $1 7 million or <unk> <unk> per share in the same period last year.

The main contributors to the increase in earnings were the.

The higher realized silver gold and lead prices I mentioned earlier, the higher gold sales and also we did not have an impairment of mineral rights in <unk>.

Properties, which we incurred in the previous period.

This increase though was offset by a 27% decrease in the realized zinc price and also at 12, 12, and 23% decrease in silver lead and zinc sold respectively.

And also a decrease of $3 million and foreign exchange gain.

On an adjusted basis with adjustments, we make to remove the impacts of noncash and unusual items.

For the quarter were $11 7 million or <unk> <unk> per share and that compared to $6 8 million or four cents a share in the same period last year.

And just a reminder for everyone. The adjusted earnings as a supplemental non-GAAP measure.

We provide to investors as another metric to better measure the performance of the underlying business.

Continuing profitability and growth potential.

Turning to cash flow, our cash flow from operations in the quarter was $28 8 million that was up from $14 1 million in the prior year period to those previously mentioned factors that impacted revenue and net income.

But also $1 $8 million in cash taxes paid versus $4 3 million in the prior year quarter and a positive adjustment in noncash working capital of $3 2 million compared to a prior year quarter negative adjustment of $6 8 million.

Capital expenditures totaled approximately $15 1 million in the last quarter.

Down 13% from $17 4 million in the prior year period, due to lower corporate exploration spending and modestly lower investments in equipment and facilities at both operations. This.

This was partially offset by higher exploration and ramp development spending at the GC and young minds.

During this period, we also repurchased under our normal course issuer bid.

Just under 200000 shares of company for a total of approximately 600000, we ended the quarter with $189 1 million in cash and cash equivalents and short term investments.

This was down 6% compared to the $200 1 million, we reported at June 30th.

It was largely due to an additional 5 million investment in new Pacific.

As a part of our participation in their financing and an $18 5 million investment in or Corp. Through a private placement that we completed.

In conjunction with the signing of the binding scheme implementation D to acquire or Corp.

This cash position does not include our investments in associates and other companies, which had a total market value of $124 million as of September 30th.

Now looking at production over the quarter as we previously reported we mined 273465 tonnes of ore and milled 261107 tons of ore those numbers were down, 6% and 10% respectively compared to the same quarter last year.

The decline was primarily a result from a five week shutdown at the GC mine as we previously reported.

In both and update as well as the production figures are that we put out.

So we produce on a consolidated basis, approximately one 6 million ounces of silver.

$16 1 million pounds of lead and $4 6 million pounds of zinc in the quarter. These figures represent decreases of 12, 11% and 23% respectively in silver lead and zinc production compared.

Compared to Q2 of fiscal 2023.

The decrease mainly reflects lower production from GC and lower head grades achieved at Yang due to mining sequencing.

Any creased mining and milling of gold ore.

During the quarter in total 12800 tons of gold or.

<unk> 1.9 grams per ton and 82 grams per ton silver were processed in Q2 to produce a gravity gold concentrates leading to the pouring of the company's first gold Dore and contributing to a record quarterly gold output.

Of 2.5 thousand ounces of gold.

Our year to date, we've produced $3 4 million ounces of silver.

4000 ounces of gold 34 million pounds of lead and 11 million pounds of zinc.

The cash cost per ounce of silver net of byproduct credits was negative $1 in the second quarter compared to a positive 77 cents in the prior year quarter.

The improvement is mainly due to decreases in per ton production costs contributing to a decrease of $4 1 million in expense production cost.

Unit production cost improvement also reflected a 6% depreciation of the Chinese RMB against the US dollar over the same prior year period.

The all in sustaining cost per ounce of silver net of byproduct credits was $11 50. This compare to 825 in Q2 of fiscal 2023, and the increase primarily reflects a $5 4 million increase in sustaining capital expenditures and a 7 million increase in G&A expenses and government fees and other.

Taxes over the same prior year period.

Turning to our growth projects, we spent $1 7 million on the construction of a new tailing storage facility Yang during the quarter.

As of September 30th total expenditures incurred on the tailing storage facility were $8 9 million in construction is on track for completion in 2024.

At the quantifying project satellite property located to the North of <unk>. The company has completed environmental water and soil assessments. These reports have been approved by the relevant provincial authorities.

And an updated mineral resource estimate report to.

To be prepared in accordance with Chinese standards is currently under review by the Province. The company is also in the process of preparing a comprehensive report that includes the mineral resources development and utilization plan.

Our reclamation plan environmental rehabilitation plan, we will provide.

Additional details when they are available.

Looking ahead at Yang we are considering opportunities to increase operational efficiencies through enhanced mechanization of our minds and the Ying mining district.

Underground stoping activities will increasingly pivot to more shrinkage mining with LH de loading this will help to reduce the labor intensive marketing associated with the cut and fill out pursuing stoping method, which is being used predominantly the shift is expected to increase mine output improved labor efficiency introduce unit operating costs in the future.

And as part of this initiative. The company has ordered 20 scoop trams are L. H D for Yang.

With the first unit delivered to site in late October.

And mobile extra T ore sorting system is being installed at the number two mill to address the higher anticipated dilution associated with shrinkage mining. This is one of three X starchy ore sorting plant at Yang to upgrade or from the various mines throughout the district.

Type of sorting system has already been implemented at the GC mine.

With reported improvements in head grades.

Silver corpus considering alternate strategies to expand <unk> mineral processing capacity instead of the original plan to build a new 3000 ton per day mill, and then decommission the existing number one mill.

We are currently considering the option.

Adding 1500 tonnes per day of capacity to the number two mill, which would increase the processing capacity at the Ying mining district to 4000 tonnes per day.

The company will provide additional details when available but as expected this expansion could be operational sooner and at a lower cost both in terms of absolute.

To implement and on a dollars per ton per day, increasing capacity.

With respect to our or Corp acquisition on August six 2023, the company an oil Corp announced the signing of a definitive agreement whereby we will acquire or Corp, pursuant to an Australian scheme of arrangement.

Subject to the satisfaction of various conditions.

Since the announcement the company or Corp had been working together to seek the necessary regulatory approvals, including an application lodge to the Tanzanian Fair competition competition Commission for which approval was granted effective in November 3rd.

The scheme booklet, which includes an independent expert report, saying the transaction is fair and reasonable to all Corp shareholders.

It's been completed and provided to all corp shareholders to assist them in the considerations as to whether to vote in favor of the scheme at the scheme meeting.

The scheme meeting as is currently scheduled to take place at 10, a M. Australia time on Friday, the eight of December.

We look forward to providing the market with further updates on the transaction over the coming weeks.

I'd like to turn the call open.

Over to questions operator.

Thank you, Sir ladies and gentlemen, we will now conduct a question and answer session. If you would like to ask a question. The number one on your telephone keypad.

I would like to withdraw your question Press Star two.

Taking a speaker phone please keep the handset before pressing.

One moment. Please for your first question.

Yeah.

Your first question comes from the line of Joseph Reagor from Roth MTM. Please go ahead.

Hey, Thanks for taking my questions.

Joe.

So okay.

At G C.

You guys are obviously trending a little below expectations with the issues in Q2.

Do you think you can make up the tonnes that to meet the low end of guidance on tonnage.

<unk>.

By the end of the year or you know or is it just a matter of like saying how much you can make up and then revising later.

Yes, I mean, I think the first thing to say is that G. C is back up and running according to plan if not even ahead of plan with respect to tonnage I think what we're more focused on is really from a corporate standpoint.

And also you know just given the.

The relative size of GC to Yang you know, what's really important with respect to guidance is that we don't we still see silver as being achievable from a low end standpoint of guidance, yes, our lead and zinc looks difficult at this point here, but.

We're talking about sort of rounding numbers not.

You know not not huge differences.

Fair enough.

And then obviously as the as it ramps back up to normal rates, we should expect the operating cost per ton to come back down and in your fiscal Q3 right.

Yes, I mean, what we have at all the mines a bit of a small numbers have factor that can can bite us when I'm in a win win those small tonnage numbers are made even smaller and you're having to allocate those costs to smaller smaller tons and so you know we've seen that over over periods. So yeah.

You know with it back up and running we see things falling back into line in a more normal operating rates and costs going forward.

Okay.

And then based on current expectations for the ore Corp transaction, if it closes on time.

Would be the timeframe thereafter that we would see you know like an.

Updated financial study with your guys outlook for the project.

Yes, that's anticipated in terms of a technical report that we would issue.

Exact nature of it to be determined still but probably in sort of January February timeframe.

In terms of an initial report, but obviously, we'd look to give as much guidance in advance of that as we can.

Okay, I'll turn it over thanks, a lot okay. Thanks, Joe.

Thank you once again that is star one to ask a question and your next question comes from the line of Jeffrey Cohen from <unk> capital. Please go ahead.

Hey, thanks for taking the questions.

I feel like low Yep Yep.

You hear me.

Yes. So my question is around the <unk>.

The alternative plan for expanding the processing capacity at Yang.

I understand it's probably early days, but can you give a ballpark figure for what youre expecting the capex to be to add this extra processing line that mill number two and also how much money is left there to be spent on the new tailings facility.

Yeah.

I will tackle the second question first you know we're at roughly 8.9 million and as you recall the cost was 38, so we would have.

30 to go through and through the next sort of.

My guess it would be five quarters really.

From a calendar standpoint to get to the end of 2024 calendar.

Uh huh.

And then with respect to your first question, Yes, we're still working on the estimates.

Our sense is the numbers here would come in a sub $10 million.

So it's actually quite a reasonable cost with respect to getting that production increase.

And the other elegance of it is from a timeframe, we can see it being completed at some point over the course of 2024.

Which as you recall is ahead of schedule relative to the number three meal plan that we've articulated.

Okay that makes sense and if I recall correctly I think you were using the number one mill.

Most of the gold processing, what's happening or the number one mill will that be will that remain to be the case going forward.

That's a bit to be chairman, obviously with with.

With the number three meal plan, we're anticipating shutting mill number one.

Now if if we're keeping it open and.

And looking at quantifying we may actually dedicate.

Number one to address or coming from Comping in which case, we would move the the gold circuit over to the number two mill.

But that's yet to be finalized.

Okay understood. Thank you Laura.

Okay. Thanks, so much.

Thank you once again that Istar and wanted to ask a question.

This concludes the question and answer session I would like to turn the conference back over to Mr. Longe Shiva for any closing remarks.

Okay, well, thank you operator, and thanks, everyone for joining today I appreciate your time and interest and as we finish the call. Please remember that our lines of communication are always open. If you have additional questions you didn't get to put to us.

On the call today, please reach out to us by phone or email and we will follow up with you and get you. The information that you need as you head into the holiday season, sending our best wishes for a wonderful relaxing time for you and your loved ones and we're looking forward to what promises to be an exciting and successful 2024.

Thank you. This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.

Yeah.