Q3 2025 Silvercorp Metals Inc Earnings Call

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Chloe: Thank you for standing by and good afternoon. My name is Chloe and I'll be your conference operator for today. At this time, I would like to welcome everyone to the Silvercorp 3rd Quarter Fiscal 2025 Financial Results Conference Call.

Chloe: All lights have been placed on mute to prevent any background noise.

Chloe: After the speaker's 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 your telephone keypad. If you would like to withdraw your question, please press star, then the number 2. Thank you.

Chloe: I would now like to turn the conference over to Lon Shaver, President of Silvercore. Please go ahead.

Lon Shaver: Thank you, Chloe. On behalf of Silvercorp, I'd like to welcome everyone to the call this morning or afternoon, wherever you may be.

Chloe: Today we'll discuss our third quarter fiscal 2025 financial results, which were released on Tuesday after the market closed.

Chloe: A copy of the news release, our MD&A, and the financial statements are available on our website.

on CDAR Plus.

Chloe: Before we jump into the call, note that certain statements on today's call will contain forward-looking information within the meaning of securities laws, and please review the cautionary statements in our news release as well as the risk factors described in our most recent regulatory filings.

Chloe: And now to jump in and recap our financial results, fiscal Q3 was our strongest quarter ever.

Chloe: And this was highlighted by record revenue of $84 million, which was up 43% from the quarter last year. Record operating cash flow of $45 million, which is up 90%, and record silver production of 1.9 million ounces, which was up 16%.

Chloe: This growth was driven by a strong performance from our flagship Yingmai.

Chloe: which also successfully completed a mill expansion in early December and will be increasing production capacity from 2,500 to 4,000 tons per day.

Chloe: In addition, a robust commodity market led to improved realized metals prices compared to the same period last year.

Chloe: And in particular, the realized gold and silver price rose by 35%, the zinc price rose by 49%, and lead by 8%.

Chloe: Silver remains our most important metal and contributed 63% of our net realized Q3 revenue this year.

Chloe: And that compared to 59% of revenue in last year's fiscal Q3.

Chloe: The results again reinforce why Silvercorp remains a compelling investment. We are a growing and profitable silver producer that provides investors with leverage to higher metals prices.

Chloe: Moving down the income statement, attributable net income for the quarter was 26 million or 12 cents per share, more than double the 11 million or 6 cents a share that was reported in the same period last year.

Chloe: On an adjusted basis, removing the impact of non-cash and one-time items, our net income for the quarter was $22 million or $0.10 per share, compared to $11 million or $0.06 in the comparative quarter.

year.

Chloe: And these increases were partially offset by a 10% decrease in zinc sold, a $2 million increase in admin expenses, and a one-time $12 million government payment related to the renewal of our mining license at the SGX mine.

Chloe: Looking at cash flow from operating activities, our mines generated $45 million this past quarter. This is up 90% year-over-year, driven by higher metal prices, increased sales, and $10 million inflow from changes in non-cap working capital.

Chloe: and that's compared to a 135,000 outflow for the changes of non-cash hoarding capital last year.

Chloe: Even after adjusting for non-cash-forwarding capital changes, our cash flow still grew by 47% year-over-year.

Chloe: During the quarter, we invested $25 million in our mines and projects.

Chloe: This is up 29% from last year and is largely due to increased underground development and completion of the new tailing storage facility and mill expansion projects at the Ying Mine, as well as ongoing spending at El Domo and Condor projects in Ecuador.

Chloe: Additionally, we repaid Wheaton Precious Metals $13.25 million that had been drawn as an early deposit for the El Domo project, paid $2.7 million in dividends, and repurchased close to $1 million worth of our shares under the current

NCIB program.

Chloe: We ended 2024 with a healthy cash balance of $355 million, which includes $143 million in net proceeds from our convertible notes offering, which we completed last November.

Chloe: This cash position does not include our investments in our associates and other companies, which had a total market value of $69 million as of December 31st, and this value is up slightly to $73 million as of today.

Chloe: Turning to our operating results, as we reported in January, Ying delivered record performance in Q3, which drove an 11% and 16% increase year-over-year in the company's total ore mined and milled.

Chloe: As a result, our production of silver, gold, and lead increased by 16%, 53%, and 5% respectively in Q3.

Chloe: Zinc production decreased by 10% compared to last year due to lower head grades.

Chloe: Year-to-date, we have produced 5.3 million ounces of silver, 4,400 ounces of gold, 46 million pounds of lead, and 19 million pounds of zinc.

With the successful expansion of our mill number two.

fiscal 2025.

Chloe: On the unit cost front, the production cost averaged $78 per ton in Q3, five percent higher than last year due to more underground development and great control drilling completed and expense was part of the mining cost.

Chloe: Year-to-date production costs average $80 per ton which was in line with our annual cost guidance of between $77 and $80.

$80 per ton.

Chloe: Our cash cost per ounce of silver net of byproducts was negative $1.88 in Q3, lower than the negative 96 cents in the prior year quarter, which reflected a $6 million increase in byproduct credits.

which offset the impact of higher production costs.

Chloe: And our all-in sustaining production costs increased by 10% year-over-year to 150 per ton in Q3, driven by a 5% increase in unit production costs.

and a 3% increase in sustaining capital expenditures.

144 to 152 per ton.

Chloe: Our all-in sustaining cost per ounce of silver net of by-product credits was $12.75, a 13% increase year-over-year reflecting increases in G&A, some sustaining capital, plus some government payments totaling $6 million.

Chloe: Turning to our growth projects, as mentioned earlier we commissioned the mill number two capacity expansion and phase one of our third tailing storage facility at Ying last December. Both were completed on time and under budget.

Chloe: With these upgrades we are well positioned for sustained production growth in the coming years as we continue to increase mechanization at our underground mines.

Chloe: Additionally, we secured all necessary permits and licenses for the Kuanping satellite project, which is now ready for construction. Recall, as part of our fiscal 2025 budget, we've allocated $1 million for development at Kuanping.

Chloe: We are leveraging our mine billing expertise in Ecuador as we advance construction of the Aldomo copper gold project.

Chloe: Since acquiring the project last July, we have strengthened our in-country technical and management team. We've optimized the site layout, project infrastructure designs, and our open pit production plan.

Chloe: and commence detailed engineering for the process plant while conducting some additional metallurgical testing to potentially improve gold recovery in our copper concentrate.

Chloe: Additionally, we have signed a power line contract with the Ecuadorian State Utility, CINEL, and we finalized the project's materials balance.

And for...

Chloe: For everyone, this is basically an earth-moving schedule, and it really speaks to exactly what gets moved when to where, and that includes ore coming from the open pit.

Chloe: We've also adopted a unit cost method for contractor bidding, ensuring we pay only on a per ton of material moved basis.

going forward.

Chloe: Based on this approach, we awarded the first civil contract to CRCC 14, a seasoned operator in-country with over a decade of experience building large infrastructure and mining projects in Ecuador.

Chloe: PRCC is now mobilized to build the temporary camp, initial phase of the tailings facility, the waste dump, and other important infrastructure.

Chloe: The remaining two civil contracts for pit stripping and mining as well as for process plant construction are set to be awarded in the coming months keeping us on track for initial production targeted in the second half of 2026.

Chloe: We look to provide guidance on our capital budget for fiscal 2026 along with our production targets in April.

Chloe: At the Early Stage Condor Project, our focus has been on completing a resource review to assess future development plans for what would be a high-grade underground gold mine, and we continue to develop an exploration plan as we further our understanding of the project.

Chloe: We're committed to working closely with the government of Ecuador, local communities, and our in-country partners, Salazar Resources. Our focus on responsible and sustainable development aims to create lasting benefits for both the local communities in the country.

Chloe: And for that, with that operator, I would like to open the call for questions.

Speaker Change: Thank you, sir. Ladies and gentlemen, we will now conduct the question-and-answer session. If you would like to ask a question, press star, then the number one on your telephone keypad. If you would like to withdraw your question, please press star 2. If you are using a speakerphone, please lift the handset before pressing any keys.

Speaker Change: Our first question comes from the line of Dalton Barreto from Canaccord Analyst. Your line is open.

Dalton Barreto: Thanks, operator. Good morning, guys. I'm going to start with sort of a housekeeping question here. My understanding is that you guys aren't exposed at all to a lot of the tariff talk that's happening. I just want to confirm that that's the case in how you are fielding questions from investors around it. Thank you.

Dalton Barreto: that obviously has to ship them to a smelter, but obviously there's advantages to us being a domestic producer.

Dalton Barreto: And really, once the metals leave our mine site in concentrate form and we've been paid for them, we really have no further exposure.

Dalton Barreto: And we're not exporting anything from China. Obviously, I sometimes joke the only thing we export is cash in the form of dividends. So we're not bringing anything out of the country to bring into the U.S.

Dalton Barreto: But obviously, Dalton, you know, your analysis follows the sector and the world markets. So, you know, if the tariffs were to impact, you know, global economic activity in some way...

Dalton Barreto: and that somehow led to an impact on global metals prices, we'd be affected indirectly like any other miner that would be in your coverage universe.

Speaker Change: Got it. Thank you for that. And then just as a follow-up on El Domo, is it, I mean, are you planning to put out some sort of an overall game plan going forward with this April update? How comprehensive is it going to be?

Speaker Change: Yes, we are. And what we'll do, if we have the benefit of some more contracts being signed, then we'll have some fixed numbers.

Speaker Change: in terms of, you know, being able to report on actuals. But what we'll be putting together is a budget which is, you know, our best.

Speaker Change: estimates of both the total construction as well as the budget this current fiscal year. So I have to wait just a little bit longer but we will have numbers.

Speaker Change: to provide that update. It just seemed a bit premature to put them out now while we're in the midst of finalizing some, you know, very important details.

Speaker Change: regarding the construction but you know we continue to see the opportunity to cut back on that initial capital which in the feasibility study had been 248 million and there's nothing that we're seeing now that causes us to change our view.

Speaker Change: Okay, so that's fine on the CapEx, but just in terms of a mine plan, because I know you guys are looking at pretty much everything, are you going to put an updated mine plan as well?

Speaker Change: mine plan once we're into mining. So the the production numbers that you'd be using from the feasibility study are still the best to use going forward.

Speaker Change: Got it, thank you. If I can just squeeze one last one, is Salazar still committed to their stake or you know is there an opportunity for you to consolidate that as well?

I can't comment on that, you'll have to ask them.

Speaker Change: But, you know, obviously we're very happy having a local partner in-country and our relationship with Salazar is very good.

Got it, thanks Lon, that's all for me.

Speaker Change: Our next question comes from the line of Joseph Ricor from Roth Capital Partners. Your line is open.

Thanks for taking the questions.

Thank you.

Speaker Change: So, I guess first thing, you know, part of modeling you guys...

Speaker Change: individual commodities being Chinese-based rather than, you know, the rest of the world. As you look at El Domo and, you know, the concentrates you'll produce there and the sales you'll have, should we be more modeling like an LME pricing basis or an SME pricing basis?

Speaker Change: Yeah, no, no, an LME and a more typical pricing structure would be appropriate.

Speaker Change: with Concentrate Traders, and this is based on sort of market terms and conditions at the times of delivery.

Speaker Change: So if you used Western-based LME pricing and a more typical, you know, concentrate pricing model, that would be appropriate.

Speaker Change: Okay, that's helpful. And then another intention is to keep the mill running through the Chinese New Year this year. Do you have kind of a rough estimate of how much extra tonnage you're going to get? I know you guys have a stockpile, but how much of that you're going to process during this, you know, extra milling time?

Speaker Change: Our view, I mean obviously we're through, we're through Chinese New Year now, but you know we're still milling stockpile ores and you know we will be doing that. I think our current estimate is that we will end the quarter with a more typical, you know,

Speaker Change: a more typical ore inventory that we would have carried in the past. So not the 145,000 tonnes, but I think in the past we've had somewhere in the range of the 15,000 tonne type numbers or whatever.

Speaker Change: that we've carried. So I think you can model that we will have run through the bulk of the ore stockpile to the end of March.

Speaker Change: Right, and adjusting that 15 to the fat to the mill is a little larger, that number might be a little larger.

Speaker Change: Yeah, yeah, I mean we haven't sort of hit steady state yet and and just obviously as we're ramping up production on the mine and we have been and that's obviously why we were able to build that that stockpile.

Speaker Change: you know as we're ramping up there will be you know periods of time where suddenly we'll get a point where we're running at a higher rate from the mine and obviously the mill now is is in a position to to ramp up to match that.

Okay, thanks and congrats on a good quarter.

Thanks, Joe.

Speaker Change: Again, if you would like to ask a question, please press start and the number 1 on your telephone keypad.

Speaker Change: This concludes the question and answer session. I would like to turn the conference back over to Mr. Shaver for any closing remarks.

Speaker Change: Okay well that's that's great. I'd like to thank everyone for tuning in today and as always if anyone has any further questions please call or email us and we look forward to hearing from you and continuing the conversation. Thanks everyone and have a great day.

Speaker Change: This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a wonderful day.

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