Erdene Resource Development Corporation press release

Silvercorp net income $30.2 million, $0.18 per share, up 284% for first three quarters of fiscal 2017

2017-02-02

TSX - Toronto Stock Exchange · Gold · Silver · Lead · Zinc · Molybdenum · Antimony · Copper · Canada

Canada NewsWire

VANCOUVER, Feb. 2, 2017

Trading Symbol:TSX: SVM

VANCOUVER, Feb. 2, 2017/CNW/ - Silvercorp Metals Inc. ("Silvercorp" or the "Company") (TSX: SVM) reported its financial and operating results for the third quarter and nine months ended December 31, 2016. All amounts are expressed in US Dollars.

HIGHLIGHTS FOR THE THREE QUARTERS ENDED DECEMBER 31, 2016

Net income attributable to equity shareholders of $30.2 million, or $0.18per share, up 284% compared with net income attributable to equity shareholders of $7.9 millionor $0.05per share in the prior year period; Silver, lead and zinc metals sold up 28%, 32%, and 22%, respectively, from the prior year period, to approximately 5.2 million ounces silver, 56.1 million pounds lead, and 16.8 million pounds zinc; Silver production for the three quarters has already surpassed the Fiscal 2017 annual production guidance by approximately 2%; Sales of $129.4 million, up 46% compared to $88.5 millionin the prior year period; A 15%, 16%, and 15% increase in the head grades of silver, lead, and zinc compared to the prior year period; A 13%,13%, and 23% increase in the net realized selling prices of silver, lead, and zinc compared to the prior year period; Gross margin improved to 54% from 34% in the prior year period; Cash flows from operations of $75.6 million, or $0.44per share, an increase of $48.1 millioncompared to $27.5 million, or $0.16per share in the prior year period; Cash production cost per tonne[1] of decreased by 14% to $59.26from $69.12in the prior year period; Cash cost per ounce of silver1, net of by-product credits, of negative $2.88, compared to $1.26in the prior year period; All-in sustaining cost per ounce of silver1, net of by-product credits, of $3.96, compared to $10.27in the prior year period; and Ended the period with $97.4 millionin cash and short term investments, an increase of $35.4 millionor 60% compared to $62.0 millionas at March 31, 2016.

HIGHLIGHTS FOR THE THIRD QUARTER FISCAL 2017 ("Q3 FISCAL 2017")

Net income attributable to equity shareholders of $13.1 million, or $0.08per share, up 294% compared with net income attributable to equity shareholders of $3.3 millionor $0.02per share in the prior year quarter; Silver, lead and zinc metals sold up 22%, 29%, and 21%, respectively, from the prior year quarter, to approximately 1.7 million ounces silver, 19.5 million pounds lead, and 5.7 million pounds zinc; Sales of $47.8 million, up 64% compared to $29.1 millionfrom the prior year quarter; A 5%, 9%, and 15% increase in the head grades of silver, lead, and zinc compared to the prior year quarter; A 15%, 52%, and 83% increase in the net realized selling prices of silver, lead, and zinc compared to the prior year quarter; Gross margin improved to 58% from 33% in the prior year quarter; Cash flows from operations of $28.3 million, an increase of $18.7 millioncompared to $9.6 millionin the prior year quarter; Cash production cost per tonne of $60.51, down 8% compared with $65.59in the prior year quarter; Cash cost per ounce of silver, net of by-product credits, of negative $5.48, compared to $0.90in the prior year quarter; and All-in sustaining cost per ounce of silver, net of by-product credits, of $1.87, compared to $7.72in the prior year quarter.

FINANCIALS

Net incomeattributable to the shareholders of the Company in Q3 Fiscal 2017 was $13.1 million, or $0.08per share, up 294% compared to $3.3 million, or $0.02per share in Q3 Fiscal 2016.

In the current quarter, the Company's financial results were mainly impacted by the following: i) improved head grades yielded higher silver, lead, zinc sales, up 5%, 9% and 15%, respectively; ii) a 8% decrease in total production costs per tonne of ore processed; and iii) the increase of metals prices, as the realized selling price for silver, lead, and zinc increased by 15%, 52% and 83%, respectively, compared to the same prior year quarter.

Salesin Q3 Fiscal 2017 were $47.8 million, up 64% compared to $29.1 millionin Q3 Fiscal 2016. Silver and gold sales represented $23.4 millionand $0.7 million, respectively, while base metals represented $23.7 millionof total sales in this quarter compared to silver, gold and base metals of $16.8 million, $0.4 million, and $11.9 million, respectively, in Q3 Fiscal 2016.

Cost of salesin Q3 Fiscal 2017 was $20.1 millioncompared to $19.5 millionin Q3 Fiscal 2016. The cost of sales included $14.9 million(Q3 Fiscal 2016 - $13.5 million) cash costs and $5.2 million(Q3 Fiscal 2016 - $6.0 million) depreciation, amortization and depletion charges. The increase of cash cost of sales was mainly due to the increase of metals sold offset by an 8% decrease in cash production costs per tonne of ore processed. The total per tonne ore production cost was $82.19in Q3 Fiscal 2017, a decrease of 5%, from $86.47in Q3 Fiscal 2016.

Gross profit margin in Q3 Fiscal 2017 was 58% compared to 33% in Q3 Fiscal 2016. The improvement of gross profit margin was mainly due to: i) a 5%, 9%, and 15% increase in the head grades of silver, lead, and zinc; ii) a 5% decrease in per tonne ore production costs; and iii) the increase of metal prices. Ying Mining District's gross profit margin was 61% compared to a 40% gross profit margin in the same prior year quarter, while GC Mine's profit margin was 42% compared to a 3% gross profit margin in Q3 Fiscal 2016.

Cash flows provided by operating activitiesin Q3 Fiscal 2017 were $28.3 millionor $0.17per share compared to $9.6 millionor $0.06per share in Q3 Fiscal 2016. Before changes in non-cash operating working capital, cash flows provided by operating activities were $26.4 million, an increase of $13.9 millionor 111%, compared to $12.5 millionin Q3 Fiscal 2016 as a result of the improvement of operating earnings.

For the nine months ended December 31, 2016,net income attributable to the shareholders of the Company was $30.2 million, or $0.18per share, up 284% compared to $7.9 million, or $0.05per share in the same prior year period; sales were $129.4 million, up 46% from $88.5 millionin the same prior year period; and cash flows provided by operating activities were $75.6 millionor $0.44per share compared to $27.5 millionor $0.16per share in the same prior year period. Before changes in non-cash operating working capital, cash flows provided by operating activities for the nine months ended December 31, 2016were $66.9 million, an increase of $35.9 millionor 116%, compared to $31.0 millionin the same prior year period.

The Company ended the period with $97.4 millionin cash and short term investments, an increase of $35.4 millionor 60% compared to $62.0 millionas at March 31, 2016.

OPERATIONS AND DEVELOPMENT

In Q3 Fiscal 2017, the Company sold approximately 1.7 million ounces of silver, 19.5 million pounds of lead, and 5.7 million pounds of zinc, up 22%, 29% and 21%, respectively, compared to 1.4 million ounces of silver, 15.1 million pounds of lead, and 4.7 million pounds of zinc in Q3 Fiscal 2016. The increase of metals sold, on a consolidated basis, was mainly due to: i) a 5%, 9%, and 15% increase in the head grades of silver, lead and zinc, resulting largely from the ongoing dilution control measures and operation management improvements; and ii) a 18% increase of ore milled. In addition, as at the end of Q3 Fiscal 2017, the Ying Mining District held 4,656 tonnes of silver-lead concentrate inventories, and the estimated metals contained in silver-lead concentrate were approximately 0.5 million ounces of silver and 5.3 million pounds of lead.

For the nine months ended December 31, 2016, on a consolidated basis, the Company sold approximately 5.2 million ounces of silver, 56.1 million pounds of lead, and 16.8 million pounds of zinc, up 28%, 32% and 22% compared to the same prior year period.

1. Ying Mining District, Henan Province, China

| | | | | | | | | | | | Operational results - Ying Mining District | | | | | | | | | | | | Q3 2017 | Q2 2017 | Q1 2017 | Q4 2016 | Q3 2016 | | Nine Months ended December 31, | | | | | December 31, 2016 | September 30, 2016 | June 30, 2016 | March 31, 2016 | December 31, 2015 | | 2016 | 2015 | | | Ore Mined (tonne) | 171,303 | 179,194 | 173,508 | 99,415 | 152,230 | | 524,005 | 490,351 | | | Ore Milled (tonne) | 182,259 | 180,154 | 167,747 | 99,203 | 151,035 | | 530,160 | 488,248 | | | Head Grades | | | | | | | | | | | | Silver (gram/tonne) | 303 | 302 | 308 | 310 | 287 | | 305 | 260 | | | Lead (%) | 4.8 | 4.9 | 4.4 | 4.0 | 4.1 | | 4.7 | 3.8 | | | Zinc (%) | 0.8 | 1.1 | 1.1 | 0.9 | 0.8 | | 1.0 | 0.8 | | Recoveries | | | | | | | | | | | | Silver (%) | 95.1 | 95.5 | 95.7 | 95.0 | 95.4 | | 95.4 | 95.0 | | | Lead (%) | 96.7 | 96.3 | 96.4 | 96.3 | 96.6 | | 96.4 | 95.4 | | | Zinc (%) | 47.5 | 42.9 | 48.4 | 57.6 | 50.2 | | 46.0 | 53.3 | | Metal Sales | | | | | | | | | | | | Silver (in thousands of ounce) | 1,555 | 1,630 | 1,490 | 857 | 1,216 | | 4,675 | 3,538 | | | Gold (in thousands of ounce) | 0.7 | 1.0 | 0.9 | 0.3 | 0.5 | | 2.6 | 2.0 | | | Lead (in thousands of pound) | 17,269 | 17,768 | 14,861 | 7,379 | 12,107 | | 49,898 | 35,563 | | | Zinc (in thousands of pound) | 1,210 | 1,785 | 1,820 | 999 | 1,168 | | 4,815 | 3,999 | | Cash mining cost ($ per tonne) | 55.21 | 49.13 | 52.33 | 54.63 | 55.63 | | 52.18 | 58.25 | | | Total mining cost ($ per tonne) | 80.53 | 76.30 | 78.64 | 83.24 | 78.91 | | 78.46 | 80.15 | | | Cash milling cost ($ per tonne) | 9.09 | 8.85 | 10.07 | 13.70 | 11.67 | | 9.31 | 12.06 | | | Total milling cost ($ per tonne) | 11.03 | 10.86 | 12.25 | 17.38 | 14.15 | | 11.35 | 14.40 | | | Cash production cost ($ per tonne) | 68.22 | 61.79 | 66.27 | 71.90 | 71.29 | | 65.35 | 74.41 | | | | | | | | | | | | | | Cash cost per ounce of silver ($) | (4.60) | (2.68) | 0.12 | 2.83 | 0.25 | | (2.43) | 1.03 | | | All-in sustaining cost per ounce of silver ($) | 1.34 | 2.33 | 5.80 | 8.92 | 6.62 | | 3.11 | 8.52 | | | * Figures may not add due to rounding | | | | | | | | | |

In Q3 Fiscal 2017, the total ore mined at the Ying Mining District was 171,303 tonnes, an increase of 13% compared to total ore production of 152,230 tonnes in Q3 Fiscal 2016. Total ore milled at the Ying Mining District in Q3 Fiscal 2017 was 182,259 tonnes, an increase of 21% compared to 151,035 tonnes in Q3 Fiscal 2016. Silver and lead head grades improved by 6% and 16%, respectively, to 303 grams per tonne ("g/t") for silver and 4.8% for lead from 287 g/t for silver and 4.1% for lead, respectively, in Q3 Fiscal 2016, resulting largely from the ongoing dilution control and operation management improvements. Head grade for zinc was 0.8%, comparable to 0.8% in the prior year quarter.

In Q3 Fiscal 2017, the Ying Mining District sold approximately 1.6 million ounces of silver, 700 ounces of gold, 17.3 million pounds of lead, and 1.2 million pounds of zinc, up 28%, 33%, 43%, and 4% respectively, compared to 1.2 million ounces of silver, 500 ounces of gold, 12.1 million pounds of lead, and 1.2 million pounds of zinc in Q3 Fiscal 2016. The increase in metals sold is mainly due to the improved head grades achieved and higher ore production in the quarter.

Cash mining costs per tonne in Q3 Fiscal 2017 was $55.21, compared to $55.63in Q3 Fiscal 2016. Cash milling costs in Q3 Fiscal 2017 were $9.09compared to $11.67in Q3 Fiscal 2016 with the decrease mainly due to: i) a 15% reduction in per tonne utility costs; ii) a 4% decrease in per tonne labour costs; and iii) the exclusion of mineral resource tax from milling costs. Prior to June 30, 2016, mineral resource tax was levied at RMB¥13.0 per tonne of ore milled and included as part of milling costs. Effective July 1, 2016, the mineral resource tax was changed to a levy based on a certain percentage of sales, and therefore such tax is excluded from milling costs but expensed directly and included in government fee and other taxes.

Cash production cost per tonne of ore processed at the Ying Mining District in Fiscal Q3 2017 was $68.22, a decrease of 4% compared to $71.29in Q3 Fiscal 2016 as a result of the decrease in both per tonne cash mining and milling costs.

Cash cost per ounce of silver, net of by-product credits, at the Ying Mining District, was negative $4.60in Q3 Fiscal 2017 compared to $0.25in Q3 Fiscal 2016. The decrease was mainly due to: i) lower per tonne cash production costs as discussed above; and, ii) a 111% increase in by-product credits arising from 43% and 4% increases in lead and zinc sold and 50% and 67% increases in net realized lead and zinc selling prices. Sales from lead and zinc accounted for 44% of the total sales at the Ying Mining District in the current quarter, and amounted to $17.7 million, an increase of $9.4 million, compared to $8.3 millionin the prior year quarter.

All in sustaining costs per ounce of silver, net of by-product credits, at the Ying Mining District in Q3 2017 was $1.34per ounce of silver compared to $6.62in Q3 Fiscal 2016. The decrease was mainly due to lower per tonne cash production cost and the increase in by-product credits as discussed above, offset by a $1.2 millionincrease in sustaining capital expenditures.

For the nine months ended December 31, 2016, the total ore mined at the Ying Mining District was 524,005 tonnes, up 7% compared to 490,351 tonnes in the same prior year period. Correspondingly, total ore milled was 530,160 tonnes, up 9% compared to 488,248 tonnes. Average head grades were 305 g/t for silver, 4.7% for lead, and 1.0% for zinc compared to 260 g/t for silver, 3.8% for lead, and 0.8% for zinc, respectively.

During the same time periods, the Ying Mining District sold approximately 4.7 million ounces of silver, 2,600 ounces of gold, 49.9 million pounds of lead, and 4.8 million pounds of zinc, compared to 3.5 million ounces of silver, 2,000 ounces of gold, 35.6 million pounds of lead, and 4.0 million pounds of zinc in the same prior year period.

For the nine months ended December 31, 2016, the cash mining costs at the Ying Mining District was $52.18per tonne, a decrease of 10% compared to $58.25per tonne in the same prior year period. The cash milling cost was $9.31per tonne, a decrease of 23% compared to $12.06in the same prior year period.

Cash cost per ounce of silver and all in sustaining costs per ounce of silver, net of by-product credits, at the Ying Mining District, for the nine months ended December 31, 2016, were negative $2.43and $3.11respectively, compared to $1.03and $8.52in the same prior year period.

In Q3 Fiscal 2017, approximately 36,756 meters ("m") of underground diamond drilling (Q3 Fiscal 2016 – 21,223 m) and 4,900 m of preparation tunnelling (Q3 Fiscal 2016 – 4,231 m) were completed and expensed as mining preparation costs at the Ying Mining District. In addition, approximately 17,823 m of horizontal tunnel, raise, and declines (Q3 Fiscal 2016 – 13,893 m) were completed and capitalized. Total capitalized exploration and development expenditures in Q3 Fiscal 2017 for the Ying Mining District were $5.7 millioncompared to $4.6 millionin Q3 Fiscal 2016.

For the nine months ended December 31, 2016, approximately 71,794 m of underground diamond drilling (same prior year period – 60,435 m) and 15,069 m of preparation tunnelling (same prior year period – 16,460 m) were completed and expensed as mining preparation costs at the Ying Mining District. In addition, approximately 50,500 m of horizontal tunnel, raise, and declines (same prior year period – 49,452 m) were completed and capitalized. Total capitalized exploration and development expenditures for the nine months ended December 31, 2016for the Ying Mining District were $15.4 millioncompared to $16.4 millionin same prior year period. The Company also paid $1.3 millionto renew the mining permit for TLP and LM mine and $8.7 millionto retire the mineral right fee payable incurred in prior years for the mining permit for the SGX mine.

2. GC Mine, Guangdong Province, China

| | | | | | | | | | | | Operational results - GC Mine | Q3 2017 | Q2 2017 | Q1 2017 | Q4 2016 | Q3 2016 | | Nine Months ended December 31, | | | | | December 31, 2016 | September 30, 2016 | June 30, 2016 | March 31, 2016 | December 31, 2015 | | 2016 | 2015 | | | Ore Mined (tonne) | 81,481 | 74,692 | 64,349 | 50,014 | 71,288 | | 220,522 | 207,561 | | | Ore Milled (tonne) | 81,080 | 76,100 | 63,587 | 50,124 | 71,593 | | 220,767 | 206,738 | | | Head Grades | | | | | | | | | | | | Silver (gram/tonne) | 89 | 96 | 99 | 92 | 97 | | 94 | 97 | | | Lead (%) | 1.4 | 1.6 | 1.5 | 2.0 | 1.9 | | 1.5 | 1.6 | | | Zinc (%) | 2.8 | 2.8 | 2.9 | 2.7 | 2.6 | | 2.9 | 2.5 | | Recovery Rates | | | | | | | | | | | | Silver (%) | 75.4 | 76.2 | 76.8 | 79.1 | 80.2 | | 76.2 | 78.3 | | | Lead (%) | 85.5 | 86.6 | 86.9 | 84.9 | 88.3 | | 86.3 | 88.5 | | | Zinc (%) | 86.5 | 86.4 | 85.8 | 82.6 | 81.2 | | 86.3 | 82.4 | | Metal Sales | | | | | | | | | | | | Silver (in thousands of ounce) | 179 | 183 | 149 | 118 | 210 | | 511 | 519 | | | Lead (in thousands of pound) | 2,214 | 2,163 | 1,860 | 1,970 | 3,021 | | 6,237 | 7,072 | | | Zinc (in thousands of pound) | 4,478 | 4,106 | 3,407 | 2,576 | 3,525 | | 11,991 | 9,726 | | Cash mining cost ($ per tonne) | 31.34 | 28.61 | 33.50 | 26.24 | 38.22 | | 31.04 | 41.13 | | | Total mining cost ($ per tonne) | 38.90 | 36.78 | 41.91 | 34.76 | 46.52 | | 39.05 | 49.33 | | | Cash milling cost ($ per tonne) | 13.09 | 12.94 | 15.60 | 16.99 | 15.16 | | 13.76 | 15.49 | | | Total milling cost ($ per tonne) | 15.50 | 15.57 | 18.81 | 20.67 | 17.30 | | 16.47 | 17.72 | | | Cash production cost ($ per tonne) | 44.43 | 41.55 | 49.10 | 43.23 | 53.38 | | 44.80 | 56.62 | | | | | | | | | | | | | | Cash cost per ounce of silver ($) | (13.11) | (6.39) | (0.28) | (2.24) | 4.62 | | (6.96) | 2.78 | | | All-in sustaining cost per ounce of silver ($) | (6.12) | (1.49) | 4.76 | 1.19 | 9.80 | | (1.29) | 10.54 | | | * Figures may not add due to rounding | | | | | | | | | |

In Q3 Fiscal 2017, the Company mined 81,481 tonnes of ore at the GC Mine, an increase of 14% compared to 71,288 tonnes in Q3 Fiscal 2016. Total ore milled at the GC Mine in Q3 Fiscal 2017 was 81,080 tonnes, an increase of 13% compared to 71,593 tonnes in Q3 Fiscal 2016. Head grades were 89 g/t for silver, 1.4% for lead and 2.8% for zinc, compared to 97 g/t for silver, 1.9% for lead and 2.6% for zinc in Q3 Fiscal 2016.

Cash mining cost was $31.34in Q3 Fiscal 2017 compared to $38.22in Q3 Fiscal 2016. The decrease of cash mining costs arose mainly because approximately 29% of the ore was by-product ore from exploration tunnelling or extracted from previously mined stopes for which direct mining costs were paid in prior periods, and the only cost involved was to ship the ore to the mill. The cash milling cost per tonne was $13.09, compared to $15.16in Q3 Fiscal 2016, with the decrease mainly due to the exclusion of mineral resource tax from milling costs as discussed above.

Correspondingly, cash production cost per tonne of ore processed at the GC Mine was $44.43, a decrease of 17% compared to $53.38in Q3 Fiscal 2016 as a result of the decrease in both per tonne cash mining and milling cost.

In Q3 Fiscal 2017, the GC Mine sold approximately 4.5 million pounds of zinc, an increase of 27%, compared to 3.5 million pounds of zinc in the prior year quarter as a result of the 6% increase in zinc head grade and higher output. Silver and lead sold at the GC Mine decreased by 15% and 27% to approximately 0.2 million ounces of silver and 2.2 million pounds of lead, respectively, compared to 0.2 million ounces of silver and 3.0 million pounds of lead sold in Q3 Fiscal 2016, with the decrease mainly due to lower head grades and recovery rates.

Cash cost per ounce of silver, net of by-product credits, at the GC Mine, was negative $13.11in Q3 Fiscal 2017 compared to $4.62in Q3 Fiscal 2016. The decrease was mainly due to: i) lower per tonne cash production costs as discussed above; and, ii) a 68% increase in by-product credits, mainly arising from more zinc sold and higher lead and zinc prices. Sales from lead and zinc accounted for 75% of the total sales at the GC Mine in the current quarter, and amounted to $5.9 million, an increase of $2.5 million, compared to $3.4 millionin the prior year quarter.