Silvercorp net income $43.7 million, $0.26 per share, for Fiscal 2017

2017-05-25

NASDAQ - Nasdaq Stock Market · Gold · Antimony · Silver · United States

Canada NewsWire

VANCOUVER, May 25, 2017

VANCOUVER, May 25, 2017/CNW/ - Silvercorp Metals Inc. ("Silvercorp" or the "Company") (TSX: SVM) (NYSE: SVM) reported its financial and operating results for the fourth quarter and twelve months ended March 31, 2017. All amounts are expressed in US Dollars.

FISCAL YEAR 2017 HIGHLIGHTS

Net income attributable to equity shareholders of $43.7 million, or $0.26per share1, up 589% compared to net income attributable to equity shareholders of $6.3 million, or $0.04per share in the prior year. Adjusted net income2attributable to equity shareholders of $38.6 millionor $0.23per share, up 509% from the prior year after adjustment to one-time net impairment reversal of $5.1 million; Silver, lead, and zinc metals sold up 29%, 34%, and 5%, respectively from the prior year, to approximately 6.5 million ounces silver, 70.5 million pounds lead, and 18.3 million pounds zinc; Silver production of approximately 6.4 million ounces, surpassing the Fiscal 2017 annual production guidance by 25%; Sales of $163.5 million, up 51% compared to $107.9 millionin the prior year; A 12%, 16%, and 15% increase in the head grades of silver, lead, and zinc compared to the prior year; Gross margin of 54% compared with 33% in the prior year; Cash flow from operations of $80.4 million, an increase of $48.5 millioncompared to $31.9 millionin the prior year; Cash production costs per tonne ore2decreased by 11% to $59.84from $67.39in the prior year; Cash costs per ounce of silver2, net of by-product credits, of negative $3.03, compared to $1.44in the prior year; All-in sustaining costs per ounce of silver2, net of by-product credits, of $3.82, compared to $10.20in the prior year; and Ended the fiscal year with $96.5 millionin cash and cash equivalents and short-term investments, an increase of $34.5 millionor 56% compared to $62.0 millionas at March 31, 2016.

HIGHLIGHTS FOR THE FOURTH QUARTER FISCAL 2017 ("Q4 FISCAL 2017")

Net income attributable to equity shareholders was $13.5 million, or $0.08per share in Q4 Fiscal 2017, compared to the loss of $1.5 million, or $0.01per share in Q4 Fiscal 2016. Adjusted net income attributable to equity shareholders of $8.2 million, or $0.05per share after adjustment to one-time impairment reversal of $5.3 million; Silver and lead metals sold up 34% and 53%, respectively from the prior year quarter, to approximately 1.3 million ounces silver and 14.3 million pounds lead; Sales of $34.1 million, up 75% compared to $19.4 millionin Q4 Fiscal 2016; Gross margin of 60% compared with 32% in the prior year; Cash costs per ounce of silver, net of by-product credits, of negative $3.65, compared to $2.22in the prior year; All-in sustaining costs per ounce of silver, net of by-product credits, of $3.26, compared to $9.91in the prior year.

| _ | | | 1 | Earnings per share refers to basic earnings per share | | 2 | Non IFRS measure, please see reconciliation on section 11 of MD&A for the corresponding period |

FINANCIALS

1.Fiscal 2017 vs. Fiscal 2016

Net income attributable to the shareholders of the Companyin Fiscal 2017 was $43.7 million, or $0.26per share, up 589% compared to $6.3 million, or $0.04per share in Fiscal 2016. The adjusted net income attributable to the shareholders of the Company was $38.6 million, or $0.23per share, up 509% compared to $6.3 million, or $0.04per share in the prior year.

In the current fiscal year, the Company's financial results were mainly impacted by the following: i) improved head grades yielded higher silver, lead, and zinc metals sold, up 29%, 34%, and 5% respectively; ii) a 9% decrease in per tonne ore production costs; and iii) the increase of metals prices, as the realized selling price for silver, lead, and zinc increased by 15%, 21%, and 33% compared to the prior year, respectively.

Sales in Fiscal 2017 were $163.5 million, up 51% compared to $107.9 millionin Fiscal 2016. Silver and gold sales represented $89.6 millionand $3.3 million, respectively, while base metals represented $70.6 millionof total sales compared to silver, gold and base metals of $60.6 million, $1.9 million, and $45.4 million, respectively, in Fiscal 2016.

Cost of salesin Fiscal 2017 was $75.3 millioncompared to $71.9 millionin Fiscal 2016. The cost of sales included $57.6 million(Fiscal 2016 - $54.5 million) cash costs, $17.7 million(Fiscal 2016 - $17.3 million) depreciation, amortization and depletion charges, and a $nil write down of inventories (Fiscal 2016 - $0.2 million).

Gross profit in Fiscal 2017 was 54% compared to 33% in Fiscal 2016. The improvement of gross profit margin was mainly due to: i) a 12%, 16%, and 15% increase in the head grades of silver, lead, and zinc; ii) a 9% decrease in per tonne ore production costs; and iii) the increase of metal prices. Ying Mining District's gross margin was 57% compared to a 38% gross profit margin in the prior year, while GC Mine's profit margin was 31% compared to a 10% gross profit margin in the prior year.

Cash flows provided by operating activitiesin Fiscal 2017 were $80.4 million, an increase of $48.5 millionor 152%, compared to $31.9 millionin the prior year. Before changes in non-cash operating working capital, cash flows provided by operating activities in Fiscal 2017 were $76.0 million, an increase of $42.8 millionor 129%, compared to $33.1 millionin the prior year mainly due to the improvement of operating earnings.

The Company ended the fiscal year with $96.5 millionin cash and short term investments, an increase of $34.5 millionor 56% compared to $62.0 millionas at March 31, 2016.

Working capital as at March 31, 2017was $70.7 million, an increase of $35.5 millionor 101%, compared to $35.2 millionworking capital as at March 31, 2016.

2.Q4 Fiscal 2017 vs. Q4 Fiscal 2016

Net income attributable to equity shareholders of the Companyin Q4 Fiscal 2017 was $13.5 million, or $0.08per share compared to a loss of $1.5 million, or $0.01per share in Q4 Fiscal 2016 while the adjusted net income attributable to the equity shareholders of the Company in Q4 Fiscal 2017 was $8.2 million, or $0.05per share.

The Company's financial results in Q4 Fiscal 2017 were mainly impacted by the following: i) more lead concentrate sold at the Ying Mining District, resulted in higher quantities of silver and lead metals being sold, up 34% and 53%, respectively; ii) a 19% decrease in per tonne ore production costs; iii) due to the annual Chinese New Yearholiday the mine is only in operation for two months in Q4, resulting in reduced tonnage of ore mined compared to previous quarters of Fiscal 2017; and iv) the increase of metals prices, as the realized selling price for silver, lead, and zinc increased by 22%, 49%, and 107% compared to the prior year quarter, respectively.

Sales in Q4 Fiscal 2017 were $34.1 million, up 75% compared to $19.4 millionin the same quarter last year. Silver and gold sales represented $18.3 millionand $0.7 million, respectively, while base metals represented $15.1 millionof total sales compared to silver, gold and base metals of $11.1 million, $0.3 million, and $8.0 million, respectively, in the prior year quarter.

Cost of salesin Q4 Fiscal 2017 was $13.8 millioncompared to $13.2 millionin Q4 Fiscal 2016. The cost of sales included $12.0 million(Q4 Fiscal 2016 - $10.2 million) cash costs, $1.8 million(Q4 Fiscal 2016 - $2.8 million) depreciation, amortization and depletion charges, and $nil write down of inventories (Q4 Fiscal 2016 - $0.2 million).

Gross profitin Q4 Fiscal 2017 improved to 60%, compared to 32% in Q4 Fiscal 2016.

Cash flows provided by operating activitiesin Q4 Fiscal 2017 were $4.9 millionin Q4 Fiscal 2017 compared to $4.3 millionin Q4 Fiscal 2016. Before changes in non-cash operating working capital, cash flows provided by operating activities in the current quarter were $9.1 million, an increase of $7.0 million, compared to $2.1 millionin the prior year quarter.

OPERATIONS AND DEVELOPMENT

In Fiscal 2017, the Company sold 6.5 million ounces of silver, 3,300 ounces of gold, 70.5 million pounds of lead, and 18.3 million pounds of zinc, compared to 5.0 million ounces of silver, 2,400 ounces of gold, 52.5 million pounds of lead, and 17.5 million pounds of zinc, respectively, in Fiscal 2016. The increase of metals sold was mainly due to: i) a 6% increase in ore milled, and ii) a 12%, 16% and 15% increase in the head grades of silver, lead and zinc head grades, resulting largely from the ongoing dilution control measures and operation management improvements.

1. Ying Mining District, Henan Province, China

| | | | | | | | | | | | Operational results - Ying Mining District | | | | | | | | | | | | Q4 2017 | Q3 2017 | Q2 2017 | Q1 2017 | Q4 2016 | | Fiscal year ended March 31, | | | | | March 31, 2017 | December 31, 2016 | September 30, 2016 | June 30, 2016 | March 31, 2016 | | 2017 | 2016 | | | Ore Mined (tonne) | 112,755 | 171,303 | 179,194 | 173,508 | 99,415 | | 636,760 | 589,766 | | | Ore Milled (tonne) | 108,051 | 182,259 | 180,154 | 167,747 | 99,203 | | 638,211 | 587,450 | | | Head Grades | | | | | | | | | | | | Silver (gram/tonne) | 298 | 303 | 302 | 308 | 310 | | 303 | 268 | | | Lead (%) | 4.8 | 4.8 | 4.9 | 4.4 | 4.0 | | 4.7 | 3.9 | | | Zinc (%) | 0.8 | 0.8 | 1.1 | 1.1 | 0.9 | | 1.0 | 0.8 | | Recoveries | | | | | | | | | | | | Silver (%) | 96.6 | 95.1 | 95.5 | 95.7 | 95.0 | | 95.5 | 95.0 | | | Lead (%) | 95.6 | 96.7 | 96.3 | 96.4 | 96.3 | | 96.5 | 95.6 | | | Zinc (%) | 46.2 | 47.5 | 42.9 | 48.4 | 57.6 | | 46.0 | 54.1 | | Metal Sales | | | | | | | | | | | | Silver (in thousands of ounce) | 1,255 | 1,555 | 1,630 | 1,490 | 857 | | 5,930 | 4,395 | | | Gold (in thousands of ounce) | 0.7 | 0.7 | 1.0 | 0.9 | 0.3 | | 3.3 | 2.3 | | | Lead (in thousands of pound) | 13,520 | 17,269 | 17,768 | 14,861 | 7,379 | | 63,418 | 43,469 | | | Zinc (in thousands of pound) | 1,033 | 1,210 | 1,785 | 1,820 | 999 | | 5,848 | 5,155 | | Cash mining costs ($ per tonne) | 49.99 | 55.21 | 49.13 | 52.33 | 54.63 | | 51.79 | 56.90 | | | Total mining costs ($ per tonne) | 53.50 | 80.53 | 76.30 | 78.64 | 83.24 | | 74.04 | 79.93 | | | Cash milling costs ($ per tonne) | 10.43 | 9.09 | 8.85 | 10.07 | 13.70 | | 9.50 | 12.34 | | | Total milling costs ($ per tonne) | 13.60 | 11.03 | 10.86 | 12.25 | 17.38 | | 11.73 | 14.91 | | | Cash production costs ($ per tonne) | 64.34 | 68.22 | 61.79 | 66.27 | 71.90 | | 65.17 | 73.25 | | | | | | | | | | | | | | Cash costs per ounce of silver ($) | (3.73) | (4.60) | (2.68) | 0.12 | 2.83 | | (2.70) | 1.38 | | | All-in sustaining costs per ounce of silver ($) | 0.74 | 1.34 | 2.33 | 5.80 | 8.92 | | 2.61 | 8.60 | | | * Figures may not add due to rounding | | | | | | | | | |

In Fiscal 2017, total ore mined at the Ying Mining District was 636,760 tonnes, an 8% increase compared to 589,766 tonnes mined in the prior year. Correspondently, ore milled increased by 9% to 638,211 tonnes from 587,450 tonnes in the prior year. Silver, lead and zinc head grades improved by 13%, 20% and 19%, respectively, to 303 grams per tonne ("g/t") for silver, 4.7% for lead and 1.0% for zinc from 268 g/t for silver, 3.9% for lead and 0.8% for zinc in the prior year, resulting largely from the ongoing dilution control and operation management improvements.

Silver, gold, lead, and zinc metals sold in Fiscal 2017 at the Ying Mining District was up by 35%, 43%, 46% and 13%, respectively, to approximately 5.9 million ounces silver, 3,300 ounces gold, 63.4 million pounds lead, and 5.8 million pounds zinc from 4.4 million ounces silver, 2,300 ounces gold, 43.5 million pounds lead, and 5.2 million pounds of zinc.

Total and cash mining costs per tonne at the Ying Mining District in Fiscal 2017 were $74.04and $51.79per tonne, respectively, compared to $79.93and $56.90per tonne in the prior year. The decrease in cash mining costs was mainly due to: i) a 4% decrease in per tonne labour costs, and ii) a 28% decrease in per tonne mining preparation costs.

Total and cash milling costs per tonne at the Ying Mining District in Fiscal 2017 were $11.73and $9.50, a decrease of 21% and 23%, respectively, compared to $14.91and $12.34in Fiscal 2016. The decrease in cash milling costs was mainly due to i) an 8% decrease in per tonne labor costs, ii) a 20% reduction in raw material costs, iii) a 10% decrease in per tonne utility costs, and iv) the exclusion of mineral resources 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 has been changed to a levy based on a certain percentage of sales, and therefore such tax is excluded from milling costs but expensed and included directly as part of cost of sales.

Correspondingly, cash production costs per tonne of ore processed in Fiscal 2017 at the Ying Mining District was $65.17, an 11% decrease compared to $73.25in the prior year due to the decrease in both per tonne cash mining and milling costs.

Cash costs per ounce of silver, net of by-product credits, in Fiscal 2017 at the Ying Mining District, was negative $2.70compared to $1.38in the prior year. The decrease was mainly due to i) lower per tonne cash production costs as discussed above, and ii) a 73% increase in by-product credits mainly arising from 46% and 13% increase in lead and zinc metals sold and 19% and 37% increase in net realized lead and zinc selling prices. Sales from lead and zinc accounted for 39% of the total sales at the Ying Mining District in Fiscal 2017, and amounted to $55.8 million, an increase of $23.5 million, compared to $32.3 millionin the prior year.

All in sustaining costs per ounce of silver, net of by-product credits, in Fiscal 2017 at the Ying Mining District was $2.61compared to $8.60in the prior year. The decrease was mainly due to lower cash costs per ounce of silver as discussed above.

In Fiscal 2017, approximately 93,755 meters ("m") of underground diamond drilling (Fiscal 2016 – 63,398 m) and 17,787 m of preparation tunnelling (Fiscal 2016 – 19,113 m) were completed and expensed as mining preparation costs at the Ying Mining District. In addition, approximately 60,241 m of horizontal tunnel, raises and declines (58,268 m) were completed and capitalized. Total exploration and development expenditures capitalized at the Ying Mining District in Fiscal 2017 were $18.1 millioncompared to $18.9 millionin Fiscal 2016.

In Q4 Fiscal 2017, the Company mined 112,755 tonnes of ore at the Ying Mining District, a 13% increase compared to 99,415 tonnes in Q4 Fiscal 2016. Correspondently, ore milled increased by 9% to 108,051 tonnes from 99,203 tonnes in the prior year quarter. Head grades were 298 gram per tonne ("g/t") for silver, 4.8% for lead, and 0.8% for zinc in Q4 Fiscal 2017, compared to 310 g/t for silver, 4.0% for lead, and 0.9% for zinc in Q4 Fiscal 2016.

Silver, lead, and zinc metals sold in Q4 Fiscal 2017 at the Ying Mining District was up by 46%, 83%, and 3%, respectively, to approximately 1.3 million ounces silver, 13.5 million pounds lead, and 1.0 million pounds zinc from 0.9 million ounces silver, 7.4 million pounds lead, and 1.0 million pounds of zinc.

In Q4 Fiscal 2017, the total and cash mining costs per tonne, at the Ying Mining District, were $53.50and $49.99, compared to $83.24and $54.63in Q4 Fiscal 2016. The decrease in per tonne cash mining costs was mainly due to higher output resulting in lower per tonne labor costs and mine administration costs.

The total milling and cash milling cost per tonne in Q4 Fiscal 2017 at the Ying Mining District was $13.60and $10.43, a decrease of 22% and 24%, respectively, compared to $17.38and $13.70in the prior year period. The decrease in cash milling costs was mainly due to i) a 16% decrease in per tonne labor costs, ii) a 25% reduction in raw material costs, and iii) the exclusion of mineral resources tax from milling costs as discussed above.

Correspondingly, cash production costs per tonne of ore processed in Q4 Fiscal 2017 at the Ying Mining District was $64.34, an 11% decrease compared to $71.90in the prior year quarter due to the decrease in both per tonne cash mining and milling costs.

Cash costs per ounce of silver, net of by-product credits, at the Ying Mining District, was negative $3.73in Q4 Fiscal 2017 compared to $2.83in Q4 Fiscal 2016. The decrease was mainly due to: i) lower per tonne cash production costs as discussed above, and ii) a 90% increase in by-product credits arising from 83% and 3% increase in lead and zinc metals sold and 36% and 115% increase in net realized lead and zinc selling prices. Sales from lead and zinc accounted for 43% of the total sales at the Ying Mining District in the current quarter, and amounted to $13.8 million, an increase of $8.2 million, compared to $5.6 millionin the prior year quarter.

All in sustaining costs per ounce of silver, net of by-product credits, at the Ying Mining District in Q4 Fiscal 2017 was $0.74per ounce of silver compared to $8.92in Q4 Fiscal 2016. The decrease was mainly due to the lower per tonne cash production costs and the increase in by-product credits as discussed above.

2. GC Mine, Guangdong Province, China

| | | | | | | | | | | | Operational results - GC Mine | Q4 2017 | Q3 2017 | Q2 2017 | Q1 2017 | Q4 2016 | | Fiscal year ended March 31, | | | | | March 31, 2017 | December 31, 2016 | September 30, 2016 | June 30, 2016 | March 31, 2016 | | 2017 | 2016 | | | Ore Mined (tonne) | 40,224 | 81,481 | 74,692 | 64,349 | 50,014 | | 260,746 | 257,575 | | | Ore Milled (tonne) | 39,929 | 81,080 | 76,100 | 63,587 | 50,124 | | 260,696 | 256,862 | | | Head Grades | | | | | | | | | | | | Silver (gram/tonne) | 91 | 89 | 96 | 99 | 92 | | 94 | 94 | | | Lead (%) | 1.3 | 1.4 | 1.6 | 1.5 | 2.0 | | 1.4 | 1.8 | | | Zinc (%) | 2.6 | 2.8 | 2.8 | 2.9 | 2.7 | | 2.8 | 2.5 | | Recovery Rates | | | | | | | | | | | | Silver (%) | 72.8 | 75.4 | 76.2 | 76.8 | 79.1 | | 75.7 | 78.9 | | | Lead (%) | 82.4 | 85.5 | 86.6 | 86.9 | 84.9 | | 85.7 | 88.2 | | | Zinc (%) | 74.8 | 86.5 | 86.4 | 85.8 | 82.6 | | 84.7 | 82.9 | | Metal Sales | | | | | | | | | | | | Silver (in thousands of ounce) | 53 | 179 | 183 | 149 | 118 | | 564 | 637 | | | Lead (in thousands of pound) | 818 | 2,214 | 2,163 | 1,860 | 1,970 | | 7,055 | 9,042 | | | Zinc (in thousands of pound) | 455 | 4,478 | 4,106 | 3,407 | 2,576 | | 12,446 | 12,302 | | Cash mining costs ($ per tonne) | 37.91 | 31.34 | 28.61 | 33.50 | 26.24 | | 32.10 | 38.23 | | | Total mining costs ($ per tonne) | 45.37 | 38.90 | 36.78 | 41.91 | 34.76 | | 40.03 | 46.49 | | | Cash milling costs ($ per tonne) | 20.06 | 13.09 | 12.94 | 15.60 | 16.99 | | 14.73 | 15.79 | | | Total milling costs ($ per tonne) | 24.99 | 15.50 | 15.57 | 18.81 | 20.67 | | 17.78 | 18.30 | | | Cash production costs ($ per tonne) | 57.97 | 44.43 | 41.55 | 49.10 | 43.23 | | 46.83 | 54.02 | | | | | | | | | | | | | | Cash costs per ounce of silver ($) | (1.72) | (13.11) | (6.39) | (0.28) | (2.24) | | (6.47) | 1.85 | | | All-in sustaining costs per ounce of silver ($) | 14.55 | (6.12) | (1.49) | 4.76 | 1.19 | | 0.20 | 8.81 | | | * Figures may not add due to rounding | | | | | | | | | |

In Fiscal 2017, total ore mined at the GC Mine was 260,746 tonnes, a 1% increase compared to 257,575 tonnes of mined in Fiscal 2016. Correspondingly, ore milled increased by 1% to 260,696 tonnes from 256,862 tonnes in the prior year. Head grades were 94 g/t for silver, 1.4% for lead, and 2.8% for zinc compared to 94 g/t for silver, 1.8% for lead, and 2.5% for zinc in the prior year.

In Fiscal 2017, GC Mine sold 564 thousand ounces of silver, 7.1 million pounds of lead, 12.4 million pounds of zinc compared to 637 thousand ounces of silver, 9.0 million pounds of lead, and 12.3 million pounds of zinc sold in the prior year.

Total and cash mining costs per tonne at the GC Mine in Fiscal 2017 were $40.03and $32.1per tonne, compared to $46.49and $38.23per tonne in Fiscal 2016. The decrease in cash mining costs was mainly because approximately 35% of ore was by-product ore from exploration tunnelling or extracted from previously mined stopes for which direct mining costs were paid in prior years and the only cost involved was to ship the ore to the mill.