China’s largest silver producer
$48.6-million in cash, strong operations and the lowest production costs among its global peers.
Message: Announces its Financial and Operating Results for the 3rd Quarter
| February 12, 2009 | |||||||
| Silvercorp Announces its Financial and Operating Results for the 3rd Quarter Ended December 31, 2008 | |||||||
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VANCOUVER, BRITISH COLUMBIA--(Marketwire - Feb. 12, 2009) - Silvercorp Metals Inc. (TSX:SVM) (the "Company") reports the unaudited financial and operating results for the third quarter ended December 31, 2008. The financial results in the following text are expressed in US dollars (US$) unless stated otherwise. THIRD QUARTER HIGHLIGHTS - Earnings, before non-cash impairment charges and unrealized foreign exchange loss relating to future income tax liability arising from the acquisition of the GC&SMT projects, of $2.6 million or $0.02 per share - Silver head grades at the Ying mine for the quarter improved 27% to 420 g/t from 331 g/t in the previous quarter ended September 30, 2008 - Cash mining costs per tonne of ore at the Ying mine for the quarter declined 19% to $45.10 from $55.71 in the previous quarter ended September 30, 2008 - 36% increase in silver resources in the Measured and Indicated categories to 80.8 million ounces - Completion of a 10,083-meter diamond drill program at the GC project in Guangdong resulting in the discovery of 15 new veins with high-grade silver mineralization - Achievement of key milestones on the GC mining permit application - Cash flow from operations of $8.5 million - Cash, cash equivalents and short term investments of $43.3 million and no debt FINANCIAL HIGHLIGHTS Silvercorp reported a net loss for the quarter of $33.7 million, or $0.22 per share, compared to a net income of $17.8 million, or $0.12 per share, for the same period last year. On December 30, 2008, the Company announced the suspension of mining operations at the TLP and HPG mines, the scale down of mine production at the LM mine, and the suspension of its exploration program at the Nabao Project. As a result, non-cash impairment charges of $47.4 million ($40.3 million after tax) were recorded for the quarter. In addition, the Company recorded an unrealized foreign exchange loss relating to the translation from Chinese Yuan to the Canadian dollar for a future income tax liability arising from the acquisition of the GC & SMT projects. Excluding these two exceptional items, adjusted earnings for the quarter were $2.6 million, or $0.02 per share. Condensed unaudited statements of operations for the three and nine months ended December 31, 2008 and 2007 are as follows: Three months ended Nine months ended
December 31 December 31
2008 2008 2007 2008 2008 2007
------------------------- ---------------------------
Exclu- Exclu-
(USD $000s, ding ding
except per except- except-
share numbers) ional ional
items(i) items(i)
Sales $ 15,168 15,168 30,091 66,130 66,130 $ 81,518
Gross profit 5,239 5,239 24,209 36,826 36,826 64,811
Accretion of assets
retirement
obligations (27) (27) (14) (87) (87) (44)
Amortization (353) (353) (139) (794) (794) (342)
Foreign exchange
gain (loss)(i) 1,693 (830) (58) 5,695 2,199 (1,120)
General exploration (196) (196) (228) (1,825) (1,824) (778)
Impairment charges - (47,433) - - (47,800) -
General
administration (2,688) (2,688) (2,574) (9,096) (9,096) (5,736)
Other income and
expenses (240) (240) 2,142 (558) (558) 6,146
------------------------- ---------------------------
Income (loss) before
income taxes and non-
controlling interest 3,428 (46,528) 23,338 30,161 (21,134) 62,937
Income tax (expense)
recovery(i) (706) 6,434 39 (3,723) 3,417 1,406
Non-controlling
interest(i) (121) 6,400 (5,596) (6,039) 482 (15,265)
------------------------- ---------------------------
Net income (loss) $ 2,601 (33,694) 17,781 20,399 (17,235) $ 49,078
------------------------- ---------------------------
------------------------- ---------------------------
Earnings (loss) per
share $ 0.02 (0.22) 0.12 0.13 (0.11) $ 0.33
(i) exceptional items include non-cash impairment charges and unrealized
foreign exchange loss relating to the translation from Chinese Yuan to
Canadian dollars for future income tax liability arising from the
acquisition of the GC & SMT projects.
For the nine months ended December 31, 2008, the Company achieved sales of $66.1 million, down 19% from sales of $81.5 million for the same period last year. Gross profit from operations amounted to $36.8 million, a decrease of 43% compared to the $64.8 million for the nine months ended December 31, 2007, representing a gross margin of 56% (nine months ended December 31, 2007 - 80%). Cash provided by operating activities for the three months ended December 31, 2008, was $8.5 million, a decrease of 63% from $23.1 million for the same period last year. Cash provided by operating activities for the nine months ended December 31, 2008, was $36.4 million, a decrease of 42% from $62.6 million for the same period last year. For the three months ended December 31, 2008, the Company achieved 38% higher production levels in terms of the tonnes of ore mined over the same period last year. However, sales, earnings and cash provided by operating activities decreased, mainly due to the following: (i) during the quarter, the Net Smelter Return (NSR) for silver, lead and zinc decreased by 39%, 49% and 32%, respectively, compared to the previous quarter, and by 34%, 60% and 60%, respectively, compared to the same quarter last year. During the nine months ended December 31, 2008, the NSR for silver, lead and zinc dropped by 1%, 27% and 55%, respectively, compared to the same period last year; and (ii) a total of $47.4 million ($40.3 million after tax) in impairment charges and a $2.5 million unrealized foreign exchange loss relating to the translation from Chinese Yuan to the Canadian dollar for a future income tax liability arising from the acquisition of the GC & SMT projects were recorded in the current quarter while $nil was recorded in the same quarter last year. The Company ended the quarter with $43.3 million in cash and cash equivalents and short-term investments, after making dividend payments of $3.0 million to shareholders and $3.6 million in capital expenditures. Capital expenditures during the nine months ended December 31, 2008, amounted to $47.6 million (nine months ended December 31, 2007 - $29.8 million), representing the purchase of mineral rights and properties and deferred exploration costs totaling $36.4 million (nine months ended December 31, 2007 - $26.4 million) and the purchase of equipment and construction of a new mill totaling $11.2 million (nine months ended December 31, 2007 - $3.4 million). OPERATIONS HIGHLIGHTS Total sales and selling prices (NSR, net of smelter charges and the value added tax) for the three months ended December 31, 2008, compared to the same period of last year, are as follows: Three months ended December 31
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Quantity Metal Prices Sales Revenue
2008 2007 2008 2007 2008 2007
--------------------- ------------------ ---------------------
Silver
(ounces) 1.1 1.1 $ 7.34 $ 11.09 $8.0 $12.1
million million million million
Gold
(ounces) 601 853 449.52 664.33 0.3 0.6
million million
Lead
(pounds) 14.8 13.8 0.41 1.02 6.1 14.0
million million million million
Zinc
(pounds) 3.0 4.9 0.28 0.70 0.8 3.4
million million million million
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For the nine months ended December 31, 2008, 376,099 tonnes of ore were mined, representing a 61% increase compared to the same period last year. Of this amount, 5,994 tonnes were hand sorted for direct shipment to smelters and 370,106 tonnes of ores were shipped to mills for processing. A total of 366,944 tonnes of ore were treated in mills to recover silver-lead and zinc concentrates. For the three months ended December 31, 2008, the cash unit mining cost per tonne of ore decreased by 8% to $42.57, compared to a cash unit mining cost of $46.49 in the same quarter last year. On a sequential basis, the cash mining cost per tonne of ore decreased by 19% to $42.57 in the current quarter from $52.33 in the quarter ended September 30, 2008, as a result of operational improvements. For the three months ended December 31, 2008, the total mining cost per tonne of ore mined increased by 19% to $64.30 per tonne compared to $53.92 per tonne in the same period last year. The total mining cost is comprised of a cash unit mining cost of $42.57 per tonne (same period last year - $46.49 per tonne) and a non-cash unit mining cost of $21.73 per tonne (same period last year - $7.43 per tonne). The Company continues to achieve industry-leading low total production costs per ounce of silver. For the three months ended December 31, 2008, the total production cost per ounce of silver and total cash cost per ounce of silver adjusted for by-product credits were $2.54 (same period last year - negative $11.18) and $0.25 (same period last year - negative $12.10), respectively. This increase was mainly caused by the reduction in by-product credits as the average selling price of lead fell 60% from $1.02 to $0.41 per pound and the average selling price of zinc fell 60% from $0.70 to $0.28 per pound compared to same quarter last year. Ying Mine The following table lists the grade changes over the last five quarters at the Ying Mine: -------------------------------------------------
Q3 2009 Q2 2009 Q1 2009 Q4 2008 Q3 2008
31-Dec-08 30-Sep-08 30-Jun-08 31-Mar-08 31-Dec-07
--------------------------------------------------------------------------
Run of Mine Ores (tonne)
Direct Smelting Ores
(tonne) 3,114 2,387 3,071 2,673 3,210
Ores Milled (tonne) 70,854 69,493 74,691 51,996 64,635
-------------------------------------------------
73,968 71,880 77,762 54,669 67,845
-------------------------------------------------
Head Grades of Run of
Mine Ores
Silver (gram/tonne) 420.2 331.2 396.0 488.9 461.7
Lead (%) 7.7 6.0 6.7 8.1 7.5
Zinc (%) 2.6 2.5 3.3 3.8 3.6
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HPG Mine The following table lists the grade changes over the last five quarters at the HPG Mine: -------------------------------------------------
Q3 2009 Q2 2009 Q1 2009 Q4 2008 Q3 2008
31-Dec-08 30-Sep-08 30-Jun-08 31-Mar-08 31-Dec-07
--------------------------------------------------------------------------
Run of Mine Ores (tonne)
Direct Smelting Ores
(tonne) 162 135 193 496 481
Ores Milled (tonne) 23,692 19,233 13,163 12,645 16,434
-------------------------------------------------
23,854 19,368 13,356 13,141 16,915
-------------------------------------------------
Head Grades of Run of
Mine Ores
Silver (gram/tonne) 108.8 134.6 248.3 198.9 217.3
Lead (%) 4.6 4.2 9.7 7.9 6.5
Zinc (%) 1.2 0.9 0.6 1.1 0.7
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The LM Mine was in its third quarter of test production. The following table lists the grade changes over the last three quarters: For the Quarters Ended
-----------------------------
Q3 2009 Q2 2009 Q1 2009
31-Dec-08 30-Sep-08 30-Jun-08
----------------------------------------------------------------
Run of Mine Ores (tonne)
Direct Smelting Ores (tonne) 4 15 71
Ores Milled (tonne) 10,118 8,441 11,516
-----------------------------
10,122 8,456 11,587
-----------------------------
Head Grades of Run of Mine Ores
Silver (gram/tonne) 307.3 309.7 305.4
Lead (%) 1.9 2.4 2.0
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The TLP Mine was in its third quarter of test production. The following table lists the grade changes over the last three quarters: For the Quarters Ended
-----------------------------
Q3 2009 Q2 2009 Q1 2009
31-Dec-08 30-Sep-08 30-Jun-08
-----------------------------
Run of Mine Ores (tonne)
Direct Smelting Ores (tonne) 8 34 53
Ores Milled (tonne) 10,563 28,532 23,404
-----------------------------
10,571 28,566 23,457
-----------------------------
Head Grades of Run of Mine Ores
Silver (gram/tonne) 181.4 140.3 183.0
Lead (%) 2.8 2.0 2.7
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In light of reduced global commodity prices, the Company has adjusted its China operations strategies in order to preserve cash and maintain positive operating cash flows. Mining operations at the TLP and HPG mines were suspended in late December 2008 while mining capacity in the LM Mine has been scaled down from approximately 150 tonnes per day to 100 tonnes per day with mining activities focusing on higher grade zones. At the Ying mine -- which has accounted for 79% of sales in the year to date -- mining, development and exploration are proceeding as planned with production being maintained at 700-750 tonnes of ore per day. Production at the mine is forecast to be 260,000 tonnes of ore for fiscal 2010. Projected head grades, recovery rates and metal production for the Ying mine are listed in the table below: -------------------------------------------------------------------------
Ying Mine Production Forecast
Fiscal 2010 (Ending March 31, 2010)
-------------------------------------------------------------------------
Ore mined/milled Commodity Grade Recoveries Projected metal sales
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Silver 480g/t 91% 3.65 Million oz
------------------------------------------------------
260,000 Tonnes Lead 9% 95% 49 Million lbs
------------------------------------------------------
Zinc 3% 72% 12 Million lbs
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Using metal prices in mid-January 2009 and the above production projections, the Company's mining operations are projected to operate with a gross profit margin of between 55% and 65%, resulting in expected cash flows from operations of $30 million to $35 million. Capital expenditures for fiscal 2010 are budgeted at $16 million for the Ying Mining Camp, including $11 million for the Ying Mine and $5 million for the TLP, LM and HPG mines. For the GC project in the southern Chinese province of Guangdong, a Phase II 3,000-meter diamond drill program will commence in March 2009 with a resource estimate update expected in June 2009. The Company plans to complete an Environmental Assessment Study of the project by the end of March 2009 after which a mining permit application will be submitted to the Ministry of Land and Resources of China in Beijing. The Company has budgeted approximately $4 million for the GC project in fiscal 2010 for exploration and the permitting process. This brings the Company's overall capital expenditures budget for fiscal 2010 to $20 million. The Company's Audited Annual and Unaudited Interim Consolidated Financial Statements and Management's Discussion and Analysis are available for review on the corporate website at www.silvercorp.ca and through SEDAR at www.sedar.com. Selected unaudited interim consolidated results for the three and nine months ended December 31, 2008 (Canadian GAAP) are attached to this news release. CONFERENCE CALL AND WEBCAST INFORMATION A conference call and live audio webcast to discuss these results have been scheduled as follows: Date: Friday, February 13, 2009 Time: 9:00 am PST (12:00 pm EST) Dial-In Number: 1-612-332-0107 Live audio webcast: www.silvercorp.ca (click on the link on the home page) Playback webcast can be accessed at: www.silvercorp.ca About Silvercorp Metals Inc. Silvercorp Metals Inc., China's largest primary silver producer, is engaged in the acquisition, exploration and development of silver related mineral properties located in the People's Republic of China ("China"). Silvercorp Metals Inc. is operating and developing four Silver-Lead-Zinc mines at the highly profitable Ying Mining Camp, Henan Province, China. Silvercorp is also applying for a mining permit at the newly acquired, 95% owned, GC&SMT property to profitably mine and produce silver, lead and zinc in Guangdong Province, China. The Company's common shares are included as a component of the S&P/TSX Composite and the S&P/TSX Global Mining Indexes. |
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