Silvercorp Metals Inc.

Thank you for standing by and good morning. My name is Sylvie and I will be your conference operator today. At this time, I would like to welcome everyone to the Silvercorp Metals Inc. fiscal 2021 fourth quarter and four year financial results conference call. Note that all participants lines have been placed on mute to prevent any background noise. 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 number one on your telephone keypad. And if you would like to withdraw your question, please press star followed by two. Thank you. And I would like to turn the conference to Lon Shaver, Vice President for Opening Remarks. Please go ahead, sir.

Thank you, Sylvie. Good morning and welcome, everyone. On behalf of Silvercorp Metals, I'd like to thank you for joining our call today. Before we get started, I'm required to remind you that certain statements On today's call, we'll contain forward-looking information within the meaning of 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 MD&A and financial statements. Also important to note, unless stated otherwise, all references to dollars in this call are U.S. dollars. So we're pleased to have finished fiscal 2021 with a solid financial quarter. As we previously announced in Q4, we mined 163,000 tons of ore and milled just over 180,000 tons. Those numbers are up 53% and 76% respectively compared to the prior year quarter. Our Q4 sales were up versus last year. Sales of silver were just over a million ounces, up 32%. Gold 7,000 ounces, 40%. Lead, just under 11 million pounds, that was up 13%. And zinc, just under 4.6 million pounds, that was up 50%. It's important to recall that Q4 is always impacted by the two-week Chinese New Year holiday mine suspension. This makes comparability to the results of the other quarters in the year, and the year itself somewhat difficult. Also, this Q4 was better than last year when we had an extended shutdown. But this year, we did still experience a slightly slower production resumption this year due to some of the COVID-19 prevention restrictions that did affect some of the travel affecting workers getting back to site. But for the quarter, our revenue was $35.7 million. That was up just under 90% compared to the prior year quarter. And our net earnings to shareholders were $7 million, or $0.04 per share. Our Q4 earnings were impacted by some accounting charges, namely an $800,000 foreign exchange loss and a $1.1 million loss on equity investments. Our cash flow from operations before changes in non-cash foreign capital for the quarter was $11.9 million. For the year, we've announced that we mined 964,925 tons of ore, milled 967,581. Those numbers up 9% and 8% respectively. And in terms of sales, we sold 6.3 million ounces of silver, 4,700 ounces of gold, 67 million pounds of lead, and just under 28 million pounds of zinc. Now, those production numbers, silver up 1%, gold up 42%, but that's a bit of an anomaly because we had a clear out of some concentrates at a mine that's on current maintenance. Lead was up 3% and zinc was up 10% compared to the prior year. Silver and lead production met guidance and zinc production beat guidance. Our revenue for the year was $192.1 million. That was up 21%. compared to $158.8 million in the prior year. I'd like to note that silver was 58% of revenues for the year on a net basis, compared to 53% in fiscal 2020. And looking a bit quickly at pricing, you know, realized pricing for us for silver was up 30% for the year, but 64% for Q4. Lead was, in fact, down 6% for the year, but up 21% in Q4. And zinc was up 26% for the year and up 92% for the quarter. It's also a little important to recall that COVID in early 2020 did skew the quarterly numbers for most metals. For this current year, net income to equity shareholders was $46.4 million, and that's up 35% compared to the prior year. And this worked out to $0.27 per share. I should note that in Q4 of this year, Hinan found our subsidiary was recognized as a high and new technology enterprise. So this is a classification at the national level. And we're proud of this. It's based on the efforts that we've made in mining research and innovation. And what it resulted is in an effective income tax rate reduction to 15% from the statutory 25%. This applied to taxes paid for calendar 2020 and led to a 4.3 million tax recovery reflected in the Q4 financials. And this tax rate incentive will last until December of 2022. at which point we can see if the program is still active and reapply. As a result of this, we have a $4 million tax refund due at year-end. The foreign exchange loss in fiscal 2021 was $7.7 million, and that was compared to a gain of $4.1 in fiscal 2020. And the foreign exchange gain and loss was really mainly driven by the exchange rate differences between the U.S. dollar and the Canadian dollar. Our cash flow from operations, this is after non-cash working capital in fiscal 2021, was $85.9 million, up 11% compared to $77.2 million in the prior year. And for the fiscal year, our cash cost per ounce of silver net of byproduct credits was negative $1.80 in fiscal 2021, and our all-in-sustaining cost per ounce of silver net of byproduct credits was $7.49 per ounce. Ying, which is our biggest contributor to our results, showed an 8 percent increase in the cash production cost per ton for the year, but the all and sustaining cost per ton was flat. Part of the reason for that is capital expenditures, which totaled $45.6 million, which was $3.2 million above our guidance as a result of a $4 million expenditure to build an aggregate plant to treat a million tons a year of our waste rock was not in the previous guidance. But otherwise, capital expenditures at the Ying Mining District and the GC Mine were below the annual guidance. And in fiscal 2021, Silvercorp was undertaking an extensive drilling programs at the Ying Mining District with two main objectives. One was to look at areas with existing development and access and re-examine them to potentially define additional resources and reserves. And this led to a reduction of about 17,000 meters or $5 million worth of exploration and development tunneling in fiscal 2021. And this drilling program is also looking at areas which may have been overlooked for potential gold mineralization. And these are being tested for different alteration styles from the typical silver lead zones that we're mining. We currently have 70 drill rigs at Ying drilling across the different mines for both surface and underground. For the year, we paid $4.4 million of dividends to our shareholders. And in terms of corporate development, during the year, we acquired a 27% interest in Whitehorse Gold. This was valued at $19 million as of March 31st. And this is a result of receiving shares in a spin-out by New Pacific and subscribing for additional shares for a total of $1.3 million under a private placement. During the year, we also won an online auction to acquire the exploration rights to the Zonghe Silver Project from the Henan Provincial Government in China, and with the mineral rights transfer contract pending a national security clearance by the related authorities. We acquired a 43.8% interest in the La Yesca Silver Project in Mexico for approximately $9.1 million. And we participated pro rata in an offering by New Pacific to the tune of $5.8 million. We ended the year with a strong balance sheet with $199.1 million in cash and cash equivalents. And this is up $56.6 million from the end of last year. And our working capital was up $53.7 million. Now, it's important to note that this cash and investment number does not include the equity investments in our other companies, which had a total market value of $212 million as of March 31st. In terms of outlook, a little quick review on that. Looking forward for fiscal 2022, we're expecting production of between 960,000 to just over a million tons of ore. Between 6.4 and 6.7 million ounces of silver, that's up approximately 3% compared to the guidance for fiscal 2021. Between 65.7 and 68.9 million pounds of lead, which is essentially flat to the fiscal 2021 guidance, and between 26.9 to 28.5 million pounds of zinc, and that'll be up between 7 to 10% compared to the guidance. For fiscal 2022, the total capital expenditures budget at the Union Mining District and the GC Mine are estimated around $38.2 million. And we also plan to complete and expense about 33,600 meters of mining preparation tunneling and 206,900 meters of underground diamond drilling. Further details on these numbers are available in our MD&A. In terms of other development plans for fiscal 2022, we plan to commence a phase one 10,000-meter drilling program at the La Yesca Silver Project, estimated cost around $3 million. We have applied for the necessary drilling permits from the respective Mexican government agencies, are optimistic to receive them soon, and commence drilling here within the next month. We also plan to initiate an extensive drilling campaign at the Zongho Project. We'll formalize the plan and update the cost estimates with respect to Zahar once the mineral rights transfer contract has been executed. Looking longer term, we're also in the process of applying for permits to build a third tailings facility near the existing facilities at the Ying mining district. The company is also considering plans to expand the current milling capacity or to build a new mill for future production expansion at the Ying mining district and to potentially accommodate some of the additional material we anticipate, both from within the Ying mines currently, as well as to process ore from the Zhonghe project during its development stage. We previously announced that our two-year mining contracts with the eight mining contractors at the Ying Mining District expired at the end of March. We successfully negotiated a renewed contract with all of the mining contractors at Ying, except for the one at the LME mine, which is actually our smallest mine at Ying. The renewed contracts have terms of two to three years and represent an overall 14.5% increase compared to previous agreements. And there haven't really been contract renewals for at least two years. Based on the renewed contracts and assuming the amount of work that was done in fiscal 2021, the total annual increase would have been estimated around 5 million, but we expect to offset this with reduced tunneling meterage as drilling activities in the previous mining areas are increasing instead of that tunneling. And that's, as I mentioned previously, in terms of our program. And with that, I think it would be appropriate to open the call for questions.

Thank you, sir. Ladies and gentlemen, as stated, if you would like to ask a question, please press star followed by one on your touch-tone phone. Once you do, you will hear a three-tone prompt acknowledging your request. And if you would like to withdraw your question, you will need to press star followed by two. And if you're using a speakerphone, you will need to please lift the handset before pressing any keys. Please go ahead and press star one now. if you have any questions. And your first question will be from Dalton Barreto at Canaccord. Please go ahead. Please unmute, Mr. Barreto.