Silvercorp Metals Inc.

Thank you for standing by. Good morning. My name is Lara, and I will be your conference operator today. At this time, I would like to welcome everyone to the Silver Corp's third quarter fiscal 2023 financial results conference call. All lines have been placed in 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 the number one on your telephone keypad. If you would like to withdraw your question, please press star then the number two. Thank you. I would now like to turn the conference over to Lon Shaver, Vice President for Opening Remarks. Please go ahead, sir.

Thank you, Lara. On behalf of Silvercorp, I'd like to welcome everyone for joining this call to discuss our third quarter fiscal 2023 results, which were released yesterday after market. A copy of the news release, the MD&A, and financial statements for today's call are available on our website and on CDAR. Before we get started, I'm required to remind you that certain statements on today's call will contain forward-looking information within the meaning of applicable securities laws. Please review the cautionary statements included in our news release and presentation, as well as the risk factors in our most recent 10Q and Form 40F and Annual Information Form. So to kick it off with a review of our quarterly financial results with respect to the quarter, revenue in Q3 was $58.7 million. That's down 1% compared to the prior year quarter, and that's mainly due to a decrease of $4.6 million from lower silver, lead, and zinc prices, but offset by an increase of $4.2 million from higher silver and lead sold. Based on production levels and realized prices in this quarter, Silver was 54% of revenues on a net realized basis, the same as in Q3 of last year. Q3 net income attributable to equity shareholders was $11.9 million or $0.07 per share. That compares to a net income of $5.1 million or $0.03 per share in the same period last year. The main contributor to the gain was an increase of 8% and 12% in silver and lead sales respectively. a 13% increase in the realized selling price for gold, and a gain of $3 million on equity investments. Also, you'll recall we had a write-down in the previous quarter which affected net income. These were partially offset by a 6% decrease in zinc sales, and as I mentioned, lower realized selling prices for silver, lead, and zinc, which decreased 7%, 8%, and 13% respectively. We also experienced a foreign exchange loss in this quarter of $800,000, and that was from the depreciation of the U.S. dollar, which occurred over the quarter. On an adjusted basis, with the adjustments made to remove the impacts of non-cash and unusual items, such as impairment charges, share-based compensation, foreign exchange loss that I mentioned, the share of loss and associates operating results, gains and losses on investments and one-time items. The earnings for the quarter were $11.8 million, or $0.07 per share, which compared to $13.4 million, or $0.08 per share, in the same period last year. And just a reminder, we're providing the suggested earnings as a supplemental non-gap measure to give investors another metric to better measure the performance of the underlying business, its continuing profitability and growth potential. Our cash flow from operations in the quarter was $25.7 million. That compared to $28.7 million in the prior year quarter. The decrease was mainly due to the previously mentioned factors on income, but offset by a $1.7 million change in non-cash working capital. Before changes in non-cash working capital, our cash flow in the third quarter was $24 million, and that's compared to $20.9 million in Q2 of this year, but $28 million in Q3 of last year. Capital expenditures totaled approximately $15.6 million in the last quarter, down from $18.7 in the prior year quarter, mainly due to decreased underground exploration and drilling. We ended the quarter with $210.3 million in cash and cash equivalents and short-term investments, up from $201 million at the end of last quarter, but down modestly $2.7 million from our March year end of last year. And again, largely due to a negative 9.9 million translation impact from the appreciation of the US dollar against the Canadian dollar and Chinese RMB. This cash position does not include our investments in associates and other companies, which had a total market value of 121.8 million as of December 31st. Not necessarily the best ending period to track these investments, as obviously we've seen a rebound in the markets here in January. At December, New Pacific represented 98 million of that 121.8. Now, we've released our production numbers, but just to give a quick recap, quarterly production, as we reported, we mined 296,000 tons of ore, milled 303,000 tons of ore. Those were essentially flat compared to the same quarter last year. We produced on a consolidated basis approximately 1.9 million ounces of silver, 1,100 ounces of gold, 20.1 million pounds of lead, 7 million pounds of zinc in the quarter. And that was increases of 1%, 0, and 6% in silver, gold, and lead, and a decrease of 13% in zinc production over Q3 fiscal 2022. Sales in the quarter, 1.9 million ounces of silver, 1,100 ounces of gold, 19.3 million pounds of lead, and 7.1 million pounds of zinc. Those are increases of 8% flat and 12% respectively in silver, gold, and lead, and a decrease of 6% in zinc sales over the same period last year. The cash cost per ounce of silver net of byproduct credits was negative $1.15 in the third quarter. compared to negative $1.33 in the prior year quarter. The increase in the cost was mainly due to lower byproduct credits, but offset by a decrease in expense production costs. The all in sustaining cost per ounce of silver net of byproduct credits was $9.28 compared to $8.82 in Q3 of fiscal 2022, increase mainly due to an increase in sustaining capital expenditures but offset by a decrease in admin expenses and mineral resource tax. Looking at nine-month results, 887,000 tons of ore were mined, and we milled 893,000 tons. Both of those numbers up 9% compared to the prior period. Year-to-date, we've sold 5.5 million ounces of silver, 3,400 ounces of gold, 55.7 million pounds of lead and 20 million pounds of zinc represent an increase of 9%, 17%, and 9%, respectively, in silver, gold, and lead sold, and a decrease of 11% in zinc sold. For the nine-month period, the consolidated cash cost per ounce of silver net of byproduct credits was negative 68 cents compared to negative $1.47 in the same prior year period. Consolidated all-in sustaining cost per ounce of silver for this nine-month period net of byproduct credits was $894, and that compares to $788 in the same prior year period. Compared to our fiscal 2023 production guidance on a consolidated basis after nine months or 75% of the year, our milling tonnage is at 83% of the target. And with respect to the metal production, we've hit 77% of our silver target, 82% of our lead target, but only 60% of our zinc target for the year. Turning to our growth projects, we completed an additional 978 meters of drilling during the quarter at the Kuan Ping project, which is a satellite property located north of Ying that we acquired in November of 2021. Last quarter, we received the Kwan Ping mining license from the Department of Natural Resources, which covers the 6.9 square kilometer property and is good until March of 2029. Going forward in this year, fiscal 2024, we're planning to carry out studies to complete the environmental assessment, water and soil protection assessment, and preliminary safety facilities and mine design reports. Further updates on the mine construction plan and cost estimates will be provided once we've completed those reports. As a result of those reports, we should have the permits in hand. As of December 31st, we spent a total of $4 million on the construction of a new 3,000 ton per day flotation mill and the new tailing storage facility at Ying. A total of 2,147 meters of drainage tunnels were completed. and the site preparation for the new mill was also substantially completed. The first batch of 4.1 million of milling equipment was ordered. With regards to permitting, the environmental assessment study report was revised and is pending government approval. This is for the mill. We're fully good to go on the tailing storage facility. Now turning to the fiscal 2024 guidance that we've also provided in this release. So as it relates to production cost and capital expenditures in fiscal 2024, we expect to mine and process approximately 1.1 to 1.17 million tons of ore, which is expected to produce between 4,400 to 5,500 ounces of gold, 6.8 to 7.2 million ounces of silver, between 70.5 and 73.8 million pounds of lead, and 27.7 to 29.7 million pounds of zinc. So this guidance for fiscal 2024 represents anticipated increases of between 3 percent to 8 percent in ore, flat to up 26 percent in gold production, between 3 and 8 percent increase in silver, between 3 and 8 percent increase in lead, and between 14 to 23 percent in zinc compared to our expected production. results completing here in fiscal 2023. In terms of cost guidance for the next year, we're anticipating between $78.2 and $80.5 per ton on a cash cost basis, and between $136.4 and $142.4 on an all-in sustaining basis. Overall capex for fiscal 2024 is forecast at $64.7 million. with roughly 21.8 million going towards Ying's equipment and facilities, construction of the tailing storage facility, paste backfill plant, and we're adding an XRT ore sorting system to optimize the mine plan and improve ore processing head grades. The tailing storage facility is expected to be completed in 2024, and we're now anticipating completing the new 3,000 ton per day mill being delayed by one year and being also completed in calendar 2024. With that, I would like to open the call for questions.

Thank you, sir. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the number one on your touchstone phone. If you would like to withdraw your request, please press star followed by the number two. One moment, please, for your first question. Your first question comes from the line of Justin Stevens from PI Financial. Please go ahead.