Silvercorp Metals Inc.

Good afternoon, ladies and gentlemen. Thank you for standing by. My name is Michelle and I will be your conference operator today. At this time, I would like to welcome everyone to Silver Corp's first quarter fiscal 2023 financial results conference call. All 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 at that 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. I would now like to turn the conference over to Lon Shaver, Vice President for Opening Remarks. Please go ahead, sir.

Thank you, Michelle. On behalf of Silvercorp Metals, I'd like to welcome everyone for joining the call to discuss our first quarter fiscal 2023 financial results, which were released yesterday after the market. A copy of the news release, the MD&A, and the financial statements for today's call are available on our website. And 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 described in our most recent 10Q and Form 40F, as well as our annual information form. Now to jump into the results, we started off fiscal 2023 with a respectable quarter with all our minds delivering solid performance. Revenue in the quarter was $63.6 million, up 8% compared to last year's quarter. Based on the production levels and realized prices this quarter, silver was 54% of revenues on a net basis down slightly from 58% in Q1 fiscal 2022. Our Q1 net earnings attributable to equity shareholders were $10.2 million or $0.06 per share. That compared to $12.2 million or $0.07 for the same period last year. The main contributors to the slight decrease were a 13% decrease in the realized selling price of silver, 7% increase in unit production costs, a 5% decrease in zinc sold, and the booking of a $2.7 million mark-to-market loss on equity investments. These were offset by higher silver, gold, and lead sales, which increased 17%, 10%, and 14% respectively, as well as higher realized selling prices for gold, lead, and zinc, and a foreign exchange gain of $1.7 million. Our adjusted earnings for the quarter were $13.5 million, or $0.08 per share, compared to $15.8 million, or $0.09 per share, for the same period last year. And just a reminder, our adjusted earnings is a supplemental non-GAAP measure, which we're releasing to provide investors with another metric to better measure the performance of our underlying business, its continuing profitability and growth potential. Adjustments were made to remove the impacts from non-cash and unusual items including the elimination of share-based compensation, foreign exchange loss, impairments, adjustments, and reversals, the share of loss in our associates' operating results, and gain or loss in investments and one-time items. Our cash flow from operations in the quarter was 40.2 million, up 10%, or 3.7 million compared to 36.5 million in the prior year quarter. Capital expenditures in the quarter totaled approximately 18.1 million, That was up from $11.3 million in the prior year quarter, primarily due to increased underground exploration development, equipment, and facilities investments at Yang. During this period, we paid $2.2 million of dividends to shareholders and repurchased, under our existing normal course issuer bid, 334,990 shares of the company for a total of approximately $900,000. And earlier in this current quarter, we also repurchased an additional 404,970 shares for a total of $1 million. We ended the quarter in a strong financial position with $215.8 million in cash and cash equivalents and short-term investments. And this does not include the investments in Associates and other companies, which had a total market value of $147.4 million as of June. Of that number, New Pacific was 125 million of that total. Just for a quarterly production recap, as we previously reported, we mined 300,104 tons of ore and milled 298,176 tons. Those numbers were up 30% and 23% respectively compared to last year's Q1. We produced approximately 1.9 million ounces of silver, 1,100 ounces of gold, 19.1 million pounds of lead, and 6.9 million pounds of zinc in the quarter. And those were increases of 26% in silver, 10% in gold, 20% in lead production, and a decrease of 4% in zinc production over Q1 fiscal 2022. We're on track to produce between 7 and 7.3 million ounces of silver, between 6,300 and 7,900 ounces of gold, 68.4 to 71.3 million pounds of lead, and between 32 to 34.5 million pounds of zinc in fiscal 2023. Recall that this guidance represents increases between 14 to 19% in silver, between 85 and 132% in gold, between 6 and 11% in lead, and between 19 and 29% in zinc production. compared to our actual fiscal 2022 numbers. The cash cost per ounce of silver net of byproduct credits was negative 157 in this Q1, and that compared to negative 143 in the prior year quarter, and our all-insustaining cost per ounce of silver net of our byproduct credits was 925 compared to 746 in Q1 of fiscal 2022. Cash cost and all-insustaining cost per ounce of silver During the quarter, we were impacted by some inflationary cost pressures that resulted in higher material costs and utility costs, an average 9% increase in employee pay rates, increased drilling and tunneling resulting in higher costs included in mining costs and sustaining capital expenditures, but was offset by higher byproduct credits, an average 2% depreciation in the Chinese RMB against the U.S. dollar. Now, turning to our growth projects, we completed just under 2,000 meters of drilling during the quarter at the Kuan Ping project, which is a satellite property located north of Ying that we acquired last November. We have submitted the application for a mining permit at Kuan Ping, which is now being reviewed by the provincial government. At Ying, we continue to make progress on our new 3,000 ton per day flotation mill and the new tailing storage facility, the preliminary design and engineering survey, the water and soil conservation studies, for the new mill and the tailing storage facility and the feasibility study for the tailing storage facility have been completed. The company also received the construction permit for the new mill and is in the process to negotiate purchases of major equipment. We expect that the final approval of the environmental and safety assessment studies as well as the detailed engineering design of the new mill and the tailing storage facility will be granted later this quarter. In addition, the company continues to work with its consultants to complete an updated NI 43-101 resource and reserve estimate for the Union Mining District, which is expected to be completed this fall, probably early fall. And with that, I'd like to open the call for questions.

Thank you. Ladies and gentlemen, we will now conduct the question and answer session. If you would like to ask a question, please press star, then the number one on your telephone keypad. If you would like to withdraw your question, please press star followed by the number two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Your first question comes from Joseph Rieger at Roth Capital Partners. Please go ahead.