Silvercorp Metals Inc.

Thank you for standing by. Good afternoon. My name is Angeline and I will be your conference operator today. At this time, I would like to welcome everyone to the Silvercorp Second Quarter Fiscal 2025 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, 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. And I would like to turn the conference over to Lon Shaver, President of Silvercorp. Please go ahead, sir.

That's great. Thank you, Angeline. On behalf of Silvercorp, I'd like to welcome everyone to the call this morning. Today we'll be discussing our second quarter for the fiscal 2025 financial results, which were released yesterday after market close. A copy of our news release, the MD&A, and financial statements are available on our website and CDAR+. Before we jump in, note that certain statements on today's call will contain forward-looking information within the meaning of securities laws. Additionally, please review the cautionary statements in our news release as well as the risk factors described in our most recent regulatory filings. Now, to recap our quarterly financial results, we delivered a strong fiscal Q2 with a near-record quarterly revenue of $68 million, which was a 26% increase from last year's quarter. This growth was driven by a robust commodity market, which led to improvements in realized metals prices, particularly in China, compared to the same quarter last year. In particular, the realized silver price rose by 34%, gold rose by 20%, and lead rose by 15%. and zinc was up 43%. Silver remains our most important metal and contributed 64% of our Q2 revenue, followed by lead at 20%. Just by comparison, silver was 58% of revenue in last year's fiscal Q2. The results continue to reinforce why investors should own our shares, namely demonstrating that we provide leverage to higher metals prices through the response and our financial results. Moving down the income statement, Attributable net income for the quarter was $18 million or $0.09 per share. This is up from $11 million or $0.06 per share in the comparative quarter. The increase in our bottom line reflects higher metals prices, a 4% increase in silver sold and a 29% increase in zinc sold, along with a $4 million gain on investments. These increases were partially offset by a 51% and a 13% decrease in gold and lead sold, a $3 million increase in admin expenses, including costs related to our efforts and related to the transaction costs for closing the Adventist acquisition, as well as a $2 million loss in FX. Looking at cash flow from operating activities, we generated $23 million this past quarter. This is down $6 million from last year due to a $5 million increase in income tax paid. and a $5 million increase in non-cash working capital compared to a positive non-cash working capital adjustment of $3 million in the prior year quarter. If we adjust out changes in non-cash working capital items, we generate $28 million in operating cash flow in Q2, representing an 8% year-over-year increase. Additionally, we invested $28 million in our mines and projects during the quarter. This is up 86% from last year, largely stemming from increased underground development construction of the third tailing storage facility at Ying, and the mill expansion activities at Ying, as well as spending on the newly acquired Eldomo and Condor projects. Despite the increase in capital expenditures, we ended the quarter with a strong cash position of $210 million. This position does not include our investments in Associates and other companies, which had a total market value of $84 million as of September 30th. New Pacific Metals was the lion's share of that, totaling $70 million. Turning our attention to our operating results, as we reported in October, our mines performed as expected in Q2. We mined 361,000 tons and milled 209,000 tons of ore during the quarter, representing year-over-year increases of 32% and 14%, respectively. Due to higher quarterly output, our production of silver and zinc increased by 4% and 26%, respectively. but gold and lead production decreased by 52% and 18%, respectively, due to lower head grades during the quarter. Year-to-date, we have produced 3.4 million ounces of silver, 2,300 ounces of gold, and 29 million pounds of lead, along with 12 million pounds of zinc. We remain confident in achieving our annual production guidance set in April as we process the stockpile of 129,000 tons of ore in the second half of our fiscal year, at our newly expanded milling facility, which we are now in the midst of commissioning. On the unit cost front, production costs averaged $82 per ton in Q2, 2% higher than last year's results due to more mining preparation tunnels and grade control drilling completed and expensed as part of the mining costs in the current quarter. Year-to-date production costs averaged $81 per ton, slightly higher than our annual cost guidance of $77 to $80 per ton. Our cash cost per ounce of silver net of byproduct credits was negative 74 cents in Q2, higher than the negative dollar in the prior year quarter due to the same factors impacting the unit production costs, partially offset by higher byproduct credits. The all-in sustaining production cost decreased by 3% year-over-year to $146 per ton in Q2, driven by a 4% reduction in sustaining capital expenditures per ton, resulting from higher mill throughput. Additionally, year-to-date all-in-sustaining production costs of $143 per ton remains below our annual cost guidance of between $144 to $152 per ton. Our all-in-sustaining cost per ounce of silver net of byproduct credits was $1,165, which is 1% higher than Q2 of last year due to the previously mentioned increase in cash costs per ounce of silver. Turning to the Ying growth projects, the mill number two capacity expansion has been completed on time and on budget, and as I mentioned earlier, commissioning is now underway. Recall that the project will expand Ying's total production capacity to 4,000 tons per day from 2,500 tons per day. Additionally, construction of phase one of the third tailings facility at Ying, which will hold 10 million cubic meters of tailings, is substantially complete, and commissioning of this facility is underway. it should be ready to receive tailings by the end of November of this month. As a reminder, this is a two-phase facility that will ultimately hold 19 million cubic meters of tailings. Regarding the Kwan Ping satellite deposit, the environmental impact assessment report was approved in July, the mine safety design report was approved in September, and the final approval for mine construction is pending receipt from the province. We expect to commence development this fiscal year and have allocated $1 million for mine construction in our fiscal 2025 budget. Turning our attention to Ecuador, since the acquisition, we have diligently reorganized our operational structure in Ecuador. At our fully permitted El Domo copper-gold project, we have undertaken a number of activities, including a review of the execution plan, specifically related to the contracting, purchasing, and construction sequencing. We've completed 800 meters of metallurgical drilling to support a test program, which is aimed at optimizing the process flow sheet for improved gold recovery in the copper concentrate. And we've continued further engineering work to refine the mine layout and processing plant, which includes adjustments such as relocating the camp and mill building to reduce civil excavation, moving the maintenance shop closer to the plant to share electrical infrastructure, and revising surface water management plans to simplify construction and reduce excavation and concrete needs. These efforts paved the way for a smooth transition to mine construction, which we intend in early 2025, and remain optimistic for initial production targeted for the second half of calendar 2026. At the prospective Condor project, our focus has been on completing a resource review to assess future development plans. and initiating site control activities in preparation for the start of on-ground exploration work. We continue to develop an exploration plan as we further our understanding of the project. We remain dedicated to working collaboratively with the government of Ecuador, local communities, and Salazar Resources, our in-country partners. Our commitment to modern responsible development will benefit both the local communities and the country as a whole. We intend to provide more details on our work plans for El Domo and Condor in the near future.

and with that i would like to open the call for questions thank you sir 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 2. if you are using a speakerphone please lift the handset before pressing any keys One moment, please, for your first question. The first question comes from Joseph Rigger from Roth Capital Partners Analyst. Please go ahead.