Silvercorp Metals Inc.

Thank you for standing by and good afternoon. My name is Chloe and I'll be your conference operator for today. At this time, I would like to welcome everyone to the Silver Corp. 3rd Quarter Fiscal 2025 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 during this time, simply press star, then the number 1 on your telephone keypad. If you would like to withdraw your question, please press start and the number two. Thank you. I would now like to turn the conference over to Lon Schamer, President of Silvercorp. Please go ahead.

Thank you, Chloe. On behalf of Silvercorp, I'd like to welcome everyone to the call this morning or afternoon, wherever you may be. Today we'll discuss our third quarter fiscal 2025 financial results, which were released on Tuesday after the market closed, a copy of the news release, Our MD&A and the financial statements are available on our website and on CDAR+. Before we jump into the call, note that certain statements on today's call will contain forward-looking information within the meaning of securities laws. And please review the cautionary statements in our news release as well as the risk factors described in our most recent regulatory filings. And now to jump in and recap our financial results. Fiscal Q3 was our strongest quarter ever. and this was highlighted by record revenue of $84 million, which was up 43% from the quarter last year, record operating cash flow of $45 million, which was up 90%, and record silver production of 1.9 million ounces, which was up 16%. This growth was driven by a strong performance from our flagship Ying mine, which also successfully completed a mill expansion in early December and will be increasing production capacity from 2,500 to 4,000 tons per day. In addition, a robust commodity market led to improved realized metals prices compared to the same period last year. And in particular, the realized gold and silver price rose by 35%. The zinc price rose by 49% and lead by 8%. Silver remains our most important metal and contributed 63% of our net realized Q3 revenue this year. and that compared to 59% of revenue in last year's fiscal Q3. The results again reinforce why Silvercorp remains a compelling investment. We are a growing and profitable silver producer that provides investors with leverage to higher metals prices. Moving down the income statement, attributable net income for the quarter was $26 million, or $0.12 per share, more than double the $11 million, or $0.06 a share, that was reported in the same period last year. On an adjusted basis, removing the impact of non-cash and one-time items, our net income for the quarter was $22 million or $0.10 per share, compared to $11 million or $0.06 in the comparative quarter. The increase in our bottom line primarily reflects the higher metals prices, as well as higher volumes of gold, silver, and lead sold, which increased 40%, 15%, and 5%, respectively, year over year. And these increases were partially offset by a 10% decrease in zinc sold, a $2 million increase in admin expenses, and a one-time $12 million government payment related to the renewal of our mining license at the SGX mine. Looking at cash flow from operating activities, our mines generated $45 million this past quarter. This is up 90% year over year, driven by higher metal prices, increased sales, and $10 million inflow from changes in non-cap working capital. And that's compared to 135,000 outflow for the changes of non-cash forwarding capital last year. Even after adjusting for non-cash forwarding capital changes, our cash flow still grew by 47% year over year. During the quarter, we invested $25 million in our mines and projects. This is up 29% from last year and is largely due to increased underground development and completion of a new tailing storage facility and mill expansion projects at the Yingmai, as well as ongoing spending at El Domo and Condor projects in Ecuador. Additionally, we repaid Wheaton Precious Metals $13.25 million that had been drawn as an early deposit for the El Domo project, paid $2.7 million in dividends, and repurchased close to $1 million worth of our shares under the current NCIB program. We ended 2024 with a healthy cash balance of $355 million, which includes $143 million in net proceeds from our convertible notes offering, which we completed last November. This cash position does not include our investments in our associates and other companies, which had a total market value of $69 million as of December 31st, and this value is up slightly to $73 million as of today. Turning to our operating results, as we reported in January, Ying delivered record performance in Q3, which drove an 11% and 16% increase year over year in the company's total ore mined and milled. As a result, our production of silver, gold, and lead increased by 16%, 53%, and 5% respectively in Q3. Zinc production decreased by 10% compared to last year due to lower head grades. Year-to-date, we have produced 5.3 million ounces of silver 4,400 ounces of gold, 46 million pounds of lead, and 19 million pounds of zinc. With the successful expansion of our mill number two and a 145,000-ton ore stockpile, we kept the plant running at Ying during Chinese New Year, and we remain confident in achieving our silver guidance of between 6.7 to 7.2 million ounces for fiscal 2025. On the unit cost front, production costs averaged $78 per ton in K3, 5% higher than last year due to more underground development and great control drilling completed and expense was part of the mining cost. Year-to-date production costs averaged $80 per ton, which was in line with our annual cost guidance of between $77 and $80 per ton. Our cash cost per ounce of silver net of byproducts was negative $1.88 in Q3, lower than the negative $0.96 in the prior year quarter, which reflected a $6 million increase in byproduct credits, which offset the impact of higher production costs. And our all-in-sustaining production costs increased by 10% year-over-year to $150 per ton in Q3, driven by a 5% increase in unit production costs and a 3% increase in sustaining capital expenditures. However, year-to-date all-in-sustaining production costs of $146 per ton is in line with our annual guidance of between $144 to $152 per ton. Our all-in-sustaining cost per ounce of silver net of byproduct credits was $12.75, a 13% increase year-over-year, reflecting increases in G&A, some sustaining capital, plus some government payments totaling $6 million. Turning to our growth projects, as mentioned earlier, we commissioned the Mill No. 2 capacity expansion and Phase 1 of our third tailing storage facility at Ying last December. Both were completed on time and under budget. With these upgrades, we are well positioned for sustained production growth in the coming years as we continue to increase mechanization at our underground mines. Additionally, we secured all necessary permits and licenses for the Kuan Ping satellite project, which is now ready for construction. Recall, as part of our fiscal 2025 budget, we've allocated $1 million for development at Kuan Ping. We are leveraging our mine-billing expertise in Ecuador as we advance construction of the Aldomo copper-gold project. Since acquiring the project last July, we have strengthened our in-country technical and management team. We've optimized the site layout, project infrastructure designs, and our open pit production plan, and commenced detailed engineering for the process plant, while conducting some additional metallurgical testing to potentially improve gold recovery in our copper concentrate. Additionally, we have signed a power line contract with the Ecuadorian state utility SINEL, And we finalized the project's materials balance. And for everyone, this is basically an earth-moving schedule, and it really speaks to exactly what moves when to where and from the open pit. We've also adopted a unit cost method for contractor bidding, ensuring we pay only on a per ton of material moved basis going forward. Based on this approach, we awarded the first civil contract to CRCC 14, a seasoned operator in country with over a decade of experience building large infrastructure and mining projects in Ecuador. CRCC is now mobilized to build the temporary camp, initial phase of the tailings facility, the waste dump, and other important infrastructure. The remaining two civil contracts for pit stripping and mining, as well as for process plant construction, are set to be awarded in the coming months, keeping us on track for initial production targeted in the second half of 2026. We look to provide guidance on our capital budget for fiscal 2026, along with our production targets in April. At the early-stage Condor project, our focus has been on completing a resource review to assess future development plans for what would be a high-grade underground gold mine, and we continue to develop an exploration plan as we further our understanding of the project. We're committed to working closely with the government of Ecuador, local communities, and our in-country partners, Salazar Resources. Our focus on responsible and sustainable development aims to create lasting benefits for both the local communities and the country. And for that, with that operator, 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... Press star, then the number 1 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. Our first question comes from the line of Dalton Barreto from Canaccord Analyst. Your line is open.