Silvercorp Metals Inc.

Thank you for standing by. Good afternoon. My name is Ina and I will be your conference operator today. At this time, I would like to welcome everyone to the Silver Corp First Quarter Fiscal 2027 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 star, then the number two. Thank you. I would now like to turn the conference over to Lon Shaver, president of SilverCorp. Please go ahead.

Thank you, Ina. On behalf of SilverCorp, I'd like to thank everyone for joining this call today to discuss our Q1 fiscal 2027 financial results, which were released yesterday afternoon. Copies of the news release, the MD&A, and the financial statements are available on CDAR+. Before we start, please note that certain statements on today's call will contain forward-looking information within the meaning of securities laws. Also, please review the cautionary statements in our news release as well as the risk factors described in our most recent regulatory filings. So let's start with our financial results. We delivered a strong first quarter despite the temporary production slowdown at our Chinese operations that's related to the safety upgrades that began in June. Revenue rose 70% year-over-year to $139 million, while cash flow from operating activities and free cash flow reached nearly $62 million and $29 million, respectively, and that was up 28% and 27% from the prior year. This performance was mainly driven by a 135% increase in the realized selling price of silver, which averaged above $69 an ounce after smelter deductions. and Silver accounted for 77% of our revenue in Q1. We reported a net income of 59.4 million for the quarter or 27 cents per share. This includes an $11 million gain on investments and a $6 million gain from the sale of the Santa Barbara project in Ecuador. Removing non-cash and non-recurring items, our adjusted net income for the quarter was 53.9 million or 24 cents per share and that compares to 21 million and 10 cents in the comparative quarter. We delivered strong cash flow from operating activities before changes in non-cash working capital of 70.4 million, up 82% compared to last year. During the quarter, we spent and capitalized about 22 million at our operations in China, 12 million at the El Domo project in Ecuador and 2.6 million at the Chirag Zaab project in Kurdistan. Additionally, in May, we made a $60 million cash payment to the Kyrgyzstan government following the issuance of the new mining license and license agreement for Izav, which extends the license term by 20 years to June of 2062. As we advance on our growth strategy, our strong balance sheet provides us with significant financial flexibility. We ended the quarter with $387 million in cash, and that excludes our investments in associates and other companies. which had a combined market value of $304 million as of June 30th. We have further funding available through the RMB denominated term loan facilities that we signed which totals approximately US$220 million which remains undrawn. Now to recap our operating results which we reported in July. During the first quarter we produced approximately 1.5 million ounces of silver Over 2,500 ounces of gold, 13 million ounces of lead, and 4 million pounds of zinc. Compared to last year, gold production increased 24%, while silver, lead, and zinc production decreased 17%, 15%, and 15% respectively. Production at Yang was impacted by lower head grades, reflecting higher dilution associated with the shift to more shrinkage mining. Also on June 29th, we reported that we voluntarily suspended operations at both Ying, and GC to complete a comprehensive safety self-review. This followed the rollout of new nationwide safety requirements across China's mining industry after a major accident occurred in the country in May. Through this process, we identified areas requiring some upgrades to meet the new regulations and engaged five certified vendors to complete the six major safety systems underground upgrades. Safety has always been our top priority. While these upgrades are temporarily impacting production, they're an important investment in our operations, and we expect to emerge from this process with even stronger and safer mines. For the quarter, consolidated mining operating income was $84.8 million, with Ying contributing $80.1 million, or approximately 95% of the total. Turning to costs, Ying's production costs averaged $87 per ton. which was up 5% year-over-year. This increase was primarily driven by a 6% appreciation of the RMB against the U.S. dollar. Despite this, production costs remained below our annual guidance range of $88 to $90 per ton. Yings cash cost per ounce of silver net of byproduct credits was $2.45 compared with $1.26 in the prior year quarter. This is mainly due to a 15% decline in the silver sold in the quarter and the stronger RMB that I mentioned, partially offset by a $3.8 million increase in byproduct credits. All-in-sustaining production costs at Ying were $130 per ton, essentially flat year-over-year, and below our annual guidance range of $155 to $160 per ton. On a per-ounce basis, Ying's all-in-sustaining cost net of byproducts was $1,394 an ounce. This is up 38% year-over-year. and the increase reflected the same factors impacting cash costs but also a 68% increase in government taxes which was driven by the higher revenue that we reported. Turning to our growth projects, at Yang, capital expenditures totaled over $16 million in Q1 for underground development and drilling, mainly aimed at improving underground access and material handling to boost productivity. At the Kuan Ping project north of Ying, mine construction focused on underground development to access the ore. The project, which has a license to produce up to 200,000 tons of ore per year, will deliver some nominal development ore to be milled at Ying in this fiscal year. With the capacity expansions at the existing Ying permit areas in Kuan Ping, we'll have a permitted mining capacity of approximately 1.5 million tons per year. In anticipation of higher mine production, we've begun constructing a new mill, the number three mill. Capital expenditures total $300,000 in the quarter, with foundation treatments and the elevated water tank currently in progress. The mill is expected to add 3,000 tons per day of capacity and be commissioned in Q1 of fiscal 2028. Switching to Ecuador, at El Domo, construction continued to advance in Q1 despite unusually heavy rainfall. On the infrastructure side, the non-contact water channel, processing plant foundation work, and initial tailing storage facility dam construction progressed, with more than 600,000 cubic meters of earthworks completed. In parallel, open pit prescripting is underway, and efficiency is improving through the addition of large-scale equipment, expanded operating areas, and road upgrades. In addition, major equipment for the processing plant and water treatment plant has been procured and is being shipped to Ecuador. The construction contract for the plant has been awarded to TGJA, an experienced contractor that recently constructed the 80,000 ton per day flotation mill at the Mirador copper gold mine in the south of Ecuador. Moving to Condor, our permitting work continues with the formal consultation process underway with the directly impacted communities. This is the final step required to secure the small-scale environmental license, which we expect to obtain later this quarter. Once it is received, we will commence development of two 1,500-meter exploration tunnels at the Camp and Mosquitos deposits to support underground drilling and advance exploration and resource definition. We have also made significant progress in Kyrgyzstan since acquiring Chorat Zav in January. This is the joint venture company that holds the Tulkabash and Kiziltash Gold projects and is 70% owned by Silvercorp, with us as operator, and with the remaining 30% owned by the state mining company Kyrgyz Altan. At the fully permitted Tulkabash Oxide project, construction is underway on the temporary camp and related facilities. We have contracted CRCC-19, which is currently onsite building access roads to the feature open pit and waste rock storage areas. and preparing the foundation for the heat leach pad. CRCC19 has operating experience in Kyrgyzstan and is also our mining contractor at El Domo. The updated feasibility study on Tulkabash is expected later this month. As outlined in our budget released in June, we plan to invest 166 million to develop a 4 million ton per year open pit heat leach operation at Tulkabash with 42 million of capital expenditures planned for fiscal 2027. At the neighboring Kisseltash Sulfide Project, we completed nearly 13,000 meters of drilling to the end of the quarter, with 16 rigs currently turning and assays pending. This work is part of our ongoing 50,000 meter drill program for the year, focused on both infilling the deposit to upgrade resources and stepping out to extend mineralization and make new discoveries. This program will support the completion of a PEA next year, followed by a further 60,000-meter drill campaign to support feasibility-level studies and detailed engineering design for construction. We look forward to providing further updates as we continue to advance our growth projects. And with that, operator, I'd like to open the call for questions.

Thank you, sir. Ladies and gentlemen, we will now conduct a question-and-answer session. If you would like to ask a question, press star, then the number 1 on the telephone keypad. If you would like to return your question, please press star, then the number two. If you're using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Thank you. And your first question comes from the line of Kevin O'Halloran from BMO Capital Markets. Please go ahead.