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Silvercorp Metals Inc

China-focused miner Silvercorp Metals is on the hunt for more growth opportunities

Snapshot

Silvercorp is the primary silver producer in China, with six silver-lead-zinc mines in the Ying mine district in Henan province, as well the silver-lead-zinc Gaocheng project in Guangdong, China

Silvercorp Metals worker

Quick facts: Silvercorp Metals Inc

Price: $5.31

Market: TSX
Market Cap: $891.44 m
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  • China's premier silver producer

  • A significant resource and reserve base

  • Well-funded to grow with $125.2 million in cash at the end 2018


What does Silvercorp metals do?

Silvercorp Metals Inc (NSYEAMERICAN:SVM) (TSX:SVM) has been operating underground mines in China since 2006 and has a track record of growing the company organically through generating its own cashflow. It has also built up a substantial reserve base. The company is currently focused on silver, lead and zinc.

The flagship asset is the Ying project, also known as the SGX silver-lead-zinc property, which was acquired in March 2004 and started commercial production on April 1, 2006. It lies 240 km southwest of Zhengzhou, the capital city of Henan Province in central China and consists of six separate mines which feed a central mill. Concentrates are shipped to smelters in China. The mine life is until 2036.

In the last 13 years, it has generated over 50 million ounces of silver and over 700 million pounds of lead and zinc. Elsewhere, at the profitable GC mine in Guangdong province, initial output started in 2014.

The consolidated proven and probable reserve across both the Ying mine and the GC mine for contained metal is around 106 million ounces of silver, 511,693 tonnes of lead and 264,628 tonnes of zinc.

Vancouver-headquartered Silvercorp also owns 27.5% of the shares in New Pacific Metals Corp (CVE:NUAG), which is advancing the Silver Sand project in Bolivia, where a 55,000 meter drill program has  started and where an initial resource is targeted for the end of 2019. Silvercorp chairman and CEO Dr Rui Feng is the CEO at  New Pacific.

How's it doing?

In its fiscal third quarter, 2019, the firm mined 3% more ore than in the same period a year ago, but sales of $42.4 million were down 5% compared to $44.4 million in the same quarter the year before. Cash flow from operations was $19.5 million, down $8 million compared to $27.5 million in fiscal 3Q, 2018.

Silvercorp put the decrease mainly down to lower metal prices and the increase of withholding tax paid. Notably, the miner paid $2.1 million dividends to shareholders.

For the full year 2019, Silvercorp is forecasting production of 6 million ounces of silver, 63.6 million pounds of lead and 19.8 million pounds of zinc.

Outlook

In its presentation, the firm says the strategy is to maintain steady output, with stable or reduced costs, while growing existing assets organically through drilling.

Also, the group wants to bring the BYP gold mine (suspended since 2014) in Hunan province back into production, targeting 30,000 ounces of the yellow metal a year. It will also hope to grow the value of its investment in  New Pacific Metals Corp.

Silvercorp  plans to acquire high grade exploration projects, with geography and commodity type not an issue, so long as they have defined resources that can quickly be brought into profitable operation at reasonable cost.

What the vice-president says

Lon Shaver told Proactive in March: "Our operations have generated cashflow. They're high grade and that has put us in a position that, while many of our peers are not making money at current silver prices, we are. And we do have US$125 million in the bank and we're aggressively looking to grow the company and look at other attractive projects around the world."

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