Please disable any adblockers if the video is not showing below.

Silvercorp Metals Inc.

View Company Profile

September 17, 2024 at 10:30 AM (MDT)|Broadmoor Hotel & Resort

Lon Shaver

President

Lon Shaver has over 25 years of capital markets and corporate finance experience, mainly focused on the mining sector. He held investment banking roles with Raymond James and Merrill Lynch, assisting corporate issuers with numerous financing and M&A transactions. He began his career in equity research with an institutional sell-side firmand his previous corporate experience includes CFO roles with a publicly-listed mining company and a private technology company. Most recently, he acted as a consultant and advisor, providing corporate development and capital markets support to a number of companies in the resource sector. He has a B.Comm. degree, with a major in finance,and is a CFA charterholder.

This is an automatically generated transcript. Denver Gold Group cannot accept responsibility for mistakes, errors, omissions, or any action taken in reliance thereon. Use of this transcript is governed by Denver Gold Group’s Terms of Use.

Thanks. Great, thanks very much. I'm Juan Shaver, President at Silvercorp. I'd like to thank you all for joining us this morning to hear the story of Silvercorp, a profitable silver producer position to grow. The slide includes a cautionary statement that I will be making forward looking comments. And obviously a legal disclaimer there. So I'd like to jump in really with this slide, give an overview and I'd like to think of this in terms of Silver Corp as a bit of the past, the present and the future. And this all ties into funding growth of a company through continuing profitable operations. So, starting on the left hand side, you know, proven track record and you know, we've been operating 18 years. And that is a testament to our commitment to ESG and sustainability recognized by the agencies we've produced in, in aggregate over 100 million ounces of silver and 1.4 billion pounds of lead and zinc and our minds have been profitable, delivering profits in excess of 520 million to shareholders. What's that has allowed us to do as a company is to also then pay dividends to our shareholders and execute buybacks in excess of 200 million. We currently pay a 2.5 cent dividend annually. With that, we've built a cash position of 216 million out of operations, no debt. And we also have a investments and other mining companies that were worth 77 million as of our June quarter. I'll talk a bit more about that. Later. In terms of the present, our mines are generating cash flow. We are looking at 8 million ounces of silver equivalent and that's just silver and gold converted to silver equivalent in this current fiscal year. And based on the technical reports, we've just published, we see that growing to 10 million ounces by fiscal 2027 most recently in our June quarter, we were producing silver at an all sustaining cost of 982 per ounce out of by product credits. And our operating cash flow over the last 12 months was 100 and 3 million. Looking to the future in terms of growth at our existing mines in China. We see an opportunity to expand these mines in particular at the Ying operation. And we also have a satellite deposit at Ying that we're looking to bring into into production. Recently, we closed the acquisition of Adventist mining which took us to Ecuador. Main focus was on the permitted 2000 ton per day open pit and high grade El Domo copper gold project. But it also gives us the opportunity to transform project number two, which is the Conner gold project. From what is a currently thought of as a low grade open pit into a higher grade underground opportunity jumping right into the operations. Looking at Ying, this is a flagship for the, for the company. It's in fact seven individual mines in those four mining permits at the bottom of the slide, they feed ore to two mills that are operating at a effective capacity of 2500 tons per day in the little red box just above operations have been running since 2006 and we sell our product which is silver lead concentrates and zinc concentrates to local smelters on very favorable terms. We've had a very aggressive program over the life of the mines in terms of drilling and tunneling. Recently, we drilled 1.3 million m over three calendar years, still have a very healthy 255,000 m planned for this current fiscal year. And this has been focused on drilling for new discoveries and also upgrading of resources to reserves. We're in the midst of a program for optimization of the mines and growth focused on transitioning some of the areas and some of the mines to more mechanized mining that is changing to shrinkage mining. And for this, we're improving the RP access to get bigger equipment to improve access to new areas and and bring down equipment to allow that shift including new shovels. LH DS, some other growth projects that we have underway currently is to complete the third Tailings facility. We should be done by the end of this fiscal year, we have another 16 million to go on that. And we're in the midst of a mill expansion where we're adding 1500 tons per day of capacity to our mill number two at a very nominal cost of $7 million. Also this year, I mentioned the satellite project is Xuanping that's to the north. It's sort of following the same hub and Spoke Tau operation that we have for our existing mines. It's just a little bit further away and we're looking to break ground on that this year. Now, moving to Ecuador and the domo project that came through the adventist acquisition. This was really the focus for the acquisition because it's a f fully permitted project as of January this year. And so we have the rights to move ahead and start to build and operate this mine. It has in place an investment protection agreement with the government of Ecuador. And we still think that the 2021 feasibility study that you can see highlight on the right is valid 10 year mine life from the open pit producing copper, gold, zinc lead and silver. Looking at it on a copper equivalent basis, a very attractive all and sustaining cost of a dollar 26 per pound of copper equivalent. The initial Capex of 248 we think that's still a relevant number and in fact, we see some opportunities to potentially trim that back. And as it relates to funding of that, the the arrangement, the pre-existing arrangement with Wheaton calls for 100 and 62 million of payments to help develop the mine with the balance to come from the our cash position. We close the acquisition at the end of July. Next steps are to advance a number of priority projects before formal construction commences. One of them is to look at metallurgy. There's a, a small opportunity that we think to tweak the flow sheet a little bit which will bring higher gold and silver recoveries and put them in the copper concentrate. So we're doing some testing on that. Currently, we're looking at the site infrastructure and moving ahead with planning for the road getting the power line that needs to be built in place. and some other infrastructure like the camp advance the detail engineering to optimize this open pit and the flow sheet and also review and selecting of suitable equipment suppliers and construction and operation contractors. And this is a process that started before the acquisition closed. And since the the we closed the deal, we've been looking at this more intensely and, and seeing some, some good results in terms of parties that we think can help us deliver on time and on budget. So we can stick to our target of being in production by the latter half of 2026. Turning to Condor. That's the second project in the pipeline in Ecuador. This is a gold project. It's in the south of the country. It's fairly close to the Miror copper mine and the lending gold mine. We're benefiting from over 100 and 50,000 m of drilling and previous operators have spent in excess of 80 million on this on this project, which allowed them to come up with resources 2.3 million ounces of gold in the indicated category 4.3 million ounces in the inferred. They also completed a pe a in 2021 which to be honest, we're sort of ignoring at this point because what's attracted us is that there are a number of very high grade intercepts in that drilling some 10 grand plus material. So we're looking at transitioning this project more to a higher grade underground operation that we think could be built with much more modest capital and deliver a profitable gold operation for us as our second operation in Ecuador. This slide speaks a little bit to our achievements. On the left hand side is really looking at China and what we've been able to do. So we've built a number of mines and we produced over 100 million ounces of silver equivalent. And this is really just looking at silver and, and gold converted to silver equivalent. So despite that production history, we sit with an inventory from our most recent technical reports that were just published with a reserve of 100 and 8 million ounces of silver. But on top of that, in the M and I category another 117 that is not in the proven and probable category. And another call it 100 in the inferred category on top of that. So we've, we've had a healthy production history, but we have a, a long and promising future ahead of us. With the acquisition of the projects in Ecuador, you jump to the, the right hand side and you see, we can move that reserve over a small uptick in terms of gold silver equivalent by recognizing that the El Domo project does have a significant copper contribution. But moving in into the M and I category, you can see we go from 117 to 345 with the addition of those projects in Ecuador and inferred increases even more per ounce going from 100 million ounces to just under 500 million ounces of silver equivalent. And, and I'd add, we still remain active, looking at further opportunities to expand our, our footprint. looking at the impact of El Domo on our financials. on the left side here, you can see based on the technical reports on the life of mine plans, what our revenues are looking like over the next couple of years, you can see the silver number is still a very healthy contribution. You know, more than half of our revenues looking at El Domo and a typical year on sort of nominal terms would add about 100 and 50 million in revenue. And of that approximately half of that is in copper which we don't currently have any exposure to in the portfolio. but still also adds a significant gold component to our revenue base. Now, when we look at all of these operations, we like to bring this same philosophy of building mines that are good businesses, not just generating ounces or pounds. Looking at this slide, what's really heartening here is, is for everybody. We can see the the purple line, which is the silver price. It's the only line to the the right access, you can see the uptick that we've experienced in in silver pricing recently. looking at that on a revenue basis, which is the blue line and thinking in terms of units of production. So on a per ton, you can see that the uptick in the silver price has had an uptick in our revenues per ton from operations. Now, the next question is what happens on the cost basis and the red line is our all and sustaining cost per ton. And we, we've done a pretty good job at keeping that, that pretty consistent over the last few years despite inflation around the world affecting many operations. So with the increase in the revenue costing flat, you see what everybody wants to see as an investor, which is an increase in that that margin. The green line which up ticked here in the most recent quarter allowing us to deliver increased revenues, profitability and also report 63% of our revenues in this last quarter were from silver. So it's that strong operating performance which is continued to allow us to deliver a good financial performance adjusted in income on a quarterly basis on the left hand side. And you can see that bump in this most recent quarter as well as continued strong free cash flow. Now, despite that turning to valuation, you can see that as a company we trade at the lower end of the spectrum with respect to these three key metrics. Now, the quick and the lazy answer is to say that while it's operations in China and a lot of investors are not familiar or not as comfortable, I'd argue though that that's a misperception of, of country risk, given the long track record and our ability to deliver profitability and flow those funds back to head office to allow us to undertake other other things. But if you look other companies that are trading at that lower end of the spectrum, they typically are either one mine or one jurisdiction companies. And so that's what leads us to our strategy of growing the company and expanding the footprint, adding more operations and and in other jurisdictions, notably, the previous speaker and you can see where those valuations are and they've just been a party to a transaction to build critical mass in the sector and be a part of a bigger platform which we apply that strategy. I touched on the investments we have on the first page. You know, we don't think of these as traditional investments but rather incubation of what we believe are world class geological mining opportunities. The main one in our portfolio is a 27% stake in New Pacific Metals. We funded the acquisition and discovery of what has turned out to be two very large silver deposits in Bolivia. The first being silver sand and the second Kangas gives us indirect exposure to over 100 and 45 million ounces of silver equivalent in the M and I category. Now, silver sand has continued to progress. The initial results from the the P A have been largely confirmed. The PFS that just came out 12 year open fit o open pit operation average I'm sorry, 13 years, producing 12 million ounces annually on average very high production in the first four years and very attractive all and sustaining costs less than $11. And you can see that delivers a very solid N PV of 740 million and a 37% irr focus here at silver sand is to move ahead with land agreements to be able to get the ability to build and operate the mine. Kangas is the second project quickly catching up though. initial resource was published just over a year ago and we're expecting a the ph to be announced imminently. very big deposit. You can see 560 million ounces of silver equivalent in the indicated category. And another 110 in the inferred, the focus of this initial P A is going to look at a staged operation because there is a shallow flat lying silver deposit at the top of the the the top of this deposit and that will be the initial focus for development. So, coming back and, and looking at catalysts we are looking forward to completing the Ying mill expansion. Also this transition to more mechanization of our mine underground. So we can operate at a higher throughput rate and see some of those efficiencies in Ecuador advance the el domo priority projects. And we expect to have more news on this with more details on the budget and timeline. later this year, announce and begin our Condor Exploration program to advance that gold project in Ecuador. New Pacific. I've touched on a couple of the catalysts that have come. Obviously, the next big one will be the P A for Kangas. And a major catalyst is looking at the guidance that we have for this year 8 million ounces of silver equivalent growing to 10 in, in two years from an ownership and coverage standpoint, acquiring adventist brought us a significant position in in what we call the former Luminex holders that includes Ross Beatty and some of his coin investors in Vancouver as well as some Ecuadorian parties. And you can see that added a meaningful slice working your way down the list. Van Eck is number 23.68%. with the new news that we're getting added back into the GDX, we see this number moving up here significantly in the near term, the rest of the investors. A number of familiar names in terms of our CEO a number of ETF S some Canadian and European funds, mainly analyst coverage, five groups, four in Canada and one in the US. And with that, ah I'll wrap it up here. Thanks long. Well done. Any questions from the floor? la if I could start, I saw the slide on the, the revenue mix. Right now we're sitting one third base metals, two thirds precious metals. Just wondering you know, at some point, given the growth in all assets across all bases across all commodities, how does that evolve over time? And, and at some point, would you look to recalibrate that metals exposure? Yeah, it's, it's really opportunity driven. And so when we saw the, the, the ability to bring on a project like El Domo for the, the capital cost and what it can contribute, We're prepared to accept a bit of copper into the mix. Going forward, we'll see sort of asset by asset. What what each of these projects could, could add to the mix. Obviously, we were trying here for just about a year to buy a significant gold project in Africa. So we're open to silver gold and base metals to some extent, you know, what we do like in base metals projects is when there is a significant precious metals by product component? Yeah. And are there any other geographies that you find attractive that you're not currently exposed to? Well, obviously, we've indicated a willingness to go to Africa. So I'd say very broadly, it would be the Central and South America Africa. And again, it's jurisdiction and, and look, you know, case by case basis and sort of broader Australasia. And then finally, from me, you know, we hear about the mis the misperception of, of risk and, and that China exposure. How's that evolved over time in the last two or three years? We've seen Canada get more difficult. We've seen Latin America get more difficult has that, has that moved sort of in your favor, right, albeit slow but moving in the right direction, at least. Yeah, I'd like to think that it does. obviously there's a you know, an element of bureaucracy in China that we have to deal with, but we've shown we've been able to build an infrastructure and to deal with that. There's an overriding acknowledgment though that economic activity and in particular, in minerals is needed to feed into the supply chain. And so we do get great support in China for our, our projects and, and that's why we're undertaking these investments in these expansions. We've got a lot of support, you know, in the province and from our customer base, obviously, because they're seeking these our products, these concentrates to feed into the the manufacturing base in China. Last call for questions on the floor. Great. Thanks a lot adding.


NOTICE

The Denver Gold Group does not make any express or implied condition, representation, warranty or other term as to the accuracy, validity, reliability, timeliness or completeness of any information or materials in general or in connection with any particular use or purpose presented at the Gold Forum. Denver Gold Group cannot accept responsibility for sourcing variances, mistakes, errors or omissions or for any action taken in reliance thereon. Use of this data is governed by Denver Gold Group's Terms of Use.

The Denver Gold Group does not represent or endorse the accuracy or reliability of any third party advice, opinion, statement, information or materials received during the Gold Forum.

INVESTMENT ADVICE - NO OFFER OR RECOMMENDATION

The Gold Forum and the information and materials presented at the Gold Forum do not, and shall not be construed as, making any recommendation or providing any investment or other advice with respect to the purchase, sale or other disposition of any regulated gold related products or any other regulated products, securities or investments, including, without limitation, any advice to the effect that any gold related transaction is appropriate or suitable for any investment objective or financial situation of a prospective investor. A decision to invest in any regulated gold related products or any other regulated products, securities or investments should not be made in reliance on any of the information or materials presented or obtained during the Gold Forum. Before making any investment decision, prospective investors should seek advice from their financial, legal, tax and accounting advisers, take into account their individual financial needs and circumstances and carefully consider the risks associated with such investment decision.