On Friday, Silvercorp Metals (AMEX:SVM) discussed fourth-quarter financial results during its earnings call. The full transcript is provided below.

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The full earnings call is available at https://silvercorpmetals.com/events/

Summary

Silvercorp Metals reported a record revenue of $126 million for Q3 FY2026, up 3.51% from the previous year, with cash flow from operating activities reaching $133 million, a 196% increase.

The company faced a net income loss of $15.8 million due to a $60 million non-cash charge on derivative liabilities, but adjusted net income was $47.9 million.

Strategic investments included $26 million in China and $18 million in Ecuador, while cash reserves grew to $463 million.

Operational highlights include increased silver production, reduced production costs, and expanded mining capacity at the Ying District, as well as ongoing development projects in Ecuador and Kyrgyzstan.

Management indicated challenges in meeting higher grade expectations at Ying, but overall throughput remains strong, with strategic acquisitions and project expansions demonstrating commitment to growth.

Full Transcript

OPERATOR

Thank you for standing by. Good afternoon, my name is Konstantin and I will be your conference operator today. At this time I would like to welcome everyone to Silvercorp Metals' third quarter fiscal 2026 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 one 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 Metals. Please go ahead sir.

Lon Shaver (President)

Thank you, Konstantin. On behalf of Silver Corp. I'd like to welcome everyone to this call to discuss our third quarter fiscal 2026 financial results which were released yesterday. A copy of our news release, the MDA and the financial statements are available on our website and SEDAR Plus. Before we start, please 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 on our news release as well as the risk factors described in our most recent regulatory filings. So we'll kick off with our financial results. We delivered record breaking performance in this Q3 highlighted by revenue of 126 million which was up 3.51percent from last year. Cash flow from operating activities and free cash flow reached 133 million and 90 million respectively. Those were up 196% and 336% from last year. This performance was mainly driven by an 80% increase in the realized selling price of silver which averaged just under $49 an ounce after smelter deductions. Silver accounted for 72% of our revenue in the third quarter. These results reinforce why Silvercorp Metals remains a compelling investment in the silver sector. We are a profitable and growing producer that provides leverage to higher metals prices. We reported a net income of negative $15.8 million for the quarter or negative $0.07 per share which reflects a significant $60 million non cash charge on the fair value of derivative liabilities. However, removing these non cash and one time items, our adjusted net income for the quarter was 47.9 million or 22 cents per share compared to 22 million or 10 cents a share in the comparative quarter. As I mentioned, revenue is up 51%. So with adjusted net income up 118%, that shows our ongoing efforts to control costs and drop these improvements to the bottom line. I also mentioned the record cash flow from operating activities earlier. This figure included an initial 44 million draw on our 175.5 million streaming facility from Wheaton Precious Metals or the El Domo Construction, as well as a positive 9.4 million non cash working capital during the quarter. Even after adjusting for These items, our Q3 operating cash flow was still the highest quarter ever at 79.6 million, up 129% compared to last year. During the quarter we invested nearly 26 million at our operations in China and 18 million at the El Domo project in Ecuador. And despite that, we added cash to the balance sheet, ending the quarter with a strong cash balance of 463 million, an increase of over 80 million from September 30. The cash position does not include our investments in associates and other companies, which had a total market value of 233 million on December 31 and was more recently pegged at just under 260 million. After quarter end, we announced a transaction to acquire a gold project from Kyrgyzstan 462 million in cash, of which 92 million was paid at closing on January 27. To quickly recap our operating results as we reported Last month in Q3 we produced approximately 1.9 million ounces of silver, just over 2,000 ounces of gold, 16 million pounds of lead and 7 million pounds of zinc. Production at Yang benefited from increased use of shrinkage mining relative to cut and fill receiving which drove record productivity with tons mined and milled up 23% and 18% respectively. Compared with Q3 20, 25 head grades were lower due to the XRT sorter undergoing maintenance in October as well as higher dilution associated with the shift to more shrinkage mining. We stockpiled over 61,000 tons of ore to be processed during the Chinese New Year holiday later this month. Year to date we have produced 5.3 million ounces of silver, 6231 ounces of gold, 46 million pounds of lead and 18 million pounds of zinc, representing increases relative to last year of 1%, 42% and 1% respectively in silver, gold and lead production and a 6% decrease in zinc production. On the cost side, Q3 production costs averaged $76.00 per ton at Yang, down 11% from last year. The improvement reflects ongoing mine mechanization and greater use of cost efficient shrinkage mining, boosting mine and mill productivity year to date. Production costs also averaged $80 per ton below our annual guidance for Yang between 87 and $88 per ton. Yang's cash cost per ounce of silver net of byproduct Credits was negative $1.22 in Q3 compared to a negative $0.30 in the prior year quarter. The decrease was driven by a 3.5 million increase in byproduct credits. Q3 on sustaining cost per ounce net of byproducts was 1132 at Yang, supporting robust margins amid higher silver prices. Consolidated Mining income came at 77.1 million in Q3 with Yang contributing 71.6 million or 93% of the total. Turning to our growth projects at yang, we invested 9 million in Q3 primarily for ramp and tunnel development to enhance underground access and improve material handling. This work goes hand in hand with our efforts to expand mining capacity across the four licenses at yame. Recall that we increased the permit at the SGX mine with a renewal for another 11 years and a capacity increase from 198,000 tons to 500,000 tons per year. The HPG permit was also renewed and expanded from 50,000 to 120,000 tons and the DCG permit increased from 30,000 to 100,000 tons. We're now in the process of applying to increase the TLP ln permit from 230,000 tons to 600,000 tons per year with approval expected later this quarter. Once all approvals are in place, Yang's total permitted annual mining capacity will rise to 1.32 million tons. At Kuanping, our satellite project north of Yang mine, construction continued with over 3 kilometers of ramp development and 693 meters of exploration tunneling completed in Q3. Kuanping is expected to begin delivering some minor development ore starting in June of this year. Kuanping has a mining permit to produce up to 200,000 tons per year, which at a full contribution would bring our total mining capacity at Yang to 1.52 million tons per year. As we previously mentioned, we'll publish an updated technical report for the Yang District to include the Kuan Ping contribution by mid year of this year. Switching gears to Ecuador At El Domo mine, Construction continued in Q3 with around 1.1 million cubic meters of material moved. Cumulative earth moving volumes have now reached 46% of the total design volume for Construction Package 1 with activities focused on haul road development process, plant site preparation and the TSF starter dam. We also commissioned the 600 bed construction camp allowing us to accommodate the new mining contractor CRCC19, with whom we are in the process of finalizing a contract to carry out mine construction. CRCC 19 has mobilized personnel and will bring equipment on site later this month. We spent approximately 45 million on construction through December 2025, which represents about 16% of our updated budget of 284 million. And at the Condor gold project in Ecuador, we completed and announced a PA in December for an underground gold operation centered around the camp and Las Cuis deposits. The study demonstrates a long life, low cost gold project with strong economics at a base case gold price that was used of 2,600 an ounce. This represents a first step as the company continues to de risk the project through further technical work. Our plan is to drive two exploration tunnels into these deposits in order to complete underground drilling to facilitate advanced exploration and resource definition. To proceed on this basis, we require an environmental license and water permits. The water permits have been approved by the relevant government authorities. Technical reports for the environmental license were also completed and submitted to the related government authorities for review. The environmental impact study for the Condor project has been approved by the Ministry of Environment, Water and Ecological Transition. We're now actively engaged in a formal consultation with with the directly impacted communities surrounding the project. This represents the final stage in obtaining the environmental license for exploitation. Once this license is secured, we'll commence the development of underground tunnels into the camp and less clear use deposits access that we believe could be used if and when we transition to a mining operation. Once we have received appropriate permits for this and the necessary surface infrastructure. Turning to Kyrgyzstan, we recently acquired a 70% interest in the Toco Bash and Kiziltash gold projects. This represents another important step in our strategy to build a globally diversified producer with added exposure to gold's strong fundamentals. These projects give us the opportunity to apply our mind, building expertise and financial strength to unlock value for all stakeholders through a phased development approach, starting with the fully permitted Tokubash project and followed by Kiziltash. The Kyrgyzstan government retains a 30% free carried interest, so we feel interests are aligned as we advance the projects toward production in a modern and responsible manner that benefits our shareholders and the country as a whole. We look forward to updating the market on our development plans over the coming months. And with that operator, I'd like to open the call for questions.

OPERATOR

Thank you, ladies and gentlemen. We will now begin the question and answer session. If you would like to ask a question, please press star and the number one on your telephone keypad. If you would like to withdraw your question, please press star and the number two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please. while we. Queue up your questions. Your first question comes from the line of Joseph Rager from Roth Capital Partner. Please go ahead.

Joseph Rager (Equity Analyst at Roth Capital Partners)

Hey, Lon, thanks for taking the questions. I guess first thing on the guidance, you didn't make any changes to guidance, but it seems like you're probably tracking towards a higher than the expected high end on throughput at Ying, but obviously lower grades than expected. Is it fair for us to make assumptions like that?

Lon Shaver (President)

Yeah, I mean, I think it's pretty obvious given the challenges we had in Q2 that it was going to be tough to catch that up. Certainly going into Q4 with some extra tons to mill during Chinese New Year will certainly help smooth over and not make it as low of a Q4 as we typically would have because of Chinese New Year. But yeah, I think right now if we're looking at guidance, it would be at the, at the lower end and that might be still challenging at this point. Okay, fair enough.

Joseph Rager (Equity Analyst at Roth Capital Partners)

And then on the quarter, the 60 plus million derivative liability, was that solely related to the convertible notes or is there something else in that? Yeah, no, that's related to convertible. Okay.

Lon Shaver (President)

All right, thanks. I'll turn it over. Okay, thanks, Joe.

OPERATOR

Hi, ladies. Ladies and gentlemen, as a reminder, if you would like to ask a question, please press star then the number one on your telephone keypad. If you're using a speakerphone, please make sure to lift your handset before pressing any keys. There are no further questions at this time. This concludes your question and answer session. I would now like to turn the conference back over to the management team for any closing remarks.

Lon Shaver (President)

All right, well, thank you. Thanks, operator. And thanks everyone for joining us today. If anyone does have any further questions, we're always happy to take calls or emails and we look forward to catching up with all of you next time when we discuss our fiscal 2026 year end results. Have a great day, everyone.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.