Silvercorp Metals Premier Silver Producer in China, with Gordon Neil
Published in August 1, 2017on
00:00:10 Gordon Neil, Silvercorp Metals. I've got a full presentation here. I didn't get to chop it down. I'm going to have to go fairly quickly. There are making some forward-looking statements. We are Canada's and China's largest primary silver producer. We are a Canadian company with Canadian management headquartered in Vancouver. We have offices in Beijing. Our mines are in the Hunan Province. That’s our Ying Mine which produced almost 6 million ounces of silver this year.
00:00:41 Our GC Project which is close to Hong Kong in the Guangdong Province. It produced about a half a million ounces of silver this year. We just put out our financials. We did a $163 million in revenue. We have net income of over 43 million, 44 million that was up from 6 million a year ago which is about 580 percent increase. Cash flow from operation was 80 million as supposed to 31 million. We have $95 million, $96 million in the bank with short term investments included.
00:01:16 We have a dividend of $0.02 cents a share, U.S. We have no receivables. The smelter pays for our concentrate at our door which is unusual for a producing company not to have any receivables from the smelter. We have no long term debt.
00:01:36 We are a low cost producer. One of the lowest in the business actually. We have a negative cash cost of $3.03. That includes our lead and zinc. If you take out the lead and zinc numbers, we produce at about $3.82 an ounce.
00:01:52 Our metal mix is we have 50. We've produced 54 percent silver, 34 percent lead, 8 percent zinc and about 2 percent gold. I'm actually not sure what the other is. I'll find out.
00:02:05 Gross profit in terms of our peer group. We're at 54 percent which again put us into the head of the pack. We are a low cost, high margin silver producer, the lowest in the business. Our all in sustaining cost as I mentioned earlier is about $3.82. Where that’s all in cost as taxes, G&A and everything that was for the year. For the quarter it's $3.26 all cost in so with $17 silver the rest is gravy for us.
00:02:37 This is an important slide. You'll see this is improving head grades. I'm a guy that I come from a grade background. Grade is king. The higher your grade, the better it is for investors. The more mistakes you can make, the more you'll outlive and out strip any kind of problems with the vagaries of the silver price. You can see between fiscal 2012 and 2014, we had an issue with head grade.
00:03:05 The tonnage is the blue line. They were up. Our grades were down. That was a function of management focus was diverted for various reasons. In 2014, at the bottom there where we're at the bottom of our head grade count, the CEO came back into the fold, cleaned out management, was vindicated in the market place and started to push the head grade back up. Without good head grade, you're going to struggle.
00:03:29 You see in fiscal 2016 and about Q2 there, the CEO implemented a thing called an enterprise blog. It is a social media platform that he created himself which allows all the information in the mine to flow freely and transparently so that all mine managers can see what's going on in the mine at the same time. You can see when they implemented that, the grade went from 246 up to 310 and that over a short period of time. Its maintained that basically at 300 grams per ton for the last four to five quarters. Now we're out telling the story.
00:04:08 Consolidated net profit per ton we think is actually a better measure of how a silver company or actually any mining company is doing. You can see that our revenue per ton, the blue is line it was trending up. The metal silver price, the realized silver price has gone down. Our net profit stayed the same or went up while the metal price goes down. That’s a function of what I just showed you which is head grade.
00:04:35 If grade is up but metal prices are down, you can still make money. People often ask what's going to happen to the silver price. I don’t know but I do know this. If you have good grade, you can whether the price when it goes down. I can tell you how low the silver price has been. I can't tell you how far it's going to go. If you have grade, you can whether anything and you actually make money. We are about making money.
00:05:00 Now, I did talk about the enterprise blog. It is a gain of social media system that allows us to push up all information from the mine sight and let it trans and go transparently across the corporation. I can see in Vancouver what someone's doing at stope number 275 at the Ying District at any time. Here're an example. We have a contract miners. This is narrow vein mining that we have. It's the width of the tables in front of you. Its very important that you minimize dilution. If you add any more rock to the end of that table and you take it with you and push it through the system, it winds up costing us money.
00:05:42 A contract worker whose going to take down that vein you can see it's very clear demarked up top. He takes that picture. He paints the boundary. Takes the picture. Show where's going to blast. Sends that picture up to the blog. The manager who could be anywhere in the world sees it and says yes that’s fine. Go ahead. That minimizes our dilution.
00:06:02 On the lower right that picture is about COs. It's Carbon Monoxide. You have the safety. You have to take measurements of Carbon Monoxide all the time especially after blasting. That gets lifted up to the enterprise blog as well. The safety people in China love this because they now have a record of our safety record of CO and other safety regulations. They are actually looking at Silvercorp and saying other companies should be using this kind of technology.
00:06:34 The Ying District is our primary district, our primary production area. 224 veins in this district, 68 square kilometers of land. We've produced 50 million ounces of silver over a 10 years period. We now have another 20 years left with a new resource. We just put out. We have two mills that do 3,200 of tons a day in combination. We produce a lead, a silver-lead concentrate and a zinc concentrate. We have six melters in the area which I talked about.
00:07:09 They actually pay upfront because they're vying for this concentrate because it's so clean. There's no deleterious materials in it. There's no antimony. There's no arsenic. They use the high grade concentrate that we produced to blend with others. That’s why they pay in advance for it.
00:07:26 The GC Mine in Guangdong and we just put into production a few years ago. It is primary. It is a silver and zinc mine. It's grades are lower than the Ying. It is a profitable mine and adds about 10 percent to our bottom line.
00:07:39 The BYP is a gold mine. We suspended operations on that. We're looking for a gold license. We have to go back to the government to get a gold license. It's not operating at this time. We might sell it. We have strategic alternatives for it.
00:07:54 Over life time we've produced as I said more than 51.1 ounces of silver. Thank you, Cathy. The estimate for next year is that we do about 6 million ounces a year. Last year we did 6.5 million in ounces. We expect to do about 6 million ounces of silver next year combined with GC and Ying.
00:08:16 Our lead lead-zinc production we've produced over 750 million pounds of lead and zinc. Next year we expect to produce about 80 million pounds of lead and zinc. The lead and zinc price which has gone up recently has helped us quite a bit. As I said, our cash cost are negative because of the lead and zinc prices have increased over the last six to nine months.
00:08:35 Reserves and resources, as I said we've mined over the last 10 years. We've replaced that ore with a 180 ounces and measured and indicated and 115 ounces of reserves.
00:08:55 Our production guide is next year. We're looking at 681 tons next year. Head grades were looking at for the Ying District is 300 grams per ton. We want to keep that grade at 300 grams per ton. We keep that grade at 300 grams per ton and have anywhere between $15 to $17 an ounce in Silver we should be able to make between and $30 and $50 million a year in profits. That’s our goal.
00:09:25 Production guidance again for this year is 900 million tons. 275 grams per ton for silver and 5.3 for the Ying District. Capital expenditure is next year should be $21 million as opposed to $31 million that we had for last year. We'll have a our free cash flow should be in the order of about $30 million.
00:09:51 That’s my talk and I thank you very much. Sorry for speeding through it.