By Dr. Ryan D. Long
Over the past six months, Silvercorp Metals’ (TSX: SVM | NYSE-A: SVM) share price has risen 49%, which is not much of a surprise given that the Company has been consistently putting in positive operational performances while returning value to shareholders for the past 12 years, but despite this rise, the share price continues to lag compared to its peers.
During the December 2022 quarter end, Silvercorp generated US$58.7 million in revenue and US$25.7 million in operating cash flow. Compared to its peer group of other silver producers during the same quarter, Silvercorp has the lowest price-earnings ratio (Figure 1), highest realised silver price to all-in sustaining cost (AISC) margin (Figure 2), strongest balance sheet (Figure 3) and the second highest yield (Figure 4).
Despite its consistent 12-year operating performance and favourable December 2022 metrics compared to its peer group, Silvercorp has the lowest relative market value of any company within this silver peer group, with an adjusted enterprise value of just US$198 million (Figure 5).
During the next fiscal year, Silvercorp expects to continue expanding its production levels, while also undertaking a programme of extensive exploration and mine optimization across its existing operations, and advancing the Kuanping Project towards production.
Production levels of all metals at Ying and GC Mines are expected to increase with the Company targeting silver production of between 6.8 million ounces and 7.2 million ounces (↑3%-8% YoY), gold production of between 4,400 ounces and 5,500 ounces (↑1%-26% YoY), lead production of between 70.5 million pounds and 73.8 million pounds (↑3%-8% YoY), and zinc production of between 27.7 million pounds and 29.7 million pounds (↑14%-23% YoY).
These record production levels should support the continued financial growth of a company that has generated nearly 1 billion US dollars in operating cash flow since it began mining activities 17 years ago.
In the coming fiscal year, Silvercorp is planning 111,800 meters of tunnelling and mine development and 272,800 meters of diamond drilling to explore for new areas of mineralisation and to expand and upgrade the existing NI 43-101 mineral resource estimate of 210 million ounces of silver equivalent (just silver plus gold, base metals not included) in the measured and indicated categories and 108 million ounces of silver equivalent in the inferred category.
As part of its ongoing optimisation of its operations, the Company will be investing US$23.1 million on a number of work streams, including the installation of XRT Ore Sorting Systems at two locations to optimise mine plans and improve ore processing head grades, and the construction of a paste backfill plant and a new tailings storage facility.
In addition to its existing operations, Silvercorp is also planning to advance its Kuanping Project, acquired in 2021 for US$13.5 million. At Kuanping, during this financial year, Silvercorp will be completing the environmental assessment report, water and soil protection report, preliminary safety facilities, and mine design report. Further updates on the mine construction plan and cost estimates will be provided upon completion of these reports, which will provide a better sense of its contribution to the overall operations in the Ying Mining District.
During the year, Silvercorp will also benefit from developments at New Pacific Metals Corp., in which Silvercorp holds a 28.2% interest. New Pacific is advancing three precious metals projects, located in Bolivia.
At the Silver Sand Project, New Pacific has just completed a preliminary economic assessment that defined a post-tax NPV5 of US$726 million and a 39% IRR at a silver price of US$22.50 per ounce. We would expect New Pacific to continue to advance and de-risk Silver Sand during 2023 as the company drives towards permitting. While at the Carangas Project, New Pacific is completing a 15,000-meter drill programme during the first quarter of the year with a maiden mineral resource expected to follow in the third quarter.
Another important development for Silvercorp that could occur next year is the potential for additional acquisitions. Silvercorp is currently debt free and has a cash and short-term investment balance of US$210.3 million, alongside its existing equity portfolio that has a market value of US$121.8 million as of December 31, 2022. This is a substantial amount of capital that can used to expand its portfolio, in line with management’s commitments to bring in additional assets.
Prepared by Dr Ryan D. Long, CEO of Mining and Metals Research Corporation Ltd., on behalf of Silvercorp Metals Inc., a Stockhouse Publishing client.