Earnings call transcript: Silvercorp Metals Q1 2025 sees mixed results

Silvercorp Metals Inc. reported its first-quarter earnings for fiscal year 2026, revealing a revenue of $81 million, a 13% increase year-over-year, but falling short of the forecasted $83 million. The company’s earnings per share (EPS) met expectations at $0.10. Despite the revenue miss, the stock showed a decline, closing down 5.29% at $4.61 after hours. According to InvestingPro data, the company maintains strong financial health with a "GREAT" overall score, supported by robust profitability metrics and solid cash flow generation.

Key Takeaways

• Revenue increased by 13% year-over-year but missed forecasts.
• EPS met expectations at $0.10 per share.
• The stock price fell 5.29% in after-hours trading.
• Strong cash position with $377 million reported.
• Production increases in silver, gold, and lead.

Company Performance

Silvercorp Metals demonstrated robust year-over-year growth in its first-quarter revenue, driven primarily by increased production of silver, gold, and lead. However, the company faced challenges as its revenue fell short of analyst expectations. The mining company continues to benefit from a strong cash position, allowing it to invest in ongoing and future projects.

Financial Highlights

• Revenue: $81 million, up 13% year-over-year.
• EPS: $0.10, meeting analyst expectations.
• Cash flow from operating activities: $48 million, up 21% year-over-year.
• Net income: $18.1 million, down from $21.9 million last year.
• Adjusted net income: $21 million or $0.10 per share.

Earnings vs. Forecast

Silvercorp Metals’ EPS matched the forecast at $0.10, indicating stability in its earnings performance. However, the company reported a revenue of $81 million, missing the expected $83 million by 2.06%. This shortfall contributed to the negative market reaction, despite the overall positive growth in revenue and production.

Market Reaction

Following the earnings announcement, Silvercorp Metals’ stock declined by 5.29%, closing at $4.61 in after-hours trading. This decline reflects investor concerns over the revenue miss and potential production shortfalls due to a safety incident at one of its mines. The stock remains between its 52-week high of $5.32 and low of $2.87. InvestingPro analysis suggests the stock is currently undervalued, trading at an attractive P/E ratio of 15.88 relative to its near-term earnings growth potential. The company has also maintained dividend payments for 19 consecutive years, demonstrating consistent shareholder returns.

Outlook & Guidance

Looking ahead, Silvercorp Metals anticipates a potential production shortfall of 20-25% in the current quarter due to a safety incident. Despite this challenge, the company remains focused on its ongoing projects, including the El Domo project in Ecuador and the Condor gold project. The company projects EPS of $0.44 for FY2026 and $0.37 for FY2027. With a current ratio of 5.05 and strong cash flows sufficiently covering interest payments, the company appears well-positioned to weather near-term challenges while pursuing growth opportunities.

Executive Commentary

Ron Shaver, President of Silvercorp Metals, emphasized the company’s commitment to safety and its strategy to diversify mining operations. "El Aldomo and potentially Condor are evidence of the strategy that’s unfolding, which is to build a bigger and more diversified mining company," Shaver stated.

Risks and Challenges

• Potential production shortfall due to a safety incident.
• Revenue miss may impact investor confidence.
• Continued volatility in silver and gold prices.
• Operational challenges in expanding mining projects.
• Dependence on silver, which comprises 66% of revenue.

Q&A

During the earnings call, analysts inquired about the safety incident at the Ying mine and its impact on production. The management addressed these concerns, clarifying ongoing operations and contractor management. Additionally, updates on the El Domo project’s progress were provided, with a focus on meeting construction timelines.

Full transcript - Silvercorp Metals Inc (SVM) Q1 2026:

Ina, Conference Operator: Thank you for standing by. Good afternoon. My name is Ina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Silver Corp First Quarter Fiscal twenty twenty Financial Results Conference Call. All lines have been placed on mute to prevent any background noise.

After the speakers’ remarks, there will be a question and answer session. If you would like to withdraw your question, please press star then the number 2. Thank you. And I would now like to turn the conference over to mister Ron Shaver, president of Silver Corp. Thank you.

Please go ahead.

Ron Shaver, President, Silver Corp: Thank you, Ina. On behalf of Silver Corp, I’d like to welcome everyone to this call to discuss our first quarter fiscal twenty twenty six financial results, which were released yesterday after the close. A copy of the news release, the MD and A, and the financial statements are available on our website and on SEDAR plus. Before we jump into the call, please note that certain statements on today’s call will contain forward looking information within the meaning of applicable securities laws. Also, please review the cautionary statements in our news release as well as the risk factors described in our most regulatory filings.

So let’s kick off with financial results. We delivered a solid Q1, which was highlighted by revenues of 81,000,000 up 13% from last year. Additionally, cash flow from operating activities set a new quarterly record at $48,000,000 which was up 21% from last year. This performance was driven by a 595% increase in silver and gold sold during the quarter, respectively, and that was combined with a 1245% rise in the selling prices of silver and gold compared to Q1 of last year. Silver remains our most significant revenue driver contributing 66% of q one revenue, followed by lead at 18% and gold at 7%.

Moving down the income statement, we reported a net income of 18,100,000.0 for the quarter or 8¢ per share. This is down from 21,900,000.0 or 12¢ per share in 2025. But in this year’s quarter, we had a noncash $5,000,000 accounting charge on the fair value of derivative liabilities, which is related to the conversion rights of our convertible notes issued last November as well as warrants. Removing noncash and onetime items, our adjusted net income for the quarter was $21,000,000 or $0.10 per share compared to twenty point six million dollars or $0.11 per share in the comparative quarter. And we’d like to point out that all per share figures are lower due to an additional 38,800,000.0 shares that were issued for the acquisition of Adventist Mining, which closed in July 2024.

Looking at cash flow, I mentioned the record cash flow from operating activities earlier. But during the quarter, we invested over $18,000,000 in our operations in China and $7,600,000 in Ecuador to advance the Odomo construction and the Condor exploration plan. Even after these investments, we’re able to generate $22,500,000 in free cash flow. We ended the quarter with a strong cash position of $377,000,000 which is up 8,000,000 from March. This cash position does not include our investments in associates and other companies, which had a total market value of 72,000,000 as of June 30.

And note, we also had a stream financing commitment of $175,000,000 available from Wheaton Precious Metals for the Aldomo construction. Now to recap our operating results, as we reported in July, we produced in Q1 approximately 1,800,000 ounces of silver, just over 2,000 ounces of gold, 16,000,000 pounds of lead and 5,000,000 pounds of zinc. And that represents increases of 6%, 791%, respectively in silver, gold and lead production and a 19% decrease in zinc production. On the cost side, Q1 production costs averaged $83 per tonne at Ying, which is down 8% from last year due to higher volumes of ore mined and milled. Consolidated cash cost per ounce of silver, net of byproduct credits, was $1.11 in Q1 compared to a negative $1.67 in the prior year quarter.

The increase in the cash cost was driven by a $6,000,000 increase in production costs that arose from a sixteen percent increase in the ore processed, while silver production grew by only 6% due to lower grades experienced at Yang. It was also impacted by a $1,500,000 increase in mineral rights royalties following its implementation in China in 2025. But the cash cost was partially offset by a $1,000,000 increase in byproduct credits. The all in sustaining cost per ounce net of byproduct was $13.49 dollars per ounce. That’s up 37% from the prior year quarter due to $1,000,000 increase in G and A expenses and the previously mentioned factors that impacted cash costs.

On a more somber note, as we reported in our news release yesterday, we had an accident at the HZG mine in the Ying Mining District. This was a fatality of a newly hired worker. From our perspective, this incident never should have happened, and we extend our sincere condolences to the family of the deceased worker. The accident occurred earlier in q one, but only came to our intention in July after a government investigation was launched following a whistleblower report. The investigation has been performed, some recommendations made, and some changes implemented at the mines during this period.

But during this period, certain mining areas have been closed. We’ve been awaiting regulatory sign off to resume production, in those closed areas, but this has taken a little longer. It is possible the government has been preoccupied by some other tragic, industrial accidents that have occurred recently and have captured the attention of the public as well as the regulators. So to be conservative, we have disclosed a potential production shortfall of up to 20% to 25% for the current quarter. However, in recent days, we’ve begun to receive clearance to reopen certain of these closed areas.

We have been and remain committed to safety at our operations and will act on any findings or recommendations to strengthen safety protocols. In this case, the contractor contributed several rules by taking someone on an unsanctioned visit to an unapproved area that had been not been properly cleared and safe to access, and then also importantly, failing to properly report the incident both to us and to the regulators. Turning to our growth projects. At Ying, we invested 8,000,000 in q one for ramp and tunnel development to enhance underground access and materials handling to eventually phase out shaft in favor of a trackless system. This is a program we’ve discussed before and then remains in progress.

An additional 7,000,000 was spent on exploration tunneling and 1,000,000 on capitalized drilling as we continue to explore this district. At Kuan Ping, the satellite project north of Ying, mine construction got underway with 481,000,000 of ramp development and exploration time completed in the quarter. Turning to Ecuador, mine construction is progressing steadily at the Al Domo project with over 370,000 cubic meters of materials moved to date. I recall in June, a group of individuals filed a lawsuit in Bolivar province where the project is located, seeking to void the environmental license for the for the mine. The case was dismissed by the local court in July, and the dismissal was upheld on appeal at the provincial level in November.

The group then filed an extraordinary protection action with Ecuador’s constitutional court, which was rejected in February. A subsequent motion for clarification of this ruling was also unanimously dismissed by the court last month. Turning to Condor, the gold project, we drilled just over 2,000 meters in the quarter and released an updated mineral resource estimate in q one. The latest model outline a higher grade underground resource, the camp and North Cleave deposits. This work will feed into a PEA, which we’re targeting for completion by year end, which will focus on an underground gold operation, and then we’ll move forward from there.

And with that, I’d like to open the call for questions. Operator?

Ina, Conference Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press 4 by the one on your telephone keypad. You will hear a prompt that your hand has been raised. And should you wish to cancel your request, please press 4 by the 2.

If you’re using a speakerphone, please lift your handset before pressing any keys. One moment, please, for your first question. And your first question comes from the line of Joseph Wiegler from ROTH Capital.

Joseph Wiegler, Analyst, ROTH Capital: Hey, Lan. Thanks for taking the questions. I guess, first thing on the incident at Ying, Obviously, But I guess, first, is Silver Corp continuing to work with the contractor who made this error? Have you guys made any changes on that level? And then if there is a production shortfall, so we expect a relatively sized increase in cash costs for the quarter?

Ron Shaver, President, Silver Corp: Well, answer to the first question is that that contract is obviously a a company. And so we’re using that company at a number of locations in the mine. And we’re gonna continue to do that, but that individual is gone. And being dismissed is sort of the least of their worries as their this matter really is sort of now in the hands of of authorities. So I think that, you know, that addresses the first point.

As the second, it’s a little early it’s a little early to say. You know, we’re you know, I think we’ve been cautious and conservative with our potential impact on the quarter. But, obviously, you know, we’ve got lots of working areas. We’re gonna adjust mine plans and strategies, you know, not just for this quarter, but for the balance of the year, and and we’ll provide an update when we have more information.

Joseph Wiegler, Analyst, ROTH Capital: Okay. Maybe a different question then on that. Do you have a rough idea what percentage of your overall operating costs are fixed at Yin versus variable?

Ron Shaver, President, Silver Corp: Yeah. Good question, Joey. It’s been a it’s been a while since we’ve run that run that analysis. And, of course, we’ve had made a number of, you know, some changes since that time. It’s gone.

So we have to go back and and have a look at sort of where things stand now and and and rerun that analysis.

Joseph Wiegler, Analyst, ROTH Capital: Okay. Okay. Fair enough. I’ll I’ll but then we can kinda make a guess. The second question is on Kupangyang.

Once that mine is in operation, will it be consolidated under Ying or treated as a separate mining location?

Ron Shaver, President, Silver Corp: I mean, it’s it it is a separate mining operation. It is owned, you know, through the Ying sort of operating structure. And, obviously, you know, as we’ve indicated, you know, initial plans are putting that, you know, any ores through the Ying mill. So to to be honest, I don’t think it really makes much of a difference. It’ll just be really another contributor to, you know, the overall corporate production.

Okay. Okay. And

Joseph Wiegler, Analyst, ROTH Capital: then one big picture question. So, you know, like, traditionally, several corporate traded at a discount to its peer group. It seems like recently that that gap has widened That some of your peers created, you know, significant premiums now. Have you guys any thoughts on what you can do to help close that gap? Or is it just a matter of, you know, letting things play out to where your production grows over the coming years with the addition of Cuyahoga and Caldomo and potentially things beyond that?

Ron Shaver, President, Silver Corp: Well, I think it’s I think it’s important to recognize, like, a big portion of our NAV will be, you know, tied up in our cash position. And so so that’s one question in terms of how the market, you know, views that. But El Aldomo and potentially Condor, you know, are evidence of the strategy that’s unfolding, which is to build a bigger and more diversified mining company. And our view is, you know, that and some other potential targets that we have been and are looking at right now, you know, would just further accelerate that that shift.

Joseph Wiegler, Analyst, ROTH Capital: Okay. Fair enough. I’ll turn it over. Thanks. K.

Ron Shaver, President, Silver Corp: Thanks, Joe.

Ina, Conference Operator: Thank you. And your next question comes from the line of Dalton Loreto from Canaccord Bank. Please go ahead.

Joseph Wiegler, Analyst, ROTH Capital: Thanks, operator. Good morning, guys.

Ron Shaver, President, Silver Corp: Lon, I’m wondering if you

Joseph Wiegler, Analyst, ROTH Capital: can give us a sort of a more wholesome update in terms of what’s going on at El Dome these days from a construction perspective. And also, how much of it can turn these anti mining boots are right now? Thanks.

Ron Shaver, President, Silver Corp: Well, production sorry. Construction has been moving ahead since the beginning of the year. Arguably, after what was a a drought year last year, the Ecuador experienced, you know, a very intense and prolonged rainy season. Not the best time to be, you know, building a mine, but but we were able to start bringing our initial contractor to start site preparation and have been making good progress on that. Our our plans and our, you know, budgets are expecting a pretty meaningful ramp up in, you know, tons moved starting this month in August.

Seems like the temporary can’t, you know, have been the components of that have been showing up on-site, and we’ve been putting together those buildings, A number of items related to sort of long lead time orders have been put ahead, you know, with respect to mill components and things. So I’d say we’re we’re ramping up. And the balance of this year, we we expect to see things move ahead, you know, more dramatically. As for the second part, the anti mining groups have been, I’d say, a an annoyance and an inconvenience, but have not, you know, overly impacted our ability to get stuff done at the project. And having things like the camp installed and running on the site will, you know, will further improve, you know, our progress because of less, you know, less movement of, you know, people in and out of

Joseph Wiegler, Analyst, ROTH Capital: the site every day. So

Ron Shaver, President, Silver Corp: we’ve made good progress, and everything is looking looking good at this point for seeing that that that construction ramp up and accelerate here through the end of the year and, obviously, onwards into 2026.

Joseph Wiegler, Analyst, ROTH Capital: Okay. Great. And when do you plan on drawing down on the spring proceeds?

Ron Shaver, President, Silver Corp: We’re anticipating either towards the end of this current quarter or early next quarter. We’d be able to put in for an initial draw from Wheaton.

Joseph Wiegler, Analyst, ROTH Capital: Got it. Thanks. And then

Ron Shaver, President, Silver Corp: just maybe one last one on Ying, if I may.

Joseph Wiegler, Analyst, ROTH Capital: If I take the q one server production number, I just multiply it by four, it just about gets me to below the bottom end of your guidance. And now you’ve had this issue in q two. And then, you know, you always have service off this quarter at Chinese New Year. Are you still comfortable in guidance?

Ron Shaver, President, Silver Corp: Yeah. It’s a little early to address that question. Obviously, we’re we’re gonna have to, you know, revamp and revisit some of the mine plans, you know, both for this quarter and the rest of the year. So I think we’ve got to let this quarter and see what what has been the, you know, the the true impact on production in this quarter before we would make any adjustment to guidance, if any. Got it.

You know, you’re you’ve obviously been following, you know, following the company and understand, you know, the seasonality in the that q four other than last year, given that we have, you know, an enhanced milling capacity. You know, q four is typically the the softest quarter, but, you know, we were able to to change that last year. We’re gonna have to look at what plans can be and what contributions from, you know, other other sources like Quanping, you know, might be able to make up some of the difference.

Joseph Wiegler, Analyst, ROTH Capital: Great. Thanks for that, Lana.

Ron Shaver, President, Silver Corp: I’ll jump back in queue. Okay. Thanks,

Ina, Conference Operator: There are no further questions at this time. I will now hand the call back to mister Long Sheaver for any closing remarks.

Ron Shaver, President, Silver Corp: Okay. Well, I’m not sure if if any of of you guys had follow-up questions. But in case, thank you, operator, and thanks, everyone, for joining us today. Yeah. If there are follow-up questions, obviously, please feel free to call or email us.

And as always, we’d be happy to respond. I look forward to hearing from you and look forward to catching up with everyone at our next quarterly update. Have a great day. Thank you.

Ina, Conference Operator: And this concludes today’s call. Thank you for participating. You may all disconnect.

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