A weak quarter, but strong year for Silvercorp

Silvercorp Metals (SVM-T, SVM-N) reported a weak fourth-quarter profit, mainly due to resources spent fighting fraud allegations launched by a group of short sellers, but overall reported a strong fiscal 2012 and expects higher production from its four mines in China’s Ying district in fiscal 2013.

For the quarter ended March 31, 2012, the Vancouver-based company earned US$9.7 million, or US6¢ per share, as it shelled out US$1.5 million for a forensic audit and legal fees to combat the short sellers’ attack.

Profit for the period was also impacted by higher production costs, partially offset by higher sales revenue, and higher general and administrative costs resulting from the development of three projects compared to only one last year.

Revenue was up 4% to US$44.3 million, while total cash cost per silver oz. came at negative US$4.22, up from negative US$7.61 a year ago, mainly due to lower prices of byproduct metals.

During the quarter, mining costs per tonne grew as labour costs for contractors rose, and the U.S. dollar depreciated against the Chinese renminbi, by US$2 per tonne.

The producer sold 1.08 million oz. silver, compared to 1.05 million a year ago, while it generated 1.1 million oz. silver, up from 1 million oz.

The junior reported its general and administrative costs were up US$2.9 million for the quarter, which included the US$1.5-million charge.

Despite the dismal period, the company reported record financials for fiscal 2012.

For the year ended March 31, 2012, Silvercorp posted a profit of US$73.3 million, or US43¢, up 9% from the prior year. It reported US$238 million in revenue, up 42% from fiscal 2011.

Cash flows from operations, excluding non-cash working capital, rose 34% to US$123.8 million.

Silvercorp produced a record of 5.6 million oz. silver, a 6% year-over-year increase, marking the company’s sixth straight year of production growth.

Consolidated cash cost per silver oz. for the year grew to negative US$5.13, up from negative US$6.80 per oz.

For fiscal 2013 Silvercorp expects its four mines in the Ying mining district to produce 5.9 million oz. silver, 3,350 oz. gold, and 87 million lbs. lead and zinc.

That’s from 695,000 tonnes grading 295 grams silver per tonne, 0.5 gram gold, 5.1% lead and 1.5% zinc.

The GC mine in the Guangdong province is estimated to start production in the second half of 2012, initially producing 630,000 oz. silver and 12 million lbs. lead and zinc.

At the BYP mine in Hunan province, Silvercorp is targeting production of about 13,590 oz. gold.

It says it will focus on exploration during fiscal 2013 at its newly-acquired XHP and XBG mines, which should produce a limited amount of byproduct ore.

In Canada, the company is stepping closer to completing its small mine permit for the Silvertip polymetallic project in British Columbia. The permit will allow for a 75,000- tonne-per-year operation.

Total capital expenditures for fiscal 2013 are estimated at US$79.9 million.