SVM Corporate Presentation
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Transcript of SVM Corporate Presentation
1
Safe Harbor Statement under the United States Private Securities Litigation Reform Act of 1995:
Except for the statements of historical fact contained herein, the information presented constitutes "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements, including but not limited to those with
respect to the price of silver, lead and zinc, the possibility, timing and amount of estimated future production, costs of production, reserve
determination and reserve conversion rates involve known and unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievement of Silvercorp to be materially different from any future results, performance or achievements expressed
or implied by such forward-looking statements. Such factors include, among others, risks related to international operations, risks related to
Chinese government issuance of mining and related development permits, risks related to joint venture operations, the actual results of
current exploration activities, conclusions of economic evaluations, changes in project parameters as plans continue to be refined, future
prices of silver, lead and zinc, as well as other Risk Factors.
Although Silvercorp has attempted to identify important factors that could cause actual results to differ materially, there may be other factors
that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate
as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place
undue reliance on forward-looking statements.
The shares of Silvercorp Metals Inc. trade on the Toronto Stock Exchange (TSX: SVM). The TSX has not approved or disapproved the form
or content of this presentation.
Cautionary Note To U.S. Investors Concerning Estimates Of Measured, Indicated And Inferred Resources
This presentation uses the terms “Measured”, “Indicated” and Inferred” Resources. U.S. investors are advised that while such terms are
recognized and required by Canadian regulations, the Securities and Exchange Commission does not recognize them. “Inferred Resources”
have a great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. It cannot be assumed
that all or any part of an inferred resource will ever be upgraded to a higher category. Under Canadian rules, estimates of Inferred Resources
may not form the basis of feasibility or other economic studies. U.S. investors are cautioned not to assume that all or any part of
Measured or Indicated Resources will ever be converted into reserves. U.S. investors are also cautioned not to assume that all or
any part of an Inferred Mineral Resource exists, or is economically or legally mineable.
Forward Looking Statements
1
2
Overview: Strategically Focused on Silver Mining in China
2
Reserves &
Resources1
Silver
(MOz)
Lead
(Kt)
Zinc
(Kt)
Proven & Probable
Reserves 101.0 442.5 267.5
Measured & Indicated
Resources 137.3 613.1 408.0
Inferred Resources 91.9 358.0 286.8
Ying Mining District,
Henan Province FY2017: 4.6Moz Silver
BYP Mine,
Hunan Province
(On Care and Maintenance)
GC Project,
Guangdong Province FY2017: 0.5Moz Silver
1 Excludes BYP Gold Mine Resource. See appendix III-V for breakout.
China
XHP Project
Henan Province
3
Silvercorp’s Strategy
Ten Years of Proven Execution
• Successfully acquired and developed multiple projects
• Built 800,000 t/a mining + milling capacity at Ying Mining District and built 500,000 t/a mine
and mill capacity at GC Project.
• Consolidated mine life remains above 10 years after 10 years of production (46.6 million Oz
silver produced to date)
• Strong Operating Performance and Financial Position
3
Our Strategy
• Grow existing assets organically through land expansion and drilling
• Acquire under-explored, smaller-scale mining projects with resource growth potential
• Apply leading edge mine techniques to optimize operations, reducing dilution and costs
• Leverage underutilized milling capacity as commodity prices improve
4
Three Months Ended
June 30, 2016
(millions US$)
Three Months Ended
June 30, 2015
(millions US$)
Revenue $35.3 $32.2
Gross Profit $15.7
$11.5
Net Income $6.5
$3.8
Cash Flow from Operations $20.2 $13.3
Cash, cash equivalents and short-term investments: $73.4 Million, up $11.4 million
since year end.
Shares Outstanding: 167 million (basic and diluted)
TSX Exchange: SVM (OTC:SVMLF)
No Long-term Debt, Unhedged
Financial Snapshot – Q1 FY2017 Results
4
5
45%
36% 34%
29%
24% 23%
15%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Gross Profit Margins*
Low Cost Silver Producer - Fiscal 2017 Q1 Results
5
Low cost producer of silver - cash cost of
$0.08** per Ag ounce for Q1 FY2017 Q1 FY2017 Sales Mix by Metal
** Net of by-product credits. AISCC of $7.06 per Oz
* Quarter ended Jun. 30, 2016.
Silver, 59.1%
Gold, 2.5%
Lead, 29.7%
Zinc, 8.4%
Other, 0.3%
6
7.06
8.16
9.62
10.53 10.97
11.31
14.92
0.00
3.00
6.00
9.00
12.00
15.00AISCC
6
Low All in Sustaining Cost Relative to Peers
* Quarter ended Jun. 30, 2016.
7
0.0
5.0
10.0
15.0
SVM CDE PAAS FVI EDR FR
EV/EBITDA
2016E 2017E
0.0
4.0
8.0
12.0
16.0
20.0
CDE SVM PAAS FVI EDR FR
P/CF
2016E 2017E
7
Source: Raymond James Report September 22, 2016.
Low Valuation Matrix Relative to Peers
SVM SVM
8
Ying Mining District: Silvercorp’s Flagship Asset
• Flagship Ying District consists of underground mines including SGX, TLP, LM, and HPG mines
• Over 70km2 land package
• Extensive underground drilling has maintained mine life at >10 years
• Has produced over 46.6 million Oz silver since 2006
• Two centralized mills with 3,200 t/d capacity
• Producing silver-lead and zinc concentrates
• 6 smelters within 200km of the district
• Opportunity for further acquisitions in local area
8
9 9
• “Enterprise Blog” system is an internet social
media system that makes the distribution and flow
of the work related knowledge and information
easy and transparent for parties at different
locations.
• Each of the mining stopes, development faces, or
equipment is assigned a “blog” name.
• Daily results of onsite inspection are required to
be “published” on these “blogs”.
• The results are listed in a structured data
formatted in a “check list table”, containing
information and supporting photos.
• Parties at different levels of the management
team can access to the daily “blog” for each
workplace.
• The system will also record if a management
person has accessed the “blog” to read or
comment.
Enterprise Blog: A Tool to Achieve Dilution and Cost Control
Carbon monoxide reading is recorded
in a supporting photo and “published”
on the “blog” for the workplace.
The significant improvement in the head grades of silver, lead and zinc since the December
quarter of 2015 can be attributed to implementation of an internal “Enterprise Blog” system
in the management of Mine Production and Safety Information.
10 10
Benefits of the “Enterprise Blog”
• Information collection, distribution, retrieval, and monitoring has become transparent and immediate.
• The information and knowledge collected by the frontline technicians or engineers freely flows throughout layers
of the management structure.
• Management has the pressure, incentive, and tools to make prompt and more accurate decisions.
• Collaboration becomes easy, KPI assessments are fair and timely, and each person is accountable for his work.
Enterprise Blog: A Tool to Achieve Dilution and Cost Control
11 11
200,000
180,000
160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000
0 0
50
100
400
350
300
250
200
150
Tonnes Grades
Silver Head Grades and Ore Production Monthly Data at Ying Mining District
(Jan 2012 to Jun 2016)
IMPROVING HEAD GRADES
Silv
er
Gra
de G
ram
/to
nn
e
To
nn
es
of
Ore
12
Longer Term Goal: Increase the production
capacity to match our existing milling capacity
Ying Mining District: Cost Control Efforts are Working
No.1 – 1,000 tpd Mill
No. 2 – 2,200 tpd Mill
12
• Cost cutting efforts have
succeeded at reducing head
counts and lowering general and
administration costs at Ying.
• An employee incentive
compensation plan is encouraging
more efficient production
• General and administrative
expenses in Q1 FY2017
decreased 25%
• Total Production Cost has been
reduced
15 15
225,000m of drilling and 128,000m of tunnelling between 2013 - 2016
New 43-101 Report Expected at Ying Mining District
• Expansion and definition of previous known Mineral Resource blocks.
• New mineralization defined downdip and along strike within known
vein structures.
• New mineralized parallel and splay structures discovered beside major
structures.
• New mineralized structures in less-explored areas in the Ying property.
Results of the extensive exploration program have been incorporated into
the exploration database for the current 43-101 resource update which is
being prepared by AMC Consulting and expected in November 2016.
16
Reserve & Resource Growth
16
1 Excludes Lead and Zinc. Gold was converted to Silver equivalent at a rate of 50:1.
2 Measured & Indicated Resources Inclusive of Reserves. See Appendix III, IV and V for breakout of Measured, Indicated and Inferred, Proven and Probable categories.
98.5
117.9
142.8
154.1
64.2 58.7
98.2 102.4
-
20
40
60
80
100
120
140
160
180
2010 2011 2012 2014
Ou
nc
es
of
Sil
ve
r a
nd
Sil
ve
r E
q.*
(M
illi
on
s)1
,2
Reserves & Resources: FY2010 - FY2014
M&I
P&P Reserves
Updated Ying
District NI43-101
expected - fall 2016.
17
Concentrate Thickener
Mill Plant Shaft
110KV Power Substation
17
Dewatering Plant
Concentrate Warehouse
GC Mine: Commercial Mining Underway
18
• Underground silver/zinc mine
• Excellent infrastructure and access
• Construction completed and permits obtained
• Commercial production underway
• Producing zinc-silver, lead-silver, and pyrite concentrates
• Produced 0.15 million Oz Ag and 5.27 million lbs. Pb/Zn in Q1 FY2017
GC Mine in Guangdong – Our Newest Mine
18
Main Access Ramp
19
Flotation Mill Interior
• Sold 149,000 Oz Ag and 5.3 million lbs. Pb/Zn during Q1
FY2017.
• Contributed $4.6 million in revenue.
• Ongoing efforts being made to lower production costs and
fine tune milling and mining operations.
• FY2017 capital ex budget of $1.0 million, including $0.5
million for tunnel development and $0.5 million to compete
the shaft development.
GC Mine: Commercial Production is Underway
19
Flotation Mill Testing
20
BYP Gold Mine – a non-core asset
Status:
• suspended mining operations in
August 2014
• Currently the Company is evaluating
to re-start the operation or other
options.
500 tpd Mill at the BYP Mine
20
21
FY2017 Production Guidance
21
• Guidance as of February 5, 2016
Ore processed (tonnes) 610,000 250,000 860,000
Silver (gram per tonne) 260 109
Lead (%) 4.1 1.3
Zinc (%) 0.8 3.0
Silver ('000 ounces) 4.6 0.5 5.1
Lead (million pounds) 50.7 6.3 57.0
Zinc (million pounds) 5.3 14.0 19.3
Total Cash Cost (US$/t) 74.3 47.0 66.4
AISCC (US$/Ag Oz) 8.13 8.86 9.67
Metal Production
Mining Costs
Project Ying Mining District GC Mine Grand Total
Head Grades
22
Silver Production – Over 46 Million Ounces to Date
1. Gold converted to silver at a rate of 50:1; Silvercorp’s fiscal year ends March 31st
2. FY2017E as of Feb 5, 2016.
22
1.9
4.1 4.3 4.7
5.5 5.8
5.2
3.9
4.6 4.4 4.6
0.5 0.6
0.5
-
1.0
2.0
3.0
4.0
5.0
6.0
M
i
l
l
i
o
n
s
o
f
O
u
n
c
e
s
AgEq Production – Actual and Forecast1,2
GC Ying MiningDistrict
5.0 5.1 5.1E
23
* includes tunnel development.
** includes $7.2 million for transportation tunnel and haul road construction, and $5.0 million of mining right fees.
*** in F2017 Company’s focus is shifting to increased usage of exploration tunneling based on previous year’s drilling.
Guidance as of Feb. 5, 2016.
Mines/
Projects
Mine Development*
Facilities/
Land Usage/
Equipment**
Drilling/Tunnelling
Exploration***
Total
US$
million
Cost
($million)
Work
(meters)
Cost
($million)
Cost
($million)
Drilling
(meters)
Ying Mining District 2.1 6,743 13.5 14.6 48,375 30.2
GC Mine 0.5 1,080 0.5 0 3,545 1.0
Total Budget 2.6 7,823 14.0 14.6 51,920 31.2
FY2017 Capital Expenditure Guidance
23
24
Recent Achievements
24
• Focus on improved monitoring resulting in continuous operating
improvements
• Strengthened management with new mine managers, & return of
Silvercorp’s founder, Rui Feng as CEO
• Addressed and improved relationships with contractors
• Head grade improvements achieved thru dilution control
• Mining costs are under control
• Production quantity is achieving targets
• Employee headcount reductions achieved
• Lowered G&A expenses
• GC in commercial production
• Repurchased 4.0 million shares in the latest 12 months
25
• Strong Financial Position - $73.4 million cash on hand. No LT. debt
• Low cost silver producer in a mining friendly jurisdiction
• Long life silver asset with a track record of resource growth
• Generated $20.2 million in cash flow from operations in Q1 FY2017
despite lower silver prices
• Optimized mine operating performance has succeeded
- Higher grades,
- Higher production,
- Lower All In Sustaining Cash Costs
• Low valuations relative to peer companies
Investment Highlights
25
27
Top 10 Institutional Investors –
Firms and Funds % O/S
1 Van Eck Associates Corporation 10.34
2 Rafferty Asset Management LLC 4.15
3 Global X Management Company
LLC 1.38
4 Esposito Partners, LLC 0.95
5 Norges Bank Investment
Management (NBIM) 0.79
6 AMG Fondsverwaltung AG 0.70
7 Renaissance Technologies LLC 0.65
8 Stabilitas GmbH 0.60
9 BlackRock Institutional Trust
Company, N.A. 0.36
10 Old Mutual Global Investors (UK)
Limited 0.29
Analyst Coverage
Chris Thompson Raymond James
Source: Thomson One September 28, 2016 Data
Appendix I: Ownership and Coverage
27
28
Board of Directors
Rui Feng Malcolm Swallow
Yikang Liu Paul Simpson
David Kong
Management
Rui Feng, Ph.D., Geology
Chairman and CEO, Director
Derek Liu, CGA, CPA
Chief Financial Officer
Luke Liu, M. Eng. PhD (Mining Eng.)
Vice President China Operations
Lorne Waldman, MBA, LL.B.
Senior Vice President
Alex Zhang, M. Eng., M.Sci., P. Geo.
Vice President, Exploration
Gordon Neal,
Vice President, Corporate Development
Appendix II: Management & Board
28
29
1. Table excludes HPG mine Proven reserves of 16,900 oz Au (560,000 tonnes grading 0.94 g/t Au) and HPG mine Probable reserves of 12,200 00 oz Au (360,000 tonnes grading 1.05
g/t Au)
2. For further information please refer to the Technical Report for Ying Gold-Silver-Lead-Zinc Property (filed September 2014) and the GC Technical Report (filed February 2012). All reports
are available on SEDAR (www.sedar.com).
3. Rounding of some figures may lead to minor discrepancies in some totals
4. Mineral reserves include consideration of mining dilution
Appendix III: Summary of Silver Reserves1,2,3,4
29
Project Reserve
Category
Tonnes
(Million)
Head Grades Contained Metal Reserves
Ag (g/t) Pb (%) Zn (%) Ag (Moz) Pb (t) Zn (t)
Ying Mining
District
Proven 5.24 207 3.56 1.34 34.81 186,700 70,200
Probable 7.40 200 2.62 0.77 47.71 193,700 57,000
GC Project
Proven 0.46 199 1.12 3.18 3.0 5,200 14,800
Probable 4.29 113 1.33 2.93 15.5 56,900 125,500
Consolidated
Proven 5.70 37.81 191,900 85,000
Probable 11.69 63.21 250,600 182,500
Total 17.39 101.02 442,500 267,500
30
1. Table excludes HPG mine Measured resources of 23,900 oz Au (660,000 tonnes grading 1.12 g/t Au), Indicated resources of 20,000 oz Au (500,000 tonnes grading 1.25
g/t Au), Inferred resources of 14,600 oz Au (430,000 tonnes grading 1.07 g/t Au). Table also excludes BYP Au-Pb-Zn project resources (BYP resources summarized on
Slide 28).
2. For further information please refer to the revised Technical Report for Ying Gold-Silver-Lead-Zinc Property (filed September 2014) and the GC Technical Report (filed
February 2012). All reports are available on*SEDAR (www.sedar.com).
3. Rounding of some figures may lead to minor discrepancies in some totals
4. Resources are inclusive of resources converted in mineral reserves.
Appendix IV: Summary of Silver Resources1,2,3,4
30
Project Reserve
Category
Tonnes
(Million)
Head Grades Contained Metal Resources
(Inclusive of Reserves)
Ag (g/t) Pb (%) Zn (%) Ag (Moz) Pb (t) Zn (t)
Ying Mining
District
Measured 5.56 253 4.53 1.67 45.81 253,400 94,600
Indicated 8.45 226 3.05 0.92 61.49 258,800 78,100
Inferred 7.53 251 3.26 0.99 60.50 245,500 74,900
GC Project
Measured 0.59 230 1.41 3.33 4.4 8,400 19,800
Indicated 7.04 113 1.31 3.06 25.6 92,500 215,500
Inferred 7.96 123 1.41 2.66 31.4 112,500 211,900
Consolidated
Measured 6.15 50.21 261,800 114,400
Indicated 15.49 87.09 351,300 293,600
Inferred 15.49 91.90 358,000 286,800
31
Mineral Resources for Gold Zones as of December 31, 2011:
CLASS Cut-off
Grades (g/t)
Resource Grades Contained Metal
Resources
(tonne) Au (g/t) Au (oz)
Indicated 1.0 3,510,000 2.59 292,000
Inferred 1.0 2,470,000 1.84 146,000
Mineral Resources for Lead and Zinc Zones as of December 31, 2011:
CLASS
Cut-off
Grades
(g/t)
Resource Grades Contained Metal
Resources
(tonne) Pb(%) Zn(%) Pb (Tonnes) Zn (Tonnes)
Indicated 2.0
Pb+Zn 7,330,000 1.16 2.52 85,000 184,700
Inferred 2.0
Pb+Zn 7,550,000 0.85 2.75 64,200 207,600
Notes to Resource Tables:
1. CIM definitions apply
2. Mined tonnages deducted
3. Resources are rounded to nearest 10,000 tonnes
4. Cut-off grades are based on mining, processing and G & A costs of $38/t
5. Technical report filed on August 16, 2012 at www.sedar.com
Appendix V: BYP Mine Resource
31
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Key Growth Catalysts
32
Ying Mining District :
• More efficient and lower cost mining
• Reduced management overhead and greater incentives
• Longer term opportunity to increase mining capacity to match milling capacity
• Further near district acquisitions
GC Project:
• Commercial production underway
• Fine tuning operations to improve efficiencies and lower costs
• Continue exploration to expand resources
• Growth:
• Grow existing assets organically through land expansion and drilling
• Acquire under-explored, smaller-scale mining projects, ideally in Asia, with resource
growth potential
33
Luke Liu, M. Eng. PhD Vice President China Operations is the Qualified Person within the meaning of
National Instrument 43-101 – Standards Of Disclosure for Mineral Projects (“NI 43-101”) who
supervised the preparation of the scientific and technical information of Silvercorp included in this
presentation.
For more information on Silvercorp’s projects, readers should refer to Silvercorp’s Annual Information Form,
dated June 16, 2016, and its technical reports, each of which is available on SEDAR at www.sedar.com.
The scientific and technical information related to Silvercorp’s projects included in this investor
presentation are derived from the technical reports entitled:
- NI 43-101 Technical Report for Ying Gold-Silver-Lead-Zinc Property, Henan Province, China, prepared July
29, 2014 by P R Stephenson, P. Geo., H A Smith, P.Eng., A Riles, MAIG, M Molavi, P.Eng
- NI 43-101 Technical Report on the BYP Gold-Lead-Zinc Property, Hunan Province, China, dated June 30,
2012, prepared by P R Stephenson, P. Geo., H A Smith, P.Eng., A Riles, MAIG, M Molavi, P.Eng, D.
Nussipakynova, P.Geo., A. Ross, P.Geo.
- NI 43-101 Technical Report on the GC Ag-Zn-Pb Project in Guangdong Province, People’s Republic of
China, dated January 23, 2012, prepared by Brian O’Connor, P. Geo, Peter Mokos, MAusIMM (CP), Alan
Riles, MAIG, Owen Watson, MAusIMM (CP), Mo Molavi, P. Eng, Patrick Stephenson, P. Geo, AMC Mining
Consultants (Canada) Ltd.
Endnotes and Cautionary Statements
33
34
Suite #1378 - 200 Granville St., Vancouver, BC, Canada V6C 1S4
Tel: 604-669-9397 | Fax: 604-669-9387 | Toll-Free: 1-888-224-1881
Email: [email protected] Website: www.silvercorp.ca
Head Office
Silvercorp’s disclosure
documents are available from the
System for Electronic Document
Analysis and Retrieval (SEDAR) at
www.sedar.com
Contact Information
34