VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Nov. 13, 2006) - Silvercorp Metals Inc. (the Company") (TSX:SVM) more than doubled its net earnings to $5,361,840, $0.11 per share on revenues of $10,708,123 for the 2nd quarter ended September 30, 2006 as compared to net earnings of $2,357,580, or $0.05 per share on revenues of $4,333,050 for the 1st quarter ended June 30, 2006.
Mine production at the Ying Property started on April 1, 2006. At this relatively early phase, and as part of a staged start-up to its mining operation, the Company generated gross revenue of $10,708,123 and $15,041,173 for the three-month and six-month periods ended September 30, 2006, respectively, by the selling of the direct shipping ore and silver-lead and zinc concentrates. This resulted in an earnings from mine operations of $8,279,088 and $11,691,802 and a gross margin of 77.3% and 77.7%, for the three-month and six-month periods ended September 30, 2006, respectively.
For the 2nd quarter ended September, 2006, the Company had net earnings of $5,361,840 or $0.11 per share, compared to a net loss of $2,339,299 or $0.06 per share for the same period of 2005. The increase in net earnings for the 2nd quarter ended September 30, 2006 as compared to the net loss for the same period of the prior year was mainly due to the commencement of mine production at Ying Property.
For the three-month period ended September 30, 2006, 40,525 tonnes of ores were extracted, from which 1,723 tonnes of direct shipping ores were hand-sorted for direct shipment to smelter, and 31,115 tonnes of ores were shipped to the custom mills for treatment to recover silver-lead and zinc concentrates. The custom mills have achieved high recovery rates: 93.6% for silver, 97.5% for lead, and 74.2% for zinc. The total production cost for silver adjusted for lead and zinc credits is negative $6.07 per ounce.
For the six-month period ended September 30, 2006, 71,244 tonnes of ores were extracted, from which 2,783 tonnes of direct shipping ores were hand-sorted for direct shipment to smelter, and 51,401 tonnes of ores were shipped to the four custom mills for treatment to recover silver-lead and zinc concentrates. The custom mills have achieved high recovery rates: 92.70% for silver, 97.34% for lead and 77.04% for zinc. The total production cost for silver adjusted for lead and zinc credit is negative $6.21 per ounce.
The 2nd quarter average selling prices, net of value added tax and smelter charges, were: $9.63 per ounce for silver, $345 per ounce for gold, $0.51 per pound for lead, and $1.11 per pound for zinc with average production costs of $2.19 per ounce for silver, $78.34 per ounce for gold, $0.12 per pound for lead, and $0.25 per pound for zinc, respectively.
On September 30, 2006, Silvercorp had a working capital position of $60,425,539 comprised mainly of cash and cash equivalents of $9,214,195, short-term investments of $50,602,000, offset by current liabilities of $3,260,723 without any debt.
Mine production is progressing well and is expected to reach anticipated capacity through staged ramping up of operations. With a view towards further increasing the availability and reliability of local milling capacity, the Company is currently constructing a 600 tonne per day flotation mill; presently, two third party flotation mills with a combined capacity of about 400 tonnes per day are used to treat the ore from the Ying Property through custom milling contracts. When the 600 tonnes per day mill is completed by the end of March 2007, the Company expects to be able to draw upon a combined milling capacity of 1,000 tonnes per day. The mill construction is on schedule with the majority of newly purchased equipments already installed.
Ore production using the re-suing mining method has significantly improved productivity starting September 2006 and it will improve the net earnings for the future quarters. The Company has employed two mining methods in its mine production, namely, the shrinkage and re-suing mining methods. The shrinkage mining method is relatively easy to develop but may result in a larger waste rock dilution factor of over 150% when applied to the narrow, high-grade veins at the Ying Property. Application of the re-suing mining method requires highly skilled miners and takes more time to accomplish; however, it also incurs much lower waste rock dilution, with a dilution factor of less than 20%. Prior to September 2006, most of the ores at Ying were extracted using the shrinkage mining method.
The Company will have three mining permits, namely Ying Mining permit, HPG Mining permit, and NZ mining permit, in Henan province, China, enabling Silvercorp to achieve revenues from gold, silver, lead and zinc ores from three different mining operations upon further exploration and development work. Regarding the HPG project, the Company is currently still waiting for final approval from the Ministry of Commerce of China.
During this quarter, several new concealed veins containing massive galena mineralization were discovered including S14-1, S14-2, S16E1, S16E2, S16E3, S16E4, and S8E. A total of 41 drill holes totaling 11,231m (10 surface and 31 underground drill holes) have been completed. Sixteen of 41 drill holes intercepted massive galena sheets with silver equivalent grade exceeding 1,250 g/t, representing a 39% drilling success rate. During the six month ended September 30, 2006 additional 19,368 meters of tunnels were completed, and a total of 46,942 meters of tunnel have been completed since August 2004.
During the quarter, the Company has also focused on recruiting for key staffing positions, and has elected several independent Directors to its Board. At a time when the Company is in rapid growth and expansion mode, this is expected not only to contribute to an enhanced managerial capacity but also to the promotion and maintaining of corporate governance practices of the highest standard.
The complete financial statements and management discussion and analysis are available for review on our website: www.silvercorp.ca, and on the SEDAR system at www.sedar.com.
Statements in this press release other than purely historical information, including statements relating to the Company's future plans and objectives or expected results, constitute forward-looking statements. Forward-looking statements are based on numerous assumptions and are subject to all of the risks and uncertainties inherent in the Company's business, including risks inherent in mineral exploration and development. As a result, actual results may vary materially from those described in the forward-looking statements.
FOR FURTHER INFORMATION PLEASE CONTACT:
Silvercorp Metals Inc.
Chairman & CEO
Silvercorp Metals Inc.
(604) 669-9387 (FAX)