VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Feb. 9, 2007) - Silvercorp Metals Inc. (the "Company") (TSX:SVM) increased its net income by $3,976,977 or 74% to $9,338,817 resulting in earnings per share of $0.19 on sales of $14,731,638 for the third quarter ended December 31, 2006 as compared to net income of $5,361,840, or $0.11 per share on sales of $10,708,123 for the 2nd quarter ended September 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 $14,731,638 and $29,772,811 for the three month and nine month periods ended December 31, 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 $12,027,107 and $23,718,909 and a gross margin of 82% and 80%, for the three month and nine month periods ended December 31, 2006, respectively.
For the three month period ended December 31, 2006, the Company achieved net income of $9,338,817 or $0.19 per share, compared to a net loss of $1,176,820 or $0.03 per share for the same period of 2005. The increase in net income for the third quarter ended December 31, 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 December 31, 2006, 53,521 tonnes of ores were extracted, from which 2,042 tonnes of direct shipping ores were hand sorted for direct shipment to smelter, and 44,451 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: 90.88% for silver, 94.98% for lead, and 74.91% for zinc. The total production cost for silver adjusted for lead and zinc credits is negative $8.49 per ounce.
For the nine month period ended December 31, 2006, 124,765 tonnes of ores were extracted, from which 4,825 tonnes of direct shipping ores were hand sorted for direct shipment to smelter, and 95,852 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: 90.27% for silver, 94.41% for lead, and 74.77% for zinc. The total production cost for silver adjusted for lead and zinc credit is negative $7.20 per ounce.
The three month period ended December 31, 2006, average selling prices, net of value added tax and smelter charges, were: $10.94 per ounce for silver, $261.43 per ounce for gold, $0.66 per pound for lead, and $1.34 per pound for zinc with average production costs of $2.20 per ounce for silver, $52.26 per ounce for gold, $0.13 per pound for lead, and $0.27 per pound for zinc, respectively.
On December 31, 2006, the Company had a working capital position of $68,464,198 comprised mainly of cash and cash equivalents of $67,221,252, accounts receivable of $1,234, interest receivable of $35,575, inventories of $2,016,255, prepaid expenses and deposits of $1,303,866, deposits paid to contractors of $2,326,348, offset by current liabilities of $4,474,887 and holds no debt.
Mine production commenced at relatively small capacity during the first quarter and it 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 in the process of 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 construction of the 600 tonne per day mill and associated facilities, including the tailing dam, is on schedule and on budget. A test run of the new mill is scheduled for late February 2007, after the Chinese New Year. This added capacity may offset the temporary closures at the Ying operation for the Chinese New Year.
A barge with a 300 tonne loading capacity is built and is in operation since February 1, 2007. The barge is capable of transporting five to six 25-tonne trucks to ship ores from the Ying mine to the new mill.
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. Ore production using the re-suing mining method has commenced from September 2006 and it will improve the net income in future quarters.
During the nine months ended December 31, 2006, the company focused on recruiting key staff and implementing new systems and resources to support its rapid growth and expansion. In future quarters, the Company will focus on further promoting and enhancing its internal controls and corporate governance practices.
Regarding the HPG Project, the transfer of the mining licenses and exploration permit from the vendor to the Huawei are currently in process and the Company does not anticipate any delays. The Company has reviewed the current operating situation and has planned an extensive exploration and mining program. The Company plans to develop several levels of drift tunnels along the H15 and H17 vein and a series of cross-cut tunnels to explore other known veins. In order to increase the hoisting capacity and improve ventilation for mining on the H15 and H17 veins, a 120 metre deep vertical shaft is also planned from the 340-metre level to 460-metre level where the main decline can access the surface at 600-metre elevation. Currently, the existing 200 tonnes per day flotation mill recovers silver, gold and lead. Additional flotation cells will be added to recover zinc and copper which have been assayed as high as 7.84% zinc and 1.044% copper in the H17 vein on the 380-metre level. The mining production will first be reviewed early March 2007.
Regarding the NZ Project, the Company anticipates its 77.5% owned Chinese subsidiary, Henan Found, will receive all necessary Chinese government approvals to acquire the private Chinese company that holds the gold mining permit covering the NZ Project. A full exploration program with limited start-up mining is expected to start in early March 2007. A custom mill will be contracted to process any ore extracted from exploration tunneling and from mining.
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)