EX-99.1 2 exhibit99-1.htm SILVERCORP METALS INC. FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED JUNE 30, 2022 Exhibit 99.1
Exhibit 99.1

 

 

 

 

 

 

SILVERCORP METALS INC.

 

 

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the three months ended June 30, 2022 and 2021

(Tabular amounts are in thousands of US dollars, unless otherwise stated)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SILVERCORP METALS INC.

Condensed Consolidated Interim Statements of Income

(Unaudited) (Expressed in thousands of U.S. dollars)

 

      Three Months Ended June 30, 
   Notes  2022   2021 
            
Revenue  3(a)(c)  $63,592   $58,819 
Cost of mine operations             
Production costs      26,144    22,485 
Depreciation and amortization      7,558    6,214 
Mineral resource taxes      1,540    1,413 
Government fees and other taxes  4   784    691 
General and administrative  5   2,664    2,512 
       38,690    33,315 
Income from mine operations      24,902    25,504 
              
Corporate general and administrative  5   3,557    3,838 
Property evaluation and business development      132    390 
Foreign exchange (gain) loss      (1,656)   450 
Loss on equity investments desgined as FVTPL  9   2,671    722 
Share of loss in associates  10   728    396 
Loss on disposal of plant and equipment  11   269    85 
Other income      (170)   (161)
Income from operations      19,371    19,784 
              
Finance income  6   1,322    1,353 
Finance costs  6   (522)   (88)
Income before income taxes      20,171    21,049 
              
Income tax expense  7   6,087    4,817 
Net income     $14,084   $16,232 
              
Attributable to:             
Equity holders of the Company     $10,169   $12,212 
Non-controlling interests  17   3,915    4,020 
      $14,084   $16,232 
            
Earnings per share attributable to the equity holders of the Company           
Basic earnings per share     $0.06   $0.07 
Diluted earnings per share     $0.06   $0.07 
Weighted Average Number of Shares Outstanding - Basic      177,245,037    175,953,077 
Weighted Average Number of Shares Outstanding - Diluted      179,583,285    178,524,536 

 

Approved on behalf of the Board:
 
(Signed) David Kong                                                    
Director
 
(Signed) Rui Feng                                                         
Director

 

See accompanying notes to the condensed consolidated interim financial statements

 

1

 

 

SILVERCORP METALS INC.

Condensed Consolidated Interim Statements of Comprehensive Income (loss)

(Unaudited) (Expressed in thousands of U.S. dollars, except numbers for share and per share figures)

 

      Three Months Ended June 30, 
   Notes  2022   2021 
            
Net income     $14,084   $16,232 
Other comprehensive income (loss), net of taxes:             
Items that may subsequently be reclassified to net income or loss:             
Currency translation adjustment, net of tax of $nil      (28,846)   7,354 
Share of other comprehensive (loss) income in associate  10   (398)   3,605 
Items that will not subsequently be reclassified to net income or loss:             
Change in fair value on equity investments designated as FVTOCI, net of tax of $nil  9   (951)   495 
Other comprehensive (loss) income, net of taxes     $(30,195)  $11,454 
Attributable to:             
Equity holders of the Company     $(25,459)  $10,553 
Non-controlling interests  17   (4,736)   901 
      $(30,195)  $11,454 
Total comprehensive (loss) income     $(16,111)  $27,686 
              
Attributable to:             
Equity holders of the Company     $(15,290)  $22,765 
Non-controlling interests      (821)   4,921 
      $(16,111)  $27,686 

 

See accompanying notes to the condensed consolidated interim financial statements

 

2

 

 

SILVERCORP METALS INC.

Condensed Consolidated Interim Statements of Financial Position

(Unaudited) (Expressed in thousands of U.S. dollars)

 

      As at June 30,   As at March 31, 
   Notes  2022   2022 
ASSETS           
Current Assets           
Cash and cash equivalents  20  $150,261   $113,302 
Short-term investments  8   65,503    99,623 
Trade and other receivables      3,259    3,615 
Current portion of lease receivable  13   122    182 
Inventories      8,429    9,124 
Due from related parties  17   82    66 
Income tax receivable      464    928 
Prepaids and deposits      6,038    5,468 
       234,158    232,308 
Non-current Assets             
Long-term prepaids and deposits      1,054    974 
Reclamation deposits      8,340    8,876 
Other investments  9   15,030    17,768 
Investment in associates  10   54,566    56,841 
Plant and equipment  11   75,563    79,418 
Mineral rights and properties  12   317,206    326,448 
Deferred income tax assets      648    905 
TOTAL ASSETS     $706,565   $723,538 
              
LIABILITIES AND EQUITY             
Current Liabilities             
Accounts payable and accrued liabilities     $46,311   $39,667 
Current portion of lease obligation  13   527    649 
Deposits received      3,607    5,445 
Income tax payable      1,761    277 
       52,206    46,038 
Non-current Liabilities             
Long-term portion of lease obligation  13   531    614 
Deferred income tax liabilities      47,074    48,033 
Environmental rehabilitation  14   8,303    8,739 
Total Liabilities      108,114    103,424 
              
Equity             
Share capital      255,657    255,444 
Equity reserves      17,869    43,250 
Retained earnings      221,655    213,702 
Total equity attributable to the equity holders of the Company      495,181    512,396 
              
Non-controlling interests  17   103,270    107,718 
Total Equity      598,451    620,114 
              
TOTAL LIABILITIES AND EQUITY     $706,565   $723,538 

 

See accompanying notes to the condensed consolidated interim financial statements

 

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SILVERCORP METALS INC.

Condensed Consolidated Interim Statements of Cash Flows

(Unaudited) (Expressed in thousands of U.S. dollars)

 

      Three Months Ended June 30, 
   Notes  2022   2021 
Cash provided by           
Operating activities           
Net income     $14,084   $16,232 
Add (deduct) items not affecting cash:             
Finance costs  6   522    88 
Income tax expense  7   6,087    4,817 
Depreciation, amortization and depletion      8,025    6,699 
Loss on equity investments desgined as FVTPL  9   2,671    722 
Share of loss in associates  10   728    396 
Loss on disposal of plant and equipment  11   269    85 
Share-based compensation  15(b)   1,172    2,104 
Reclamation expenditures      (8)   (87)
Income taxes paid      (2,297)   (3,729)
Interest paid  13   (14)   (20)
Changes in non-cash operating working capital  20   8,937    9,145 
Net cash provided by operating activities      40,176    36,452 
              
Investing activities             
Plant and equipment             
Additions      (2,167)   (1,224)
Proceeds on disposals  11   -    34 
Mineral rights and properties             
Capital expenditures      (15,918)   (10,059)
Reclamation deposits             
Paid      (16)   (43)
Other investments             
Acquisition  9   (1,770)   (2,611)
Proceeds on disposals  9   504    769 
Investment in associates  10   (570)   (4,960)
Net redemptions (purchases) of short-term investments      28,937    38,524 
Principal received on lease receivable  13   55    54 
Net cash provided by investing activities      9,055    20,484 
              
Financing activities             
Principal payments on lease obligation  13   (168)   (156)
Cash dividends distributed  15(c)   (2,216)   (2,202)
Non-controlling interests             
Distribution  17   (3,627)   (3,896)
Proceeds from issuance of common shares      -    754 
Common shares repurchased as part of normal course issuer bid      (881)   - 
Net cash used in financing activities      (6,892)   (5,500)
Effect of exchange rate changes on cash and cash equivalents      (5,380)   1,287 
              
Increase in cash and cash equivalents      36,959    52,723 
Cash and cash equivalents, beginning of the period      113,302    118,735 
Cash and cash equivalents, end of the period     $150,261   $171,458 
Supplementary cash flow information  20          

 

See accompanying notes to the condensed consolidated interim financial statements

 

4

 

 

SILVERCORP METALS INC.

Condensed Consolidated Interim Statements of Changes in Equity

(Unaudited) (Expressed in thousands of U.S. dollars, except numbers for share figures)

 

      Share capital   Equity reserves                 
              Share               Total equity attributable         
      Number of       option       Accumulated other   Retained   to the equity holders of   Non-controlling     
   Notes  shares   Amount   reserve   Reserves   comprehensive loss   earnings   the Company   interests   Total equity 
Balance, April 1, 2021      175,742,544   $250,199   $16,610   $25,409   $(12,550)  $187,906   $467,574   $98,154   $565,728 
Options exercised      283,333    1,003    (249)   -    -    -    754    -    754 
Restricted share units vested      109,086    603    (603)   -    -    -    -    -    - 
Share-based compensation      -    -    2,104    -    -    -    2,104    -    2,104 
Dividends declared      -    -    -    -    -    (2,202)   (2,202)   -    (2,202)
Distribution to non-controlling interests      -    -    -    -    -    -    -    (3,896)   (3,896)
Contribution to reserves      -    -    -    425    -    (425)   -    -    - 
Comprehensive income      -    -    -    -    10,553    12,212    22,765    4,921    27,686 
Balance, June 30, 2021      176,134,963   $251,805   $17,862   $25,834   $(1,997)  $197,491   $490,995   $99,179   $590,174 
Options exercised      513,750    1,525    (371)   -    -    -    1,154    -    1,154 
Restricted share units vested      457,086    2,114    (2,114)   -    -    -    -    -    - 
Share-based compensation      -    -    3,992    -    -    -    3,992    -    3,992 
Dividends declared      -    -    -    -    -    (2,211)   (2,211)   -    (2,211)
Distribution to non-controlling interests      -    -    -         -    -    -    (1,200)   (1,200)
Comprehensive income      -    -    -    -    44    18,422    18,466    9,739    28,205 
Balance, March 31, 2022      177,105,799   $255,444   $19,369   $25,834   $(1,953)  $213,702   $512,396   $107,718   $620,114 
Restricted share units vested      214,375    1,094    (1,094)   -    -    -    -    -    - 
Share-based compensation  15(b)   -    -    1,172    -    -    -    1,172    -    1,172 
Dividends declared  15(c)   -    -    -    -    -    (2,216)   (2,216)   -    (2,216)
Common shares repurchased as part of normal course issuer bid      (334,990)   (881)   -    -    -         (881)        (881)
Distribution to non-controlling interests  17   -    -    -    -    -    -    -    (3,627)   (3,627)
Comprehensive income (loss)      -    -    -    -    (25,459)   10,169    (15,290)   (821)   (16,111)
Balance, June 30, 2022      176,985,184   $255,657   $19,447   $25,834   $(27,412)  $221,655   $495,181   $103,270   $598,451 

 

See accompanying notes to the condensed consolidated interim financial statements

 

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SILVERCORP METALS INC.

Notes to Condensed Consolidated Interim Financial Statements as at June 30, 2022 and for the three months ended June 30, 2022 and 2021

(Unaudited) (Tabular amounts are in thousands of U.S. dollars, except numbers for share and per share figures or otherwise stated)

 

1.CORPORATE INFORMATION

 

Silvercorp Metals Inc., along with its subsidiary companies (collectively the “Company”), is engaged in the acquisition, exploration, development, and mining of mineral properties. The Company’s producing mines are located in China, and current exploration and development projects are located in China and Mexico.

 

The Company is a publicly listed company incorporated in the Province of British Columbia, Canada, with limited liability under the legislation of the Province of British Columbia. The Company’s shares are traded on the Toronto Stock Exchange and NYSE American.

 

The head office, registered address and records office of the Company are located at 1066 West Hastings Street, Suite 1750, Vancouver, British Columbia, Canada, V6E 3X1.

 

Operating results for the three months ended June 30, 2022, are not necessarily indicative of the results that may be expected for the year ending March 31, 2023.

 

2.SIGNIFICANT ACCOUNTING POLICIES

 

(a)Statement of Compliance

 

These condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard 34 – Interim Financial Reporting (“IAS 34”) of the International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). These condensed consolidated interim financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended March 31, 2022. These condensed consolidated interim financial statements follow the same significant accounting policies set out in note 2 to the audited consolidated financial statements for the year ended March 31, 2022.

 

These condensed consolidated interim financial statements were authorized for issue in accordance with a resolution of the Board of Directors dated August 10, 2022.

 

(b)Basis of Consolidation

 

These condensed consolidated interim financial statements include the accounts of the Company and its wholly or partially owned subsidiaries.

 

Subsidiaries are consolidated from the date on which the Company obtains control up to the date of the disposition of control. Control is achieved when the Company has power over the subsidiary, is exposed or has rights to variable returns from its involvement with the subsidiary and has the ability to use its power to affect its returns.

 

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SILVERCORP METALS INC.

Notes to Condensed Consolidated Interim Financial Statements as at June 30, 2022 and for the three months ended June 30, 2022 and 2021

(Unaudited) (Tabular amounts are in thousands of U.S. dollars, except numbers for share and per share figures or otherwise stated)

 

For non-wholly owned subsidiaries over which the Company has control, the net assets attributable to outside equity shareholders are presented as “non-controlling interests” in the equity section of the consolidated balance sheets. Net income for the period that is attributable to the non-controlling interests is calculated based on the ownership of the non-controlling interest shareholders in the subsidiary. Adjustments to recognize the non-controlling interests’ share of changes to the subsidiary’s equity are made even if this results in the non-controlling interests having a deficit balance. Changes in the Company’s ownership interest in a subsidiary that do not result in a loss of control are recorded as equity transactions. The carrying amount of non-controlling interests is adjusted to reflect the change in the non-controlling interests’ relative interests in the subsidiary and the difference between the adjustment to the carrying amount of non-controlling interest and the Company’s share of proceeds received and/or consideration paid is recognized directly in equity and attributed to equity holders of the Company.

 

Balances, transactions, revenues and expenses between the Company and its subsidiaries are eliminated on consolidation.

 

Details of the Company’s significant subsidiaries which are consolidated are as follows:

 

            Proportion of ownership interest held    
        Country of   June 30,   March 31,    
Name of subsidiaries   Principal activity   incorporation   2022   2022   Mineral properties
Silvercorp Metals China Inc.   Holding company   Canada   100%   100%    
Silvercorp Metals (China) Inc.   Holding company   China   100%   100%    
0875786 B.C. LTD.   Holding company   Canada   100%   100%    
Fortune Mining Limited   Holding company   BVI (i)   100%   100%    
Fortune Copper Limited   Holding company   BVI   100%   100%    
Fortune Gold Mining Limited   Holding company   BVI   100%   100%    
Victor Resources Ltd.   Holding company   BVI   100%   100%    
Yangtze Mining Ltd.   Holding company   BVI   100%   100%    
Victor Mining Ltd.   Holding company   BVI   100%   100%    
Yangtze Mining (H.K.) Ltd.   Holding company   Hong Kong   100%   100%    
Fortune Gold Mining (H.K.) Limited   Holding company   Hong Kong   100%   100%    
Wonder Success Limited   Holding company   Hong Kong   100%   100%    
New Infini Silver Inc. ("New Infini")   Holding company   Canada   46.1%   46.1%    
Infini Metals Inc.   Holding company   BVI   46.1%   46.1%    
Infini Resources (Asia) Co. Ltd.   Holding company   Hong Kong   46.1%   46.1%    
Golden Land (Asia) Ltd.   Holding company   Hong Kong   46.1%   46.1%    
Henan Huawei Mining Co. Ltd. ("Henan Huawei")   Mining   China   80%   80%   Ying Mining District
Henan Found Mining Co. Ltd. ("Henan Found")   Mining   China   77.5%   77.5%    
Xinshao Yunxiang Mining Co., Ltd. ("Yunxiang")   Mining   China   70%   70%   BYP
Guangdong Found Mining Co. Ltd. ("Guangdong Found")   Mining   China   99%   99%   GC
Infini Resources S.A. de C.V.   Mining   Mexico   46.1%   46.1%   La Yesca
Shanxi Xinbaoyuan Mining Co., Ltd. ("Xinbaoyuan")   Mining   China   77.5%   77.5%   Kuanping
(i) British Virgin Islands ("BVI")                    

 

(c)Significant Accounting Judgments and Estimates

 

These condensed consolidated interim financial statements follow the same significant accounting judgments and estimates set out in note 2 to the audited consolidated financial statements for the year ended March 31, 2022.

 

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SILVERCORP METALS INC.

Notes to Condensed Consolidated Interim Financial Statements as at June 30, 2022 and for the three months ended June 30, 2022 and 2021

(Unaudited) (Tabular amounts are in thousands of U.S. dollars, except numbers for share and per share figures or otherwise stated)

 

3.SEGMENTED INFORMATION

 

The Company's reportable operating segments are components of the Company where separate financial information is available that is evaluated regularly by the Company’s Chief Executive Officer who is the Chief Operating Decision Maker (“CODM”). The operational segments are determined based on the Company’s management and internal reporting structure. Operating segments are summarized as follows:

 

Operational Segments Subsidiaries Included in the Segment Properties Included in the Segment
Mining    
Henan Luoning Henan Found and Henan Huawei Ying Mining District
Hunan Yunxiang BYP
Guangdong Guangdong Found GC
Other Infini Resources S.A. de C.V. and Xinbaoyuan La Yesca, Kuanping
Administrative    
Vancouver Silvercorp Metals Inc. and holding companies  
Beijing Silvercorp Metals (China) Inc.  

 

(a) Segmented information for operating results is as follows:

 

   Three months ended June 30, 2022             
   Mining   Administrative       
   Henan                             
Statement of income:  Luoning   Hunan(1)   Guangdong   Other     Beijing   Vancouver     Total
Revenue  $52,962   $-   $10,630   $-     $-   $-     $63,592 
Costs of mine operations   (31,548)   (118)   (7,012)   (12)     -    -      (38,690)
Income from mine operations   21,414    (118)   3,618    (12)     -    -      24,902 
                                        
Operating (expenses) income   40    (98)   (160)   (1)     (421)   (4,891)     (5,531)
Finance items, net   947    (7)   131    -      85    (356)     800 
Income tax expenses   (4,218)   (109)   (453)   -      -    (1,307)     (6,087)
Net income (loss)  $18,183   $(332)  $3,136   $(13)    $(336)  $(6,554)    $14,084 
                                        
Attributable to:                                       
Equity holders of the Company   14,180    (225)   3,105    (8)     (336)   (6,547)     10,169 
Non-controlling interests   4,003    (107)   31    (5)     -    (7)     3,915 
Net income (loss)  $18,183   $(332)  $3,136   $(13)    $(336)  $(6,554)    $14,084 

(1) Hunan's BYP project was placed on care and maintenance in August 2014.

 

   Three months ended June 30, 2021             
   Mining   Administrative       
   Henan                         
Statement of income:  Luoning   Hunan   Guangdong   Other     Beijing   Vancouver     Total
Revenue  $47,418   $ -   $11,401   $-     $-   $-     $58,819 
Costs of mine operations   (26,175)   (130)   (7,010)   -      -    -      (33,315)
Income from mine operations   21,243    (130)   4,391    -      -    -      25,504 
                                        
Operating expenses   68    52    (14)   (56)     (552)   (5,218)     (5,720)
Finance items, net   643    (9)   59    -      42    530      1,265 
Income tax expenses   (3,155)   (15)   (190)   -      -    (1,457)     (4,817)
Net income (loss)  $18,799   $(102)  $4,246   $(56)    $(510)  $(6,145)    $16,232 
                                        
Attributable to:                                       
Equity holders of the Company   14,684    (66)   4,204    (25)     (510)   (6,075)     12,212 
Non-controlling interests   4,115    (36)   42    (31)     -    (70)     4,020 
Net income (loss)  $18,799   $(102)  $4,246   $(56)    $(510)  $(6,145)    $16,232 

 

8

 

 

SILVERCORP METALS INC.

Notes to Condensed Consolidated Interim Financial Statements as at June 30, 2022 and for the three months ended June 30, 2022 and 2021

(Unaudited) (Tabular amounts are in thousands of U.S. dollars, except numbers for share and per share figures or otherwise stated)

 

(b) Segmented information for assets and liabilities is as follows:

 

   June 30, 2022             
   Mining       Administrative       
   Henan                            
Statement of financial position items:  Luoning   Hunan   Guangdong   Other     Beijing   Vancouver     Total
                                        
Current assets  $148,794   $789   $17,261   $1,444     $8,325   $57,545     $234,158 
Plant and equipment   55,993    3,423    14,149    156      776    1,066      75,563 
Mineral rights and properties   246,651    7,169    31,010    32,376      -    -      317,206 
Investment in an associate   -    -    -    -      -    54,566      54,566 
Other investments   68    -    -    -      -    14,962      15,030 
Reclamation deposits   3,718    -    4,614    -      -    8      8,340 
Long-term prepaids and deposits   540    99    415    -      -    -      1,054 
Deferred income tax assets   -    -    648    -      -    -      648 
Total assets  $455,764   $11,480   $68,097   $33,976     $9,101   $128,147     $706,565 
                                        
Current liabilities  $41,794   $490   $5,222   $181     $216   $4,303     $52,206 
Long-term portion of lease obligation   -    -    -    -      -    531      531 
Deferred income tax liabilities   45,846    1,228    -    -      -    -      47,074 
Environmental rehabilitation   5,749    996    1,558    -      -    -      8,303 
Total liabilities  $93,389   $2,714   $6,780   $181     $216   $4,834     $108,114 

 

   March 31, 2022                
   Mining       Administrative       
   Henan                            
Statement of financial position items:  Luoning   Hunan   Guangdong   Other     Beijing   Vancouver     Total
                                        
Current assets  $141,376   $870   $14,919   $1,566     $8,570   $65,007     $232,308 
Plant and equipment   58,189    3,708    15,282    163      864    1,212      79,418 
Mineral rights and properties   254,071    7,571    32,091    32,715      -    -      326,448 
Investment in an associate   -    -    -    -      -    56,841      56,841 
Other investments   72    -    -    -      -    17,696      17,768 
Reclamation deposits   3,996    -    4,872    -      -    8      8,876 
Long-term prepaids and deposits   588    104    282    -      -    -      974 
Deferred income tax assets   -    -    905    -      -    -      905 
Total assets  $458,292   $12,253   $68,351   $34,444     $9,434   $140,764     $723,538 
                                        
Current liabilities  $37,161   $545   $5,155   $2     $295   $2,880     $46,038 
Long-term portion of lease obligation   -    -    -    -      -    614      614 
Deferred income tax liabilities   46,849    1,184    -    -      -    -      48,033 
Environmental rehabilitation   6,053    1,044    1,642    -      -    -      8,739 
Total liabilities  $90,063   $2,773   $6,797   $2     $295   $3,494     $103,424 

 

9

 

 

SILVERCORP METALS INC.

Notes to Condensed Consolidated Interim Financial Statements as at June 30, 2022 and for the three months ended June 30, 2022 and 2021

(Unaudited) (Tabular amounts are in thousands of U.S. dollars, except numbers for share and per share figures or otherwise stated)

 

(c) Sales by metal

 

The sales generated for the three months ended June 30, 2022 and 2021 were all earned in China and were comprised of:

 

   Three months ended June 30, 2022  
   Henan Luoning  Guangdong  Total

Silver (Ag)

  $32,326  $2,123  $34,449 

Gold (Au)

   1,753   -   1,753 

Lead (Pb)

   15,035   2,080   17,115 

Zinc (Zn)

   2,539   5,963   8,502 

Other

   1,309   464   1,773 
   $52,962  $10,630  $63,592 

 

   Three months ended June 30, 2021  
   Henan Luoning  Guangdong  Total

Silver (Ag)

  $30,924  $3,070  $33,994 

Gold (Au)

   1,508   -   1,508 

Lead (Pb)

   12,187   2,214   14,401 

Zinc (Zn)

   1,614   5,754   7,358 

Other

   1,185   363   1,548 
   $47,418  $

11,401

  $58,819 

 

(d) Major customers

 

For the three months ended June 30, 2022, four major customers (three months ended June 30, 2021 - five major customers) each accounted for 11%, 14%, 20%, and 24% (three months ended June 31, 2021 – 10%, 14%, 16%, 17%, and 18%), and collectively 69% (three months ended June 30, 2021 – 75%) of the total sales of the Company.

 

4.GOVERNMENT FEES AND OTHER TAXES

 

Government fees and other taxes consist of:

 

   Three months ended June 30 
   2022   2021 
Government fees  $11   $11  
Other taxes   773    680  
   $784   $691  

 

Government fees include environmental protection fees paid to the state and local Chinese government. Other taxes were composed of surtax on value-added tax, land usage levy, stamp duty and other miscellaneous levies, duties and taxes imposed by the state and local Chinese government.

 

10

 

 

SILVERCORP METALS INC.

Notes to Condensed Consolidated Interim Financial Statements as at June 30, 2022 and for the three months ended June 30, 2022 and 2021

(Unaudited) (Tabular amounts are in thousands of U.S. dollars, except numbers for share and per share figures or otherwise stated)

 

5.GENERAL AND ADMINISTRATIVE

 

General and administrative expenses consist of:

 

   Three months ended June 30, 2022     Three months ended June 30, 2021 
   Corporate   Mines   Total     Corporate   Mines   Total 
Amortization and depreciation  $149   $317   $466     $146   $335   $481 
Office and administrative expenses 355    619    974      568    685    1,253 
Professional fees   308    122    430      145    106    251 
Salaries and benefits   1,573    1,606    3,174      988    1,386    2,374 
Share-based compensation   1,172    -    1,175      1,991    -    1,991 
   $3,557   $2,664   $6,221     $3,838   $2,512   $6,350 

 

6.FINANCE ITEMS

 

Finance items consist of:

 

   Three months ended June 30 

Finance income

  2022   2021 
Interest income  $1,322   $1,193 
Dividend income   -    160 
   $1,322   $1,353 

 

   Three months ended June 30 
Finance costs  2022   2021 
Interest on lease obligation  $14   $20 
Impairment charges for expected credit loss against bond investments (Note 8)   445    - 
Unwinding of discount of environmental rehabilitation provision   63    68 
   $522   $88 

 

7.INCOME TAX

 

The significant components of income tax expense are as follows:

 

   Three months ended June 30 
Income tax expense  2022   2021 
Current  $3,989   $3,963 
Deferred   2,098    854 
   $6,087   $4,817 

 

11

 

 

SILVERCORP METALS INC.

Notes to Condensed Consolidated Interim Financial Statements as at June 30, 2022 and for the three months ended June 30, 2022 and 2021

(Unaudited) (Tabular amounts are in thousands of U.S. dollars, except numbers for share and per share figures or otherwise stated)

 

8.SHORT-TERM INVESTMENTS

 

As at June 30, 2022, short-term investments consist of the following:

 

   Amount  Interest rates  Maturity
Bonds  $7,497   5.50% - 13.00%   August 8, 2022 - January 16, 2025 
Money market instruments   58,006         
   $65,503         

 

During the three months ended June 30, 2022, the Company recorded impairment charges of $0.4 million against the bond investment issued by a Chinese real estate developing companies as the Company observed financial difficulty of these bond issuers. The carrying value of such bond investments was $0.1 million as at June 30, 2022. The impairment charge was included in finance costs on the condensed consolidated interim statement of income.

 

As at March 31, 2022, short-term investments consist of the following:

 

   Amount  Interest rates  Maturity
Bonds  $9,168   5.50% - 13.00%   April 9, 2022 - January 16, 2025 
Money market instruments   90,455         
   $99,623         

 

9.OTHER INVESTMENTS

 

   June 30, 2022  March 31, 2022
Equity investments designated as FVTOCI          
Public companies  $1,369   $2,383 
Private companies   67    71 
    1,436    2,454 
Equity investments designated as FVTPL          
Public companies   9,928    11,533 
Private companies   3,666    3,781 
    13,594    15,314 
Total  $15,030   $17,768 

 

Investments in publicly traded companies represent equity interests of other publicly-trading mining companies that the Company has acquired through the open market or through private placements. Investment in equity instruments that are held for trading are classified as FVTPL. For other investment in equity instruments, the Company can make an irrevocable election, on an instrument-by-instrument basis, to designate them as FVTOCI.

 

12

 

 

SILVERCORP METALS INC.

Notes to Condensed Consolidated Interim Financial Statements as at June 30, 2022 and for the three months ended June 30, 2022 and 2021

(Unaudited) (Tabular amounts are in thousands of U.S. dollars, except numbers for share and per share figures or otherwise stated)

 

The continuity of such investments is as follows:

 

      Accumulated fair  Accumulated fair
      value change  value change
   Fair Value  included in OCI  included in P&L
April 1, 2021  $15,733   $(22,810)  $7,188 
Loss on equity investments designated as FVTOCI   (1,526)   (1,526)   - 
Loss on equity investments designated as FVTPL   (3,485)   -    3,485 
Acquisition   8,235    -    - 
Disposal   (1,362)   -    - 
Impact of foreign currency translation   173    -    - 
March 31, 2022  $17,768   $(24,336)  $3,703 
Loss on equity investments designated as FVTOCI   (951)   (951)   - 
Loss equity investments designated as FVTPL   (2,671)   -    (2,671)
Acquisition   1,770    -    - 
Disposal   (504)   -    - 
Impact of foreign currency translation   (382)   -    - 
June 30, 2022  $15,030   $(25,287)  $1,032 

 

10.INVESTMENT IN ASSOCIATES

 

(a)Investment in New Pacific Metals Corp.

 

New Pacific Metals Corp. (“NUAG”) is a Canadian public company listed on the Toronto Stock Exchange (symbol: NUAG) and NYSE American (symbol: NEWP). NUAG is a related party of the Company by way of two common directors and two common officers, and the Company accounts for its investment in NUAG using the equity method as it is able to exercise significant influence over the financial and operating policies of NUAG.

 

During the three months ended June 30, 2022, the Company acquired 181,900 common shares of NUAG from the public market (three month ended June 30, 2021, nil) for a total cost of $0.6 million (three months ended June 30, 2021, $nil).

 

As at June 30, 2022, the Company owned 44,224,116 common shares of NUAG (March 31, 2022 – 44,042,216), representing an ownership interest of 28.2% (March 31, 2022 – 28.2%).

 

13

 

 

SILVERCORP METALS INC.

Notes to Condensed Consolidated Interim Financial Statements as at June 30, 2022 and for the three months ended June 30, 2022 and 2021

(Unaudited) (Tabular amounts are in thousands of U.S. dollars, except numbers for share and per share figures or otherwise stated)

 

The summary of the investment in NUAG common shares and its market value as at the respective balance sheet dates are as follows:

 

           Value of NUAG’s
   Number of       common shares per
   shares   Amount   quoted market price
Balance, April 1, 2021   43,917,216   $50,399   $181,257 
Purchase from open market   125,000    352      
Share of net loss        (1,715)     
Share of other comprehensive income        95      
Foreign exchange impact        306      
Balance, March 31, 2022   44,042,216   $49,437   $140,275 
Purchase from open market   181,900    570      
Share of net loss        (621)     
Share of other comprehensive income        (398)      
Foreign exchange impact        (1,496)     
Balance, June 30, 2022   44,224,116   $47,492   $125,953 

 

(b)Investment in Whitehorse Gold Corp.

 

Whitehorse Gold Corp. (“WHG”) is a Canadian public company listed on the TSX Venture Exchange (symbol: WHG). WHG is a related party of the Company by way of one common director, and the Company accounts for its investment in WHG using the equity method as it is able to exercise significant influence over the financial and operating policies of WHG.

 

On May 14, 2021, the Company participated in a brokered private placement of WHG and purchased 4,000,000 units at a cost of $5.0 million. Each unit was comprised of one WHG common share and one common share purchase warrant at exercise price of CAD$2 per share. The common share purchase warrant expires on May 14, 2026.

 

As at June 30, 2022, the Company owned 15,514,285 common shares of WHG (March 31, 2022 – 15,514,285), representing an ownership interest of 28.9% (March 31, 2022 – 29.3%). The summary of the investment in WHG common shares and its market value as at the respective balance sheet dates are as follows:

 

           Value of WHG’s
   Number of       common shares per
   shares   Amount   quoted market price
Balance, April 1, 2021   11,514,285   $3,058   $15,108 
Participation in private placement   4,000,000    4,960      
Share of net loss        (473)     
Foreign exchange impact        (141)      
Balance, March 31, 2022   15,514,285   $7,404   $6,208 
Share of net loss        (107)     
Foreign exchange impact        (223)     
Balance, June 30, 2022   15,514,285   $7,074   $6,381 

 

14

 

 

SILVERCORP METALS INC.

Notes to Condensed Consolidated Interim Financial Statements as at June 30, 2022 and for the three months ended June 30, 2022 and 2021

(Unaudited) (Tabular amounts are in thousands of U.S. dollars, except numbers for share and per share figures or otherwise stated)

 

11.PLANT AND EQUIPMENT

 

Plant and equipment consist of:

 

    Land use rights     Office           Motor     Construction        
Cost   and building     equipment     Machinery     vehicles     in progress     Total
Balance as at April 1, 2021   $ 110,151     $ 9,660     $ 31,074     $ 7,537     $ 1,342     $ 159,764  
Additions     1,613       967       2,575       763       3,647       9,565  
Disposals     (293 )     (68 )     (539 )     (245 )     -       (1,145 )
Reclassification of asset groups     2,100       154       191       -       (2,445 )     -  
Impact of foreign currency translation     3,676       296       1,078       258       59       5,367  
Balance as at March 31, 2022   $ 117,247     $ 11,009     $ 34,379     $ 8,313     $ 2,603     $ 173,551  
Additions     89       189       372       234       1,811       2,695  
Disposals     (373 )     (36 )     (112 )     (128 )     -       (649 )
Reclassification of asset groups     947       -       -       -       (947 )     -  
Impact of foreign currency translation     (6,205 )      (546 )      (1,849 )     (441 )     (150 )     (9,191 )
Ending balance as at June 30, 2022   $ 111,705     $ 10,616     $ 32,790     $ 7,978     $ 3,317     $ 166,406  

 

Impairment, accumulated depreciation and amortization                                          
Balance as at April 1, 2021   $ (51,570 )   $ (6,246)   $ (21,171 )   $ (5,048 )   $ -     $ (84,035 )
Disposals     158       64       419       220       -       861  
Depreciation and amortization     (4,422 )     (867 )     (2,172 )     (649 )     -       (8,110 )
Impact of foreign currency translation     (1,750 )     (183 )     (741 )     (175 )     -       (2,849 )
Balance as at March 31, 2022   $ (57,584 )   $ (7,232 )   $ (23,665 )   $ (5,652 )   $ -     $ (94,133 )
Disposals     137       32       84       115       -       368  
Depreciation and amortization     (1,115 )     (239 )     (542 )     (167 )     -       (2,063 )
Impact of foreign currency translation     3,052     349       1,282       302       -       4,985
Ending balance as at June 30, 2022   $ (55,510 )   $ (7,090 )   $ (22,841 )   $ (5,402 )   $ -     $ (90,843 )
                                                 
Carrying amounts                                                
Balance as at March 31, 2022   $ 59,663     $ 3,777     $ 10,714     $ 2,661     $ 2,603     $ 79,418  
Ending balance as at June 30, 2022   $ 56,195     $ 3,526     $ 9,949     $ 2,576     $ 3,317     $ 75,563  

 

Carrying amounts as at June 30, 2022   Ying Mining District     BYP     GC     Other     Total  
Land use rights and building   $ 40,945     $ 2,730     $ 10,983     $ 1,537     $ 56,195  
Office equipment     2,800       15       478       233       3,526  
Machinery     7,577       136       2,180       56       9,949  
Motor vehicles     2,087       19       298       172       2,576  
Construction in progress     2,584       523       210       -       3,317  
Total   $ 55,993     $ 3,423     $ 14,149     $ 1,998     $ 75,563  

 

Carrying amounts as at March 31, 2022   Ying Mining District     BYP     GC     Other     Total  
Land use rights and building   $ 42,953     $ 2,965     $ 12,027     $ 1,718     $ 59,663  
Office equipment     2,973       16       516       272       3,777  
Machinery     8,225       155       2,276       58       10,714  
Motor vehicles     2,127       20       323       191       2,661  
Construction in progress     1,911       552       140       -       2,603  
Total   $ 58,189     $ 3,708     $ 15,282     $ 2,239     $ 79,418  

 

During the three months ended June 30, 2022, certain plant and equipment were disposed for proceeds of $nil (three months ended June 30, 2021 - $0.03 million) and resulting in loss of $0.3 million (three months ended June 30, 2021 - loss of $0.09 million).

 

15

 

 

SILVERCORP METALS INC.

Notes to Condensed Consolidated Interim Financial Statements as at June 30, 2022 and for the three months ended June 30, 2022 and 2021

(Unaudited) (Tabular amounts are in thousands of U.S. dollars, except numbers for share and per share figures or otherwise stated)

 

12.MINERAL RIGHTS AND PROPERTIES

 

Mineral rights and properties consist of:

 

   Producing and development properties  Exploration and evaluation properties   
Cost   Ying Mining District   BYP   GC   RZY   Kuanping   La Yesca   Total
Balance as at April 1, 2021  $348,000   $64,609   $115,610   $185   $-   $16,747   $545,151 
Capitalized expenditures   37,307    -    4,507    -    24    2,588    44,426 
Acquisition (Note 3)   -    -    -    -    13,135    -    13,135 
Environmental rehabilitation   (68)   (18)   898    -    -    -    812 
Derecognition   -    -    -    (185)   -    -    (185)
Foreign currency translation impact   12,096    501    3,891    -    221    -    16,709 
Balance as at March 31, 2022  $397,335   $65,092   $124,906   $-   $13,380   $19,335   $620,048 
Capitalized expenditures   11,210    -    1,336    -    271    129    12,946 
Foreign currency translation impact   (21,321)   (824)   (6,647)   -    (718)   -    (29,510)
Ending balance as at June 30, 2022  $387,224   $64,268   $119,595   $-   $12,933   $19,464   $603,484 
                                    
Impairment and accumulated depletion                                   
Balance as at April 1, 2021  $(122,977)  $(57,264)  $(87,296)  $(185)  $-   $-   $(267,722)
Depletion   (15,974)   -    (2,595)   -    -    -    (18,569)
Derecognition   -    -    -    185    -    -    185 
Foreign currency translation impact   (4,313)   (257)   (2,924)   -    -    -    (7,494)
Balance as at March 31, 2022  $(143,264)  $(57,521)  $(92,815)  $-   $-   $-   $(293,600)
Depletion   (5,008)   -    (700)   -    (21)   -    (5,729)
Foreign currency translation impact   7,699    422    4,930    -    -    -    13,051 
Ending balance as at June 30, 2022  $(140,573)  $(57,099)  $(88,585)  $-   $(21)  $-   $(286,278)
                                    
Carrying amounts                                   
Balance as at March 31, 2022  $254,071   $7,571   $32,091   $-   $13,380   $19,335   $326,448 
Ending balance as at June 30, 2022  $246,651   $7,169   $31,010   $-   $12,912   $19,464   $317,206 

 

13.LEASES

 

The following table summarizes changes in the Company’s lease receivable and lease obligation related to the Company’s office lease and sublease.

 

  Lease Receivable  Lease Obligation
Balance, April 1, 2021  $396   $1,741 
Addition   -    149 
Interest accrual   15    72 
Interest received or paid   (15)   (72)
Principal repayment   (217)   (637)
Foreign exchange impact   3    10 
Balance, March 31, 2022  $182   $1,263 
Interest accrual   2    14 
Interest received or paid   (2)   (14)
Principal repayment   (55)   (168)
Foreign exchange impact   (5)   (37)
Balance, June 30, 2022  $122   $1,058 
Less: current portion   (122)   (527)
Non-current portion  $-   $531 

 

16

 

 

SILVERCORP METALS INC.

Notes to Condensed Consolidated Interim Financial Statements as at June 30, 2022 and for the three months ended June 30, 2022 and 2021

(Unaudited) (Tabular amounts are in thousands of U.S. dollars, except numbers for share and per share figures or otherwise stated)

 

The following table presents a reconciliation of the Company’s undiscounted cash flows to their present value for its lease receivable and lease obligation as at June 30, 2022:

 

  Lease Receivable  Lease Obligation
Within 1 year  $124   $550 
Between 2 to 5 years   -    572 
Total undiscounted amount   124    1,122 
Less future interest   (2)   (64)
Total discounted amount  $122   $1,058 
Less: current portion   (122)   (527)
Non-current portion  $-   $531 

 

The lease receivable and lease obligation were discounted using an estimated incremental borrowing rate of 5%.

 

14.Environmental Rehabilitation Obligation

 

The following table presents the reconciliation of the beginning and ending obligations associated with the retirement of the properties:

 

Balance, April 1, 2021  $7,863 
Reclamation expenditures   (467)
Unwinding of discount of environmental rehabilitation   269 
Revision of provision   812 
Foreign exchange impact   262 
Balance, March 31, 2022  $8,739 
Reclamation expenditures   (32)
Unwinding of discount of environmental rehabilitation   63 
Foreign exchange impact   (467)
Balance, June 30, 2022  $8,303 

 

15.SHARE CAPITAL

 

(a) Authorized

 

Unlimited number of common shares without par value. All shares issued as at June 30, 2022 were fully paid.

 

(b) Share-based compensation

 

The Company has a share-based compensation plan (the “Plan”) which consists of stock options, restricted share units (the “RSUs”) and performance share units (the “PSUs”). The Plan allows for the maximum number of common shares to be reserved for issuance on any share-based compensation to be a rolling 10% of the issued and outstanding common shares from time to time. Furthermore, no more than 3% of the reserve may be granted in the form of RSUs and PSUs.

 

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SILVERCORP METALS INC.

Notes to Condensed Consolidated Interim Financial Statements as at June 30, 2022 and for the three months ended June 30, 2022 and 2021

(Unaudited) (Tabular amounts are in thousands of U.S. dollars, except numbers for share and per share figures or otherwise stated)

 

For the three months ended June 30, 2022, a total of $1.2 million (three months ended June 30, 2021 - $2.1 million) in share-based compensation expense was recognized and included in the general and administrative expenses and property evaluation and business development expenses on the condensed consolidated interim statements of income.

 

(i)Stock options

 

The following is a summary of option transactions:

 

      Weighted average
      exercise price per
   Number of shares  share CAD$
Balance, April 1, 2021   1,862,418   $5.45 
Options exercised   (797,083)   2.98 
Options cancelled/forfeited   (70,000)   7.46 
Balance, March 31, 2022   995,335   $7.28 
Option granted   535,000    3.93 
Options cancelled/forfeited   (47,500)   6.45 
Balance, June 30, 2022   1,482,835   $6.10 

 

The following table summarizes information about stock options outstanding as at June 30, 2022:

 

      Weighted average      
    Number of options remaining Weighted   Number of options Weighted average
    outstanding at contractual life average exercise exercisable at exercise price in
  Exercise price in CAD$ June 30, 2022 (Years) price in CAD$ June 30, 2022 CAD$
$ 3.93 520,000 4.82 $ 3.93 - $ -
$ 5.46 525,335 2.90 $ 5.46 349,671 $ 5.46
$ 9.45 437,500 3.37 $ 9.45 222,500 $ 9.45
  $3.93 to $9.45 1,482,835 3.71 $ 6.10 572,171 $ 7.01

 

During the three months ended June 30, 2022, a total of 535,000 options with a life of five years were granted to directors, officers, and employees at exercise prices of CAD$3.93 per share subject to a vesting schedule over a three-year term with 1/6 of the options vesting every six months from the date of grant until fully vested.

 

The fair value of stock options granted during the three months ended June 30, 2020 were calculated as of the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions:

 

  Three months ended June 30,
  2022
Risk free interest rate 2.49%
Expected life of option in years 2.75 years
Expected volatility 62.53%
Expected dividend yield 0.81%
Estimated forfeiture rate 9.81%
Weighted average share price at date of grant $3.93 CAD

 

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SILVERCORP METALS INC.

Notes to Condensed Consolidated Interim Financial Statements as at June 30, 2022 and for the three months ended June 30, 2022 and 2021

(Unaudited) (Tabular amounts are in thousands of U.S. dollars, except numbers for share and per share figures or otherwise stated)

 

Subsequent to June 30, 2022, a total of 60,000 options with exercise prices of CAD$3.93 to $9.45 was cancelled and/or forfeited.

 

(ii)RSUs

 

The following is a summary of RSUs transactions:

 

      Weighted average
      grant date closing
   Number of shares  price per share $CAD
Balance, April 1, 2021   1,249,336   $6.28 
Granted   1,000,000    6.40 
Forfeited   (46,999)   6.63 
Distributed   (566,172)   5.90 
Balance, March 31, 2022   1,636,165   $6.47 
Granted   961,000    3.93 
Forfeited   (44,540)   5.29 
Distributed   (214,375)   6.53 
Balance, June 30, 2022   2,338,250   $5.45 

 

Subsequent to June 30, 2022, a total of 61,667 RSUs with grant prices of CAD$3.93 to $9.45 was forfeited.

 

(c)Cash dividends declared

 

During the three months ended June 30, 2022, dividends of $2.2 million (three months ended June 30, 2021 - $2.2 million) were declared and paid.

 

(d)Normal course issuer bid

 

On August 25, 2021, the Company announced a normal course issuer bid (“NCIB”) which allows it to repurchase and cancel up to 7,054,000 of its own common shares until August 26, 2022.

 

During the three months ended June 30, 2022, the Company repurchased a total of 334,990 common shares at a cost of $0.9 million under the NCIB program. All shares bought were subsequently cancelled.

 

Subsequent to June 30, 2022, the Company repurchased additional 404,970 common shares at a cost of $1.0 million under the NCIB program.

 

16.ACCUMULATED OTHER COMPREHENSIVE LOSS

 

    June 30, 2022     March 31,2022
Change in fair value on equity investments designated as FVTOCI $ 23,994   $ 23,043
Share of other comprehensive loss in associate   892     494
Currency translation adjustment   2,526     (21,584)
Balance, end of the year $ 27,412   $ 1,953

 

The change in fair value on equity investments designated as FVTOCI, share of other comprehensive loss in associates, and currency translation adjustment are net of tax of $nil for all periods presented.

 

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SILVERCORP METALS INC.

Notes to Condensed Consolidated Interim Financial Statements as at June 30, 2022 and for the three months ended June 30, 2022 and 2021

(Unaudited) (Tabular amounts are in thousands of U.S. dollars, except numbers for share and per share figures or otherwise stated)

 

17.NON-CONTROLLING INTERESTS

 

The continuity of non-controlling interests is summarized as follows:

 

   Henan
Found		  Henan
Huawei		  Yunxiang    Guangdong
Found		  New Infini  Total 
Balance, April 1, 2021  $78,564  $5,182  $3,032  $  (351)  $11,727  $98,154 
Share of net income (loss)   12,639   182   (185)    154   (140)   12,650 
Share of other comprehensive income   1,732   194   68     16   -   2,010 
Distributions   (3,266)   (630)   -     -   (1,200)   (5,096)
Balance, March 31, 2022  $89,669  $4,928  $2,915  $  (181)  $10,387  $107,718 
Share of net income (loss)   3,952   51   (107)    31   (12)   3,915 
Share of other comprehensive loss   (4,334)   (277)   (93)    (32   -   (4,736)
Distributions   (3,312)   (315)   -     -   -   (3,627)
Balance, June 30, 2022  $85,975  $4,387  $2,715  $  (182)  $10,375  $103,270 

 

As at June 30, 2022, non-controlling interests in Henan Found, Henan Huawei, Yunxiang, Guangdong Found and New Infini were 22.5%, 20%, 30%, 1%, and 53.9%, respectively (March 31, 2022 – 22.5%, 20%, 30%, 1%, and 53.9%, respectively).

 

18.RELATED PARTY TRANSACTIONS

 

Related party transactions are made on terms agreed upon by the related parties. The balances with related parties are unsecured, non-interest bearing, and due on demand. Related party transactions not disclosed elsewhere in the condensed consolidated interim financial statements are as follows:

 

Due from related parties  June 30, 2022  March 31, 2022 
NUAG(a)  $70  $43 
WHG(b)   12   23 
   $82  $66 

 

(a)The Company recovers costs for services rendered to NUAG and expenses incurred on behalf of NUAG pursuant to a services and administrative costs reallocation agreement. During the three months ended June 30, 2022, the Company recovered $0.2 million (three months ended June 30, 2021 - $0.2 million) from NUAG for services rendered and expenses incurred on behalf of NUAG. The costs recovered from NUAG were recorded as a direct reduction of general and administrative expenses on the condensed consolidated statements of income.

 

(b)The Company recovers costs for services rendered to WHG and expenses incurred on behalf of WHG pursuant to a services and administrative costs reallocation agreement. During the three months ended June 30, 2022, the Company recovered $0.04 million (three months ended June 30, 2021 - $0.06 million), from WHG for services rendered and expenses incurred on behalf of WHG. The costs recovered from WHG were recorded as a direct reduction of general and administrative expenses on the condensed consolidated statements of income.

 

20

 

 

SILVERCORP METALS INC.

Notes to Condensed Consolidated Interim Financial Statements as at June 30, 2022 and for the three months ended June 30, 2022 and 2021

(Unaudited) (Tabular amounts are in thousands of U.S. dollars, except numbers for share and per share figures or otherwise stated)

 

19.FINANCIAL INSTRUMENTS

 

The Company manages its exposure to financial risks, including liquidity risk, foreign exchange risk, interest rate risk, credit risk and equity price risk in accordance with its risk management framework. The Company’s Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk management framework and reviews the Company’s policies on an ongoing basis.

 

(a) Fair value

 

The Company classifies its fair value measurements within a fair value hierarchy, which reflects the significance of the inputs used in making the measurements as defined in IFRS 13, Fair Value Measurement (“IFRS 13”).

 

Level 1 – Unadjusted quoted prices at the measurement date for identical assets or liabilities in active markets.

 

Level 2 – Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

 

Level 3 – Unobservable inputs which are supported by little or no market activity.

 

The following tables set forth the Company’s financial assets and liabilities that are measured at fair value level on a recurring basis within the fair value hierarchy as at June 30, 2022 and March 31, 2022 that are not otherwise disclosed. As required by IFRS 13, the assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

 

 Fair value as at June 30, 2022 
Recurring measurements  Level 1  Level 2  Level 3  Total 
Financial assets                 
Cash and cash equivalents  $150,261  $-  $-  $150,261 
Short-term investments - money market instruments   58,006   -   -   58,006 
Investments in public companies   11,297   -   -   11,297 
Investments in private companies   -   -   3,733   3,733 

 

 Fair value as at March 31, 2022
Recurring measurements  Level 1  Level 2  Level 3  Total 
Financial assets             
Cash and cash equivalents  $113,302  $-  $-  $113,302 
Short-term investments - money market instruments   90,455   -   -   90,455 
Investments in public companies   13,916   -   -   13,916 
Investments in private companies   -   -   3,852   3,852 

 

Financial assets classified within Level 3 are equity investments in private companies owned by the Company. Significant unobservable inputs are used to determine the fair value of the financial assets, which includes recent arm’s length transactions of the investee, the investee’s financial performance as well as any changes in planned milestones of the investees.

 

Fair value of the other financial instruments excluded from the table above approximates their carrying amount as at June 30, 2022 and March 31, 2022, due to the short-term nature of these instruments.

 

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SILVERCORP METALS INC.

Notes to Condensed Consolidated Interim Financial Statements as at June 30, 2022 and for the three months ended June 30, 2022 and 2021

(Unaudited) (Tabular amounts are in thousands of U.S. dollars, except numbers for share and per share figures or otherwise stated)

 

There were no transfers into or out of Level 3 during the three months ended June 30, 2022 and 2021.

 

(b) Liquidity risk

 

Liquidity risk is the risk that the Company will not be able to meet its short-term business requirements. The Company has in place a planning and budgeting process to help determine the funds required to support the Company’s normal operating requirements on an ongoing basis and its expansion plans.

 

In the normal course of business, the Company enters into contracts that give rise to commitments for future minimum payments. The following summarizes the remaining contractual maturities of the Company’s financial liabilities and operating commitments on an undiscounted basis.

 

 June 30, 2022
   Within a year  2-5 years  Total 
Accounts payable and accrued liabilities  $46,311  $-  $46,311 
Lease obligation   550   572   1,122 
Deposits received   3,607   -   3,607 
Total Contractual Obligation  $50,468  $572  $51,040 

 

   March 31, 2022 
   Within a year  2-5 years  Total 
Accounts payable and accrued liabilities  $39,667  $-  $39,667 
Lease obligation   677   666   1,343 
Deposits received   5,445   -   5,445 
Total Contractual Obligation  $45,789  $666  $46,455 

 

(c) Foreign exchange risk

 

The Company reports its financial statements in US dollars. The functional currency of the head office, Canadian subsidiaries and all intermediate holding companies is CAD and the functional currency of all Chinese subsidiaries is RMB. The functional currency of New Infini and its subsidiaries is USD. The Company is exposed to foreign exchange risk when the Company undertakes transactions and holds assets and liabilities in currencies other than its functional currencies.

 

The Company currently does not engage in foreign exchange currency hedging. The Company's exposure to currency risk affect net income is summarized as follows:

 

   June 30, 2022  March 31, 2022 
Financial assets denominated in U.S. Dollars  $47,278  $59,272 

 

As at June 30,2022, with other variables unchanged, a 10% strengthening (weakening) of the CAD against the USD would have decreased (increased) net income by approximately $4.7 million.

 

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SILVERCORP METALS INC.

Notes to Condensed Consolidated Interim Financial Statements as at June 30, 2022 and for the three months ended June 30, 2022 and 2021

(Unaudited) (Tabular amounts are in thousands of U.S. dollars, except numbers for share and per share figures or otherwise stated)

 

(d) Interest rate risk

 

The Company is exposed to interest rate risk on its cash equivalents and short term investments. As at June 30, 2022, all of its interest-bearing cash equivalents and short-term investments earn interest at market rates that are fixed to maturity or at variable interest rates with terms of less than one year. The Company monitors its exposure to changes in interest rates on cash equivalents and short term investments. Due to the short-term nature of these financial instruments, fluctuations in interest rates would not have a significant impact on the Company’s net income.  

 

(e) Credit risk

 

Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The Company is exposed to credit risk primarily associated to accounts receivable, due from related parties, cash and cash equivalents, and short-term investments. The carrying amount of assets included on the balance sheet represents the maximum credit exposure.

 

The Company undertakes credit evaluations on counterparties as necessary, requests deposits from customers prior to delivery, and has monitoring processes intended to mitigate credit risks. There were no material amounts in trade or other receivables which were past due on June 30, 2022 (at March 31, 2022 - $nil).

 

(f) Equity price risk

 

The Company holds certain marketable securities that will fluctuate in value as a result of trading on financial markets. As the Company’s marketable securities holdings are mainly in mining companies, the value will also fluctuate based on commodity prices. Based upon the Company’s portfolio as at June 30, 2022, a 10% increase (decrease) in the market price of the securities held, ignoring any foreign currency effects, would have resulted in an increase (decrease) to the net income and other comprehensive income of $1.0 million and $0.1 million, respectively.

 

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SILVERCORP METALS INC.

Notes to Condensed Consolidated Interim Financial Statements as at June 30, 2022 and for the three months ended June 30, 2022 and 2021

(Unaudited) (Tabular amounts are in thousands of U.S. dollars, except numbers for share and per share figures or otherwise stated)

 

20.SUPPLEMENTARY CASH FLOW INFORMATION

 

Changes in non-cash operating working capital:  Three Months Ended June 30,
   2022  2021
Trade and other receivables  $202   $138 
inventories   (12)   3,612 
prepaids and deposits   (897)   (1,683)
Accounts payable and accrued liabilities   11,231    2,938 
Deposits received   (1,569)   4,154 
Due from a related party   (18)   (14)
   $8,937   $9,145 

 

Non-cash capital transactions:  Three Months Ended June 30,
   2022  2021
Environmental rehablitation expenditure paid from          
reclamation deposit  $24   $22 
Additions of plant and equipment included in accounts          
Payable and accrued liabilities  $528   $(179)
Capital expenditures of mineral rights and properties included          
in accounts payable and accrued liabilities  $(2,972)  $68 

 

   June 30, 2022  March 31, 2022
Cash on hand and at bank  $83,659   $72,782 
Bank term deposits and short-term money market investments   66,602    40,520 
Total cash and cash equivalents  $150,261   $113,302 

 

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