Form 6-K SILVERCORP METALS INC For: Mar 31

May 27, 2022 2:58 PM EDT

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934

For the month of: May, 2022

Commission File No. 0001-34184

SILVERCORP METALS INC.
(Translation of registrant’s name into English)

Suite 1750 - 1066 West Hastings Street
Vancouver, BC V6E 3X1 CANADA
(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F

Form 20-F [   ] Form 40-F [ X ]

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1) [   ]

Indicate by check mark if the registrant is “submitting” the Form 6-K in paper as permitted by Regulation S-T “Rule” 101(b)(7) [   ]





SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: May 26, 2022 SILVERCORP METALS INC.


 

/s/ Derek Liu

 

Derek Liu

 

Chief Financial Officer






EXHIBIT INDEX

EXHIBITS 99.4, 99.5, 99.6 AND 99.7 INCLUDED WITH THIS REPORT ARE HEREBY INCORPORATED BY REFERENCE AS EXHIBITS TO THE REGISTRANT’S REGISTRATION STATEMENT ON FORM F-10 (FILE NO. 333-249939), AS AMENDED AND SUPPLEMENTED, AND TO BE A PART THEREOF FROM THE DATE ON WHICH THIS REPORT IS SUBMITTED, TO THE EXTENT NOT SUPERSEDED BY DOCUMENTS OR REPORTS SUBSEQUENTLY FILED OR FURNISHED.

EXHIBIT DESCRIPTION OF EXHIBIT

 

2




Exhibit 99.1

NEWS RELEASE  
Trading Symbol: TSX: SVM
  NYSE AMERICAN: SVM

SILVERCORP REPORTS ADJUSTED EARNINGS OF $52.4 MILLION, $0.30 PER SHARE, AND CASH FLOW FROM OPERATIONS OF $107.4 MILLION FOR FISCAL 2022

VANCOUVER, British Columbia – May 26, 2022 Silvercorp Metals Inc. (“Silvercorp” or the “Company”) (TSX/NYSE American: SVM) reported its financial and operating results for the fourth quarter and twelve months ended March 31, 2022 (“Fiscal 2022”). All amounts are expressed in US Dollars, and figures may not add due to rounding.

FISCAL YEAR 2022 HIGHLIGHTS

  • Mined 996,280 tonnes of ore and milled 1,002,335 tonnes of ore, up 3% and 4% compared to the prior year.

  • Sold approximately 6.3 million ounces of silver, 3,400 ounces of gold, 63.6 million pounds of lead, and 26.8 million pounds of zinc, representing decreases of 1%, 28%, 5% and 4% in silver, gold, lead and zinc sold, compared to the prior year. Gold sales in the prior year included one-time sales of 1,200 ounces from the remaining concentrate inventory produced at the BYP mine before it was placed on care and maintenance in 2014.

  • Revenue of $217.9 million, up 13% compared to $192.1 million in the prior year.

  • Net income attributable to equity holders of $30.6 million, or $0.17 per share, compared to $46.4 million, or $0.27 per share in the prior year.

  • Adjusted earnings attributable to equity holders of $52.4 million, or $0.30 per share, compared to $49.8 million, or $0.28 per share in the prior year. The adjustments were made to remove impacts from non- recurring items, share-based compensation, foreign exchange gain/loss, impairment adjustments and reversals, gain/loss on equity investments and the share of associates’ operating results.

  • Cash flow from operations of $107.4 million, up 25% or $21.5 million compared to $85.9 million in the prior year.

  • Cash cost per ounce of silver, net of by-product credits, of negative $1.29 compared to negative $1.80 in the prior year.

  • All-in sustaining cost per ounce of silver, net of by-product credits, of $8.77, compared to $7.49 in the prior year.

  • Paid $4.4 million of dividends to the Company’s shareholders.

  • Acquired the Kuanping silver-lead-zinc-gold project in China for $13.1 million.

  • Strong balance sheet with $212.9 million in cash and cash equivalents and short-term investments, up $13.8 million or 7% compared to $199.1 million as at March 31, 2021. This does not include the investments in associates and equity investment in other companies, having a total market value of $164.3 million as at March 31, 2022 ($212.1 million as at March 31, 2021).





HIGHLIGHTS FOR Q4 FISCAL 2022

  • Mined 180,505 tonnes of ore and milled 182,670 tonnes of ore, up 11% and 1%, respectively, compared to the prior year quarter.

  • Sold approximately 1.2 million ounces of silver, 500 ounces of gold, 12.3 million pounds of lead, and 4.3 million pounds of zinc, up 11% and 13%, respectively, in silver and lead sold compared to the prior year quarter, and down 29% and 5%, respectively, in gold and zinc sold compared to the prior year quarter.

  • Revenue of $41.6 million, up 16% or $5.9 million compared to $35.7 million in the prior year quarter.

  • Net income attributable to equity holders of $4.0 million, or $0.02 per share, compared to $7.0 million, or $0.04 per share, in the prior year quarter.

  • Adjusted earnings attributable to equity holders of $9.5 million, or $0.05 per share, compared to $11.0 million, or $0.06 per share, in the prior year quarter.

  • Cash flow from operations of $11.4 million, up 411% or $9.2 million compared to $2.2 million in the prior year quarter.

  • Cash cost per ounces of silver, net of by-product credits, of negative $0.54 compared to negative $0.39 in the prior year quarter.

  • All-in sustaining cost per ounce of silver, net of by-product credits, of $12.60, compared to $12.55 in the prior year quarter.

CONSOLIDATED FINANCIAL RESULTS

    Three months ended March 31,       Year ended March 31,  
    2022     2021     Changes       2022     2021     Changes  
Financial                                      

Revenue (in thousands of $)

$ 41,590   $ 35,732     16 %   $ 217,923   $ 192,105     13 %

Mine operating earnings (in thousands of $)

  13,709     13,404     2 %     84,301     84,162     0 %

Net income attributable to equity holders

  3,966     7,021     -44 %     30,634     46,376     -34 %

Earnings per share - basic ($/share)

  0.02     0.04     -50 %     0.17     0.27     -37 %

Adjusted earnings attributable to equity holders

  9,496     10,960     -13 %     52,427     49,798     5 %

Adjusted earning per share - basic ($/share)

  0.05     0.06     -17 %     0.30     0.28     7 %

Net cash generated from operating activities (in thousands of $)

  11,406     2,231     411 %     107,378     85,912     25 %

Capitalized expenditures (in thousands of $)

  9,831     6,996     41 %     53,991     45,556     19 %

Cash and cash equivalents and short-term investments (in thousands of $)

  212,925     199,092     7 %     212,925     199,092     7 %

Working capital (in thousands of $)

  186,270     184,014     1 %     186,270     184,014     1 %
Metals sold                                      

Silver (in thousands of ounces)

  1,173     1,056     11 %     6,265     6,315     -1 %

Gold (in thousands of ounces)

  0.5     0.7     -29 %     3.4     4.7     -28 %

Lead (in thousands of pounds)

  12,279     10,876     13 %     63,563     67,118     -5 %

Zinc (in thousands of pounds)

  4,340     4,580     -5 %     26,809     27,914     -4 %
Average Selling Price, Net of Value Added Tax and Smelter Charges                                      

Silver ($/ounce)

  19.38     20.11     -4 %     19.36     17.61     10 %

Gold ($/ounce)

  1,475     1,437     3 %     1,495     1,430     5 %

Lead ($/pound)

  0.93     0.81     15 %     0.90     0.75     20 %

Zinc ($/pound)

  1.22     0.98     24 %     1.08     0.78     38 %

 

1. Fiscal 2022 Financial Results

Net income attributable to equity holders of the Company in Fiscal 2022 was $30.6 million or $0.17 per share, compared to $46.4 million or $0.27 per share in the year ended March 31, 2021 (“Fiscal 2021”).

In Fiscal 2022, the Company’s consolidated financial results were mainly impacted by i) an increase of 10%, 5%, 20% and 38%, respectively, in the realized selling prices for silver, gold, lead and zinc; offset by ii) a 1%, 28%, 5% and 4% decrease in silver, gold, lead and zinc sold; iii) a 17% increase in cash production costs per tonne, and iv) an impairment charge of $10.6 million against bond investments and a $3.5 million loss on equity investments in Fiscal 2022 while an impairment charge of $1.4 million against bond investments and a gain of $7.7 million on equity investments was recorded in Fiscal 2021.





Revenue in Fiscal 2022 was $217.9 million, up 13% or $25.8 million compared to $192.1 million in Fiscal 2021. The increase was mainly due to an increase of $29.9 million arising from the increase in the net realized silver, gold, lead and zinc selling prices; offset by a decrease of $7.8 million arising from the decrease in the quantities of silver, gold, lead and zinc sold. Revenues from silver, gold, and base metals were $121.3 million, $5.1 million, and $91.6 million, respectively, compared to $111.2 million, $6.7 million, and $74.2 million in Fiscal 2021. Revenue from the Ying Mining District was $176.8 million, up 12% compared to $157.3 million in Fiscal 2021. Revenue from the GC Mine was $41.2 million, up 24% compared to $33.3 million in Fiscal 2021. Gold sales in Fiscal 2021 included $1.5 million from sales of remaining gold concentrate inventory at the BYP mine before it was placed on care and maintenance in 2014.

Income from mine operations in Fiscal 2022 was $84.3 million, compared to $84.2 million in Fiscal 2021. Income from mine operations at the Ying Mining District was $70.0 million, down 6% compared to $74.2 million in Fiscal 2021. Income from mine operations at the GC Mine was $14.8 million, up 52% compared to $9.8 million in Fiscal 2021.

Cash flow provided by operating activities in Fiscal 2022 was $107.4 million, up 25% or $21.5 million, compared to $85.9 million in Fiscal 2021.

The Company ended the fiscal year with $212.9 million in cash, cash equivalents and short-term investments, up 7% or $13.8 million, compared to $199.1 million as at March 31, 2021.

Working capital as at March 31, 2022 was $186.3 million, up 1% or $2.3 million, compared to $184.0 million as at March 31, 2021.

2. Q4 Fiscal 2022 Financial Results

Net income attributable to equity holders of the Company in Q4 Fiscal 2022 was $4.0 million or $0.2 per share, compared to $7.0 million or $0.04 per share in the three months ended March 31, 2021 (“Q4 Fiscal 2021”).

Compared to the prior year quarter, the Company’s consolidated financial results in Q4 Fiscal 2022 were mainly impacted by i) an increase of 3%, 15%, and 24%, respectively, in the realized selling prices for gold, lead and zinc; ii) an 11% and 13% increase in silver and lead sold; offset by iii) a 4% decrease in the realized selling price for silver; iv) a 29% and 5% decrease in gold and zinc sold; v) an 8% increase in cash production costs per tonne; and vi) a foreign exchange loss of $3.2 million.

Revenue in Q4 Fiscal 2022 was $41.6 million, up 16% or $5.7 million, compared to $35.9 million in the same prior year period. The increase was mainly due to i) an increase of $3.5 million arising from more silver and lead sold; and ii) an increase of $2.4 million arising from the increase in the net realized selling price for lead and zinc. Silver, gold and base metals sales represented $22.7 million, $0.9 million, and $18.0 million, respectively, compared to silver, gold and base metals sales of $21.2 million, $1.0 million and $13.6 million, respectively, in the same prior year period.

Income from mine operations in Q4 Fiscal 2022 was $13.7 million, up 2% compared to $13.4 million in Q4 Fiscal 2021. Income from mine operations at the Ying Mining District was $11.9 million, compared to $11.9 million in Q4 Fiscal 2021, while GC Mine was $2.0 million, up 16% compared to $1.7 million in Q4 Fiscal 2021.

Cash flows provided by operating activities in Q4 Fiscal 2022 were $11.4 million, compared to $2.2 million in Q4 Fiscal 2021. Before changes in non-cash operating working capital, cash flow provided by operating activities In Q4 Fiscal 2022 was $14.0 million, compared to $11.9 million in Q4 Fiscal 2021.





CONSOLIDATED OPERATIONAL RESULTS

    Three months ended March 31,       Year ended March 31,  
    2022     2021     Changes       2022     2021     Changes  
Ore Production (tonne)                                      

Ore mined

  180,505     163,072     11 %     996,280     964,925     3 %

Ore milled

  182,670     180,674     1 %     1,002,335     967,581     4 %
Metal Production                                      

Silver (in thousands of ounces)

  1,146     1,195     -4 %     6,149     6,331     -3 %

Gold (in thousands of ounces)

  0.5     0.3     67 %     3.4     3.5     -3 %

Lead (in thousands of pounds)

  11,962     12,156     -2 %     64,431     68,430     -6 %

Zinc (in thousands of pounds)

  4,101     4,672     -12 %     26,812     28,011     -4 %
Cash Costs                                      

Cash cost per ounce of silver, net of by-product credits ($)

  (0.54 )   (0.39 )   -38 %     (1.29 )   (1.80 )   28 %

All-in sustaining cost per ounce of silver, net of by-product credits ($)

  12.60     12.55     0 %     8.77     7.49     17 %

Cash production cost per tonne of ore processed ($)

  92.78     85.70     8 %     84.85     72.71     17 %

All-in sustaining cost per tonne of ore processed ($)

  171.56     156.36     10 %     141.54     128.20     10 %

 

1. Fiscal 2022 Operational Results

In Fiscal 2022, on a consolidated basis, the Company mined 996,280 tonnes of ore, up 3% or 31,355 tonnes, compared to 964,925 tonnes in Fiscal 2021. Ore milled in Fiscal 2022 was 1,002,335 tonnes, up 4% or 34,754 tonnes, compared to 967,581 tonnes in Fiscal 2021.

In Fiscal 2022, the Company sold approximately 6.3 million ounces of silver, 3,400 ounces of gold, 63.6 million pounds of lead, and 26.8 million pounds of zinc, representing decreases of 1%, 28%, 5% and 4% respectively, in silver, gold, lead and zinc sold. Gold sold in Fiscal 2021 included one-time sales of 1,200 ounces from pre 2014 concentrate inventories at the BYP Mine.

Compared to Fiscal 2021, the Company’s production costs in Fiscal 2022 were mainly impacted by i) an overall 14.5% increase in mining contractors’ fee rate at the Ying Mining District; ii) an annual average 5% appreciation of the Chinese yuan against the US dollar, resulting in higher costs presented in US dollars; iii) an average 7% increase in employees’ pay rates; iv) an annual average 12% increase in electricity prices; and iv) the contribution rate paid for employees’ social welfare funds in China returning to the normal rate from a reduced rate granted by the Chinese government in Fiscal 2021 due to Covid-19.

In Fiscal 2022, the consolidated cash production cost per tonne of ore processed was $84.85, up 17% compared to $72.71 in Fiscal 2021. The consolidated cash mining cost was $68.90 per tonne, up 16% compared to $59.44 in Fiscal 2021. The consolidated cash milling cost was $13.43 per tonne, up 25% compared to $10.73 in Fiscal 2021.

In Fiscal 2022, the consolidated all-in sustaining production cost per tonne of ore processed was $141.54, up 10% compared to $128.20 in Fiscal 2021, but within the Company’s annual guidance.

In Fiscal 2022, the consolidated cash cost per ounce of silver, net of by-product credits, was negative $1.29, compared to negative $1.80 in Fiscal 2021. The increase was mainly due to the increase in per tonne cash production costs, offset by an increase of $2.61 in by-product credits per ounce of silver. The consolidated all-in sustaining cost per ounce of silver, net of by-product credits, was $8.77, compared to $7.49 in Fiscal 2021.

In Fiscal 2022, on a consolidated basis, a total of 426,128 metres or $20.7 million worth of diamond drilling were completed (Fiscal 2021 – 254,900 metres or $8.7 million), of which approximately 276,450 metres or $7.2 million worth of underground drilling were expensed as part of mining costs (Fiscal 2021 – 196,320 metres or $5.0 million) and approximately 149,678 metres or $13.5 million worth of drilling were capitalized (Fiscal 2021 –58,580 metres or $3.7 million). In addition, approximately 31,301 metres or $11.6 million worth of preparation tunnelling were completed and expensed as part of mining costs (Fiscal 2021 – 34,637 metres or $8.9 million), and approximately 74,062 metres or $31.0 million worth of tunnels, raises, ramps and declines were completed and capitalized (Fiscal 2021 – 85,221metres or $31.5 million).





2. Q4 Fiscal 2022 Operational Results

In Q4 Fiscal 2022, the Company mined 180,505 tonnes of ore, up 11% or 17,433 tonnes, compared to 163,072 tonnes in Q4 Fiscal 2021. Ore milled in Q4 Fiscal 2022 was 182,670 tonnes, up 1% or 1,996 tonnes, compared to 180,674 tonnes in Q4 Fiscal 2021.

In Q4 Fiscal 2022, the Company sold approximately 1.2 million ounces of silver, 500 ounces of gold, 12.3 million pounds of lead, and 4.3 million pounds of zinc, representing increases of 11% and 13%, respectively, in silver and lead sold, and decreases of 29% and 5%, respectively, in gold and zinc sold, compared to approximately 1.1 million ounces of silver, 700 ounces of gold, 10.9 million pounds of lead, and 4.6 million pounds of zinc sold in Q4 Fiscal 2021.

In Q4 Fiscal 2022, the consolidated cash mining cost was $73.52 per tonne, compared to $70.56 in Q4 Fiscal 2021. The consolidated cash milling cost was $16.45 per tonne, compared to $12.66 per tonne in Q4 Fiscal 2021. The increase was mainly due to the same factors for the annual results.

Correspondingly, the consolidated cash production cost per tonne of ore processed for Q4 Fiscal 2022 was $92.78, up 8% compared to $85.70 in Q4 Fiscal 2021. The all-in sustaining production cost per tonne of ore processed was $171.56, up 10% compared to $156.36 in Q4 Fiscal 2021.

In Q4 Fiscal 2022, the consolidated cash cost per ounce of silver, net of by-product credits, was negative $0.54, compared to negative $0.39 in Q4 Fiscal 2021. The consolidated all-in sustaining cost per ounce of silver, net of by-product credits was $12.60 compared to $12.55 in Q4 Fiscal 2021.

In Q4 Fiscal 2022, on a consolidated basis, approximately 66,139 metres or $2.4 million worth of diamond drilling (Q4 Fiscal 2021– 49,459 metres or $1.6 million) were completed, of which approximately 50,384 metres or $1.2 million worth of underground drilling were expensed as part of mining costs (Q4 Fiscal 2021– 41,752 metres or $0.8 million) and approximately 15,755 metres or $1.3 million worth of drilling were capitalized (Q4 Fiscal 2021–7,887 metres or $0.8 million). In addition, approximately 5,688 metres or $2.1 million worth of preparation tunnelling were completed and expensed as part of mining costs (Q4 Fiscal 2021– 7,015 metres or $1.5 million), and approximately 13,340 metres or $5.9 million worth of tunnels, raises, ramps and declines were completed and capitalized (Q4 Fiscal 2021– 10,803 metres or $4.7 million).

INDIVIDUAL MINE OPERATING PERFORMANCE

Ying Mining District   Q4 2022     Q3 2022     Q2 2022     Q1 2022     Q4 2021       Year ended March 31,  
    March 31, 2022     December 31, 2021     September 30, 2021     June 30, 2021     March 31, 2021       2022     2021  
Ore Production (tonne)                                            

Ore mined

  130,612     200,946     206,933     142,907     112,561       681,398     650,025  

Ore milled

  131,731     214,982     182,173     155,407     131,725       684,293     651,402  
Head grades                                            

Silver (gram/tonne)

  271     258     283     279     280       272     290  

Lead (%)

  3.9     3.7     4.0     4.2     3.9       3.9     4.3  

Zinc (%)

  0.8     0.8     0.7     0.8     0.8       0.8     0.8  
Recovery rates                                            

Silver (%)

  95.2     95.1     95.4     94.7     93.7       95.1     94.2  

Lead (%)

  96.1     95.2     95.5     95.7     95.1       95.6     96.0  

Zinc (%)

  57.4     64.0     56.0     59.7     65.0       59.7     62.4  
Cash Costs                                            

Cash cost per ounce of Silver, net of by-product credits ($)

  1.21     1.19     0.71     0.80     1.20       0.96     (0.39 )

All-in sustaining cost per ounce of silver, net of by-product credits ($)

  10.76     8.36     6.88     6.54     10.00       7.93     6.09  

Cash production cost per tonne of ore processed ($)

  102.49     99.24     96.59     92.79     98.13       97.76     83.01  

All-in sustaining cost per tonne of ore processed ($)

  172.63     143.72     141.26     138.55     155.14       147.52     132.54  
Metal Production                                            

Silver (in thousands of ounces)

  1,062     1,647     1,517     1,283     1,083       5,509     5,615  

Gold (in thousands of ounces)

  0.5     1.1     0.8     1.0     0.3       3.4     3.5  

Lead (in thousands of pounds)

  10,542     16,392     14,671     13,278     10,504       54,883     57,886  

Zinc (in thousands of pounds)

  1,317     2,347     1,584     1,519     1,496       6,767     6,916  

In Fiscal 2022, a total of 351,458 metres or $15.6 million worth of diamond drilling were completed (Fiscal 2021 – 208,904 metres or $6.9 million), of which approximately 216,068 metres or $5.0 million worth of underground drilling were expensed as part of mining costs (Fiscal 2021 – 150,324 metres or $3.2 million) and approximately 135,390 metres or $10.6 million worth of drilling were capitalized (Fiscal 2021 – 58,580 metres or $3.7 million). In addition, approximately 25,134 metres or $9.9 million worth of preparation tunnelling were completed and expensed as part of mining costs (Fiscal 2021 – 22,918 metres or $6.7 million), and approximately 60,311 metres





or $26.7 million worth of horizontal tunnels, raises, ramps, and declines were completed and capitalized (Fiscal 2021 – 73,350 metres or $27.4 million).

GC Mine   Q4 2022     Q3 2022     Q2 2022     Q1 2021     Q4 2021       Year ended March 31,  
    March 31, 2021     December 31, 2021     September 30, 2021     June 30, 2021     March 31, 2021       2022     2021  
Ore Production (tonne)                                            

Ore mined

  49,893     91,126     85,535     88,328     50,511       314,882     314,900  

Ore milled

  50,939     89,790     89,643     87,670     48,949       318,042     316,179  
Head grades                                            

Silver (gram/tonne)

  62     78     73     80     87       75     85  

Lead (%)

  1.4     1.5     1.7     1.5     1.7       1.5     1.7  

Zinc (%)

  2.8     3.2     3.3     3.3     3.3       3.2     3.4  
Recovery rates                                            

Silver (%)

  82.4     83.5     84.4     84.1     81.9       83.8     82.5  

Lead (%)

  88.7     89.0     89.5     89.3     89.7       89.2     89.6  

Zinc (%)

  89.8     89.8     89.6     89.3     88.2       89.6     88.2  
Cash Costs                                            

Cash cost per ounce of Silver, net of by-product credits ($)

  (16.59 )   (25.84 )   (22.51 )   (17.96 )   (12.80 )     (20.91 )   (11.48 )

All-in sustaining cost per ounce of silver, net of by-product credits ($)

  (0.39 )   (9.81 )   (11.61 )   (7.98 )   0.52       (8.07 )   -  

Cash production cost per tonne of ore processed ($)

  67.33     56.10     55.81     52.90     58.56       56.90     51.44  

All-in sustaining cost per tonne of ore processed ($)

  100.13     81.50     73.76     71.67     87.69       79.56     74.09  
Metal Production                                            

Silver (in thousands of ounces)

  84     187     179     190     112       640     716  

Lead (in thousands of pounds)

  1,420     2,586     2,942     2,600     1,652       9,548     10,544  

Zinc (in thousands of pounds)

  2,784     5,683     5,899     5,679     3,176       20,045     21,095  

In Fiscal 2022, a total of 66,699 metres or $2.5 million worth of diamond drilling were completed (Fiscal 2021 –45,996 metres or $1.8 million), of which approximately 60,382 metres or $2.2 million worth of underground drilling were expensed as part of mining costs (Fiscal 2021 – 45,996 metres or $1.8 million) and approximately 6,317 metres or $0.3 million worth of drilling were capitalized (Fiscal 2021 – nil). In addition, approximately 6,167 metres or $1.7 million worth of preparation tunnelling were completed and expensed as part of mining costs (Fiscal 2021 – 11,719 metres or $2.2 million), and approximately 13,751 metres or $4.3 million worth of horizontal tunnels, raises, ramps, and declines were completed and capitalized (Fiscal 2021 – 11,871 metres or $3.9 million).

CONFERENCE CALL DETAILS

A conference call to discuss these results will be held tomorrow, Friday, May 27, at 9:00 am PDT (12:00 pm EDT). To participate in the conference call, please dial the numbers below.

Canada/USA TF: 888-664-6383

International Toll: 416-764-8650

Conference ID: 70727987

Participants should dial-in 10 – 15 minutes prior to the start time. A replay of the conference call and transcript will be available on the Company’s website at www.silvercorp.ca.

Mr. Guoliang Ma, P.Geo., Manager of Exploration and Resources of the Company, is the Qualified Person as defined by National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”) and has reviewed and given consent to the technical information contained in this news release.

About Silvercorp

Silvercorp is a Canadian mining company producing silver, gold, lead, and zinc with a long history of profitability and growth potential. The Company’s strategy is to create shareholder value by 1) focusing on generating free cashflow from long life mines; 2) organic growth through extensive drilling for discovery; 3) equity investments in potential world class opportunities; 4) ongoing merger and acquisition efforts to unlock value; and 5) long term commitment to responsible mining and ESG. For more information, please visit our website at www.silvercorp.ca.

For further information
Silvercorp Metals Inc.
Lon Shaver
Vice President





Phone: (604) 669-9397
Toll Free 1(888) 224-1881
Email: [email protected]
Website: www.silvercorp.ca

ALTERNATIVE PERFORMANCE (NON-IFRS) MEAUSRES

This earnings release should be read in conjunction with the Company's Management Discussion & Analysis (“MD&A”), Financial Statements and Notes to Financial Statements for year ended March 31, 2022, which have been posted on SEDAR under the Company’s profile at www.sedar.com and are also available on the Company's website at www.silvercorp.ca under the Investor section. This earnings release refers to various alternative performance (non-IFRS) measures, such as adjusted earnings and adjusted earnings per share, cash cost and all-in sustaining cost per ounce of silver, net of by-product credits, cash production cost and all-in sustaining production cost per tonne of ore processed and working capital. These measures are widely used in the mining industry as a benchmark for performance, but do not have standardized meanings under IFRS as an indicator of performance and may differ from methods used by other companies with similar description. The detailed description and reconciliation of these alternative performance (non-IFRS) measures have been incorporated by reference and can be found on page 28, section 12 – Alternative Performance (Non-IFRS) Measures in the MD&A for the year ended March 31, 2022.

CAUTIONARY DISCLAIMER - FORWARD-LOOKING STATEMENTS

Certain of the statements and information in this news release constitute “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995 and “forward-looking information” within the meaning of applicable Canadian provincial securities laws (collectively, “forward-looking statements”). Any statements or information that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always, using words or phrases such as “expects”, “is expected”, “anticipates”, “believes”, “plans”, “projects”, “estimates”, “assumes”, “intends”, “strategies”, “targets”, “goals”, “forecasts”, “objectives”, “budgets”, “schedules”, “potential” or variations thereof or stating that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved, or the negative of any of these terms and similar expressions) are not statements of historical fact and may be forward-looking statements. Forward-looking statements relate to, among other things: the price of silver and other metals; the accuracy of mineral resource and mineral reserve estimates at the Company’s material properties; the sufficiency of the Company’s capital to finance the Company’s operations; estimates of the Company’s revenues and capital expenditures; estimated production from the Company’s mines in the Ying Mining District and the GC Mine; timing of receipt of permits and regulatory approvals; availability of funds from production to finance the Company’s operations; and access to and availability of funding for future construction, use of proceeds from any financing and development of the Company’s properties.

Forward-looking statements are subject to a variety of known and unknown risks, uncertainties and other factors that could cause actual events or results to differ from those reflected in the forward-looking statements, including, without limitation, risks relating to: global economic and social impact of COVID-19; fluctuating commodity prices; calculation of resources, reserves and mineralization and precious and base metal recovery; interpretations and assumptions of mineral resource and mineral reserve estimates; exploration and development programs; feasibility and engineering reports; permits and licences; title to properties; property interests; joint venture partners; acquisition of commercially mineable mineral rights; financing; recent market events and conditions; economic factors affecting the Company; timing, estimated amount, capital and operating expenditures and economic returns of future production; integration of future acquisitions into the Company’s existing operations; competition; operations and political conditions; regulatory environment in China and Canada; environmental risks; foreign exchange rate fluctuations; insurance; risks and hazards of mining operations; key personnel; conflicts of interest; dependence on management; internal control over financial reporting; and bringing actions and enforcing judgments under U.S. securities laws.

This list is not exhaustive of the factors that may affect any of the Company’s forward-looking statements. Forward-looking statements are statements about the future and are inherently uncertain, and actual achievements of the Company or other future events or conditions may differ materially from those reflected in the forward-looking statements due to a variety of risks, uncertainties and other factors, including, without limitation, those referred to in the Company’s Annual Information Form under the heading “Risk Factors” and in the Company’s Annual Report on Form 40-F, and in the Company’s other filings with Canadian and U.S. securities regulators. Although the Company 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, described or intended. Accordingly, readers should not place undue reliance on forward-looking statements.

The Company’s forward-looking statements are based on the assumptions, beliefs, expectations and opinions of management as of the date of this news release, and other than as required by applicable securities laws, the Company does





not assume any obligation to update forward-looking statements if circumstances or management’s assumptions, beliefs, expectations or opinions should change, or changes in any other events affecting such statements. For the reasons set forth above, investors should not place undue reliance on forward-looking statements.




Exhibit 99.2

Form 52-109F1
Certification of Annual Filings
Full Certificate

I, Derek Liu, Chief Financial Officer of Silvercorp Metals Inc. certify the following:

1.     

Review: I have reviewed the AIF, if any, annual financial statements and annual MD&A, including, for greater certainty, all documents and information that are incorporated by reference in the AIF (together, the “annual filings”) of Silvercorp Metals Inc. (the “issuer”) for the financial year ended March 31, 2022.

 

 

2.     

No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the annual filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, for the period covered by the annual filings.

 

 
3.     

Fair presentation: Based on my knowledge, having exercised reasonable diligence, the annual financial statements together with the other financial information included in the annual filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the annual filings.

 

 
4.     

Responsibility: The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer.

 

 
5.     

Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the financial year end

 

 
   (a)     

designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that

 

 
  (i)     

material information relating to the issuer is made known to us by others, particularly during the period in which the annual filings are being prepared; and

   

 
  (ii)     

information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and

   

 
  (b)     

designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP.

   

 
5.1     

Control framework: The control framework the issuer’s other certifying officer(s) and I used to design the issuer’s ICFR is the Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

 

 
5.2     

ICFR – material weakness relating to design: N/A

 

 
5.3     

Limitation on scope of design: N/A





6.     

Evaluation: The issuer’s other certifying officer(s) and I have

 

 
  (a)     

evaluated, or caused to be evaluated under our supervision, the effectiveness of the issuer’s DC&P at the financial year end and the issuer has disclosed in its annual MD&A our conclusions about the effectiveness of DC&P at the financial year end based on that evaluation; and

   

 
  (b)     

evaluated, or caused to be evaluated under our supervision, the effectiveness of the issuer’s ICFR at the financial year end and the issuer has disclosed in its annual MD&A

   

 
  (i)     

our conclusions about the effectiveness of ICFR at the financial year end based on that evaluation; and

   

 
  (ii)     

N/A.

   

 
7.     

Reporting changes in ICFR: The issuer has disclosed in its annual MD&A any change in the issuer’s ICFR that occurred during the period beginning on January 1, 2022 and ended on March 31, 2022 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.

 

 
8.     

Reporting to the issuer’s auditors and board of directors or audit committee: The issuer’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of ICFR, to the issuer’s auditors, and the board of directors or the audit committee of the board of directors any fraud that involves management or other employees who have a significant role in the issuer’s ICFR.

Date: May 26, 2022

“Derek Liu”

Derek Liu
Chief Financial Officer

2




Exhibit 99.3

Form 52-109F1
Certification of Annual Filings
Full Certificate

I, Rui Feng, Chief Executive Officer of Silvercorp Metals Inc. certify the following:

1.     

Review: I have reviewed the AIF, if any, annual financial statements and annual MD&A, including, for greater certainty, all documents and information that are incorporated by reference in the AIF (together, the “annual filings”) of Silvercorp Metals Inc. (the “issuer”) for the financial year ended March 31, 2022.

 

 

2.     

No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the annual filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, for the period covered by the annual filings.

 

 
3.     

Fair presentation: Based on my knowledge, having exercised reasonable diligence, the annual financial statements together with the other financial information included in the annual filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the annual filings.

 

 
4.     

Responsibility: The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer.

 

 
5.     

Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the financial year end

 

 
   (a)     

designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that

 

 
  (i)     

material information relating to the issuer is made known to us by others, particularly during the period in which the annual filings are being prepared; and

   

 
  (ii)     

information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and

   

 
  (b)     

designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP.

   

 
5.1     

Control framework: The control framework the issuer’s other certifying officer(s) and I used to design the issuer’s ICFR is the Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

 

 
5.2     

ICFR – material weakness relating to design: N/A

 

 
5.3     

Limitation on scope of design: N/A





6.     

Evaluation: The issuer’s other certifying officer(s) and I have

 

 
  (a)     

evaluated, or caused to be evaluated under our supervision, the effectiveness of the issuer’s DC&P at the financial year end and the issuer has disclosed in its annual MD&A our conclusions about the effectiveness of DC&P at the financial year end based on that evaluation; and

   

 
  (b)     

evaluated, or caused to be evaluated under our supervision, the effectiveness of the issuer’s ICFR at the financial year end and the issuer has disclosed in its annual MD&A

   

 
  (i)     

our conclusions about the effectiveness of ICFR at the financial year end based on that evaluation; and

   

 
  (ii)     

N/A.

   

 
7.     

Reporting changes in ICFR: The issuer has disclosed in its annual MD&A any change in the issuer’s ICFR that occurred during the period beginning on January 1, 2022 and ended on March 31, 2022 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.

 

 
8.     

Reporting to the issuer’s auditors and board of directors or audit committee: The issuer’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of ICFR, to the issuer’s auditors, and the board of directors or the audit committee of the board of directors any fraud that involves management or other employees who have a significant role in the issuer’s ICFR.

Date: May 26, 2022

“Rui Feng”

Rui Feng
Chief Executive Officer

2




Exhibit 99.4

 

 

SILVERCORP METALS INC.

 

CONSOLIDATED FINANCIAL STATEMENTS

For the year ended March 31, 2022 and 2021

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

 

 

 

 

Report of Independent Registered Public Accounting Firm

 

To the Shareholders and the Board of Directors of Silvercorp Metals Inc.

 

Opinion on the Financial Statements

 

We have audited the accompanying consolidated statements of financial position of Silvercorp Metals Inc. and subsidiaries (the “Company”) as of March 31, 2022 and 2021, the related consolidated statements of income, comprehensive income, changes in equity, and cash flows, for each of the two years in the period ended March 31, 2022, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2022 and 2021, and its financial performance and its cash flows for each of the two years in the period ended March 31, 2022, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

 

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of March 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated May 25, 2022, expressed an unqualified opinion on the Company’s internal control over financial reporting.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

Critical Audit Matter

 

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit

 

1

 

 

matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

 

Impairment – Assessment of Whether Indicators of Impairment or Impairment Reversal Exist in Non- financial Assets — Refer to Note 2 to the Financial Statements

 

Critical Audit Matter Description

 

The Company’s determination of whether or not an indication of impairment or impairment reversal exists at the cash generating unit level requires significant management judgment. Changes in metal price forecasts, estimated future costs of production, estimated future capital costs, the amount of recoverable mineral reserves and mineral resources and/or adverse or favorable current economics can result in a write-down or write-up of the carrying amounts of the Company’s mining interests.

 

While there are several factors that are required to determine whether or not an indicator of impairment or impairment reversal exists, the judgements with the highest degree of subjectivity are future commodity prices (for both silver and lead), forecast production output (for both silver and lead), and changes in market conditions. Auditing these estimates and market conditions required a high degree of subjectivity in applying audit procedures and in evaluating the results of those procedures. This resulted in an increased extent of audit effort, including the involvement of fair value specialists.

 

How the Critical Audit Matter Was Addressed in the Audit

 

Our audit procedures related to the future commodity prices (for both silver and lead), forecast production output (for both silver and lead), and the changes in market conditions in assessing indicators of impairment or impairment reversal included the following, among others:

 

Evaluated the effectiveness of controls over management’s assessment of whether there are indicators of impairment or impairment reversal.

 

Evaluated management’s ability to accurately forecast future production output by:

 

oAssessing the methodology used in management’s determination of the future production, and

 

oComparing management’s future production to historical data.

 

With the assistance of fair value specialists, assessed if changes in market conditions could likely affect the mining interests’ recoverable amounts materially by:

 

oEvaluating the future commodity prices by comparing management forecasts to third party pricing sources,

 

oEvaluating if there were any significant changes in the market interest rates, and

 

oAssessing implied in-situ multiples in comparable market transactions.

 

2

 

 

/s/ Deloitte LLP

 

Chartered Professional Accountants

Vancouver, Canada

May 25, 2022

 

We have served as the Company’s auditor since 2013.

 

3

 

 

Report of Independent Registered Public Accounting Firm

 

To the Shareholders and the Board of Directors of Silvercorp Metals Inc.

 

Opinion on Internal Control over Financial Reporting

 

We have audited the internal control over financial reporting of Silvercorp Metals Inc. and subsidiaries (the “Company”) as of March 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of March 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.

 

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended March 31, 2022, of the Company and our report dated May 25, 2022, expressed an unqualified opinion on those financial statements.

 

Basis for Opinion

 

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

 

Definition and Limitations of Internal Control over Financial Reporting

 

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally

 

4

 

 

accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

/s/ Deloitte LLP

 

Chartered Professional Accountants

Vancouver, Canada

May 25, 2022

 

5

 

 

SILVERCORP METALS INC.
Consolidated Statements of Financial Position
(Expressed in thousands of U.S. dollars)

 

      As at March 31,   As at March 31,  
  Notes   2022   2021  
ASSETS            
Current Assets            

Cash and cash equivalents

23 $ 113,302 $ 118,735  

Short-term investments

4  

99,623

  80,357  

Trade and other receivables

    3,615   1,485  

Current portion of lease receivable

10   182   213  

Inventories

5   9,124   9,768  

Due from related parties

19   66   847  

Income tax receivable

    928   4,978  

Prepaids and deposits

    5,468   4,806  
      232,308   221,189  
Non-current Assets            

Long-term prepaids and deposits

    974   409  

Long-term portion lease receivable

10   -   183  

Reclamation deposits

   

8,876

  8,513  

Other investments

6  

17,768

  15,733  

Investment in associates

7  

56,841

  53,457  

Plant and equipment

8  

79,418

  75,729  

Mineral rights and properties

9  

326,448

  277,429  

Deferred income tax assets

18  

905

  -  
TOTAL ASSETS   $

723,538

$ 652,642  
LIABILITIES AND EQUITY            
Current Liabilities            

Accounts payable and accrued liabilities

  $

39,667

$ 30,298  

Current portion of lease obligation

10  

649

  657  

Deposits received

   

5,445

  4,857  

Income tax payable

   

277

  1,363  
     

46,038

  37,175  
Non-current Liabilities            

Long-term portion of lease obligation

10  

614

  1,084  

Deferred income tax liabilities

18  

48,033

  40,792  

Environmental rehabilitation

11  

8,739

  7,863  
Total Liabilities    

103,424

  86,914  
Equity            

Share capital

   

255,444

  250,199  

Equity reserves

   

43,250

  29,469

Retained earnings

   

213,702

  187,906  
Total equity attributable to the equity holders of the Company  

512,396

  467,574  
Non-controlling interests 14  

107,718

  98,154  
Total Equity    

620,114

  565,728  
TOTAL LIABILITIES AND EQUITY   $ 

723,538
$ 652,642  

 

Approved on behalf of the Board:

 

(Signed) David Kong

Director

 

(Signed) Rui Feng

Director

 

See accompanying notes to the consolidated financial statements  

 

1

 

 

SILVERCORP METALS INC.
Consolidated Statements of Income
(Expressed in thousands of U.S. dollars, except numbers for share and per share figures)

 

      Year Ended March 31, 
   Notes  2022   2021 
Revenue  22 (b)(c)  $217,923   $192,105 
Cost of mine operations             
Production costs      88,537    69,544 
Depreciation and amortization      25,082    21,434 
Mineral resource taxes      5,952    5,004 
Government fees and other taxes  15   2,643    2,374 
General and administrative  16   11,408    9,587 
       133,622    107,943 
Income from mine operations      84,301    84,162 
Corporate general and administrative  16   14,181    12,365 
Property evaluation and business development      921    (3,237)
Foreign exchange (gain) loss      (267)   7,746 
Loss on disposal of plant and equipment  8   210    293 
Share of loss in associates  7   2,188    1,846 
Loss (gain) on equity investments desgined as FVTPL  6   3,485    (7,732)
Other expense      1,018    1,157 
Income from operations      62,565    71,724 
Finance income  17   5,217    3,767 
Finance costs  17   (10,710)   (1,988)
Income before income taxes      57,072    73,503 
Income tax expense  18   13,788    12,994 
Net income     $43,284   $60,509 
Attributable to:             
Equity holders of the Company     $30,634   $46,376 
Non-controlling interests  14   12,650    14,133 
      $43,284   $60,509 
Earnings per share attributable to the equity holders of the Company             
Basic earnings per share     $0.17   $0.27 
Diluted earnings per share     $0.17   $0.26 
Weighted Average Number of Shares Outstanding - Basic      176,534,501    174,868,256 
Weighted Average Number of Shares Outstanding - Diluted      178,323,968    177,074,004 

 

 

See accompanying notes to the consolidated financial statements

 

2

 

 

SILVERCORP METALS INC.
Consolidated Statements of Comprehensive Income
(Expressed in thousands of U.S. dollars)

 

      Year Ended March 31, 
   Notes  2022   2021 
Net income     $43,284   $60,509 
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      13,649    44,032 
Share of other comprehensive income (loss) in associate  7   95    (2,324)
Items that will not subsequently be reclassified to net income or loss:             
Change in fair value on equity investments designated as FVTOCI  6   (1,526)   12,551 
Income tax effect      389    - 
Other comprehensive income, net of taxes     $12,607   $54,259 
Attributable to:             
Equity holders of the Company     $10,597   $49,039 
Non-controlling interests  14   2,010    5,220 
      $12,607   $54,259 
Total comprehensive income     $55,891   $114,768 
Attributable to:             
Equity holders of the Company     $41,231   $95,415 
Non-controlling interests      14,660    19,353 
      $55,891   $114,768 

 

See accompanying notes to the consolidated financial statements

 

3

 

 

SILVERCORP METALS INC.
Consolidated Statements of Cash Flows
(Expressed in thousands of U.S. dollars)

 

     
    Year Ended March 31,  
  Notes   2022   2021  
Cash provided by            
Operating activities            
Net income   $

43,284

$ 60,509  
Add (deduct) items not affecting cash:            
Finance costs 17   10,710   1,988  
Depreciation, amortization and depletion    

27,028

  23,224  
Share of loss in associates 7  

2,188

  1,846  
Income tax expense 18  

13,788

  12,994  
Loss (gain) on equity investments desgined as FVTPL 6  

3,485

  (7,732 )
Loss on disposal of plant and equipment 8  

210

  293  
Share-based compensation 12(b)   6,096   4,307  
Reclamation expenditures    

(251

)  (150 )
Income taxes paid    

(5,512

)  (14,347 )
Interest paid 10  

(72

)  (95 )
Changes in non-cash operating working capital 23  

6,424

3,075  
Net cash provided by operating activities    

107,378

  85,912  
Investing activities            
Mineral rights and properties            
Capital expenditures    

(43,341

(35,661 )
Acquisition 3  

(13,135

)  (7,566 )
Proceeds on disposals 9   -   295  
Plant and equipment            
Additions     (10,729 )  (8,972 )
Proceeds on disposals 8 74   51  
Reclamation deposits            
Paid    

(293

)  (460 )
Refund     -   1,855  
Other investments            
Acquisition 6  

(8,235

)  (12,708 )
Proceeds on disposals 6  

1,362

  19,301  
Investment in associates 7  

(5,313

)  (7,131 )
Net redemptions (purchases) of short-term investments    

(27,233

)  9,826  
Principal received on lease receivable 10  

217

  196  
Net cash used in investing activities    

(106,626

)  (40,974 )
Financing activities            
Related parties            
Payments made 19   -   (744 )
Repayments received 19  

812

  1,423  
Principal payments on lease obligation 10   (637 )  (563 )
Non-controlling interests            
Contribution 14  

-

2,500  
Distribution 14  

(5,096

)  (3,239 )
Cash dividends distributed 12 (c)  

(4,413

)  (4,368 )
Proceeds from issuance of common shares    

1,908

  3,538  
Net cash used in financing activities    

(7,426

)  (1,453 )
Effect of exchange rate changes on cash and cash equivalents    

1,241

9,473  
(Decrease) increase in cash and cash equivalents     (5,433 )  52,958  
Cash and cash equivalents, beginning of the year    

118,735

  65,777  
Cash and cash equivalents, end of the year   $

113,302

$ 118,735  
Supplementary cash flow information 23          

 

See accompanying notes to the consolidated financial statements

 

4

 

 

SILVERCORP METALS INC.

Consolidated Statements of Changes in Equity

 

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

 

       Share capital   Equity reserves                 
   Notes   Number of shares   Amount   Share option reserve   Reserves   Accumulated other comprehensive loss   Retained earnings   Total equity attributable to the equity holders of the Company   Non-controlling interests   Total equity 
Balance, April 1, 2020       173,816,834   $243,926   $15,038   $25,409   $(61,589) $145,898   $368,682   $70,290   $438,972 
Options exercised       1,553,338    4,824    (1,286)   -    -    -    3,538    -    3,538 
Restricted share units vested       372,372    1,449    (1,449)   -    -    -    -    -    - 
Share-based compensation       -    -    4,307    -    -    -    4,307    -    4,307 
Dividends declared       -    -    -    -    -    (4,368)   (4,368)   -    (4,368)
Acquisition of La Yesca  3    -    -    -    -    -    -    -    9,250    9,250 
Contribution from non-controlling interests       -    -    -    -    -    -    -    2,500    2,500 
Distribution to non-controlling interests       -    -    -    -    -    -    -    (3,239)   (3,239)
Comprehensive income       -    -    -    -    49,039    46,376    95,415    19,353    114,768 
Balance, March 31, 2021       175,742,544   $250,199   $16,610   $25,409   $(12,550)  $187,906  $467,574   $98,154   $565,728 
Options exercised       797,083    2,528    (620)   -    -    -    1,908    -    1,908 
Restricted share units vested       566,172    2,717    (2,717)   -    -    -    -    -    - 
Share-based compensation  12(b)    -    -    6,096    -    -    -    6,096    -    6,096 
Dividends declared  12(c)    -    -    -    -    -    (4,413)   (4,413)   -    (4,413)
Distribution to non-controlling interests  14    -    -    -    -    -    -    -    (5,096)   (5,096)
Contribution to reserves       -    -    -    425    -    (425)   -    -    - 
Comprehensive income       -    -    -    -    10,597    30,634    41,231    14,660    55,891 
Balance, March 31, 2022       177,105,799   $255,444   $19,369   $25,834   $(1,953) $213,702  $512,396   $107,718   $620,114 

 

See accompanying notes to the consolidated financial statements

 

5

 

 

SILVERCORP METALS INC.
Notes to Consolidated Financial Statements

 

(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 subsidiaries (collectively the “Company”), is in the business of production, development, exploration and acquisition of mineral properties. The Company’s producing mines are located in China, and current exploration and development projects are located in Mexico and China.

 

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.

 

2.SIGNIFICANT ACCOUNTING POLICIES

 

(a) Statement of Compliance

 

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). The policies applied in these consolidated financial statements are based on IFRS in effect as of March 31, 2022.

 

These consolidated financial statements were authorized for issue in accordance with a resolution of the Board of Directors dated on May 25, 2022.

 

(b) Basis of Consolidation

 

These consolidated 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.

 

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 statement of financial position. 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.

 

6

 

 

SILVERCORP METALS INC.
Notes to Consolidated Financial Statements

 

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

 

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

 

      Proportion of ownership interest held  
Name of subsidiaries Principal activity Country of
incorporation
March 31,
2022
March 31,
2021
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% 43.8%  
Infini Metals Inc. Holding company BVI 46.1% 43.8%  
Infini Resources (Asia) Co. Ltd. Holding company Hong Kong 46.1% 43.8%  
Golden Land (Asia) Ltd. Holding company Hong Kong 46.1% 43.8%  
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% 43.8% La Yesca
Shanxi Xinbaoyuan Mining Co., Ltd. (“Xinbaoyuan”) Mining China 77.5% 0.0% Kuanping

 

(c) Investments in Associates

 

An associate is an entity over which the Company has significant influence but not control and is not a subsidiary or joint venture. Significant influence is presumed to exist where the Company has between 20% and 50% of the voting rights, but can also arise when the Company has power to be actively involved and influential in financial and operating policy decisions of the entity even though Company has less than 20% of voting rights.

 

The Company accounts for its investments in associates using the equity method. Under the equity method, the Company’s investment in an associate is initially recognized at cost and subsequently increased or decreased to recognize the Company’s share of profit and loss of the associate and for impairment losses after the initial recognition date. The Company’s share of an associate’s loss that are in excess of its investment are recognized only to the extent that the Company has incurred legal or constructive obligations or made payments on behalf of the associate. The Company’s share of comprehensive income or losses attributable to shareholders of associates are recognized in comprehensive income during the period. The carrying amount of the Company’s investments in associates also include any long-term debt interests which in substance form part of the Company’s net investment. Distributions received from an associate are accounted for as a reduction in the carrying amount of the Company’s investment.

 

7

 

 

SILVERCORP METALS INC.
Notes to Consolidated Financial Statements

 

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

 

At the end of each reporting period, the Company assesses whether there is any objective evidence that an investment in an associate is impaired. Objective evidence includes observable data indicating there is a measurable decrease in the estimated future cash flows of the associate’s operations. When there is objective evidence that an investment in an associate is impaired, the carrying amount is compared to its recoverable amount, being the higher of its fair value less cost to sell and value in use. An impairment loss is recognized if the recoverable amount is less than its carrying amount. When an impairment loss reverses in a subsequent period, the carrying amount of the investment is increased to the revised estimate of recoverable amount to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had an impairment loss not been previously recognized. Impairment losses and reversal of impairment losses, if any, are recognized in net income in the period in which the relevant circumstances are identified.

 

Details of the Company’s associates are as follows:

 

      Proportion of ownership interest held
Name of associate   Principal activity Country of
incorporation
March 31,
2022
March 31,
2021
New Pacific Metals Corp. (“NUAG”) Mining Canada 28.2% 28.6%
Whitehorse Gold Corp. (“WHG”) Mining Canada 29.3% 27.0%

 

(d) Business Combinations or asset acquisition

 

Optional concentration test

 

The Company applies an optional concentration test, on a transaction-by-transaction basis, that permits a simplified assessment of whether an acquired set of activities and assets is not a business. The concentration test is met if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. The gross assets under assessment exclude cash and cash equivalents, deferred tax assets, and goodwill resulting from the effects of deferred tax liabilities. If the concentration test is met, the set of activities and assets is determined not to be a business and no further assessment is needed.

 

Asset acquisitions

 

When the Company acquires a group of assets and liabilities that do not constitute a business, the Company identifies and recognizes the individual identifiable assets acquired and liabilities assumed by allocating the purchase price first to financial assets/financial liabilities at the respective fair values, the remaining balance of the purchase price is then allocated to the other identifiable assets and liabilities on the basis of their relative fair values at the date of purchase. Such a transaction does not give rise to goodwill or bargain purchase gain.

 

Business Combinations

 

Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. For each business combination, the Company elects whether it measures the non-controlling interest in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition costs incurred are expensed and included in general and administrative expenses.

 

8

 

 

SILVERCORP METALS INC.
Notes to Consolidated Financial Statements

 

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

 

When the Company acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date.

 

If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date through profit or loss.

 

(e) Foreign Currency Translation

 

The functional currency for each subsidiary of the Company is the currency of the primary economic environment in which the entity operates. Other than New Infini and its subsidiaries, the functional currency of the head office, Canadian subsidiaries and all intermediate holding companies is the Canadian dollar (“CAD”). The functional currency of all Chinese subsidiaries is the Chinese Renminbi (“RMB”). The functional currency of New Infini and its subsidiaries is USD.

 

Foreign currency monetary assets and liabilities are translated into the functional currency using exchange rates prevailing at the reporting date. Foreign currency non-monetary assets are translated using exchange rates prevailing at the transaction date. Foreign exchange gains and losses are included in the determination of net income.

 

The consolidated financial statements are presented in U.S. dollars (“USD”). The financial position and results of the Company’s entities are translated from functional currencies to USD as follows:

 

-assets and liabilities are translated using exchange rates prevailing at the reporting date;
-income and expenses are translated using average exchange rates prevailing during the period; and
-all resulting exchange gains and losses are included in other comprehensive income.

 

The Company treats inter-company loan balances, which are not intended to be repaid in the foreseeable future, as part of its net investment. When a foreign entity is sold, the historical exchange differences plus the foreign exchange impact that arises on the transaction are recognized in the statement of income as part of the gain or loss on sale.

 

(f) Revenue Recognition

 

Revenue from contracts with customers is recognized when control of the asset sold is transferred to customers and the Company satisfies its performance obligation. Revenue is allocated to each performance obligation. The Company considers the terms of the contract in determining the transfer price. The transaction price is based upon the amount the Company expects to receive in exchange for the transferring of the assets. In determining whether the Company has satisfied a performance obligation, it considers the indicators of the transfer of control, which include, but are not limited to, whether: the Company has a present right to payment; the customer has legal title to the asset; the Company has transferred physical possession of the asset to the customer; and the customer has the significant risks and rewards of ownership of the asset. This generally occurs when the assets are loaded on the trucks arranged by the customer at the Company’s milling facilities. In cases where the Company is responsible for the costs of shipping and certain other services after the date on which the control of the assets transferred to the customer, these other services are considered separate performance obligations and thus a portion of revenue earned under the contract is allocated and recognized as these performance obligations are satisfied.

 

9

 

 

SILVERCORP METALS INC.
Notes to Consolidated Financial Statements

 

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

 

Revenue from concentrate sales is typically recorded based on the Company’s assay results for the quantity and quality of concentrate sold and the applicable commodity prices, such as silver, gold, lead and zinc, set on a specific quotation period, typical ranging from ten to fifteen days around shipment date, by reference to active and freely traded commodity market. Adjustments, if any, related to the final assay results for the quantity and quality of concentrate sold are not significant and do not constrain the recognition of revenue.

 

Smelter charges, including refining and treatment charges, are netted against revenue from metal concentrate sales.

 

(g) Cash and Cash Equivalents

 

Cash and cash equivalents include cash on hand and held at banks and short-term money market investments that are readily convertible to cash with original terms of three months or less and exclude any restricted cash that is not available for use by the Company.

 

(h) Short-term Investments

 

Short-term investments consist of certificates of deposit and money market instruments, including cashable guaranteed investment certificates, bearer deposit notes and other financial assets with original terms of over three months but less than one year. Bonds traded on open markets are also included in short-term investments.

 

(i) Inventories

 

Inventories include concentrate inventories, direct smelting ore, stockpile ore and operating materials and supplies. The classification of inventory is determined by the stage at which the ore is in the production process. Material that does not contain a minimum quantity of metal to cover estimated processing expenses to recover the contained metal is not classified as inventory and is assigned no value.

 

Direct smelting ore and stockpiled ore are sampled for metal content and are valued at the lower of mining cost and net realizable value. Mining cost includes the cost of raw material, mining contractor cost, direct labour costs, depletion and depreciation, and applicable production overheads, based on normal operating capacity. Concentrate inventories are valued at the lower of cost and net realizable value. The cost of concentrate inventories includes the mining cost for stockpiled ore milled, freight charges for shipping stockpile ore from mine sites to mill sites and milling cost. Milling cost includes cost of materials and supplies, direct labour costs, and applicable production overheads cost, based on normal operating capacity. Material and supplies are valued at the lower of cost, determined on a weighted average cost basis, and net realizable value.

 

Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sales.

 

10

 

 

SILVERCORP METALS INC.
Notes to Consolidated Financial Statements

 

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

 

(j) Plant and Equipment

 

Plant and equipment are initially recorded at cost, including all directly attributable costs to bring the assets to the location and condition necessary for it to be capable of operating in the manner intended by management. Plant and equipment are subsequently measured at cost less accumulated depreciation and impairment losses. Depreciation is computed on a straight-line basis based on the nature and useful lives of the assets. The significant classes of plant and equipment and their estimated useful lives are as follows:

 

Buildings 20 years
Office equipment 5 years
Machinery 5-10 years
Motor vehicles 5 years
Land use rights 50 years
Leasehold improvements 5 years

 

Subsequent costs that meet the asset recognition criteria are capitalized, while costs incurred that do not extend the economic useful life of an asset are considered repairs and maintenance, which are accounted for as an expense recognized during the period.

 

Assets under construction are capitalized as construction-in-progress. The cost of construction-in-progress comprises of the asset’s purchase price and any costs directly attributable to bringing it into working condition for its intended use. Construction-in-progress assets are transferred to other respective asset classes and are depreciated when they are completed and available for use.

 

Upon disposal or abandonment, the carrying amounts of plant and equipment are derecognized and any associated gain or loss is recognized in net income.

 

(k) Mineral Rights and Properties

 

Mineral rights and properties include the following capitalized payments and expenditures:

 

-Acquisition costs which consist of payments for property rights and leases, including payments to acquire or renew an exploration or mining permit, and the estimated fair value of properties acquired as part of business combination or the acquisition of a group of assets.

 

-Exploration and evaluation costs incurred on a specific property after an acquisition of a beneficial interest or option in the property. Exploration and evaluation expenditures on properties for which the Company does not have title or rights to are expensed when incurred. Exploration and evaluation activities involve the search for mineral resources, the determination of technical feasibility and the assessment of commercial viability of an identified resource.

 

-Development costs incurred to construct a mine and bring it into commercial production. Proceeds from sales generate during this development and pre-production stage, if any, are deducted from the costs of the asset.

 

11

 

 

SILVERCORP METALS INC.
Notes to Consolidated Financial Statements

 

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

 

-Expenditures incurred on producing properties that are expected to have future economic benefit, including to extend the life of the mine and to increase production by providing access to additional reserves, such as exploration tunneling that can increase or upgrade the mineral resources, and development tunneling, including to build shafts, drifts, ramps, and access corridors that enable to access ore underground.

 

-Borrowing costs incurred that are directly attributed to the acquisition, construction and development of a qualifying mineral property.

 

-Estimated of environmental rehabilitation and restoration costs.

 

Before commencement of commercial production, mineral rights and properties are carried at costs, less any accumulated impairment charges.

 

Upon commencement of commercial production, mineral rights and properties are carried at costs, less accumulated depletion and any accumulated impairment charges. Mineral rights and properties, other than the payments to renew mining permits (the “mine right fee”) are depleted over the mine’s estimated life using the units of production method calculated based on proven and probable reserves. Estimation of proven and probable reserves for each property is updated when relative information is available; the result will be prospectively applied to calculate depletion amounts for future periods. If commercial production commences prior to the determination of proven and probable reserves, depletion is calculated based on the mineable portion of measured and indicated resources. The mine right fee is depleted using the units of production method based on the mineral resources which were used to determine the mine right fee payable.

 

(l) Impairment and Impairment Reversal

 

At each reporting period, the Company reviews and evaluates its assets for impairment, or reversal of a previously recognized impairment, when events or changes in circumstances indicate that the related carrying amounts may not be recoverable or when there is an indication that impairment may have reversed.

 

When impairment indicators exist, an estimate of the recoverable amount is undertaken, being the higher of an asset’s fair value less cost of disposal (“FVLCTD”) and value in use (“VIU”). If the carrying value exceeds the recoverable amount, an impairment loss is recognized in the consolidated statement of income during the period.

 

In assessing value in use, the estimated future cash flows are discounted to their present value using a pre- tax discount rate that reflects current market assessment of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. The cash flows are based on best estimates of expected future cash flows from the continued use of the asset and its eventual disposal.

 

FVLCTD is best evidence if obtained from an active market or binding sale agreement. Where neither exists, the fair value is based the best estimates available to reflect the amount that could be received from an arm’s length transaction. Fair value of asset is generally determined as the present value of the estimated future cash flows expected to arise from the continued use of the asset, including any expansion prospects.

 

Impairment is normally assessed at the level of cash-generating units (“CGU”), a CGU is identified as the smallest identifiable group of assets that generates cash inflows which are independent of the cash inflows generated from other assets.

 

12

 

 

SILVERCORP METALS INC.
Notes to Consolidated Financial Statements

 

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

 

When there is an indication that an impairment loss recognized previously may no longer exist or has decreased, the recoverable amount is calculated. If the recoverable amount exceeds the carrying amount, the carrying value of the asset is increased to the recoverable amount. The increased carrying amount cannot exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset in prior years. A reversal of an impairment loss is recognized as a gain in the consolidated statements of income in the period it is determined.

 

(m) Environmental Rehabilitation Provision

 

The mining, extraction and processing activities of the Company normally give rise to obligations for site closure or rehabilitation. Closure and decommissioning works can include facility decommissioning and dismantling; removal or treatment of waste materials; site and land rehabilitation. The extent of work required and the associated costs are dependent on the requirements of relevant authorities and the Company’s environmental policies. Provisions for the cost of each closure and rehabilitation program are recognized at the time when environmental disturbance occurs. When the extent of disturbance increases over the life of an operation, the provision is increased accordingly. Costs included in the provision encompass all closure and decommissioning activity expected to occur progressively over the life of the operation and at the time of closure in connection with disturbances at the reporting date. Routine operating costs that may impact the ultimate closure and decommissioning activities, such as waste material handling conducted as an integral part of a mining or production process, are not included in the provision.

 

Costs arising from unforeseen circumstances, such as the contamination caused by unplanned discharges, are recognized as an expense and liability when the event gives rise to an obligation which is probable and capable of reliable estimation. The timing of the actual closure and decommissioning expenditure is dependent upon a number of factors such as the life and nature of the asset, the operating license conditions, and the environment in which the mine operates. Expenditure may occur before and after closure and can continue for an extended period of time dependent on closure and decommissioning requirements.

 

Closure and decommissioning provisions are measured at the expected amount of future cash flows, discounted to their present value for each operation. Discount rates used are specific to the underlying obligation. Significant judgments and estimates are involved in forming expectations of future activities and the amount and timing of the associated cash flows. Those expectations are formed based on existing environmental and regulatory requirements which give rise to a constructive or legal obligation.

 

When provisions for closure and decommissioning are initially recognized, the corresponding cost is capitalized as an asset, representing part of the cost of acquiring the future economic benefits of the operation. The capitalized cost of closure and decommissioning activities is recognized in Mineral Rights and Properties and depleted accordingly. The value of the provision is progressively increased over time as the effect of discounting unwinds, creating an expense recognized in finance costs. Closure and decommissioning provisions are also adjusted for changes in estimates. Those adjustments are accounted for as a change in the corresponding capitalized cost, except where a reduction in the provision is greater than the undepreciated capitalized cost of the related assets, in which case the capitalized cost is reduced to nil and the remaining adjustment is recognized in the income statement. In the case of closed sites, changes to estimated costs are recognized immediately in the consolidated statements of income. Changes to the capitalized cost result in an adjustment to future depreciation and finance charges.

 

13

 

 

SILVERCORP METALS INC.
Notes to Consolidated Financial Statements

 

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

 

Adjustments to the estimated amount and timing of future closure and decommissioning cash flows are a normal occurrence in light of the significant judgments and estimates involved. The provision is reviewed at the end of each reporting period for changes to obligations, legislation or discount rates that impact estimated costs or lives of operations and adjusted to reflect current best estimate.

 

The cost of the related asset is adjusted for changes in the provision resulting from changes in the estimated cash flows or discount rate and the adjusted cost of the asset is depreciated prospectively.

 

(n) Leases

 

Lease Definition

 

At inception of a contract, the Company assesses whether the contract is, or contains, a lease. A contract is, or contains, a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration. An identified asset may be implicitly or explicitly specified in a contract, but must be physically distinct, and must not have the ability for substitution by a lessor. A lessee has the right to control an identified asset if it obtains substantially all of its economic benefits and either pre-determines or directs how and for what purposes the asset is used.

 

Measurement of Right of Use (“ROU”) Assets and Lease Obligations

 

At the commencement of a lease, the Company, if acting in capacity as a lessee, recognizes an ROU asset and a lease obligation. The ROU asset is initially measured at cost, which comprises the initial amount of the lease obligation adjusted for any lease payments made at, or before, the commencement date, plus any initial direct costs incurred, less any lease incentives received.

 

The ROU asset is subsequently amortized on a straight-line basis over the shorter of the term of the lease, or the useful life of the asset determined on the same basis as the Company’s plant and equipment. The ROU asset is periodically adjusted for certain remeasurements of the lease obligation, and reduced by impairment losses, if any. If an ROU asset is subsequently leased to a third party (a “sublease”) and the sublease is classified as a finance lease, the carrying value of the ROU asset to the extent of the sublease is derecognized. Any difference between the ROU asset and the lease receivable arising from the sublease is recognized in profit or loss.

 

The lease obligation is initially measured at the present value of the lease payments remaining at the lease commencement date, discounted using the interest rate implicit in the lease or the Company’s incremental borrowing rate if the rate implicit in the lease cannot be determined. Lease payments included in the measurement of the lease obligation, when applicable, may comprise of fixed payments, variable payments that depend on an index or rate, amounts expected to be payable under a residual value guarantee and the exercise price under a purchase, extension or termination option that the Company is reasonably certain to exercise.

 

The lease obligation is subsequently measured at amortized cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Company’s estimate of the amount expected to be payable under a residual value guarantee, or if the Company changes its assessment of whether it will exercise a purchase, extension or termination option. When the lease obligation is remeasured, a corresponding adjustment is made to the carrying amount of the ROU asset.

 

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SILVERCORP METALS INC.
Notes to Consolidated Financial Statements
(Tabular amounts are in thousands of U.S. dollars, except numbers for share and per share figures or otherwise stated)

 

Measurement of Lease Receivable

 

At the commencement of a lease, the Company, if acting in capacity as a lessor, will classify the lease as finance lease and recognize a lease receivable at an amount equal to the net investment in the lease if it transfers substantially all the risks and rewards incidental to ownership of an underlying asset or if the lease is a sublease, by reference to the ROU asset arising from the original lease (the “head lease”). A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership of an underlying asset or the lease is a short-term lease. Cash received from an operating lease is included in other income in the Company’s consolidated statement of income on a straight-line basis over the period the lease.

 

The lease receivable is initially measure at the present value of the lease payments remaining at the lease commencement date, discounted at the interest rate implicit in the lease or the Company’s incremental borrowing rate if the sublease is a finance lease. The lease receivable is subsequently measured at amortized cost using the effective interest rate method, and reduced by the amount received and impairment losses, if any.

 

Recognition Exemptions

 

The Company has elected not to recognize the ROU asset and lease obligations for short-term leases that have a lease term of 12 months or less or for leases of low-value assets. Payments associated with these leases are recognized as general and administrative expense on a straight-line basis over the lease term on the consolidated statement of income.

 

(o) Borrowing Costs

 

Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset, which necessarily takes a substantial period of time to get ready for its intended use or sale, are capitalized as part of the cost of that asset. All other borrowing costs are expensed in the period in which they are incurred. No borrowing costs were capitalized in the periods presented.

 

(p) Share-based Payments

 

The Company makes share-based awards, including restricted share units (“RSUs”), performance share units (“PSUs”), and stock options, to employees, officers, directors, and consultants.

 

For equity-settled awards, the fair value is charged to the consolidated statements of income and credited to equity, on a straight-line basis over the vesting period, after adjusting for the estimated number of awards that are expected to vest. The fair value of RSUs and PSUs is determined based on quoted market price of our common shares at the date of grant. The fair value of the stock options granted to employees, officers, and directors is determined at the date of grant using the Black-Scholes option pricing model with market related input. The fair value of stock options granted to consultants is measured at the fair value of the services delivered unless that fair value cannot be estimated reliably, which then is determined using the Black-Scholes option pricing model. Stock options with graded vesting schedules are accounted for as separate grants with different vesting periods and fair values.

 

At each reporting date prior to vesting, the cumulative expense representing the extent to which the vesting period has expired and management’s best estimate of the awards that are ultimately expected to vest is computed (after adjusting for non-market performance conditions). The movement in cumulative expense is recognized in the consolidated statements of income with a corresponding entry within equity. No expense is recognized for awards that do not ultimately vest, except for awards where vesting is conditional

 

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SILVERCORP METALS INC.
Notes to Consolidated Financial Statements
(Tabular amounts are in thousands of U.S. dollars, except numbers for share and per share figures or otherwise stated)

 

upon a market condition, which are treated as vested irrespective of whether or not the market condition is satisfied, provided that all other performance conditions are satisfied.

 

(q) Income Taxes

 

Current tax for each taxable entity is based on the local taxable income at the local statutory tax rate enacted or substantively enacted at the reporting date and includes adjustments to tax payable or recoverable in respect to previous periods.

 

Current tax assets and current tax liabilities are only offset if a legally enforceable right exists to set off the amounts, and the Company intends to settle on a net basis, or to realize the asset and settle the liability simultaneously.

 

Deferred tax is recognized using the balance sheet liability method on temporary differences at the reporting date between the tax bases of assets and liabilities, and their carrying amounts for financial reporting purposes. Deferred tax assets are recognized for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses, can be utilized, except:

 

-where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

 

-in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred income tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized.

 

The carrying amount of deferred income tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilized. Unrecognized deferred income tax assets are reassessed at the end of each reporting period and are recognized to the extent that it has become probable that future taxable profit will be available to allow the deferred tax asset to be recovered.

 

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.

 

Deferred income tax relating to items recognized outside profit or loss is recognized in other comprehensive income or directly in equity.

 

Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred income taxes relate to the same taxable entity and the same taxation authority.

 

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SILVERCORP METALS INC.
Notes to Consolidated Financial Statements
(Tabular amounts are in thousands of U.S. dollars, except numbers for share and per share figures or otherwise stated)

 

(r) Earnings per Share

 

Earnings per share are computed by dividing net income available to equity holders of the Company by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution that could occur if additional common shares are assumed to be issued under securities that entitle their holders to obtain common shares in the future. For stock options and warrants, the number of additional shares for inclusion in diluted earnings per share calculations is determined by the options and warrants, whose exercise price is less than the average market price of the Company’s common shares, are assumed to be exercised and the proceeds are used to repurchase common shares at the average market price for the period. The incremental number of common shares issued under stock options, and repurchased from proceeds, is included in the calculation of diluted earnings per share.

 

(s) Financial Instruments

 

Initial recognition:

 

On initial recognition, all financial assets and financial liabilities are recorded at fair value adjusted for directly attributable transaction costs except for financial assets and liabilities classified as fair value through profit or loss (“FVTPL”), in which case transaction costs are expensed as incurred.

 

Subsequent measurement of financial assets:

 

Subsequent measurement of financial assets depends on the classification of such assets.

 

I.Non-equity instruments:

 

IFRS 9 includes a single model that has only two classification categories for financial instruments other than equity instruments: amortized cost and fair value. To qualify for amortized cost accounting, the instrument must meet two criteria:

i.The objective of the business model is to hold the financial asset for the collection of the contractual cash flows; and
ii.All contractual cash flows represent only principal and interest on that principal.

 

All other instruments are mandatorily measured at fair value.

 

II.Equity instruments:

At initial recognition, for equity instruments other than held for trading, the Company may make an irrevocable election to designate them, on instrument by instrument basis, as either FVTPL or fair value through other comprehensive income (“FVTOCI”).

 

Financial assets classified as amortized cost are measured at the amount of initial recognition minus principal repayments, plus the cumulative amortization using the effective interest method of any difference between that initial amount and the maturity amount, adjusted for any impairment loss allowance. Amortization or interest income from the effective interest method is included in finance income.

 

Financial assets classified as FVTPL are measured at fair value with changes in fair values recognized in profit or loss. Equity investments designated as FVTOCI are measured at fair value with changes in fair values recognized in other comprehensive income (“OCI”). Dividends from that investment are recorded in profit or loss when the Company’s right to receive payment of the dividend is established unless they represent a recovery of part of the cost of the investment.

 

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SILVERCORP METALS INC.
Notes to Consolidated Financial Statements
(Tabular amounts are in thousands of U.S. dollars, except numbers for share and per share figures or otherwise stated)

 

Impairment of financial assets carried at amortized cost:

 

The Company recognizes a loss allowance for expected credit losses on its financial assets carried at amortized cost. The amount of expected credit losses is updated at each reporting period to reflect changes in credit risk since initial recognition of the respective financial instruments.

 

Subsequent measurement of financial liabilities:

 

Financial liabilities classified as amortized cost are measured at the amount of initial recognition minus principal repayments, plus the cumulative amortization using the effective interest method of any difference between that initial amount and the maturity amount. Amortization or interest expense using the effective interest method is included in finance costs.

 

Financial liabilities classified as FVTPL are measured at fair value with gains and losses recognized in profit or loss.

 

The Company classifies its financial instruments as follows:

 

-Financial assets classified as FVTPL: cash and cash equivalents, short-term investments – money market instruments, and other investments - equity investments designated as FVTPL and warrants;

 

-Financial assets classified as FVTOCI: other investments - equity investments designated as FVTOCI;

 

-Financial assets classified as amortized cost: short-term investments - bonds, trade and other receivables and due from related parties;

 

-Financial liabilities classified as amortized cost: accounts payable and accrued liabilities, dividends payable, bank loan, customer deposits and due to related parties.

 

Derecognition of financial assets and financial liabilities:

 

A financial asset is derecognized when:

 

-The rights to receive cash flows from the asset have expired; or

 

-The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass- through’ arrangement; and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

 

Gains and losses on derecognition of financial assets and liabilities classified as amortized cost are recognized in profit or loss when the instrument is derecognized or impaired, as well as through the amortization process.

 

Gains and losses on derecognition of equity investments designated as FVTOCI (including any related foreign exchange component) are recognized in OCI. Amounts presented in OCI are not subsequently transferred to profit or loss.

 

A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another liability from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability. In this case, a new liability is recognized, and the difference in the respective carrying amounts is recognized in the statement of income.

 

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SILVERCORP METALS INC.
Notes to Consolidated Financial Statements
(Tabular amounts are in thousands of U.S. dollars, except numbers for share and per share figures or otherwise stated)

 

Offsetting of financial instruments:

 

Financial assets and liabilities are offset and the net amount is reported in the consolidated statement of financial position if and only if, there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the assets and settle liabilities simultaneously.

 

Fair value of financial instruments:

 

The fair value of financial instruments that are traded in active markets at each reporting date is determined by reference to quoted market prices, without deduction for transaction costs. For financial instruments that are not traded in active markets, the fair value is determined using appropriate valuation techniques, such as using a recent arm’s length market transaction between knowledgeable and willing parties, discounted cash flow analysis, reference to the current fair value of another instrument that is substantially the same, or other valuation models.

 

(t) Government Assistance

 

Refundable mining exploration tax credits received from eligible mining exploration expenditures and other government grants received for project construction and development reduce the carrying amount of the related mineral rights and properties or plant and equipment assets. The depletion or depreciation of the related mineral rights and properties or plant and equipment assets is calculated based on the net amount.

 

Government subsidies as compensation for expenses already incurred are recognized in profit and loss during the period in which it becomes receivable.

 

(u) Significant Accounting Judgments and Estimates

 

The preparation of consolidated financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions about future events that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Although these judgments and estimates are continuously evaluated and are based on management’s experience and best knowledge of relevant facts and circumstances, actual results may differ from these estimates.

 

Areas where critical accounting judgments have the most significant effect on the consolidated financial statements include:

 

Capitalization of expenditures included in mineral rights and properties – management has determined that those capitalized expenditures, including exploration and evaluation expenditures and development costs incurred at producing properties, have potential future economic benefits and are potentially economically recoverable, subject to impairment analysis. Management uses several criteria in its assessments of economic recoverability and probability of future economic benefit, including geologic and metallurgic information, history of conversion of mineral deposits to proven and probable reserves, scoping and feasibility studies, accessible facilities, existing permits, whether to extend of the mine life, increase future production, or to provide access to a component of an ore body that will be mined in a future period.

 

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SILVERCORP METALS INC.
Notes to Consolidated Financial Statements
(Tabular amounts are in thousands of U.S. dollars, except numbers for share and per share figures or otherwise stated)

 

Indicators of impairment and impairment reversal - Management applies significant judgement in assessing whether indicators of impairment or reserve impairment exist for an asset or group of assets which would necessitate impairment testing. Internal and external factors such as significant changes in the use of the asset, commodity prices, and interest rates are used in determining whether there are indicators.

 

Income taxes - Deferred tax assets and liabilities are determined based on difference between the financial statements carrying values of assets and liabilities and their respective income tax based and loss carried forward. Withholding tax are determined based on the earnings of foreign subsidiary distributed to the Company.

 

The recognition of deferred tax assets and the determination of the ability of the Company to utilize tax loss carry-forwards to offset deferred tax liabilities requires management to exercise judgement and make certain assumptions about the future performance of the Company. Management is required to access whether it is “probable” that the Company will benefit from these prior losses and other deferred tax assets. Changes in economic conditions, metal prices, and other factors could result in revision to the estimates of the benefits to be realized or the timing of utilization of the losses.

 

Functional currency - The determination of an entity’s functional currency often requires significant judgement where the primary economic environment in which the entity operates may not be clear. This can have a significant impact on the consolidated results based the foreign currency translation method of the Company.

 

Contingencies - Contingencies can be either possible assets or liabilities arising from past events which, by their nature, will only be resolved when one or more future events not wholly within our control occur or fail to occur. The assessment of such contingencies inherently involves the exercise of significant judgment and estimates of the outcome of future events. In assessing loss contingencies related to legal, tax or regulatory proceedings that are pending against us or unasserted claims, that may result in such proceedings or regulatory or government actions that may negatively impact our business or operations, we evaluate with our legal counsel the perceived merits of any legal, tax or regulatory proceedings, unasserted claims or actions. Also evaluated are the perceived merits of the nature and amount of relief sought or expected to be sought, when determining the amount, if any, to recognize as a contingent liability or assessing the impact on the carrying value of assets. Contingent assets or liabilities are not recognized in the consolidated financial statements.

 

Consolidation of entities in which the Company holds less than a majority of voting rights – As at March 31, 2022, the Company owned 46.1% interest in New Infini and has evaluated and concluded that the Company has control over New Infini due to New Infini’s share structure, board composition and other related facts. Accordingly it consolidates New Infini’s results from the date of acquisition.

 

Areas where critical accounting estimates have the most significant effect on the amounts recognized in the consolidated financial statements include:

 

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SILVERCORP METALS INC.
Notes to Consolidated Financial Statements
(Tabular amounts are in thousands of U.S. dollars, except numbers for share and per share figures or otherwise stated)

 

Mineral Reserves and Mineral Resources estimates - Mineral reserves and mineral resources are estimated by qualified persons in accordance with National Instrument 43-101, “Standards of Disclosure form Mineral Projects”, issued by the Canadian Securities Administrators. There are numerous uncertainties inherent in estimating mineral reserves and mineral resources, including many factors beyond the Company’s control. Such estimation is a subjective process, and the accuracy of any mineral reserve or mineral resource estimate is a function of the quantity and quality of available data and of the assumptions made and judgements used in engineering and geological interpretation. Changes in assumptions, including metal prices, production costs, recovery rate, and market conditions could result in mineral reserve and mineral resource estimate revision. Such change could impact depreciation and amortization rates, asset carrying value and the environmental and rehabilitation provision.

 

Impairment and reserve impairment of assets - Where an indicator of impairment and reserves impairment exists, a formal estimate of the recoverable amount is made, which is determined as the higher of FVLCTD and VIU.

 

The determination of FVLCTD and VIU requires management to make estimates and assumptions about expected production based on current estimates of recoverable metal, commodity prices, operating costs, taxes and export duties, inflation and foreign exchange, salvage value, future capital expenditures and discount rates. The estimates and assumptions are subject to risk and uncertainty; hence, there is the possibility that changes in circumstances will alter these projections, which may impact the recoverable amount of the assets. In such circumstances, some or all of the carrying value of the assets may be further impaired or the impairment charge reversed with the impact recorded in the consolidated statements of (loss) income.

 

Valuation of inventory - Stockpiled ore, direct smelting ore, and concentrate inventories are valued at the lower of average cost and net realizable value. Net realizable value is calculated as the estimated price at the time of sale based on prevailing and forecast metal prices less estimated future production costs to convert the inventory into saleable form and associated selling costs. The determination of forecast sales price, recovery rates, grade, assumed contained metal in stockpiles and production and selling costs requires significant assumptions that may impact the stated value of our inventory and lead to changes in NRV. In determining the value of material and supplies inventory, we make estimates of the amounts to be used and realizable value through disposals or sales. Changes in these estimates can result in a change in carrying amounts of inventory, as well as cost of sales.

 

Environmental rehabilitation provision and the timing of expenditures - Environmental rehabilitation costs are a consequence of exploration activities and mining. The cost estimates are updated annually during the life of a mine to reflect known developments, (e.g. revisions to cost estimates and to the estimated lives of operations), and are subject to review at regular intervals. Decommissioning, restoration and similar liabilities are estimated bases on the Company’s interpretation of current regulatory requirements, constructive obligations and are measured at the best estimates of expenditures required to settle the present obligation of decommissioning, restoration or similar liabilities that may occur over the life of the mine. The carrying amount is determined based on the net present value of estimated future cash expenditures for the settlement of decommissioning, restoration or similar liabilities that may occur over the life of the mine. Such estimates are subject to change based on change in laws and regulations and negotiations with regulatory authorities.

 

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SILVERCORP METALS INC.
Notes to Consolidated Financial Statements
(Tabular amounts are in thousands of U.S. dollars, except numbers for share and per share figures or otherwise stated)

 

3.ACQUISITION

 

Acquisition in Fiscal 2022

 

In October 2021, the Company, through a 100% owned subsidiary of Henan Found, won an online open auction to acquire a 100% interest in the Kuanping silver-lead-zinc-gold project (the “Kuanping Project”). The transaction was successfully completed in November 2021 for a total consideration of $13.1 million, comprised of approximately $11.4 million in cash (RMB ¥73.5 million) plus the assumption of approximately $2.0 million (RMB ¥13.3 million) of debt, and net of $0.3 million cash received. The acquisition was through the acquisition of a 100% interest in the shares of Shanxian Xinbaoyuan Mining Co. Ltd. (“Xinbaoyuan”), an affiliate of a Henan Provincial government-controlled company located in Sanmenxia City, Henan Province. The material asset held by Xinbaoyuan is the Kuanping Project. As Henan Found’s subsidiary is considered a domestic Chinese company, the acquisition was not subject to the national security clearance.

 

The Kuanping Project is located in Shanzhou District, Sanmenxia City, Henan Province, China, approximately 33 km north of the Ying Mining District. The Kuanping Project covers an area of 12.39 km², being approximately 3 km wide (east-west) and 5 km long (north-south).

 

The exploration rights of the Kuanping Project are currently in a reservation period for mining permit application, and the Company is in the process of applying for the mining permit.

 

The transaction was accounted for as an acquisition of assets as the purchase price was concentrated on a single asset. The purchase price was allocated to the assets acquired and liabilities assumed on a relative fair value basis with $13.1 million allocated to mineral property interest.

 

Acquisition in Fiscal 2021

 

On December 17, 2020 the Company and its subsidiary New Infini entered into a framework agreement (the “Agreement”) with several arm’s length vendors (the “Vendors”), whereby New Infini agreed to acquire 100% interest in the La Yesca Silver Project (“La Yesca”) through the indirect purchase of all of the issued and outstanding shares of Infini Resources, S.A. de C.V., a Mexican company which owns La Yesca.

 

La Yesca is a silver-polymetallic, epithermal-type project located approximately 100 kilometres (“km”) (185 km by road) northwest of Guadalajara, the second-largest city in Mexico. The concessions comprising La Yesca cover an area of approximately 47.7 km2. In total, 7,649 metres from 25 drill holes have previously been completed, all of which intersected mineralization.

 

The purchase consideration and payment terms for the acquisition of La Yesca are summarized as follows:

 

Upon closing of the Agreement, a $8.3 million cash payment (the “Initial Cash Payment”) and the transfer of a 45% interest in the issued and outstanding shares of New Infini (the “New Infini Shares”) to the Vendors;

 

Within 90 days of closing of the Agreement, a cash payment of $1 million, less any liabilities contemplated under the Agreement (together with the Initial Cash Payment, the “Cash Consideration”); and

 

A “Discovery payment” of up to $30 million calculated on the basis of $0.20 per ounce of Ag resources as defined by National Instrument 43-101 Standards of Disclosure for Mineral Projects paid by New Infini to the Vendors subject to certain permitting considerations.

 

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SILVERCORP METALS INC.
Notes to Consolidated Financial Statements
(Tabular amounts are in thousands of U.S. dollars, except numbers for share and per share figures or otherwise stated)

 

The Company paid $7.6 million of the Cash Consideration through a capital injection to New Infini to hold 45% of the issued and outstanding New Infini Shares. A group of the Company’s directors, officers, employees and consultants paid $1.7 million of the Cash Consideration collectively to hold 10% of the issued and outstanding New Infini Shares. The transaction has been accounted for as an acquisition of assets as the purchase price was concentrated on a single asset, the La Yesca mineral property interest. The purchase consideration was allocated to the assets acquired based on their relative fair values at the date of the acquisition, net of any associated liabilities.

 

4.SHORT-TERM INVESTMENTS

 

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    

 

During the year ended March 31, 2022, the Company recorded impairment charges of $10.6 million against the bond investment issued by a few Chinese real estate developing companies as the Company observed financial difficulty of these bond issuers. The carrying value of such bond investments was $1.8 million as at March 31, 2022. The impairment charge was included in finance costs on the consolidated statement of income (Note 17).


During the year ended March 31, 2021, the Company recorded impairment charges of $1.4 million against the bond investment issued by a few Chinese manufacturing companies as the Company observed financial difficulty of these bond issuers. The carrying value of such bond investments was $0.1 million as at March 31, 2021. The impairment charge was included in finance costs on the consolidated statement of income (Note 17).

 

As at March 31, 2021, short-term investments consist of the following:

 

    Amount Interest rates Maturity
Bonds $ 15,812 5.38% - 13.00%   January 10, 2022 - September 3, 2024
Money market instruments   64,545    
  $ 80,357    

 

5.INVENTORIES

 

Inventories consist of the following:

 

    March 31, 2022     March 31, 2021  
Concentrate inventory $ 3,199   $ 4,536  
Stockpile   1,715     1,916  
Material and supplies   4,210     3,316  
  $ 9,124   $ 9,768  

 

The amount of inventories recognized as expense during the year ended March 31, 2022 was $113.6 million (year ended March 31, 2021 - $91.0 million).

 

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SILVERCORP METALS INC.
Notes to Consolidated Financial Statements
(Tabular amounts are in thousands of U.S. dollars, except numbers for share and per share figures or otherwise stated)

 

6.OTHER INVESTMENTS

 

    March 31, 2022   March 31, 2021  
Equity investments designated as FVTOCI          
Public companies $ 2,383 $ 2,966  
Private companies   71   2,289  
    2,454   5,255  
Equity investments designated as FVTPL          
Public companies   11,533   10,478  
Private companies   3,781   -  
    15,314   10,478  
Total $ 17,768 $ 15,733  

 

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.

 

The continuity of such investments is as follows:

 

   Fair Value   Accumulated fair
value change
included in OCI
   Accumulated fair
value change
included in P&L
   Equity Investment
designated as
FVTOCI
   Equity Investment
designated as
FVTPL
 
April 1, 2020  $8,750   $(34,879)  $-   $8,750   $- 
Gain on equity investments designated as FVTOCI   12,069    12,069    -    12,551    - 
Gain on equity investments designated as FVTPL   7,188    -    7,188    -    7,732 
Acquisition   12,708    -    -    -    12,708 
Disposal   (19,301)   -    -    (16,607)   (10,742)
Reclassified to short-term investments   (7,511)   -    -           
Impact of foreign currency translation   1,830    -    -    561    780 
March 31, 2021  $15,733   $(22,810)  $7,188   $5,255   $10,478 
Loss on equity investments designated as FVTOCI   (1,526)   (1,526)   -    (1,526)   - 
Loss equity investments designated as FVTPL   (3,485)   -    (3,485)   -    (3,485)
Acquisition   8,235    -    -    -    8,235 
Disposal   (1,362)   -    -    (1,362)   - 
Impact of foreign currency translation   173    -    -    87    86 
March 31, 2022  $17,768   $(24,336)  $3,703   $2,454   $15,314 

 

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SILVERCORP METALS INC.

Notes to Consolidated Financial Statements

 

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

 

7.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 year ended March 31, 2022, the Company acquired 125,000 common shares of NUAG from the public market for a total cost of $0.4 million. Subsequent to March 31, 2022, the Company acquired additional 48,500 common shares of NUAG from the public market for a total cost of $0.2 million.

In November 2020, NUAG completed a spin-out by way of a plan of arrangement of its then wholly-owned subsidiary, Whitehorse Gold Corp. (“WHG”), which owns 100% of the Skukum Gold Project (formerly “Tagish Lake Gold Project”) located in Yukon, Canada, and distributed all of the WHG common shares to its shareholders on a pro rata basis.

As at March 31, 2022, the Company owned 44,042,216 common shares of NUAG (March 31, 2021 – 43,917,216), representing an ownership interest of 28.2% (March 31, 2021 – 28.6%).

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

 

   Number of
shares
   Amount   Value of NUAG’s
common shares per
quoted market price
 
Balance April 1, 2020   42,596,506   $44,555   $148,624 
Participation in public offering   1,320,710    5,805      
WHG Spin-out        (1,793)     
Share of net loss        (1,672)     
Share of other comprehensive loss        (2,324)     
Foreign exchange impact        5,828      
Balance March 31, 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 

 

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SILVERCORP METALS INC.

Notes to Consolidated Financial Statements

 

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

 

Summarized financial information for the Company’s investment in NUAG on a 100% basis is as follows:

 

   Years ended March 31, 
   2022(1)   2021(1) 
Net loss attributable to NUAG’s shareholders as reported by NUAG  $(6,055)  $3,029 
Adjustments to remove impairment charges recognized by NUAG   -    (8,862)
Net loss of NUAG qualified for pick-up    (6,055)   (5,833)
Other comprehensive income (loss) attributable to NUAG’s shareholders as reported by NUAG   334    (8,079)
Comprehensive income (loss) of NUAG qualified for pick-up  $(5,721)  $(13,912)
Company’s share of net loss   (1,715)   (1,672)
Company’s share of other comprehensive income (loss)   95    (2,324)
Company’s share of comprehensive income  $(1,620)  $(3,996)

(1)NUAG’s fiscal year-end is on June 30. NUAG’s quarterly financial results were used to compile the financial information that matched with the Company’s year-end on March 31.

  

As at  March 31, 2022   March 31, 2021 
Current assets  $37,075   $48,511 
Non-current assets   88,171    78,164 
Total assets  $125,246   $126,675 
Current liabilities   2,353    811 
Total liabilities   2,353    811 
           
Net assets  $122,893   $125,864 
Non-controlling interests   (24)   (50)
Total equity attributable to equity holders of NUAG  $122,917   $125,914 
Company’s share of net assets of associate  $34,670   $35,932 

 

(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 March 31, 2022, the Company owned 15,514,285 common shares of WHG (March 31, 2021 – 11,514,285), representing an ownership interest of 29.3% (March 31, 2021 – 27.0%). The summary of the investment in WHG common shares and its market value as at the respective reporting dates are as follows:

 

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SILVERCORP METALS INC.

Notes to Consolidated Financial Statements

 

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

 

   Number of
shares
   Amount   Value of WHG’s
common shares per
quoted market price
 
Balance April 1, 2020            
Distributed by NUAG through WHG spin-out   5,740,285    1,793      
Participation in private placement   5,774,000    1,326      
Share of net loss        (174)     
Foreign exchange impact        113      
Balance March 31, 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 

 

Summarized financial information for the Company’s investment in WHG on a 100% basis is as follows:

 

   Year ended March 31, 
   2022(1)   2021(1) 
Net loss attributable to WHG’s shareholders as reported by WHG  $(1,607)  $(856)
Adjustments to exclude WHG’s net loss before spin-out   -    211 
Net loss of WHG qualified for pick-up  $(1,607)  $(645)
Company’s share of net loss  $(473)  $(174)

(1)WHG’s fiscal year-end is on December 31. WHG’s quarterly financial results were used to compile the financial information that matched with the Company’s year-end on March 31.

 

As at  March 31, 2022   March 31, 2021 
Current assets  $3,068   $823 
Non-current assets   19,159    10,862 
Total assets  $22,227   $11,685 
Current liabilities   575    237 
Long-term liabilities   5    - 
Total liabilities   580    237 
           
Net assets  $21,647   $11,448 
Company’s share of net assets of associate  $6,341   $3,090 

 

27

 

 

SILVERCORP METALS INC.

Notes to Consolidated Financial Statements

 

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

 

8. 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, 2020  $96,454   $8,010   $25,800   $6,416   $2,136   $138,816 
Additions   182    864    1,117    1,059    7,189    10,411 
Disposals   (205)   (250)   (291)   (480)   -    (1,226)
Reclassification of asset groups   5,579    325    2,221    -    (8,125)   - 
Impact of foreign currency translation   8,141    711    2,227    542    142    11,763 
Balance as at March 31, 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 
Ending balance as at March 31, 2022  $117,247   $11,009   $34,379   $8,313   $2,603   $173,551 
                               
Impairment, accumulated depreciation and amortization                              
Balance as at April 1, 2020  $(43,987)  $(5,375)  $(18,168)  $(4,564)  $-   $(72,094)
Disposals   90    228    176    388    -    882 
Depreciation and amortization   (3,921)   (630)   (1,629)   (496)   -    (6,676)
Impact of foreign currency translation   (3,752)   (469)   (1,550)   (376)   -    (6,147)
Balance as at March 31, 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)
Ending balance as at March 31, 2022  $(57,584)  $(7,232)  $(23,665)  $(5,652)  $-   $(94,133)
                               
Carrying amounts                              
Balance as at March 31, 2021  $58,581   $3,414   $9,903   $2,489   $1,342   $75,729 
Ending balance as at March 31, 2022  $59,663   $3,777   $10,714   $2,661   $2,603   $79,418 

 

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   2,979    16    516    266    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  $58,195   $3,708   $15,282   $2,233   $79,418 
                          
Carrying amounts as at March 31, 2021   

Ying Mining District

    

BYP

    

GC

    

Other

    

Total

 
Land use rights and building  $41,177   $3,047   $12,369   $1,988   $58,581 
Office equipment   2,647    20    448    299    3,414 
Machinery   7,114    213    2,576    -    9,903 
Motor vehicles   1,917    20    359    193    2,489 
Construction in progress   796    533    13    -    1,342 
Total  $53,651   $3,833   $15,765   $2,480   $75,729 

 

During the year ended March 31, 2022, certain plant and equipment were disposed for proceeds of $0.07 million (year ended March 31, 2021 - $0.05 million) and resulting in loss of $0.2 million (year ended March 31, 2021 – $0.3 million).

 

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SILVERCORP METALS INC.

Notes to Consolidated Financial Statements

 

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

 

9. 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, 2020  $293,136   $63,572   $103,311   $164   $-   $-   $460,183 
Capitalized expenditures   31,138    30    3,890    -    -    87    35,145 
Acquisition (Note 3)   -    -    -    -    -    16,660    16,660 
Environmental rehabilitation   (1,268)   (135)   (207)   -    -    -    (1,610)
Foreign currency translation impact   24,994    1,142    8,616    21    -    -    34,773 
Balance as at March 31, 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 
Ending balance as at March 31, 2022  $397,335   $65,092   $124,906   $-   $13,380   $19,335   $620,048 
                                    
Impairment and accumulated depletion                                   
Balance as at April 1, 2020  $(100,390)  $(56,688)  $(78,355)  $(164)  $-   $-   $(235,597)
Depletion   (13,921)   -    (2,419)        -    -    (16,340)
Foreign currency translation impact   (8,666)   (576)   (6,522)   (21)   -    -    (15,785)
Balance as at March 31, 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)
Ending balance as at March 31, 2022  $(143,264)  $(57,521)  $(92,815)  $-   $-   $-   $(293,600)
                                    
Carrying amounts                                   
Balance as at March 31, 2021  $225,023   $7,345   $28,314   $-   $-   $16,747   $277,429 
Ending balance as at March 31, 2022  $254,071   $7,571   $32,091   $-   $13,380   $19,335   $326,448 

 

10. 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, 2020  $534   $2,069 
Interest accrual   24    95 
Interest received or paid   (24)   (95)
Principal repayment   (196)   (563)
Foreign exchange impact   58    235 
Balance, March 31, 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 
Less: current portion   (182)   (649)
Non-current portion  $-   $614 

 

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SILVERCORP METALS INC.

Notes to Consolidated Financial Statements

 

(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 March 31, 2022:

 

   Lease Receivable   Lease Obligation 
Within 1 year  $186   $677 
Between 2 to 5 years   -    666 
Total undiscounted amount   186    1,343 
Less future interest   (4)   (80)
Total discounted amount  $182   $1,263 
Less: current portion   (182)   (649)
Non-current portion  $-   $614 

 

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

 

11.ENVIRONMENTAL REHABILITATION

 

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

 

   Total 
Balance, April 1, 2020  $8,700 
Reclamation expenditures   (189)
Unwinding of discount of environmental rehabilitation   251 
Revision of provision   (1,610)
Foreign exchange impact   711 
Balance, March 31, 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 

 

As at March 31, 2022, the total undiscounted amount of estimated cash flows required to settle the Company’s environmental rehabilitation provision was $12.3 million (March 31, 2021 - $10.5 million) over the next twenty-five years, which has been discounted using an average discount rate of 3.01% (March 31, 2021 – 3.39%).

 

During the year ended March 31, 2022, the Company incurred actual reclamation expenditures of $0.5 million (year ended March 31, 2021 - $0.2 million), paid reclamation deposit of $0.3 million (year ended March 31, 2021 - $0.5 million) and received nil reclamation deposit refund (year ended March 31, 2021 - $1.9 million).

 

Estimated future reclamation costs are based on the extent of work required and the associated costs are dependent on the requirements of relevant authorities and the Company’s environmental policies. In view of uncertainties concerning environmental rehabilitation obligations, the ultimate costs could be materially different from the amounts estimated.

 

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SILVERCORP METALS INC.

Notes to Consolidated Financial Statements

 

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

 

12.SHARE CAPITAL

 

(a)Authorized

 

Unlimited number of common shares without par value. All shares issued as at March 31, 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.

 

For the year ended March 31, 2022, a total of $6.1 million (year ended March 31, 2021 - $4.3 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 consolidated statements of income.

 

(i)Stock options

 

The following is a summary of option transactions:

 

  

Number of shares

   Weighted average
exercise price per
share CAD$
 
Balance, April 1, 2020   2,423,760   $3.00 
Option granted   1,127,000    7.25 
Options exercised   (1,553,338)   3.02 
Options cancelled   (135,004)   4.52 
Balance, March 31, 2021   1,862,418   $5.45 
Options exercised   (797,083)   2.98 
Options cancelled   (70,000)   7.46 
Balance, March 31, 2022   995,335   $7.28 

 

The following table summarizes information about stock options outstanding as at March 31, 2022:

 

Exercise price in   Number of options
outstanding at
   Weighted average
remaining
contractual life
   Weighted
average exercise
   Number of options
exercisable at
   Weighted average
exercise price in
 
CAD$   March 31,2022   (Years)   price in CAD$   March 31, 2022   CAD$ 
$5.46    540,335    3.15   $5.46    264,335   $5.46 
$9.45    455,000    3.62   $9.45    151,665   $9.45 
 $5.46 to $9.45    995,335    3.37   $7.28    416,000   $6.91 

 

Subsequent to March 31, 2022, a total of 535,000 options with a life of five years were granted to directors, officers, and employees at an exercise price 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 after the date of grant until fully vested.

 

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SILVERCORP METALS INC.

Notes to Consolidated Financial Statements

 

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

 

(ii)RSUs

 

The following is a summary of RSUs transactions:

 

   Number of shares   Weighted average
grant date closing
price per share $CAD
 
Balance, April 1, 2020   677,374   $4.94 
Granted   1,021,500    6.68 
Cancelled   (77,166)   5.82 
Distributed   (372,372)   5.05 
Balance, March 31, 2021   1,249,336   $6.28 
Granted   1,000,000    6.40 
Cancelled   (46,999)   6.63 
Distributed   (566,172)   5.90 
Balance, March 31, 2022   1,636,165   $6.47 

 

During the year ended March 31, 2022, a total of 1,000,000 RSUs were granted to directors, officers, and employees of the Company at grant date closing price of CAD$6.40 per share subject to a vesting schedule over a three-year term with 1/6 of the RSUs vesting every six months from the date of grant.

 

Subsequent to March 31, 2022, a total of 961,000 RSUs were granted to directors, officers, and employees of the Company at grant date closing price of CAD$3.93 per share subject to a vesting schedule over a three- year term with 1/6 of the RSUs vesting every six months from the date of grant.

 

Subsequent to March 31, 2022, a total of 137,876 RSUs were distributed, and a total of 1,667 RSUs were cancelled.

 

(c)Cash dividends declared

 

During the year ended March 31, 2022, dividends of $4.4 million (year ended March 31, 2021 - $4.4 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 acquire up to 7,054,000 of its own common shares until August 26, 2022. The Company did not acquire any its own common shares during the year ended March 31, 2022

 

Subsequent to March 31, 2022, the Company acquired a total of 100,000 common shares at a cost of $0.3 million under the NCIB program.

 

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SILVERCORP METALS INC.

Notes to Consolidated Financial Statements

 

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

 

(e)Earnings per share (basic and diluted)

 

   For the years ended March 31, 
       2022           2021     
   Income   Shares   Per-Share   Income   Shares   Per-Share 
   (Numerator)   (Denominator)   Amount   (Numerator)   (Denominator)   Amount 
Net income attributable to equity holders of the Company  $30,634           $46,376         
Basic earnings per share   30,634    176,534,501   $0.17    46,376    174,868,256  $0.27 
Effect of dilutive securities:                              
Stock options and RSUs        1,789,467              2,205,748      
Diluted earnings per share  $30,634    178,323,968   $0.17   $46,376    177,074,004   $0.26 

 

Anti-dilutive options that are not included in the diluted EPS calculation were 995,335 for the year ended March 31, 2022 (year ended March 31, 2021 – 490,000).

 

13.ACCUMULATED OTHER COMPREHENSIVE LOSS

 

   March 31, 2022   March 31, 2021 
Change in fair value on equity investments designated as FVTOCI  $23,043   $22,328 
Share of other comprehensive loss in associate   494    589 
Currency translation adjustment   (21,584)   (10,367)
Balance, end of the year  $1,953   $12,550 

 

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

 

14.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, 2020  $63,331   $4,702   $2,723  $(466)  $-   $70,290 
Share of net income (loss)   13,210    639    219    88    (23)   14,133 
Share of other comprehensive income   4,623    480    90    27    -    5,220 
Acquisition of La Yesca   -    -    -    -    9,250    9,250 
Contributions   -    -    -    -    2,500    2,500 
Distributions   (2,600)   (639)   -    -    -    (3,239)
Balance, March 31, 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 

 

As at March 31, 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, 2021 – 22.5%, 20%, 30%, 1%, and 56.3%, respectively).

 

Henan Non-ferrous Geology Minerals Ltd. (“Henan Non-ferrous”) is the 17.5% equity interest holder of Henan Found. During the year ended March 31, 2022, Henan Found declared and paid dividends of $2.5 million (year ended March 31, 2021 – declared and paid dividends of $2.0 million) to Henan Non-ferrous.

 

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Notes to Consolidated Financial Statements

 

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

 

Henan Xinxiangrong Mining Ltd. (“Henan Xinxiangrong”) is the 5% equity interest holder of Henan Found. During the year ended March 31, 2022, Henan Found declared and paid dividends of $0.8 million (year ended March 31, 2021 – declared and paid dividends of $0.6 million) to Henan Xinxiangrong.

 

Henan Xinhui Mining Co., Ltd. (“Henan Xinhui”) is a 20% equity interest holder of Henan Huawei. For the year ended March 31, 2022, Henan Huawei declared and paid dividends of $0.6 million (year ended March 31, 2021 – $0.6 million) to Henan Xinhui.

 

For the year ended March 31, 2022, New Infini refunded capital contribution of $1.2 million to its non- controlling shareholders.

 

15.GOVERNMENT FEES AND OTHER TAXES

 

Government fees and other taxes consist of:

 

   Year ended March 31, 
   2022   2021 
Government fees  $69   $63 
Other taxes   2,574    2,311 
   $2,643   $2,374 

 

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.

 

16.GENERAL AND ADMINISTRATIVE

 

General and administrative expenses consist of:

 

   Year ended March 31, 2022   Year ended March 31, 2021 
   Corporate   Mines   Total   Corporate   Mines   Total 
Amortization and depreciation  $593   $1,354   $1,947   $533   $1,255   $1,788 
Office and administrative expenses   1,598    3,149    4,747    1,946    2,897    4,843 
Professional fees   771    428    1,199    783    442    1,225 
Salaries and benefits   5,392    6,477    11,869    4,947    4,993    9,940 
Share-based compensation   5,827    -    5,827    4,156    -    4,156 
   $14,181   $11,408   $25,589   $12,365   $9,587   $21,952 

 

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Notes to Consolidated Financial Statements

 

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

 

17.FINANCE ITEMS

 

Finance items consist of:

 

   Year ended March 31, 
Finance income  2022   2021 
Interest income  $5,019   $3,767 
Dividend income   198    - 
   $5,217   $3,767 

  

   Year ended March 31, 
Finance costs  2022   2021 
Interest on lease obligation  $72   $95 
Impairment charges for expected credit loss against bond investments (Note 4)   10,560    1,376 
(Gain) loss on disposal of bonds   (191)   266 
Unwinding of discount of environmental rehabilitation provision   269    251 
   $10,710   $1,988 

 

18.INCOME TAX

 

(a)Income tax expense

 

The significant components of income tax expense recognized in the statements of income are as follows:

 

   Year ended March 31, 
Income tax expense  2022   2021 
Current  $8,760   $10,942 
Deferred   5,028    2,052 
   $13,788   $12,994 

 

The reconciliation of the Canadian statutory income tax rates to the effective tax rate is as follows:

 

   Years ended March, 31 
   2022   2021 
Canadian statutory tax rate   27.00%   27.00%
Income before income taxes  $57,072   $73,503 
Income tax expense computed at Canadian statutory rates   15,409    19,846 
Foreign tax rates different from statutory rate   (3,398)   (7,172)
Permanent items   635    2,567 
Withholding taxes   1,428    1,191 
Change in unrecognized deferred tax assets   (286)   (3,438)
Income tax expense  $13,788   $12,994 

 

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Notes to Consolidated Financial Statements

 

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

 

(b)Deferred income tax

 

The continuity of deferred income tax assets (liabilities) is summarized as follows:

 

   Years ended March, 31 
   2022   2021 
Net deferred income tax liabilities, beginning of the year  $(40,792)  $(35,758)
Deferred income tax expense recognized in net income for the year    (5,028)   (2,052)
Deferred income tax expense recognized in other comprehensive income for the year   122    - 
Foreign exchange impact   (1,430)   (2,982)
Net deferred income tax liabilities, end of the year  $(47,128)  $(40,792)

 

The significant components of the Company’s deferred income tax are as follows:

 

   March 31, 2022   March 31, 2021 
Deferred income tax assets        
Plant and equipment  $2,230   $1,706 
Environmental rehabilitation   2,021    1,716 
Unrealized loss on investments   122    - 
Other deductible temporary difference   133    655 
Total deferred income tax assets   4,506    4,077 
           
Deferred income tax liabilities          
Plant and equipment   (2,024)   (1,488)
Mineral rights and properties   (49,386)   (43,105)
Unrealized gain on investments   -    - 
Other taxable temporary difference   (224)   (276)
Total deferred income tax liabilities   (51,634)   (44,869)
                 
Net deferred income tax liabilities   (47,128)   (40,792)
           
Of which          
-Deferred tax assets   905    - 
-Deferred tax liabilities  $(48,033)  $(40,792)

 

Deferred tax assets are recognized to the extent that the realization of the related tax benefit through future taxable profits is probable. The ability to realize the tax benefits is dependent upon numerous factors, including the future profitability of operations in the jurisdictions in which the tax benefits arose. Deductible temporary differences and unused tax losses for which no deferred tax assets have been recognized are attributable to the following:

 

   March 31, 2022   March 31, 2021 
Non-capital loss carry forward  $69,341   $62,764 
Plant and equipment   2,331    10,813 
Mineral rights and properties   2,006    1,972 
Other deductible temporary difference   21,088    21,669 
   $94,766   $97,218 

 

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Notes to Consolidated Financial Statements

 

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

 

As at March 31, 2022, the Company has the following net operating losses, expiring in various years to 2042 and available to offset future taxable income in Canada and China, respectively.

 

   Canada   China   Total 
2023  $-   $1,105   $1,105 
2024   -    1,322    1,322 
2025   -    902    902 
2026   -    267    267 
2027   -    1,308    1,308 
2030   1,175    -    1,175 
2031   6,820    -    6,820 
2032   9,893    -    9,893 
2033   10,181    -    10,181 
2034   8,001    -    8,001 
2035   7,266    -    7,266 
2036   54    -    54 
2037   585    -    585 
2038   2,555    -    2,555 
2039   4,719    -    4,719 
2040   2,155    -    2,155 
2041   4,281    -    4,281 
2042   6,752    -    6,752 
   $64,437   $4,904   $69,341 

 

As at March 31, 2022, temporary differences of $184.6 million (March 31, 2021 - $143.6 million) associated with the investments in subsidiaries have not been recognized as the Company is able to control the timing of the reversal of these differences which are not expected to reverse in the foreseeable future.

 

19.RELATED PARTY TRANSACTIONS

 

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

 

(a)Due from related parties

 

   March 31, 2022   March 31, 2021 
NUAG (i)  $              43   $59 
WHG (ii )   23    19 
Henan Non-ferrous (iii)   -    769 
   $66   $847 

 

i.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 year ended March 31, 2022, the Company recovered $0.7 million (year ended March 31, 2021 - $0.6 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 consolidated statements of income.

 

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SILVERCORP METALS INC.

Notes to Consolidated Financial Statements

 

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

 

ii.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 year ended March 31, 2022, the Company recovered $0.2 million (year ended March 31, 2021 - $0.1 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 consolidated statements of income.

 

iii.In January 2021, Henan Found advanced a loan of $0.8 million (RMB¥5 million) to Henan Non-ferrous. The loan bears an interest rate of 4.35% per annum. In January 2022, the loan, including accumulated interest, of $0.8 million (RMB¥5.2 million) was repaid in full.

 

The balances with related parties are unsecured.

 

(b) Compensation of key management personnel

 

The remuneration of directors and other members of key management personnel, who are those having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, for the years ended March 31, 2022 and 2021 were as follows:

 

   Years Ended March 31, 
   2022   2021 
Cash compensation   3,246    3,252 
Share-based compensation   3,179    2,814 
   $6,425   $6,066 

 

20.CAPITAL DISCLOSURES

 

The Company’s objectives of capital management are intended to safeguard the entity’s ability to support the Company’s normal operating requirement on an ongoing basis, continue the development and exploration of its mineral properties, and support any expansionary plans.

 

The capital of the Company consists of the items included in equity less cash and cash equivalents and short- term investments. Risk and capital management are primarily the responsibility of the Company’s corporate finance function and is monitored by the Board of Directors. The Company manages the capital structure and makes adjustments depending on economic conditions. Funds have been primarily secured through profitable operations and issuances of equity capital. The Company invests all capital that is surplus to its immediate needs in short-term, liquid and highly rated financial instruments, such as cash and other short- term deposits, all held with major financial institutions. Significant risks are monitored and actions are taken, when necessary, according to the Company’s approved policies.

 

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SILVERCORP METALS INC.

Notes to Consolidated Financial Statements

 

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

 

21.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 March 31, 2022 and March 31, 2021. 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 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 

 

   Fair value as at March 31, 2021     
Recurring measurements  Level 1   Level 2   Level 3   Total 
Financial assets                
Cash and cash equivalents  $118,735   $-   $-   $118,735 
Short-term investments - money market instruments   64,545    -    -    64,545 
Investments in public companies   13,444    -    -    13,444 
Investments in private companies   -    -    2,289    2,289 

 

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 March 31, 2022 and March 31, 2021, due to the short-term nature of these instruments.

 

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Notes to Consolidated Financial Statements

 

(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 year ended March 31, 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.

 

   March 31, 2022       March 31, 2021 
   Within a year   2-5 years   Total   Total 
Accounts payable and accrued liabilities  $39,667   $-   $39,667   $30,298 
Lease obligation   677    666    1,343    1,741 
   $40,344   $666   $41,010   $32,039 

 

(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:

 

   March 31, 2022   March 31, 2021 
Financial assets denominated in U.S. Dollars  $59,272   $58,610 
Financial liabilities denominated in U.S. Dollars  $-   $52 

 

As at March 31, 2022, with other variables unchanged, a 10% strengthening (weakening) of the CAD against the USD would have decreased (increased) net income by approximately $6.0 million.

 

(d) Interest rate risk

 

The Company is exposed to interest rate risk on its cash equivalents and short term investments. As at March 31, 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.

 

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Notes to Consolidated Financial Statements

 

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

 

(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 in the consolidated statement of financial position 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 March 31, 2022 (at March 31, 2021

- $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 March 31, 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 $1.2 million and $0.2 million, respectively.

 

22.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.   

 

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Notes to Consolidated Financial Statements

 

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

 

(a)Segmented information for assets and liabilities are as follows:

 

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 

 

March 31, 2021 
   Mining   Administrative     
   Henan                         
Statement of financial position items:  Luoning   Hunan   Guangdong