Form 6-K SILVERCORP METALS INC For: Mar 31

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.

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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

 

 

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:

 

o

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

 

o

Comparing 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:

 

o

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

 

o

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

 

o

Assessing implied in-situ multiples in comparable market transactions.

 

 

/s/ Deloitte LLP

 

Chartered Professional Accountants

Vancouver, Canada

May 25, 2022

 

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

 

 

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

 

 

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

 

 

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  

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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.

 

 

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.

 

 

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.

 

 

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.

 

 

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.

 

 

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.

 

 

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.

 

 

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.

 

 

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.

 

 

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

 

 

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.

 

 

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.

 

 

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.

 

 

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.

 

 

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:

 

 

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.

 

 

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.

 

 

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).

 

 

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

 

 

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

 

 

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:

 

 

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

 

 

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).

 

 

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

 

 

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.

 

 

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.

 

 

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.

 

 

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.

 

 

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)

 

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

 

 

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)

 

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

 

 

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)

 

(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

 

 

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)

 

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.

 

 

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.

 

 

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.

 

 

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)

 

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.

 

 

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) 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.

 

 

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)

 

(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				Other				Beijing				Vancouver				Total
Current assets		$	124,636			$	909			$	11,177			$	191			$	4,322			$	79,954			$	221,189
Plant and equipment			53,651				3,833				15,765				59				965				1,456				75,729
Mineral rights and properties			225,023				7,345				28,314				16,747				-				-				277,429
Investment in an associate			-				-				-				-				-				53,457				53,457
Other investments			2,289				-				-				-				-				13,444				15,733
Reclamation deposits			3,898				-				4,607				-				-				8				8,513
Long-term prepaids and deposits			221				101				87				-				-				-				409
Long-term portion of lease receivable			-				-				-				-				-				183				183
Total assets		$	409,718			$	12,188			$	59,950			$	16,997			$	5,287			$	148,502			$	652,642
Current liabilities		$	28,654			$	625			$	4,570			$	-			$	112			$	3,214			$	37,175
Long-term portion of lease obligation			-				-				-				-				-				1,084				1,084
Deferred income tax liabilities			39,756				1,036				-				-				-				-				40,792
Environmental rehabilitation			6,115				993				755				-				-				-				7,863
Total liabilities		$	74,525			$	2,654			$	5,325			$	-			$	112			$	4,298			$	86,914

 

 

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)

  

(b)

Segmented information for operating results is as follows:

 

Year ended March 31, 2022
		Mining																Administrative
		Henan
Statement of income:		Luoning				Hunan				Guangdong				Other				Beijing				Vancouver				Total
Revenue		$	176,751			$	-			$	41,172			$	-			$	-			$	-			$	217,923
Costs of mine operations			(106,706	)			(530	)			(26,345	)			(41	)			-				-				(133,622	)
Income from mine operations			70,045				(530	)			14,827				(41	)			-				-				84,301
Operating (expenses) income			(1,367	)			146				59				(143	)			(2,109	)			(18,322	)			(21,736	)
Finance items, net			2,862				(35	)			374				1				255				(8,950	)			(5,493	)
Income tax expenses			(12,612	)			(112	)			364				-				-				(1,428	)			(13,788	)
Net income (loss)		$	58,928			$	(531	)		$	15,624			$	(183	)		$	(1,854	)		$	(28,700	)		$	43,284
Attributable to:
Equity holders of the Company			46,099				(346	)			15,470				(77	)			(1,854	)			(28,658	)			30,634
Non-controlling interests			12,829				(185	)			154				(106	)			-				(42	)			12,650
Net income (loss)		$	58,928			$	(531	)		$	15,624			$	(183	)		$	(1,854	)		$	(28,700	)		$	43,284

 

(1)

Hunan’s BYP project was placed on care and maintenance in August 2014.

 

Year ended March 31, 2021
		Mining																Administrative
		Henan
Statement of income:		Luoning				Hunan				Guangdong				Other				Beijing				Vancouver				Total
Revenue		$	157,297			$	1,553			$	33,255			$	-			$	-			$	-			$	192,105
Costs of mine operations			(83,090	)			(1,356	)			(23,497	)			-				-				-				(107,943	)
Income from mine operations			74,207				197				9,758				-				-				-				84,162
Operating expenses			(1,848	)			576				9				(6	)			(1,012	)			(10,157	)			(12,438	)
Finance items, net			1,788				(29	)			145				-				118				(243	)			1,779
Income tax expenses			(10,876	)			41				(960	)			-				(8	)			(1,191	)			(12,994	)
Net income (loss)		$	63,271			$	785			$	8,952			$	(6	)		$	(902	)		$	(11,591	)		$	60,509
Attributable to:
Equity holders of the Company			49,422				566				8,864				(3	)			(902	)			(11,571	)			46,376
Non-controlling interests			13,849				219				88				(3	)			-				(20	)			14,133
Net income (loss)		$	63,271			$	785			$	8,952			$	(6	)		$	(902	)		$	(11,591	)		$	60,509

  

  

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)

 

(c)

Sales by metal

 

The sales generated for the year ended March 31, 2022 and 2021 were all earned in China and were comprised of:

 

		Year ended March 31, 2022
		Henan Luoning				Hunan				Guangdong				Total
Silver (Ag)		$	111,835			$	-			$	9,438			$	121,273
Gold (Au)			5,083				-				-				5,083
Lead (Pb)			48,504				-				8,586				57,090
Zinc (Zn)			7,489				-				21,353				28,842
Other			3,840				-				1,795				5,635
		$	176,751			$	-			$	41,172			$	217,923

 

		Year ended March 31, 2021
		Henan Luoning				Hunan				Guangdong				Total
Silver (Ag)			102,100			$	-			$	9,091			$	111,191
Gold (Au)			5,169				1,553				-				6,722
Lead (Pb)			42,836				-				7,628				50,464
Zinc (Zn)			5,898				-				15,895				21,793
Other			1,294				-				641				1,935
		$	157,297			$	1,553			$	33,255			$	192,105

 

(d)

Major customers

 

For the year ending March 31, 2022, four major customers (year ended March 31, 2021 – five) each accounted for 13%, 18%, 19%, and 19% (year ended March 31, 2021 – 11%, 12%, 15%, 16%, and 21%) and collectively 69% (year ended March 31, 2021 – 75%) of the total sales of the Company.

 

23.

SUPPLEMENTARY CASH FLOW INFORMATION

 

Changes in non-cash operating working capital:		Year Ended March 31,
		2022				2021
Trade and other receivables		$	(2,101	)		$	(470	)
Inventories			753				(859	)
Prepaids and deposits			(650	)			(1,133	)
Accounts payable and accrued liabilities			8,014				4,158
Deposits received			422				1,352
Due from a related party			(14	)			27
		$	6,424			$	3,075

 

		March 31, 2022				March 31, 2021
Cash on hand and at bank		$	72,782			$	111,191
Bank term deposits and short-term money market investments			40,520				7,544
Total cash and cash equivalents		$	113,302			$	118,735

 

 

44

---

Exhibit 99.5

 

 

SILVERCORP METALS INC.

 

MANAGEMENT’S DISCUSSION AND ANALYSIS

 

For the Year Ended March 31, 2022

 

(Tabular amounts are in thousands of US dollars, except share, per share, unit cost, and production data, or otherwise stated)

 

 

Table of Contents
1.	Core Business and Strategy	2
2.	Fiscal Year 2022 Highlights	2
3.	Fourth Quarter of Fiscal 2022 Highlights	3
4.	Operating Performance	4
5.	Fiscal 2023 Operating Outlook	12
6.	Investment in Associates	15
7.	Overview of Financial Results	18
8.	Liquidity and Capital Resources	23
9.	Financial Instruments and Related Risks	25
10.	Off-Balance Sheet Arrangements	28
11.	Transactions with Related Parties	28
12.	Alternative Performance (Non-IFRS) Measures	28
13.	Critical Accounting Policies, Judgments, and Estimates	33
14.	New Accounting Standards	33
15.	Other MD&A Requirements	34
16.	Outstanding Share Data	34
17.	Risks and Uncertainties	34
18.	Corporate Governance, Safety, Environment and Social Responsibility	39
19.	Disclosure Controls and Procedures	40
20.	Management’s Report on Internal Control over Financial Reporting	41
21.	Changes in Internal Control over Financial Reporting	41
22.	Directors and Officers	41
Technical Information		42
Forward Looking Statements		42

 

 

SILVERCORP METALS INC. Management’s Discussion and Analysis For the Year Ended March 31, 2022 (Tabular amounts are in thousands of U.S. dollars, except share, per share, unit cost, and production data, or unless otherwise stated)

 

This Management’s Discussion and Analysis (“MD&A”) is intended to help the reader understand the significant factors that have affected Silvercorp Metals Inc. and its subsidiaries’ (“Silvercorp” or the “Company”) performance and such factors that may affect its future performance. This MD&A should be read in conjunction with the Company’s audited consolidated financial statements for the year ended March 31, 2022 and 2021 and the related notes contained therein. The Company reports its financial position, financial performance and cash flow in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). Silvercorp’s significant accounting policies are set out in Note 2 to the audited consolidated financial statements for the year ended March 31, 2022 and 2021. This MD&A refers to various alternative performance (non-IFRS) measures, such as adjusted earnings and adjusted earnings per share, working capital, cash cost per ounce of silver, net of by-product credits, all-in & all-in sustaining cost per ounce of silver, net of by-product credits, production cost per tonne, and all-in sustaining production costs per tonne. Non-IFRS measures do not have standardized meanings under IFRS. Accordingly, non-IFRS measures should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. To facilitate a better understanding of these measures as calculated by the Company, additional information has been provided in this MD&A. Please refer to section 12, “Alternative Performance (Non-IFRS) Measures” of this MD&A for detailed descriptions and reconciliations. Figures may not add due to rounding.

 

This MD&A is prepared as of May 25, 2022 and expressed in thousands of U.S. dollars, except share, per share, unit cost, and production data, or unless otherwise stated.

 

1.

Core Business and Strategy

 

Silvercorp is a Canadian mining company producing silver, gold, lead, zinc, and other metals with long history of profitability and growth potential. The Company’s strategy is to create shareholder value by focusing on generating free cashflow from long life mines; organic growth through extensive drilling for discovery; equity investments in potential world class opportunities; ongoing merger and acquisition efforts to unlock value; and long-term commitment to responsible mining and sound Environmental, Social and Governance (“ESG”) practices. Silvercorp operates several silver-lead-zinc mines at the Ying Mining District in Henan Province, China and the GC silver-lead-zinc mine in Guangdong Province, China. The Company’s common shares are traded on the Toronto Stock Exchange and NYSE American under the symbol “SVM”.

 

2.

Fiscal Year 2022 Highlights

 

●

Mined 996,280 tonnes of ore and milled 1,002,335 tonnes of ore, up 3% and 4%, respectively 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 earnings1 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.

 

¹ Non-IFRS measures, please refer to section 12 for reconciliation.

 

 

SILVERCORP METALS INC. Management’s Discussion and Analysis For the Year Ended March 31, 2022 (Tabular amounts are in thousands of U.S. dollars, except share, per share, unit cost, and production data, or unless otherwise stated)

 

●

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 silver1, 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 silver1, 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).

 

3.

Fourth Quarter of Fiscal 2022 Highlights

 

●

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 earnings1 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 ounce of silver1, 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 silver1, net of by-product credits, of $12.60, compared to $12.55 in the prior year quarter.

 

¹ Non-IFRS measures, please refer to section 12 for reconciliation.

 

 

SILVERCORP METALS INC. Management’s Discussion and Analysis For the Year Ended March 31, 2022 (Tabular amounts are in thousands of U.S. dollars, except share, per share, unit cost, and production data, or unless otherwise stated)

 

4.

Operating Performance

 

(a)

Consolidated operating performance

 

The following table summarizes consolidated operational information for the three months and the year ended March 31, 2022 and 2021:

 

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

Production Data
	Mine Data
		Ore Mined (tonne)				180,505				163,072				11	%			996,280				964,925				3	%
		Ore Milled (tonne)				182,670				180,674				1	%			1,002,335				967,581				4	%
		Head Grades
			Silver (gram/tonne)			213				228				-7	%			209				223				-6	%
			Lead (%)			3.2				3.3				-3	%			3.2				3.4				-6	%
			Zinc (%)			1.4				1.5				-7	%			1.5				1.7				-12	%
		Recovery Rates
			Silver (%)			94.2				92.5				2	%			93.8				92.7				1	%
			Lead (%)			95.2				94.3				1	%			94.6				95.0				0	%
			Zinc (%)			75.8				79.0				-4	%			79.3				80.0				-1	%
Cost Data
	+	Mining cost per tonne of ore mined ($)				99.30				94.86				5	%			92.14				79.73				16	%
			Cash mining cost per tonne of ore mined ($)			73.52				70.56				4	%			68.90				59.44				16	%
			Depreciation and amortization charges per tonne of ore mined ($)			25.78				24.30				6	%			23.24				20.29				15	%
	+	Unit shipping costs ($)				2.81				2.48				13	%			2.52				2.54				-1	%
	+	Milling costs per tonne of ore milled ($)				19.18				15.10				27	%			15.39				12.41				24	%
			Cash milling costs per tonne of ore milled ($)			16.45				12.66				30	%			13.43				10.73				25	%
			Depreciation and amortization charges per tonne of ore milled ($)			2.73				2.44				12	%			1.96				1.68				17	%
	+	Cash production cost per tonne of ore processed ($)				92.78				85.70				8	%			84.85				72.71				17	%
	+	All-in sustaining cost per tonne of ore processed ($)				171.56				156.36				10	%			141.54				128.20				10	%
	+	Cash cost per ounce of Silver, net of by-product credits ($)				(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	%
Concentrate inventory
		Lead concentrate (tonne)				1,267				2,089				-39	%			1,267				2,089				-39	%
		Zinc concentrate (tonne)				562				471				19	%			562				471				19	%
Sales Data
	Metal Sales
		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	%
	Revenue
		Silver (in thousands of $)				22,735				21,239				7	%			121,273				111,191				9	%
		Gold (in thousands of $)				885				1,006				-12	%			5,083				6,722				-24	%
		Lead (in thousands of $)				11,466				8,849				30	%			57,090				50,464				13	%
		Zinc (in thousands of $)				5,295				4,480				18	%			28,842				21,793				32	%
		Other (in thousands of $)				1,209				158				665	%			5,635				1,935				191	%
						41,590				35,732				16	%			217,923				192,105				13	%
	Average Selling Price, Net of Value Added Tax and Smelter Charges
		Silver ($ per ounce)				19.38				20.11				-4	%			19.36				17.61				10	%
		Gold ($ per ounce)				1,475				1,437				3	%			1,495				1,430				5	%
		Lead ($ per pound)				0.93				0.81				15	%			0.90				0.75				20	%
		Zinc ($ per pound)				1.22				0.98				24	%			1.08				0.78				38	%

 

+ Alternative performance (Non-IFRS) measures, see section 12 for reconciliation.

 

 

SILVERCORP METALS INC. Management’s Discussion and Analysis For the Year Ended March 31, 2022 (Tabular amounts are in thousands of U.S. dollars, except share, per share, unit cost, and production data, or unless otherwise stated)

 

(i)

Mine and Mill Production

 

For the year ended March 31, 2022 (“Fiscal 2022”), the Company mined 996,280 tonnes of ore, up 3% or 31,355 tonnes, compared to 964,925 tonnes in the year ended March 31, 2021 (“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.

 

For the three months ended March 31, 2022 (“Q4 Fiscal 2022”), the Company mined 180,505 tonnes of ore, up 11% or 17,433 tonnes, compared to 163,072 tonnes in the three months ended March 31, 2021 (“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.

 

(ii)

Metal Sales

 

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.

 

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.

 

(iii)

Per Tonne Costs1

 

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) 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. The increase was mainly due to the increase in cash production costs as discussed above.

 

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.

 

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

 

(iv)

Costs per Ounce of Silver, Net of By-Product Credits1

 

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. Sales from lead and zinc in Fiscal 2022 amounted to $85.9 million, up $13.6 million compared to $72.3 million in Fiscal 2021.

 

¹ Alternative Performance (Non-IFRS) measure. Please refer to section 12 for reconciliation.

 

 

SILVERCORP METALS INC. Management’s Discussion and Analysis For the Year Ended March 31, 2022 (Tabular amounts are in thousands of U.S. dollars, except share, per share, unit cost, and production data, or unless otherwise stated)

 

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. The increase was mainly due to the increase in cash cost per ounce of silver as discussed above.

 

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.

 

(v)

Exploration and Development

 

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 – 85,221 metres or $31.5 million).

 

In Q4 Fiscal 2021, 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).

 

 

SILVERCORP METALS INC. Management’s Discussion and Analysis For the Year Ended March 31, 2022 (Tabular amounts are in thousands of U.S. dollars, except share, per share, unit cost, and production data, or unless otherwise stated)

 

(b)

Individual Mine Performance

 

(i)

Ying Mining District

 

The following table summarizes the operational information at the Ying Mining District for the three months and the year ended March 31, 2022 and 2021. The Ying Mining District is the Company’s primary source of production, and consists of four mining licenses, containing the SGX-HZG, HPG, TLP-LME-LMW, and DCG mines.

 

Ying Mining District				Three months ended March 31,							Year ended March 31,
				2022		2021		Changes			2022		2021		Changes
Production Data
	Mine Data
		Ore Mined (tonne)		130,612		112,561		16	%		681,398		650,025		5	%
		Ore Milled (tonne)		131,731		131,725		0	%		684,293		651,402		5	%
		Head Grades
			Silver (gram/tonne)	271		280		-3	%		272		290		-6	%
			Lead (%)	3.9		3.9		0	%		3.9		4.3		-9	%
			Zinc (%)	0.8		0.8		0	%		0.8		0.8		0	%
		Recovery Rates Silver (%)		95.2		93.7		2	%		95.1		94.2		1	%
			Lead (%)	96.1		95.1		1	%		95.6		96.0		0	%
			Zinc (%)	57.4		65.0		-12	%		59.7		62.4		-4	%
Cost Data
	+	Mining cost per tonne of ore mined ($)		115.80		113.40		2	%		111.35		95.27		17	%
			Cash mining cost per tonne of ore mined ($)	84.19		83.35		1	%		81.98		69.56		18	%
			Depreciation and amortization charges per tonne of ore mined ($)	31.61		30.05		5	%		29.37		25.71		14	%
	+	Unit shipping costs ($)		3.90		3.55		10	%		3.68		3.76		-2	%
	+	Milling costs per tonne of ore milled ($)		17.19		13.67		26	%		14.24		11.52		24	%
			Cash milling cost per tonne of ore milled ($)	14.40		11.23		28	%		12.10		9.69		25	%
			Depreciation and amortization charges per tonne of ore milled ($)	2.79		2.44		14	%		2.14		1.83		17	%
	+	Cash production cost per tonne of ore processed ($)		102.49		98.13		4	%		97.76		83.01		18	%
	+	All-in sustaining cost per tonne of ore processed ($)		172.63		155.14		11	%		147.52		132.54		11	%
	+	Cash cost per ounce of Silver, net of by-product credits ($)		1.21		1.20		1	%		0.96		(0.39	)	346	%
	+	All-in sustaining cost per ounce of Silver, net of by-product credits ($)		10.76		10.00		8	%		7.93		6.09		30	%
Concentrate inventory
		Lead concentrate (tonne)		1,240		1,922		-35	%		1,240		1,922		-35	%
		Zinc concentrate (tonne)		467		218		114	%		467		218		114	%
Sales Data
	Metal Sales
		Silver (in thousands of ounces)		1,058		936		13	%		5,619		5,610		0	%
		Gold (in thousands of ounces)		0.5		0.7		-29	%		3.4		3.5		-3	%
		Lead (in thousands of pounds)		10,278		9,137		12	%		53,892		56,708		-5	%
		Zinc (in thousands of pounds)		1,524		1,306		17	%		6,609		6,968		-5	%
	Revenue
		Silver (in thousands of $)		20,990		19,474		8	%		111,835		102,100		10	%
		Gold (in thousands of $)		885		1,006		-12	%		5,083		5,169		-2	%
		Lead (in thousands of $)		9,618		7,450		29	%		48,504		42,836		13	%
		Zinc (in thousands of $)		1,908		1,342		42	%		7,489		5,898		27	%
		Other (in thousands of $)		664		182		265	%		3,840		1,294		197	%
				34,065		29,454		16	%		176,751		157,297		12	%
	Average Selling Price, Net of Value Added Tax and Smelter Charges
		Silver ($ per ounce)		19.84		20.81		-5	%		19.90		18.20		9	%
		Gold ($ per ounce)		1,475		1,437		3	%		1,495		1,477		1	%
		Lead ($ per pound)		0.94		0.82		15	%		0.90		0.76		18	%
		Zinc ($ per pound)		1.25		1.03		21	%		1.13		0.85		33	%

 

+ Alternative Performance (Non-IFRS) measures, see section 12 for reconciliation

 

 

SILVERCORP METALS INC. Management’s Discussion and Analysis For the Year Ended March 31, 2022 (Tabular amounts are in thousands of U.S. dollars, except share, per share, unit cost, and production data, or unless otherwise stated)

 

i)

Fiscal 2022 vs. Fiscal 2021

 

In Fiscal 2022, a total of 681,398 tonnes of ore were mined, up 5% compared to 650,025 tonnes in Fiscal 2021. Ore milled was 684,293 tonnes, up 5% compared to 651,402 tonnes in Fiscal 2021.

 

Average head grades of ore processed at the Ying Mining District were 272 g/t for silver, 3.9% for lead, and 0.8% for zinc compared to 290 g/t for silver, 4.3% for lead, and 0.8% for zinc in Fiscal 2021. As reported in the Company’s news release in previous quarters, the decrease was mainly due to the disruptions arising from the mining contract renewal negotiation process and the heavy rainfall experienced at the Ying Mining District.

 

In Fiscal 2022, metals sold were approximately 5.6 million ounces of silver, 3,400 ounces of gold, 53.9 million pounds of lead, and 6.6 million pounds of zinc, compared to 5.6 million ounces of silver, 3,500 ounces of gold, 56.7 million pounds of lead, and 7.0 million pounds of zinc in Fiscal 2021.

 

In Fiscal 2022, the cash production cost per tonne of ore processed at the Ying Mining District was $97.76, up 18% compared to $83.01 in Fiscal 2021. The cash mining cost and milling cost per tonne were $81.98 and $12.10, up 18% and 25% respectively, compared to $69.56 and $9.69 in Fiscal 2021. The increase was mainly due to the same factors for the consolidated results as discussed above.

 

The all-in sustaining cost per tonne of ore processed was $147.52, up 11% compared to $132.54 in Fiscal 2021. The increase was mainly due to the increase in cash production cost per tonne of ore processed.

 

In Fiscal 2022, the cash cost per ounce of silver and all-in sustaining cost per ounce of silver, net of by-product credits, were $0.96 and $7.93, respectively, compared to negative $0.39 and $6.09 in Fiscal 2021. The increase was mainly due to the increase in per tonne production costs, offset by the increase of total by-product credits per ounce of silver.

 

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).

 

ii)

Q4 Fiscal 2022 vs. Q4 Fiscal 2021

 

In Q4 Fiscal 2022, a total of 130,612 tonnes of ore were mined at the Ying Mining District, up 16% or 18,051 tonnes compared to 112,561 tonnes in Q4 Fiscal 2021. Ore milled was 131,731 tonnes, compared to 131,725 tonnes in Q4 Fiscal 2021. Average head grades of ore processed were 271 g/t for silver, 3.9% for lead, and 0.8% for zinc compared to 280 g/t for silver, 3.9% for lead, and 0.8% for zinc, in Q4 Fiscal 2021.

 

In Q4 Fiscal 2022, the Ying Mining District sold approximately 1.1 million ounces of silver, 10.3 million pounds of lead, 1.5 million pounds of zinc, and 500 ounces of gold, increases of 13%, 12% and 17%, respectively, in silver, lead and zinc sold, and a decrease of 29% in gold sold, compared to 0.9 million ounces of silver, 9.1 million pounds of lead, 1.3 million pounds of zinc and 700 ounces of gold, in Q4 Fiscal 2021.

 

In Q4 Fiscal 2022, the cash production cost per tonne of ore processed was $102.49, up 4% compared to $98.13 in Q4 Fiscal 2021. The cash mining cost and milling cost per tonne were $84.19 and $14.40, up 1% and 28% respectively, compared to $83.35 and $11.23 in Q4 Fiscal 2021.

 

The all-in sustaining cash production cost per tonne of ore processed was $172.63, up 11%, compared to $155.14 in Q4 Fiscal 2021.

 

In Q4 Fiscal 2022, the cash cost per ounce of silver and all-in sustaining cost per ounce of silver, net of by-product credits, at the Ying Mining District, were $1.21 and $10.76 respectively, compared to $1.20 and $10.00 in Q4 Fiscal 2021.

 

 

SILVERCORP METALS INC. Management’s Discussion and Analysis For the Year Ended March 31, 2022 (Tabular amounts are in thousands of U.S. dollars, except share, per share, unit cost, and production data, or unless otherwise stated)

 

In Q4 Fiscal 2022, approximately 55,473 metres or $2.2 million worth of diamond drilling (Q4 Fiscal 2021 – 40,438 metres or $1.5 million), of which approximately 42,050 metres or $0.8 million worth of underground drilling were expensed as part of mining costs (Q4 Fiscal 2021 – 32,551 metres or $0.7 million) and approximately 13,423 metres or $1.4 million worth of drilling were capitalized (Q4 Fiscal 2021 – 7,887 metres or $0.8 million). In addition, approximately 4,355 metres or $1.7 million worth of preparation tunnelling was completed and expensed as part of mining costs (Q4 Fiscal 2021 – 5,132 metres or $1.1 million), and approximately 11,603 metres or $5.2 million worth of tunnels, raises, ramps and declines were completed and capitalized (Q4 Fiscal 2021 – 9,414 metres or $4.0 million).

 

(ii)

GC Mine

 

The following table summarizes the operational information at the GC Mine for the three months and the year ended March 31, 2022 and 2021:

 

GC Mine				Three months ended March 31,							Year ended March 31,
				2022		2021		Changes			2022		2021		Changes
Production Data
	Mine Data
		Ore Mined (tonne)		49,893		50,511		-1	%		314,882		314,900		0	%
		Ore Milled (tonne)		50,939		48,949		4	%		318,042		316,179		1	%
		Head Grades
			Silver (gram/tonne)	62		87		-29	%		75		85		-12	%
			Lead (%)	1.4		1.7		-18	%		1.5		1.7		-12	%
			Zinc (%)	2.8		3.3		-15	%		3.2		3.4		-6	%
		Recovery Rates
			Silver (%) *	82.4		81.9		1	%		83.8		82.5		2	%
			Lead (%)	88.7		89.7		-1	%		89.2		89.6		0	%
			Zinc (%)	89.8		88.2		2	%		89.6		88.2		2	%
Cost Data
	+	Mining cost per tonne of ore mined ($)		56.10		53.53		5	%		50.55		47.68		6	%
			Cash mining cost per tonne of ore mined ($)	45.58		42.05		8	%		40.59		38.56		5	%
			Depreciation and amortization charges per tonne of ore mined ($)	10.52		11.48		-8	%		9.96		9.12		9	%
	+	Milling cost per tonne of ore milled ($)		24.32		18.94		28	%		17.89		14.25		26	%
			Cash milling cost per tonne of ore milled ($)	21.75		16.51		32	%		16.31		12.88		27	%
			Depreciation and amortization charges per tonne of ore milled ($)	2.57		2.43		6	%		1.58		1.37		15	%
	+	Cash production cost per tonne of ore processed ($)		67.33		58.56		15	%		56.90		51.44		11	%
	+	All-in sustaining cost per tonne of ore processed ($)		100.13		87.69		14	%		79.56		74.09		7	%
	+	Cash cost per ounce of Silver, net of by-product credits ($)		(16.59	)	(12.80	)	-30	%		(20.91	)	(11.48	)	-82	%
	+	All-in sustaining cost per ounce of Silver, net of by-product credits ($)		(0.39	)	0.52		-175	%		(8.07	)	-		-
Concentrate inventory
		Lead concentrate (tonne)		27		167		-84	%		27		167		-84	%
		Zinc concentrate (tonne)		95		253		-62	%		95		253		-62	%
Sales Data
	Metal Sales
		Silver (in thousands of ounces)		115		120		-4	%		646		705		-8	%
		Lead (in thousands of pounds)		2,001		1,739		15	%		9,671		10,410		-7	%
		Zinc (in thousands of pounds)		2,816		3,274		-14	%		20,200		20,946		-4	%
	Revenue
		Silver (in thousands of $)		1,745		1,765		-1	%		9,438		9,091		4	%
		Lead (in thousands of $)		1,848		1,399		32	%		8,586		7,628		13	%
		Zinc (in thousands of $)		3,387		3,138		8	%		21,353		15,895		34	%
		Other (in thousands of $)		545		(24	)	-2371	%		1,795		641		180	%
				7,525		6,278		20	%		41,172		33,255		24	%
	Average Selling Price, Net of Value Added Tax and Smelter Charges
		Silver ($ per ounce) **		15.17		14.71		3	%		14.61		12.90		13	%
		Lead ($ per pound)		0.92		0.80		15	%		0.89		0.73		22	%
		Zinc ($ per pound)		1.20		0.96		25	%		1.06		0.76		39	%

 

* Silver recovery includes silver recovered in lead concentrate and silver recovered in zinc concentrate.

** Silver in zinc concentrate is subjected to higher smelter and refining charges which lowers the net silver selling price.

+ Alternative Performance (Non-IFRS) measures, see section 12 for reconciliation

 

 

SILVERCORP METALS INC. Management’s Discussion and Analysis For the Year Ended March 31, 2022 (Tabular amounts are in thousands of U.S. dollars, except share, per share, unit cost, and production data, or unless otherwise stated)

 

i)

Fiscal 2022 vs. Fiscal 2021

 

In Fiscal 2022, a total of 314,882 tonnes of ore were mined and 318,042 tonnes were milled at the GC Mine, compared to 314,900 tonnes mined and 316,179 tonnes milled in Fiscal 2021.

 

Average head grades of ore milled were 75 g/t for silver, 1.5% for lead, and 3.2% for zinc compared to 85 g/t for silver, 1.7% for lead, and 3.4% for zinc in Fiscal 2021.

 

Metals sold were approximately 646 thousand ounces of silver, 9.7 million pounds of lead, and 20.2 million pounds of zinc, compared to 705 thousand ounces of silver, 10.4 million pounds of lead, and 20.9 million pounds of zinc in Fiscal 2021.

 

The cash mining and milling cost at the GC Mine was $40.59 and $16.31 per tonne, up 5% and 27% compared to $38.56 and $12.88 per tonne in Fiscal 2021.

 

The cash production cost per tonne was $56.90, up 11%, compared to $51.44 in Fiscal 2021. The all-in sustaining production cost per tonne of ore processed was $79.56, up 7%, compared to $74.09 in Fiscal 2021.

 

The cash cost per ounce of silver and all-in sustaining cost per ounce of silver, net of by-product credits, at the GC Mine, in Fiscal 2022, were negative $20.91 and negative $8.07, respectively, compared to negative $11.48 and $nil in Fiscal 2021. The improvement was mainly due to an increase of $14.84 in by-product credits per ounce of silver, offset by the increase in cash production cost per tonne and all-in sustaining production cost per tonne as discussed above. Revenue from lead and zinc was $29.9 million, up $6.4 million, compared to $23.5 million in Fiscal 2021.

 

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).

 

ii)

Q4 Fiscal 2022 vs. Q4 Fiscal 2021

 

In Q4 Fiscal 2022, a total of 49,893 tonnes of ore were mined and 50,939 tonnes were milled at the GC Mine, compared to 50,511 tonnes mined and 48,949 tonnes milled in Q4 Fiscal 2021. Average head grades of ore milled were 62 g/t for silver, 1.4% for lead, and 2.8% for zinc compared to 87 g/t for silver, 1.7% for lead, and 3.3% for zinc, in Q4 Fiscal 2021.

 

In Q4 Fiscal 2022, the GC Mine sold approximately 115 thousand ounces of silver, 2.0 million pounds of lead, and 2.8 million pounds of zinc, compared to 120 thousand ounces of silver, 1.7 million pounds of lead, and 3.3 million pounds of zinc in Q4 Fiscal 2021.

 

In Q4 Fiscal 2022, the cash mining cost at the GC Mine was $45.58 per tonne, up 8% compared to $42.05 per tonne in Q4 Fiscal 2021. The cash milling cost was $21.75 per tonne, compared to $16.51 in Q4 Fiscal 2021.

 

Correspondingly, the cash production cost per tonne of ore processed at the GC Mine was $67.33, up 15% compared to $58.56 in Q4 Fiscal 2021. The all-in sustaining production cost per tonne of ore processed was $100.13, up 14% compared to $87.69 in Q4 Fiscal 2021.

 

In Q4 Fiscal 2022, the cash cost per ounce of silver and all-in sustaining cost per ounce of silver, net of by-product credits, at the GC Mine were negative $16.59 and negative $0.39 respectively, compared to negative $12.80 and $0.52 in Q4 Fiscal 2021. The decrease was mainly due to an increase of $1.3 million in by-product sales.

 

In Q4 Fiscal 2022, approximately 10,666 metres or $0.4 million worth of diamond drilling (Q4 Fiscal 2021 – 9,021 metres or $0.2 million), of which approximately 8,334 metres or $0.3 million worth of underground drilling were expensed as part of mining costs (Q4 Fiscal 2021 – 9,021 metres or $0.2 million) and approximately 2,332 metres

 

 

SILVERCORP METALS INC. Management’s Discussion and Analysis For the Year Ended March 31, 2022 (Tabular amounts are in thousands of U.S. dollars, except share, per share, unit cost, and production data, or unless otherwise stated)

 

or $0.1 million worth of drilling were capitalized (Q4 Fiscal 2021 – nil). In addition, approximately 1,333 metres or $0.4 million worth of preparation tunnelling was completed and expensed as part of mining costs (Q4 Fiscal 2021 – 1,883 metres or $0.4 million), and approximately 1,737 metres or $0.7 million worth of tunnels, raises, ramps and declines were completed and capitalized (Q4 Fiscal 2021 – 1,389 metres or $0.6 million).

 

(iii)

La Yesca Project

 

In Fiscal 2022, the Company completed 7,971 metres diamond drilling and capitalized $2.6 million expenditures at the La Yesca Project, but assay results are not yet available.

 

(iv)

BYP Mine

 

The BYP Mine was placed on care and maintenance in August 2014 due to required capital upgrades to sustain its ongoing production and the market environment. The Company has been carrying out activities to apply for a new mining permit for gold, but pending a provincial wide rezoning of environmental and ecological areas and the process has taken longer than expected. No guarantee can be given that the new mining permit for the BYP Mine will be issued, or if it is issued, that it will be issued under reasonable operational and/or financial terms, or in a timely manner, or that the Company will be in a position to comply with all conditions that are imposed.

 

(c)

Comparison of Fiscal 2022 Results with Fiscal 2022 Guidance

 

All references to Fiscal 2022 Guidance in this MD&A refer to the “Fiscal 2022 Operating Outlook” section in the Company’s Fiscal 2021 Annual MD&A dated May 20, 2021 (“Fiscal 2022 Guidance”) filed under the Company’s SEDAR profile at www.sedar.com.

 

(i)

Production and Production Costs

 

The following table summarizes the actual production and production costs achieved in Fiscal 2022 compared to the respective Fiscal 2022 Guidance:

 

			Head grades						Metal production						Production costs
	Ore processed		Silver		Lead		Zinc		Silver		Lead		Zinc		Cash cost		AISC
	(tonnes)		(g/t)		(%)		(%)		(Koz)		(Klbs)		(Klbs)		($/t)		($/t)
YTD Fiscal 2022 Actual Results
Ying Mining District	684,293		272		3.9		0.8		5,509		54,883		6,767		97.76		147.52
GC Mine	318,042		75		1.5		3.2		640		9,548		20,045		56.90		79.56
Consolidated	1,002,335		209		3.2		1.5		6,149		64,431		26,812		84.85		141.54
.
Fiscal 2022 Guidance
Ying Mining District	670,000 - 700,000		284		4.2		0.9		5,700-5,900		57,200-59,800		7,800-8,100		87.1-91.7		134.2-141.2
GC Mine	290,000 - 310,000		86		1.5		3.6		600-700		8,500-9,100		19,100-20,400		55.7-59.6		81.3-85.6
Consolidated	960,000 - 1,010,000		223		3.3		1.7		6,300-6,600		65,700-68,900		26,900-28,500		77.7-82.6		130.7-141.7

 

In Fiscal 2022, the Company produced approximately 6.1 million ounces of silver, 3,400 ounces of gold, 64.4 million pounds of lead, and 26.8 million pounds of zinc, slightly below the guidance of 6.3 to 6.6 million ounces of silver, 65.7 to 68.9 million pounds of lead, and 26.9 to 28.5 million pounds of zinc. The shortfall was mainly due to the disruptions arising from the mining contract renewal negotiation process and the heavy rainfall experienced at the Ying Mining District as reported in previous quarters.

 

The consolidated all-in sustaining production costs per tonne was within the guidance while the cash production cost per tonne was slightly over the guidance due to higher than expected appreciation of the Chinese yuan against the US dollar and the increase of mining contractor rate at the Ying Mining District.

 

 

SILVERCORP METALS INC. Management’s Discussion and Analysis For the Year Ended March 31, 2022 (Tabular amounts are in thousands of U.S. dollars, except share, per share, unit cost, and production data, or unless otherwise stated)

 

(ii)

Development and Capital Expenditures

 

The following table summarizes the development work and capitalized expenditures in Fiscal 2022 compared to the Fiscal 2022 Guidance.

 

	Capitalized Development and Expenditures																							Expensed Tunneling		Expensed Drilling
	Ramp Development					Exploration and Development Tunnels					Capitalized Exploration Drilling					Equipment & Facilities			Total					Mining Preparation		Exploration Drilling
	(Metres)		($ Thousand)			(Metres)		($ Thousand)			(Metres)		$ Thousand)			($ Thousand)			(Metres)		($ Thousand)			(Metres)		(Metres)
YTD Fiscal 2022 Actual Results
Ying Mining District	7,279		$	4,858		53,032		$	21,851		135,390		$	10,598		$	8,609		60,311		$	45,916		25,134		216,068
GC Mine	1,012			1,218		12,739			3,049		6,317			240			504		13,751			5,011		6,167		60,382
Corporate and other	-			-		-			-		7,971			2,612			452		-			3,064
Consolidated	8,291		$	6,076		65,771		$	24,900		149,678		$	13,450		$	9,565		74,062		$	53,991		31,301		276,450
Fiscal 2022 Guidance
Ying Mining District	6,100		$	5,200		52,200		$	18,800		50,000		$	3,500		$	6,300		58,300		$	33,800		23,400		148,400
GC Mine	500			400		10,300			3,000		-			-			1,000		10,800			4,400		10,200		58,500
Consolidated	6,600		$	5,600		62,500		$	21,800		50,000		$	3,500		$	7,300		69,100		$	38,200		33,600		206,900

 

Total capital expenditures incurred in Fiscal 2022 was $54.0 million, $15.8 million or 41% over the guidance as the Company completed more drilling, ramp and tunneling development than planned for the purposes of increasing production and defining additional mineral resources. In addition, the $2.6 million capital expenditures incurred at the Las Yesca Project was not included in the Fiscal 2022 Guidance.

 

(d)

Acquisition of Kuanping Silver-Lead-Zinc-Gold Project

 

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 for 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 applying for the mining permit.

 

5.

Fiscal 2023 Operating Outlook

 

The Company reiterates its production guidance for the year ended March 31, 2023 (“Fiscal 2023”) previously announced in the Company’s news release dated February 8, 2022.

 

(a)

Production and Production Costs

 

In Fiscal 2023, the Company continues to expect production of approximately 1,040,000 - 1,140,000 tonnes of ore, yielding 6,300 to 7,900 ounces of gold, 7.0 million to 7.3 million ounces of silver, 68.4 million to 71.3 million pounds of lead, and 32.0 million to 34.5 million pounds of zinc. Fiscal 2023 production guidance represents an anticipated increases of approximately 4% to 14% in ore, 14% to 19% in silver, 85% to 132% in gold, 6% to 11% in lead, and 19% to 29% in zinc productions compared to Fiscal 2022 production results.

 

 

SILVERCORP METALS INC. Management’s Discussion and Analysis For the Year Ended March 31, 2022 (Tabular amounts are in thousands of U.S. dollars, except share, per share, unit cost, and production data, or unless otherwise stated)

 

			Head grades								Metal production								Production costs
	Ore processed (tonnes)		Gold (g/t)		Silver (g/t)		Lead (%)		Zinc (%)		Gold (koz)		Silver (Moz)		Lead (Mlbs)		Zinc (Mlbs)		Cash cost ($/t)		AISC* ($/t)
Fiscal 2023 Guidance
Gold ore	30,000 - 43,000		3.9		60		0.5		-		3.4 - 4.9		0.1 - 0.1		0.3 - 0.5		-		-		-
Silver ore	710,000 - 731,000		0.1		287		3.9		0.9		2.9 - 3.0		6.2 - 6.4		58.6 - 60.4		8.2 - 8.5		-		-
Ying Mining District	740,000 - 774,000		0.3		276		3.8		0.9		6.3 - 7.9		6.3 - 6.5		58.9 - 60.9		8.2 - 8.5		92.3 - 93.7		143.5 - 145.7
GC Mine	300,000 - 330,000		-		93		1.6		3.7		-		0.7 - 0.8		9.5 - 10.4		21.8 - 24.0		54.9 - 57.5		86.1 - 92.0
Consolidated	1,040,000 - 1,140,000		0.2		224		3.2		1.7		6.3 - 7.9		7.0 - 7.3		68.4 - 71.3		32.0 - 34.5		83.3 - 85.9		141.6 - 143.5

 

*Both AISC and cash costs are non-IFRS measures. AISC refers to all-in sustaining costs per tonne of ore processed. Cash costs refer to cash production costs per tonne of ore processed. Foreign exchange rates assumptions used are: US$1 = CAD$1.30, US$1 = RMB¥6.40.

 

(b)

Development and Capital Expenditures

 

The increased production guidance is made possible by over 629,000 metres of exploration and resource upgrade drilling completed at the mines from 2021 to 2022. Other benefits of the extensive drilling include: i) slowing down the rate of mining depth increase, and with some mines, its average mining depths becoming shallower; and ii) reducing the amount of tunnel development as more resources and reserves were identified near existing infrastructures.

 

The table below summarizes the work plan and estimated capital expenditures in Fiscal 2023.

 

	Capitalized Development Work and Expenditures																Expensed
	Ramp Development				Exploration and Development Tunnels				Capitalized Drilling				Equipment, Mill and TSF		Total		Mining Preparation Tunnnels		Underground driling
	(Metres)		($ Million)		(Metres)		($ Million)		(Metres)		($ Million)		($ Million)		($ Million)		(Metres)		(Metres)
Fiscal 2023 Capitalized Work Plan and Capita Expenditure Estimates
Ying Mining District	4,600		3.2		61,300		26.3		110,700		6.8		44.6		80.9		29,000		135,300
GC Mine	-		-		13,200		4.2		14,800		0.4		1.9		6.5		7,600		46,600
Corporate and others	-		-		-		-		10,500		0.7		0.5		1.2		-		-
Consolidated	4,600		3.2		74,500		30.5		136,000		7.9		47.0		88.6		36,600		181,900

 

In Fiscal 2023, the Company plans to: i) complete 4,600 metres of 4.0 x 4.2 metre tunnels as major access and transportation ramps at estimated capitalized expenditures of $3.2 million, representing a 30% decrease in meterage and a 43% decrease in total cost compared to Fiscal 2022 guidance; ii) complete 74,500 metres of exploration and mining development tunnels (2.2x2.6 metres) at estimated capitalized expenditures of $30.5 million, representing a 19% increase in meterage and a 40% increase in cost mainly due to increased tunnel dimension to allow small scale mechanized equipment access, compared to Fiscal 2022 guidance; iii) complete and capitalize 136,000 metres of drilling at an estimated cost of $7.9 million, representing a 172% increase in meterage to prepare for future production and a 126% increase in total cost compared to Fiscal 2022 Guidance; and iv) spend $47.0 million on equipment, mill and tailing storage facility (“TSF”), including $39.9 million towards the construction of a new 3,000 tonne per day flotation mill and 19.1 million cubic metre TSF at the Ying Mining District.

 

In addition to the capitalized tunneling and drilling work, the Company also plans to complete and expense 36,600 metres of mining preparation tunnels and 181,900 metres of underground definition drilling.

 

 

SILVERCORP METALS INC. Management’s Discussion and Analysis For the Year Ended March 31, 2022 (Tabular amounts are in thousands of U.S. dollars, except share, per share, unit cost, and production data, or unless otherwise stated)

 

(i)

Ying Mining District

 

In Fiscal 2023, the Company plans to mine and process 740,000 – 774,000 tonnes of ore at the Ying Mining District, including 30,000 – 43,000 tonnes of gold ore with an expected head grade of 3.9 g/t gold, to produce 6,300 to 7,900 ounces of gold, 6.3 million to 6.5 million ounces of silver, 58.9 million to 60.9 million pounds of lead, and 8.2 million to 8.5 million pounds of zinc. Fiscal 2023 production guidance at the Ying Mining District represents increases of approximately 10% in ore production, 10% in silver production, 3% in lead production, and 5% in zinc production.

 

The cash production cost is expected to be $92.3 to $93.7 per tonne of ore, and the all-in sustaining cost is estimated at $143.5 to $145.7 per tonne of ore processed.

 

In Fiscal 2023, the Ying Mining District plans to: i) complete 4,600 metres of 4.0 x 4.2 metre tunnels as major access and transportation ramps at estimated capitalized expenditures of $3.2 million, representing a 25% decrease in meterage and a 38% decrease in total cost compared to Fiscal 2022 Guidance; ii) complete 61,300 metres of exploration and mining development tunnels (2.2x2.6 metres) at estimated capitalized expenditures of $26.3 million, representing a 17% increase in meterage and a 40% increase in cost mainly due to increased tunnel dimension to allow small scale mechanized equipment access, compared to Fiscal 2022 Guidance; iii) complete and capitalize 110,700 metres of drilling at an estimated cost of $6.8 million, representing a 121% increase in meterage to prepare for future production and a 94% increase in total costs compared to Fiscal 2022 Guidance; and iv) spend $44.6 million on equipment, mill and TSF, including $39.9 million towards the construction of a new 3,000 tonne per day flotation mill and 20 million cubic metre TSF.

 

Excluding the $39.9 million capital expenditures to be incurred on the new mill and TSF, the total capital expenditures at the Ying Mining District are budgeted at $41.0 million, up 21% compared to Fiscal 2022 Guidance as a result of increased tunneling and drilling work, and a substantial increase in the price of explosives.

 

In addition to the capitalized tunneling and drilling work, the Company also plans to complete and expense 29,000 metres of mining preparation tunnels and 135,300 metres of underground drilling at the Ying Mining District.

 

(ii)

GC Mine

 

In Fiscal 2023, the Company plans to mine and process 300,000 to 330,000 tonnes of ore at the GC Mine to produce 700 thousand to 800 thousand ounces of silver, 9.5 million to 10.4 million pounds of lead, and 21.8 million to 24.0 million pounds of zinc. Fiscal 2023 production guidance at the GC Mine represents increases of approximately 3% to 6% in ore production, 14% to 17% in silver production, 12% to 14% in lead production, and 14% to 26% in zinc production compared to Fiscal 2022 Guidance.

 

The cash production cost is expected to be $54.9 to $57.5 per tonne of ore, and the all-in sustaining cost is estimated at $86.1 to $92.0 per tonne of ore processed.

 

In Fiscal 2023, the GC Mine plans to: i) complete and capitalize 13,200 metres of exploration and development tunnels (2.2x2.6 metres) at estimated capital expenditures of $4.2 million, a 28% increase in meterage and a 40% increase in cost mainly due to increased tunnel dimension to allow small scale mechanized equipment access, compared to Fiscal 2022 Guidance; ii) complete and capitalize 14,800 metres of drilling at an estimated cost of $0.4 million, representing a 100% increase in meterage and cost to prepare for future production, compared to Fiscal 2022 Guidance; and iii) spend $1.9 million on equipment and facilities. The total capital expenditures at the GC Mine are budgeted at $6.5 million in Fiscal 2023, up $2.1 million compared to Fiscal 2022 Guidance.

 

In addition to the capitalized tunneling and drilling work, the Company also plans to complete and expense 7,600 metres of tunnels and 46,600 metres of underground drilling at the GC Mine.

 

 

SILVERCORP METALS INC.

Management’s Discussion and Analysis

For the Year Ended March 31, 2022

(Tabular amounts are in thousands of U.S. dollars, except share, per share, unit cost, and production data, or unless otherwise stated)

 

(iii)

Kuanping Project

 

Total capital expenditures at the Kuanping Project in Fiscal 2023 are estimated at $1.2 million, including $0.7 million for a 10,500 metre drilling program and $0.5 million to complete reports and studies to apply for the mining permit.

 

(iv)

New Mill and Tailing Storage Facility

 

The Company has budgeted $29.8 million to construct a new 3,000 tonne per day floatation mill (the “New Mill”) and $38.0 million for a TSF at the Ying Mining District. The New Mill will be equipped with a Knelson gold gravity separation circuit and designed to produce silver-lead, zinc, copper and gold concentrates. The TSF may be constructed in two phases, with approximately 10.2 million cubic metres storage capacity in Phase 1, and approximately 8.9 million cubic metres capacity in Phase 2, for a total storage capacity of 19.1 million cubic metres.

 

In Fiscal 2023, the Company expects to spend $23.8 million on construction of the New Mill and $16.1 million on the TSF. So far, the Company has i) leased 123.46 hectares of land; ii) filed the environmental assessment report and safety report for the TSF with the local county government; iii) completed 142 drill holes, or 5,760 metres of foundation engineering survey drilling at the TSF; iv) elected a contractor to construct approximately 5,100 metres of drain tunnel at the TSF; and v) completed the preliminary engineering design for the New Mill.

 

6.

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 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%).

 

 

SILVERCORP METALS INC.

Management’s Discussion and Analysis

For the Year Ended March 31, 2022

(Tabular amounts are in thousands of U.S. dollars, except share, per share, unit cost, and production data, or unless otherwise stated)

 

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

 

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 Other comprehensive income (loss) attributable to NUAG’s			(6,055	)			(5,833	)
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.

 

 

SILVERCORP METALS INC.

Management’s Discussion and Analysis

For the Year Ended March 31, 2022

(Tabular amounts are in thousands of U.S. dollars, except share, per share, unit cost, and production data, or unless otherwise stated)

 

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:

 

		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 l iabilities			5				-
Total liabilities			580				237
Net assets		$	21,647			$	11,448
Company’s share of net assets of associate		$	6,341			$	3,090

 

 

SILVERCORP METALS INC.

Management’s Discussion and Analysis

For the Year Ended March 31, 2022

(Tabular amounts are in thousands of U.S. dollars, except share, per share, unit cost, and production data, or unless otherwise stated)

 

7.

Overview of Financial Results

 

(a)

Selected Annual and Quarterly Information

  

The following tables set out selected quarterly results for the past twelve quarters as well as selected annual results for the past three years. The dominant factors affecting results presented below are the volatility of the realized selling metal prices and the timing of sales. The results for the quarters ended March 31 are normally affected by the extended Chinese New Year holiday, and during the quarter ended March 31, 2020, the operations in China were shut down for an extra month due to Covid-19.

 

Fiscal 2022		Quarter Ended																Year Ended
(In thousands of USD, other than per share amounts)		Jun 30, 2021				Sep 30, 2021				Dec 31, 2021				Mar 31, 2022				Mar 31, 2022
Revenue		$	58,819			$	58,435			$	59,079			$	41,590			$	217,923
Cost of mine operations		$	33,315			$	34,823			$	37,603				27,881				133,622
Income from mine operations			25,504				23,612				21,476				13,709				84,301
Corporate general and administrative expenses			3,838				3,749				3,310				3,284				14,181
Foreign exchange loss (gain)			450				(2,063	)			(1,813	)			3,159				(267	)
Share of loss in associates			396				469				403				920				2,188
Loss (gain) on equity investments			722				3,365				(1,101	)			499				3,485
Other items			314				460				1,481				(106	)			2,149
Income from operations			19,784				17,632				19,196				5,953				62,565
Finance items			(1,265	)			(481	)			8,171				(932	)			5,493
Income tax expenses			4,817				5,355				3,093				523				13,788
Net income			16,232				12,758				7,932				6,362				43,284
Net income attributable to equity holders of the
Company			12,212				9,393				5,063				3,966				30,634
Basic earnings per share			0.07				0.05				0.03				0.02				0.17
Diluted earnings per share			0.07				0.05				0.03				0.02				0.17
Cash dividend declared			2,202				-				2,211				-				4,413
Cash dividend declared per share			0.0125				-				0.0125				-				0.025
Other financial information
Total assets																			723,538
Total liabilities																			103,424
Total attributable shareholders’ equity																			512,396

  

 

SILVERCORP METALS INC.

Management’s Discussion and Analysis

For the Year Ended March 31, 2022

(Tabular amounts are in thousands of U.S. dollars, except share, per share, unit cost, and production data, or unless otherwise stated)

 

Fiscal 2021		Quarter Ended																Year Ended
(In thousands of USD, other than per share amounts)		Jun 30, 2020				Sep 30, 2020				Dec 31, 2020				Mar 31, 2021				Mar 31, 2021
Revenue		$	46,705			$	56,372			$	53,296			$	35,732			$	192,105
Cost of mine operations		$	27,420			$	29,700			$	28,495				22,328				107,943
Income from mine operations			19,285				26,672				24,801				13,404				84,162
Corporate general and administrative expenses			2,687				2,784				3,525				3,369				12,365
Foreign exchange loss			2,670				1,349				2,954				773				7,746
Share of loss in associates			161				319				550				816				1,846
Loss (gain) on equity investments			(5,466	)			(2,771	)			(600	)			1,105				(7,732	)
Other items			(3,841	)			214				(258	)			2,098				(1,787	)
Income from operations			23,074				24,777				18,630				5,243				71,724
Finance items			(800	)			(657	)			295				(617	)			(1,779	)
Income tax expenses (recovery)			5,382				5,877				6,046				(4,311	)			12,994
Net income			18,492				19,557				12,289				10,171				60,509
Net income attributable to equity holders of the Company			15,491				15,472				8,392				7,021				46,376
Basic earnings per share			0.09				0.09				0.05				0.04				0.27
Diluted earnings per share			0.09				0.09				0.05				0.04				0.26
Cash dividend declared			2,178				-				2,190				-				4,368
Cash dividend declared per share			0.0125				-				0.0125				-				0.025
Other financial information
Total assets																			652,642
Total liabilities																			86,914
Total attributable shareholders’ equity																			467,574

  

Fiscal 2020		Quarter Ended																Year Ended
(In thousands of USD, other than per share amounts)		Jun 30, 2019				Sep 30, 2019				Dec 31, 2019				Mar 31, 2020				Mar 31, 2020
Revenue		$	45,576			$	49,886			$	44,508			$	18,859			$	158,829
Cost of mine operations			27,843				27,219				28,738				15,655				99,455
Income from mine operations			17,733				22,667				15,770				3,204				59,374
Corporate general and administrative			2,353				2,583				2,568				2,590				10,094
Foreign exchange loss (gain)			854				(797	)			1,277				(5,437	)			(4,103	)
Share of loss in associates			281				244				322				429				1,276
Dilution gain on investment in associate			(723	)			-				-				-				(723	)
Gain on disposal of mineral rights and properties			(1,477	)			-				-				-				(1,477	)
Gain on equity investments			-				-				-				-				-
Other items			386				519				160				1,080				2,145
Income from operations			16,059				20,118				11,443				4,542				52,162
Finance items			(754	)			(682	)			(988	)			474				(1,950	)
Income tax expenses (recovery)			(488	)			5,139				3,715				543				8,909
Net income			17,301				15,661				8,716				3,525				45,203
Net income attributable to equity holders of the Company			12,607				12,221				6,283				3,163				34,274
Basic earnings per share			0.07				0.07				0.04				0.02				0.20
Diluted earnings per share			0.07				0.07				0.04				0.02				0.20
Cash dividend declared			2,125				-				2,162				-				4,287
Cash dividend declared per share			0.0125				-				0.0125				-				0.025
Other financial information
Total assets																			512,760
Total liabilities																			73,788
Total attributable shareholders’ equity																			368,682

  

 

SILVERCORP METALS INC. Management’s Discussion and Analysis For the Year Ended March 31, 2022 (Tabular amounts are in thousands of U.S. dollars, except share, per share, unit cost, and production data, or unless otherwise stated)

 

(b) Overview of Annual 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 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 net 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 from BYP mine before it was placed on care and maintenance in 2014.

 

Fluctuation in sales revenue is mainly dependent on metal sales and realized metal prices. The net realized selling price is calculated using the Shanghai Metal Exchange (“SME”) price, less smelter charges, recovery, and value added tax (“VAT”). The metal prices quoted on SME, excluding gold, include VAT. The following table is a comparison among the Company’s net realized selling prices, prices quoted on SME, and prices quoted on London Metal Exchange (“LME”):

 

		Silver (in US$/ounce)				Gold (in US$/ounce)				Lead (in US$/pound)				Zinc (in US$/pound)
		F2022		F2021		F2022		F2021		F2022		F2021		F2022		F2021
Net realized selling prices	$	19.36	$	17.61	$	1,495	$	1,430	$	0.90	$	0.75	$	1.08	$	0.78
SME	$	24.58	$	22.93	$	1,826	$	1,800	$	1.08	$	1.00	$	1.65	$	1.29
LME	$	24.58	$	22.92	$	1,819	$	1,825	$	1.03	$	0.86	$	1.47	$	1.11

 

Cost of mine operations in Fiscal 2022 was $133.6 million, up 24% compared to $107.9 million in Fiscal 2021. Items included in cost of mine operations are summarized as follows:

 

		Fiscal 2022				Fiscal 2021				Change
Production costs		$	88,537			$	69,544				27	%
Depreciation and amortization			25,082				21,434				17	%
Mineral resource taxes			5,952				5,004				19	%
Government fees and other taxes			2,643				2,374				11	%
General and administrative			11,408				9,587				19	%
		$	133,622				107,943				24	%

 

Production costs expensed in Fiscal 2022 were $88.5 million, up 27% compared to $69.5 million in Fiscal 2021. The increase was mainly due to the increase in per tonne production costs and more ore processed. The production costs expensed represent approximately 1,043,450 tonnes of ore processed and expensed at $84.85 per tonne, compared to approximately 956,460 tonnes of ore processed and expensed at $72.71 per tonne in Fiscal 2021.

 

The increases in the mineral resource taxes and government fees and other taxes were mainly due to higher revenue achieved in Fiscal 2022. Government fees and other taxes are comprised of environmental protection fees, surtaxes on VAT, land usage levies, stamp duties and other miscellaneous levies, duties and taxes imposed by the state and local Chinese governments.

 

SILVERCORP METALS INC. Management’s Discussion and Analysis For the Year Ended March 31, 2022 (Tabular amounts are in thousands of U.S. dollars, except share, per share, unit cost, and production data, or unless otherwise stated)

 

General and administrative expenses for the mine operations in Fiscal 2022 were $11.4 million, up 19% compared to $9.6 million in Fiscal 2021. The increase was mainly due to the increase in salaries and benefits as results of i) an increase in employees’ pay rates; ii) additional staff in preparation for production expansion and new project; and iii) the contribution to the employees’ social welfare funds in China returning to the normal rate from a reduced contribution rate granted by the Chinese government in Fiscal 2021 due to Covid-19. Items included in general and administrative expenses in Fiscal 2022 are summarized as follows:

 

			Fiscal 2022				Fiscal 2021				Change
Amortization and depreciation		$	1,354			$	1,255				8	%
Office and administrative expenses			3,149				2,897				9	%
Professional Fees			428				442				-3	%
Salaries and benefits			6,477				4,993				30	%
		$	11,408			$	9,587				19	%

 

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.

 

Corporate general and administrative expenses in Fiscal 2022 were $14.2 million, up 15% compared to $12.4 million in Fiscal 2021. The increase was mainly due to the increase in non-cash share-based compensation expenses. Items included in corporate general and administrative expenses are summarized as follows:

 

			Fiscal 2022				Fiscal 2021				Change
Amortization and depreciation		$	593			$	533				11	%
Office and administrative expenses			1,598				1,946				-18	%
Professional Fees			771				783				-2	%
Salaries and benefits			5,392				4,947				9	%
Share-based compensation			5,827				4,156				40	%
		$	14,181			$	12,365				15	%

 

Property evaluation and business development expenses in Fiscal 2022 were $0.9 million, compared to a recovery of $3.2 million in Fiscal 2021. In Fiscal 2021, a break fee of $6.5 million, net of expenses of $2.5 million, was included as a recovery of property evaluation and business development expenses.

 

Foreign exchange gain in Fiscal 2022 was $0.3 million compared to a loss of $7.7 million in Fiscal 2021. The foreign exchange gain or loss is mainly driven by the exchange rate between the US dollar and the Canadian dollar.

 

Share of loss in associates in Fiscal 2022 was $2.2 million, compared to $1.8 million in Fiscal 2021. Share of loss in an associate represents the Company’s equity pickup in NUAG and WHG.

 

Loss on equity investments in Fiscal 2022 was $3.5 million, compared to a gain of $7.7 million in Fiscal 2021. The gain or loss on equity investments includes changes from the investment in mark-to-market equity instruments.

 

Finance income in Fiscal 2022 was $5.2 million compared to $3.8 million in Fiscal 2021. The Company invests in short-term investments which include term deposits, money market instruments, and bonds.

 

Finance costs in Fiscal 2022 was $10.7 million compared to $2.0 million in Fiscal 2021. The finance costs included $10.6 million impairment charge against short-term investment in bonds, compared to $1.4 million in Fiscal 2021.

 

Income tax expenses in Fiscal 2022 were $13.8 million, up $0.8 million compared to $13.0 million in Fiscal 2021. The income tax expenses recorded in Fiscal 2022 included a current income tax expenses of $8.8 million (Fiscal 2021 - $10.9 million) and a deferred income tax expenses of $5.0 million (Fiscal 2021 - $2.1 million).

 

SILVERCORP METALS INC. Management’s Discussion and Analysis For the Year Ended March 31, 2022 (Tabular amounts are in thousands of U.S. dollars, except share, per share, unit cost, and production data, or unless otherwise stated)

 

(c) Overview of Fourth Quarter Financial Results

 

Net income attributable to equity holders of the Company in Q4 Fiscal 2022 was $4.0 million or $0.02 per share, compared to $7.0 million or $0.04 per share in 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.

 

The following table is a comparison among the Company’s net realized selling prices, prices quoted on SME, and prices quoted on LME:

 

		Silver (in US$/ounce)								Gold (in US$/ounce)								Lead (in US$/pound)								Zinc (in US$/pound)
		Q4 2022				Q4 2021				Q4 2022				Q4 2021				Q4 2022				Q4 2021				Q4 2022				Q4 2021
Net realized selling prices		$	19.38			$	20.11			$	1,475			$	1,437			$	0.93			$	0.81			$	1.22			$	0.98
SME		$	23.97			$	25.68			$	1,885			$	1,800			$	1.09			$	1.05			$	1.80			$	1.47
LME		$	24.01			$	26.26			$	1,877			$	1,794			$	1.05			$	0.92			$	1.69			$	1.25

 

Cost of mine operations in Q4 Fiscal 2022 was $27.9 million, up 25% compared to $22.3 million in Q4 Fiscal 2021. Items included in cost of mine operations are summarized as follows:

 

			Q4 Fiscal 2022				Q4 Fiscal 2021				Change
Production costs		$	18,226			$	14,084				29	%
Depreciation and amortization			5,168				4,507				15	%
Mineral resource taxes			1,012				898				13	%
Government fees and other taxes			446				409				9	%
General and administrative			3,029				2,431				25	%
		$	27,881				22,329				25	%

 

Production costs expensed in Q4 Fiscal 2022 were $18.2 million, up 29% compared to $14.1 million during the same prior year period. The increase was mainly due to the increase in per tonne production cost and more silver and lead sold. The production costs expensed represent approximately 196,440 tonnes of ore processed and expensed at $92.78 per tonne, compared to approximately 164,340 tonnes of ore processed and expensed at $85.70 per tonne In Q4 Fiscal 2021.

 

Items included in general and administrative expenses for the mine operations In Q4 Fiscal 2022 are summarized as follows:

 

			Q4 Fiscal 2022				Q4 Fiscal 2021				Change
Amortization and depreciation		$	340			$	333				2	%
Office and administrative expenses			729				670				9	%
Professional Fees			102				97				5	%
Salaries and benefits			1,858				1,331				40	%
		$	3,029			$	2,431				25	%

 

SILVERCORP METALS INC. Management’s Discussion and Analysis For the Year Ended March 31, 2022 (Tabular amounts are in thousands of U.S. dollars, except share, per share, unit cost, and production data, or unless otherwise stated)

 

 

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.

 

Corporate general and administrative expenses in Q4 Fiscal 2022 were $3.3 million, down 3% compared to $3.4 million In Q4 Fiscal 2021. Items included in corporate general and administrative expenses are summarized as follows:

 

			Q4 Fiscal 2022				Q4 Fiscal 2021				Change
Amortization and depreciation		$	158			$	142				11	%
Office and administrative expenses			370				387				-4	%
Professional Fees			248				222				12	%
Salaries and benefits			1,556				1,373				13	%
Share-based compensation			952				1,245				-24	%
		$	3,284			$	3,369				-3	%

 

Property evaluation and business development expenses in Q4 Fiscal 2022 were $0.1 million, compared to $0.2 million in Q4 Fiscal 2021.

 

Foreign exchange gain in Q4 Fiscal 2022 was $3.2 million compared to $0.8 million in Q4 Fiscal 2021.

 

Share of loss in associates in Q4 Fiscal 2022 was $0.9 million, compared to $0.8 million in Q4 Fiscal 2021.

 

Loss on equity investments in Q4 Fiscal 2022 was $0.5 million, compared to $1.1 million in Q4 Fiscal 2021., mainly arising from changes due to the mark-to-market adjustments.

 

Finance income in Q4 Fiscal 2022 was $1.0 million compared to $1.0 million in Q4 Fiscal 2021.

 

Finance costs in Q4 Fiscal 2022 was $0.1 million compared to $0.4 million in Q4 Fiscal 2021.

 

Income tax expenses in Q4 Fiscal 2022 were $0.5 million, compared to a recovery of $4.3 million in the Q4 Fiscal 2021. The income tax expenses recorded in Q4 Fiscal 2022 included a current income tax expenses of $0.4 million (Q4 Fiscal 2021 – a recovery of $3.3 million) and a deferred income tax expense of $0.1 million (Q4 Fiscal 2021 – $1.0 million). In Q4 Fiscal 2022, Guangdong Found was recognized as a High and New Technology Enterprise (“HNTE”) and its effective income tax rate was reduced to 15% from 25%, while Henan Found was recognized as a HNTE in Q4 Fiscal 2021.

 

8.

Liquidity and Capital Resources

 

As at		March 31, 2022				March 31, 2021				Changes
Cash and cash equivalents		$	113,302			$	118,735			$	(5,433	)
Short-term investments			99,623				80,357				19,266
		$	212,925			$	199,092			$	13,833
Working capital		$	186,270			$	184,014			$	2,256

 

Cash, cash equivalents and short-term investments as at March 31, 2022 were $212.9 million, 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.

 

 

SILVERCORP METALS INC. Management’s Discussion and Analysis For the Year Ended March 31, 2022 (Tabular amounts are in thousands of U.S. dollars, except share, per share, unit cost, and production data, or unless otherwise stated)

 

		Three months ended March 31,												Year ended March 31,
		2022				2021				Changes				2022				2021				Changes
Cash flow
Cash provided by operating activities		$	11,406			$	2,231			$	9,175			$	107,378			$	85,912			$	21,466
Cash provided by (used in) investing activities			(50,997	)			10,429				(61,426	)			(106,626	)			(40,974	)			(65,652	)
Cash provided by financing activities			645				838				(193	)			(7,426	)			(1,453	)			(5,973	)
Increase (decrease) in cash and cash equivalents			(38,946	)			13,498				(52,444	)			(6,674	)			43,485				(50,159	)
Effect of exchange rate changes on cash and cash equivalents			221				467				(246	)			1,241				9,473				(8,232	)
Cash and cash equivalents, beginning of the period			152,027				104,770				47,257				118,735				65,777				52,958
Cash and cash equivalents, end of the period		$	113,302			$	118,735			$	(5,433	)		$	113,302			$	118,735			$	(5,433	)

 

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 increase was due to:

 

·

$100.9 million cash flow from operating activities before changes in non-cash operating working capital, up 22% or $18.1 million, compared to $82.8 million in Fiscal 2021; offset by

 

·

$6.4 million cash inflow from a reduction in non-cash working capital, compared to $3.1 million in Fiscal 2021.

 

In Q4 Fiscal 2022, cash flow provided by operating activities was $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.

 

Cash flow used in investing activities in Fiscal 2022 was $106.6 million, compared to $41.0 million cash used in Fiscal 2021, and comprised mostly of:

 

·

$43.3 million spent on mineral exploration and development expenditures (Fiscal 2021 - $35.7 million);

 

·

$13.1 million paid for the acquisition of the Kuanping Project (Fiscal 2021 - $7.6 million paid for the acquisition of La Yesca Project)

 

·

$10.7 million spent to acquire plant and equipment (Fiscal 2021 - $9.0 million);

 

·

$8.2 million spent on the acquisition of other investments (Fiscal 2021 - $12.7 million);

 

·

$5.3 million spent on investment in associates (Fiscal 2021 - $7.1million), including $5.0 million investment in WHG (Fiscal 2021 - $1.3 million) and $0.3 million in NUAG (Fiscal 2021 - $5.8million); and

 

·

$27.2 million spent on net purchase of short-term investments (Fiscal 2021 - $9.8 million proceeds from net redemption).

 

In Q4 Fiscal 2022, cash flow used in investing activities was $51.0 million (Q4 Fiscal 2021 – $10.4 million provided by investing activities) and comprised mostly of:

 

·

$7.8 million spent on mineral exploration and development expenditures (Q4 Fiscal 2021 - $6.5 million);

 

·

$nil paid for the acquisition of mineral project (Q4 Fiscal 2021 - $1.0 million for the acquisition of La Yesca Project);

 

·

$3.6 million spent to acquire plant and equipment (Q4 Fiscal 2021 - $2.9 million);

 

·

$0.8 million spent on the acquisition of other investments (Q4 Fiscal 2021 - $nil); and

 

·

$39.2 million spent on net purchase of short-term investments (Q4 Fiscal 2021 - $19.1 million proceeds from the net redemptions); offset by

 

●	$0.4 million proceeds from disposal of other investments (Q4 Fiscal 2021 - $1.4 million).

 

Cash flow used in financing activities in Fiscal 2022 was $7.4 million, compared to $1.5 million in Fiscal 2021, and comprised mostly of:

 

SILVERCORP METALS INC. Management’s Discussion and Analysis For the Year Ended March 31, 2022 (Tabular amounts are in thousands of U.S. dollars, except share, per share, unit cost, and production data, or unless otherwise stated)

 

●	$5.1 million in distributions to non-controlling shareholders (Fiscal 2021 - $3.2 million);

 

●	$4.4 million cash dividends paid to the equity shareholders of the Company (Fiscal 2021 - $4.4 million);

 

●	$0.6 million lease payment (Fiscal 2021 - $0.6 million); offset by

 

●	$0.8 million received from a related party for a loan repayment (Fiscal 2021 - $1.4 million);

 

●	$1.9 million cash received arising from exercise of stock options (Fiscal 2021 - $3.5 million).

 

In Q4 Fiscal 2022, cash flow provided by financing activities was $0.6 million (Q4 Fiscal 2021 - $0.8 million) and comprised mostly of:

 

●	$0.8 million received from a related party for a loan repayment while a loan of $2.2 million made to the related party in Q4 Fiscal 2021;

 

●	$nil contribution received from non-controlling interests’ shareholders (Q4 Fiscal 2021 - $2.5 million);

 

●	$nil received arising from exercise of stock options (Q4 Fiscal 2021 - $0.7 million); and offset by

 

●	$0.2 million lease payment (Q4 Fiscal 2021 - $0.1 million).

 

Available sources of funding

 

The Company does not have unlimited resources and its future capital requirements will depend on many factors, including, among others, cash flow from operations. To the extent that its existing resources and the funds generated by future income are insufficient to fund the Company’s operations, the Company may need to raise additional funds through public or private debt or equity financing. If additional funds are raised through the issuance of equity securities, the percentage ownership of current shareholders will be reduced, and such equity securities may have rights, preferences or privileges senior to those of the holders of the Company’s common shares. No assurance can be given that additional financing will be available or that, if available, can be obtained on terms favourable to the Company and its shareholders. If adequate funds are not available, the Company may be required to delay, limit or eliminate some or all of its proposed operations. The Company believes it has sufficient capital to meet its cash needs for the next 12 months, including the cost of compliance with continuing reporting requirements.

 

9.	Financial Instruments and Related Risks

 

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.

 

SILVERCORP METALS INC. Management’s Discussion and Analysis For the Year Ended March 31, 2022 (Tabular amounts are in thousands of U.S. dollars, except share, per share, unit cost, and production data, or unless otherwise stated)

 

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.

 

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

 

 

SILVERCORP METALS INC. Management’s Discussion and Analysis For the Year Ended March 31, 2022 (Tabular amounts are in thousands of U.S. dollars, except share, per share, unit cost, and production data, or unless otherwise stated)

 

(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:

 

		USD				USD
		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.

 

(e)

Credit risk

 

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

 

 

SILVERCORP METALS INC. Management’s Discussion and Analysis For the Year Ended March 31, 2022 (Tabular amounts are in thousands of U.S. dollars, except share, per share, unit cost, and production data, or unless otherwise stated)

 

10.	Off-Balance Sheet Arrangements

 

The Company does not have any off-balance sheet arrangements.

 

11.	Transactions with Related Parties

 

Related party transactions are made on terms agreed upon with the related parties. The balances with related parties are unsecured and due on demand. Related party transactions not disclosed elsewhere in this MD&A 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.

 

(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

 

12.	Alternative Performance (Non-IFRS) Measures

 

The following alternative performance measures are used by the Company to manage and evaluate operating performance of the Company’s mines and are widely reported in the silver mining industry as benchmarks for performance but are alternative performance (non-IFRS) measures that do not have standardized meaning prescribed by IFRS and therefore unlikely to be comparable to similar measures presented by other companies. Accordingly, it is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. To facilitate a better understanding

 

SILVERCORP METALS INC. Management’s Discussion and Analysis For the Year Ended March 31, 2022 (Tabular amounts are in thousands of U.S. dollars, except share, per share, unit cost, and production data, or unless otherwise stated)

 

of these measures, the tables in this section provide the reconciliation of these measures to the financial statements for the three months and the year ended March 31, 2022 and 2021:

 

(a)	Adjusted Earnings and Adjusted Earnings per Share

 

Adjusted earnings and adjusted earnings per share are non-IFRS measures and supplement information to the Company’s consolidated financial statements. The Company believes that, in addition to the conventional measures prepared in accordance with IFRS, the Company and certain investors and analysts use this information to evaluate the Company’s underlying core operating performance. The presentation of adjusted earnings and adjusted earnings per share is not meant to be a substitute of net income and net income per share presented in accordance with IFRS, but rather should be evaluated in conjunction with such IFRS measure.

 

The Company defines the adjusted earnings as net income adjusted to exclude certain non-cash and unusual items, and items that in the Company’s judgment are subject to volatility as a result of factors which are unrelated to the Company’s operation in the period, and/or relate to items that will settle in future period, including impairment adjustments and reversal, foreign exchange gain or loss, dilution gain or loss, share-based compensation, share of gain or loss of associates, gain or loss on investments, and other non-recurring items. Certain items that become applicable in a period may be adjusted for, with the Company retroactively presenting comparable periods with an adjustment for such items and, conversely, items no longer applicable may be removed from the calculation. The following table provides a detailed reconciliation of net income as reported in the Company’s consolidated financial statements to adjusted earnings and adjusted earning per share.

 

		Three months ended March 31,								Year ended March 31,
		2022				2021				2022				2021
Net income as reported for the period		$	6,362			$	10,171			$	43,284			$	60,509
Adjustments, net of tax
Share-based compensation included in general and administrative			952				1,245			$	5,827			$	4,156
One time break fee recovery included in property evaluation and business development			-				-				-				(3,970	)
Foreign exchange loss (gain)			3,159				773				(267	)			7,746
Share of loss in associates			920				816				2,188				1,846
Loss (gain) on equity investments			499				1,105				3,485				(7,732	)
Impairment loss on bonds investments included in finance costs			-				-				10,560				1,376
Adjusted earnings for the period		$	11,892			$	14,110			$	65,077			$	63,931
Non-controlling interest as reported			2,396				3,150				12,650				14,133
Adjusted earnings attributable to equity holders		$	9,496			$	10,960			$	52,427			$	49,798
Adjusted earnings per share attributable to the equity shareholders of the Company
Basic adjusted earning per share		$	0.05			$	0.06			$	0.30			$	0.28
Diluted adjusted earning per share		$	0.05			$	0.06			$	0.29			$	0.28
Basic weighted average shares outstanding			177,105,799				175,530,456				176,534,501				174,868,256
Diluted weighted average shares outstanding			178,741,964				177,398,782				178,323,968				177,074,004

 

(b)	Working Capital

 

Working capital is an alternative performance (non-IFRS) measure calculated as current assets less current liabilities. Working capital dose not have any standardized meaning prescribed by IFRS and is therefore unlikely to be comparable to similar measures presented by other companies. The Company and certain investors use this information to evaluate whether the Company is able to meet its current obligations using its current assets.

 

SILVERCORP METALS INC. Management’s Discussion and Analysis For the Year Ended March 31, 2022 (Tabular amounts are in thousands of U.S. dollars, except share, per share, unit cost, and production data, or unless otherwise stated)

 

(c)	Costs per Ounce of Silver

 

Cash cost and all-in sustaining cost (“AISC”) per ounce of silver, net of by-product credits, are non-IFRS measures. The Company produces by-product metals incidentally to our silver mining activities. We have adopted the practice of calculating a performance measure with the net cost of producing an ounce of silver, our primary payable metal, after deducting revenues gained from incidental by-product production. This performance measure has been commonly used in the mining industry for many years and was developed as a relatively simple way of comparing the net production costs of the primary metal for a specific period against the prevailing market price of such metal.

 

Cash cost is calculated by deducting revenue from the sales of all metals other than silver and is calculated per ounce of silver sold.

 

AISC is an extension of the “cash cost” metric and provides a comprehensive measure of the Company’s operating performance and ability to generate cash flows. AISC has been calculated based on World Gold Council (“WGC”)

 

guidance released in 2013 and updated in 2018. The WGC is not a regulatory organization and does not have the authority to develop accounting standards for disclosure requirements.

 

AISC is based on the Company’s cash costs, net of by-product sales, and further includes corporate general and administrative expense, government fees and other taxes, reclamation cost accretion, lease liability payments, and sustaining capital expenditures. Sustaining capital expenditures are those costs incurred to sustain and maintain existing assets at current productive capacity and constant planned levels of production output. Excluded are non-sustaining capital expenditures, which result in a material increase in the life of assets, materially increase resources or reserves, productive capacity, or future earning potential, or significant improvement in recovery or grade, or which do not relate to the current production activities. The Company believes that this measure represents the total sustainable costs of producing silver from current operations and provides additional information about the Company’s operational performance and ability to generate cash flows.

 

The following table provides a reconciliation of cash cost and AISC per ounce of silver, net of by-product credits:

 

				Year ended March 31, 2022																				Year ended March 31, 2021
(Expressed in thousands of U.S. dollars, except ounce and per ounce amount)				Ying Mining District				GC				Other				Corporate				Consolidated				Ying Mining District				GC				Other				Corporate				Consolidated
Production costs expensed as reported		A		$	70,309			$	18,228			$	-			$	-			$	88,537			$	53,023				16,072			$	449			$	-			$	69,544
By-product sales
Gold					(5,083	)			-				-				-				(5,083	)			(5,169	)			-				(1,553	)			-				(6,722	)
Lead					(48,504	)			(8,586	)			-				-				(57,090	)			(42,836	)			(7,628	)			-				-				(50,464	)
Zinc					(7,489	)			(21,353	)			-				-				(28,842	)			(5,898	)			(15,895	)			-				-				(21,793	)
Other					(3,840	)			(1,795	)			-				-				(5,635	)			(1,294	)			(641	)			-				-				(1,935	)
Total by-product sales		B			(64,916	)			(31,734	)			-				-				(96,650	)			(55,197	)			(24,164	)			(1,553	)			-				(80,914	)
Total cash cost, net of by-product credits		C=A+B			5,393				(13,506	)			-				-				(8,113	)			(2,174	)			(8,092	)			(1,104	)			-				(11,370	)
Add: Mineral resources tax					4,865				1,087				-				-				5,952				4,072				932				-				-				5,004
General and administrative					8,228				2,651				529				14,181				25,589				6,191				2,812				584				12,365				21,952
Amortization included in general and administrative					(562	)			(398	)			(395	)			(593	)			(1,948	)			(507	)			(373	)			(376	)			(533	)			(1,789	)
Property evaluation and business development*					-				-				122				799				921				-				-				42				691				733
Government fees and other taxes					1,960				669				14				-				2,643				1,781				588				5				-				2,374
Reclamation accretion					209				25				35				-				269				196				26				30				-				252
Lease payment					-				-				-				637				637				-				-				-				563				563
Sustaining capital expenditures					24,472				4,259				106				128				28,965				24,603				4,110				389				501				29,603
All-in sustaining cost, net of by-product credits		F			44,565				(5,213	)			411				15,152				54,915				34,162				3				(430	)			13,587				47,322
Add: Non-sustaining capital expenditures					21,470				959				2,676				-				25,105				11,698				852				2,480				-				15,030
All-in cost, net of by-product credits		G			66,035				(4,254	)			3,087				15,152				80,020				45,860				855				2,050				13,587				62,352
Silver ounces sold (‘000s)		H			5,619				646				-				-				6,265				5,610				705				-				-				6,315
Cash cost per ounce of silver, net of by-product credits		(A+B)/H		$	0.96			$	(20.91	)		$	-			$	-			$	(1.29	)		$	(0.39	)		$	(11.48	)		$	-			$	-			$	(1.80	)
All-in sustaining cost per ounce of silver, net of by-product credits		F/H		$	7.93			$	(8.07	)		$	-			$	-			$	8.77			$	6.09			$	-			$	-			$	-			$	7.49
All-in cost per ounce of silver, net of by-product credits		G/H		$	11.75			$	(6.59	)		$	-			$	-			$	12.77			$	8.17			$	1.21			$	-			$	-			$	9.87
By-product credits per ounce of silver
Gold					(0.90	)			-				-				-				(0.81	)			(0.92	)			-				-				-				(1.06	)
Lead					(8.63	)			(13.29	)			-				-				(9.11	)			(7.64	)			(10.82	)			-				-				(7.99	)
Zinc					(1.33	)			(33.05	)			-				-				(4.60	)			(1.05	)			(22.55	)			-				-				(3.45	)
Other					(0.68	)			(2.78	)			-				-				(0.90	)			(0.23	)			(0.91	)			-				-				(0.31	)
Total by-product credits per ounce of silver				$	(11.54	)		$	(49.12	)		$	-			$	-			$	(15.42	)		$	(9.84	)		$	(34.28	)		$	-			$	-			$	(12.81	)

* Recovery of $3,970, arising the break fee of $6,497 (CAD$9,000) receipt from Guyana Goldfields net of expenses of $2,527, was excluded for the year ended March 31, 2021

 

 

SILVERCORP METALS INC. Management’s Discussion and Analysis For the Year Ended March 31, 2022 (Tabular amounts are in thousands of U.S. dollars, except share, per share, unit cost, and production data, or unless otherwise stated)

 

				Three months ended March 31, 2022																				Three months ended March 31, 2021
(Expressed in thousands of U.S. dollars, except ounce and per ounce amount)				Ying Mining District				GC				Other				Corporate				Consolidated				Ying Mining District				GC				Other				Corporate				Consolidated
Production costs expensed as reported		A		$	14,354			$	3,872			$	-			$	-			$	18,226			$	11,107				2,977			$	-			$	-			$	14,084
By-product sales
Gold					(885	)			-				-				-				(885	)			(1,006	)			-				-				-				(1,006	)
Lead					(9,618	)			(1,848	)			-				-				(11,466	)			(7,450	)			(1,399	)			-				-				(8,849	)
Zinc					(1,908	)			(3,387	)			-				-				(5,295	)			(1,342	)			(3,138	)			-				-				(4,480	)
Other					(664	)			(545	)			-				-				(1,209	)			(182	)			24				-				-				(158	)
Total by-product sales		B			(13,075	)			(5,780	)			-				-				(18,855	)			(9,980	)			(4,513	)			-				-				(14,493	)
Total cash cost, net of by-product credits		C=A-B			1,279				(1,908	)			-				-				(629	)			1,127				(1,536	)			-				-				(409	)
Add: Mineral resources tax					820				192				-				-				1,012				726				172				-				-				898
General and administrative					2,243				657				129				3,284				6,313				1,600				698				133				3,369				5,800
Amortization included in general and administrative					(142	)			(101	)			(97	)			(158	)			(498	)			(136	)			(98	)			(100	)			(142	)			(476	)
Property evaluation and business development*					-				-				12				71				83				-				-				42				171				213
Government fees and other taxes					345				96				5				-				446				320				89				-				-				409
Reclamation accretion					52				6				9				-				67				51				7				8				-				66
Lease payment					-				-				-				167				167				-				-				-				149				149
Sustaining capital expenditures					6,790				1,013				5				5				7,813				5,674				730				193				8				6,605
All-in sustaining cost, net of by-product credits		F			11,387				(45	)			63				3,369				14,774				9,362				62				276				3,555				13,255
Add: Non-sustaining capital expenditures					3,253				146				187				-				3,586				1,534				140				1,164				-				2,838
All-in cost, net of by-product credits		G			14,640				101				250				3,369				18,360				10,896				202				1,440				3,555				16,093
Silver ounces sold (‘000s)		H			1,058				115				-				-				1,173				936				120				-				-				1,056
Cash cost per ounce of silver, net of by-product credits		(A+B)/H		$	1.21			$	(16.59	)		$	-			$	-			$	(0.54	)		$	1.20				(12.80	)		$	-			$	-			$	(0.39	)
All-in sustaining cost per ounce of silver, net of by-product credits		F/H		$	10.76			$	(0.39	)		$	-			$	-			$	12.60			$	10.00				0.52			$	-			$	-			$	12.55
All-in cost per ounce of silver, net of by-product credits		G/H		$	13.84			$	0.88			$	-			$	-			$	15.65			$	11.64				1.68			$	-			$	-			$	15.24
By-product credits per ounce of silver
Gold					(0.84	)			-				-				-				(0.75	)			(1.07	)			-				-				-				(0.95	)
Lead					(9.09	)			(16.07	)			-				-				(9.77	)			(7.96	)			(11.66	)			-				-				(8.38	)
Zinc					(1.80	)			(29.45	)			-				-				(4.51	)			(1.43	)			(26.15	)			-				-				(4.24	)
Other					(0.63	)			(4.74	)			-				-				(1.03	)			(0.19	)			0.20				-				-				(0.15	)
Total by-product credits per ounce of silver				$	(12.36	)		$	(50.26	)		$	-			$	-			$	(16.06	)		$	(10.65	)		$	(37.61	)		$	-			$	-			$	(13.72	)

 

(d)

Costs per Tonne of Ore Processed

 

The Company uses cost per tonne of ore processed to manage and evaluate operating performance at each of its mines. Cost per tonne of ore processed is calculated based on total production costs on a sales basis, adjusted for changes in inventory, to arrive at total production costs that relate to ore production during the period. These total production costs are then further divided into mining cost, shipping cost, and milling cost. Cost per tonne of ore processed is the total of per tonne mining cost, per tonne shipping cost, and per tonne milling cost.

 

All-in sustaining production cost per tonne is an extension of the cash production cost per tonne and provides a comprehensive measure of the Company’s operating performance and ability to generate cash flows. All-in sustaining production cost per tonne is based on the Company’s cash production cost, and further includes corporate general and administrative expenses, government fees and other taxes, reclamation cost accretion, lease liability payments, and sustaining capital expenditures. The Company believes that this measure represents the total sustainable costs of processing ore from current operations and provides additional information about the Company’s operational performance and ability to generate cash flows.

 

The following table provides a reconciliation of production cost and all-in sustaining production cost per tonne of ore processed: 

 

SILVERCORP METALS INC. Management’s Discussion and Analysis For the Year Ended March 31, 2022 (Tabular amounts are in thousands of U.S. dollars, except share, per share, unit cost, and production data, or unless otherwise stated)

 

				Year ended March 31, 2022																				Year ended March 31, 2021
(Expressed in thousands of U.S. dollars, except ounce and per ounce amount)				Ying Mining District				GC				Other				Corporate				Consolidated				Ying Mining District				GC				Other				Corporate				Consolidated
Production costs expensed as reported				$	70,309			$	18,228			$	-			$	-			$	88,537			$	53,023			$	16,072			$	449			$	-			$	69,544
Depreciation and amortization					21,392				3,690				-				-				25,082				17,844				3,272				318				-				21,434
Adjustment for aggregate plant operations*					(2,129	)															(2,129	)			-				-				-				-				-
Changes in stockpile and concentrate inventory
Less: stockpile and concentrate inventory - Beginning					(5,996	)			(442	)			(34	)			-				(6,472	)			(4,474	)			(241	)			(790	)			-				(5,505	)
Add: stockpile and concentrate inventory - Ending					4,684				137				35				-				4,856				5,996				442				34				-				6,472
Adjustment for foreign exchange movement					(120	)			(9	)			(1	)			-				(130	)			(492	)			(27	)			(11	)			-				(530	)
					(1,432	)			(314	)			-				-				(1,746	)			1,030				174				(767	)			-				437
Total production cost				$	88,140			$	21,604			$	-			$	-			$	109,744			$	71,897			$	19,518			$	-							$	91,415
Depreciation and amortization charged to mining costs		A			20,015				3,135				-				-				23,150				16,711				2,872				-				-				19,583
Depreciation and amortization charged to milling costs		B			1,466				502				-				-				1,968				1,189				432				-				-				1,621
Total non-cash production cost				$	21,481			$	3,637			$	-			$	-			$	25,118			$	17,900			$	3,304			$	-			$	-				21,204
Cash mining cost		C			55,859				12,780				-				-				68,639				45,216				12,141				-				-				57,357
Shipping cost		D			2,523				-				-				-				2,523				2,471				-				-				-				2,471
Cash milling cost		E			8,277				5,187				-				-				13,464				6,310				4,073				-				-				10,383
Total cash production cost				$	66,659			$	17,967			$	-			$	-			$	84,626			$	53,997			$	16,214			$	-			$	-			$	70,211
General and administrative					8,228				2,651				529				14,181				25,589				6,191				2,812				584				12,365				21,952
Property evaluation and business development**					-				-				122				799				921				-				-				42				691				733
Amortization included in general and administrative					(562	)			(398	)			(395	)			(593	)			(1,948	)			(507	)			(373	)			(376	)			(533	)			(1,789	)
Government fees and other taxes					1,960				669				14				-				2,643				1,781				588				5				-				2,374
Reclamation accretion					209				25				35				-				269				196				26				30				-				252
Lease payment					-				-				-				637				637				-				-				-				563				563
Adjustment for aggregate plant operations*					(257	)			-				-				-				(257	)			-				-				-				-				-
Sustaining capital expenditures					24,472				4,259				106				128				28,965				24,603				4,110				389				501				29,603
All-in sustaining production cost		F		$	100,709			$	25,173			$	411			$	15,152			$	141,445			$	86,261			$	23,377			$	674			$	13,587			$	123,899
Non-sustaining capital expenditures					21,470				959				2,676				-				25,105				11,698				852				2,480				-			$	15,030
All in production cost		G		$	122,179			$	26,132			$	3,087			$	15,152			$	166,550			$	97,959			$	24,229			$	3,154			$	13,587			$	138,929
Ore mined (‘000s)		H			681.398				314.882				-				-				996.280				650.025				314.900				-								964.925
Ore shipped (‘000s)		I			684.959				314.882				-				-				999.841				657.337				314.900				-								972.237
Ore milled (‘000s)		J			684.293				318.042				-				-				1,002.335				651.402				316.179				-								967.581
Per tonne Production cost
Non-cash mining cost ($/tonne)		K=A/H			29.37				9.96				-				-				23.24				25.71				9.12				-				-				20.29
Non-cash milling cost ($/tonne)		L=B/J			2.14				1.58				-				-				1.96				1.83				1.37				-				-				1.68
Non-cash production cost ($/tonne)		M=K+L		$	31.51			$	11.54			$	-			$	-			$	25.20			$	27.54			$	10.49			$	-			$	-			$	21.97
Cash mining cost ($/tonne)		N=C/H			81.98				40.59				-				-				68.90				69.56				38.56				-				-				59.44
Shipping costs ($/tonne)		O=D/I			3.68				-				-				-				2.52				3.76				-				-				-				2.54
Cash milling costs ($/tonne)		P=E/J			12.10				16.31				-				-				13.43				9.69				12.88				-				-				10.73
Cash production costs ($/tonne)		Q=N+O+P		$	97.76			$	56.90			$	-			$	-			$	84.85			$	83.01			$	51.44			$	-			$	-			$	72.71
All-in sustaining production costs ($/tonne)		P=(F-C-D-E)/J+Q		$	147.52			$	79.56			$	-			$	-			$	141.54			$	132.54			$	74.09			$	-			$	-			$	128.20
All in costs ($/tonne)		S=P+(G-F)/J		$	178.89			$	82.57			$	-			$	-			$	166.58			$	150.50			$	76.79			$	-			$	-			$	143.73

*Adjustments to exclude the opera ting costs of the aggregate pl ant.

**Recovery of $3,970, arising the break fee of $6,497 (CAD$9,000) receipt from Guyana Gol dfields net of expenses of $2,527, was excluded for the year ended March 31, 2021.

 

				Three months ended March 31, 2022																				Three months ended March 31, 2021
(Expressed in thousands of U.S. dollars, except ounce and per ounce amount)				Ying Mining District				GC				Other				Corporate				Consolidated				Ying Mining District				GC				Other				Corporate				Consolidated
Production costs expensed as reported				$	14,354			$	3,872			$	-			$	-			$	18,226			$	11,107			$	2,977			$	-			$	-			$	14,084
Depreciation and amortization as reported					4,411				757				-				-				5,168				3,802				705				-				-				4,507
Adjustment for aggregate plant operations*					(471	)			-				-				-				(471	)
Change in stockpile and concentrate inventory
Less: stockpile and concentrate inventory - Beginning					(5,062	)			(725	)			(35	)			-				(5,822	)			(6,156	)			(499	)			(34	)			-				(6,689	)
Add: stockpile and concentrate inventory - Ending					4,684				137				35				-				4,856				5,996				442				34				-				6,472
Adjustment for foreign exchange movement					(24	)			(3	)			-				-				(27	)			232				6				-				-				238
					(402	)			(591	)			-				-				(993	)			72				(51	)			-				-				21
Total production cost				$	17,892			$	4,038			$	-			$	-			$	21,930			$	14,981			$	3,631			$	-							$	18,612
Depreciation and amortization charged to mining costs		A			4,128				525				-				-				4,653				3,382				580				-				-				3,962
Depreciation and amortization charged to milling costs		B			367				131				-				-				498				322				119				-				-				441
Total non-cash production cost				$	4,495			$	656			$	-			$	-			$	5,151			$	3,704			$	699			$	-							$	4,403
Cash mining cost		C			10,996				2,274				-				-				13,270				9,382				2,124				-				-				11,506
Shipping cost		D			504				-				-				-				504				416				-				-				-				416
Cash milling cost		E			1,897				1,108				-				-				3,005				1,479				808				-				-				2,287
Total cash production cost				$	13,397			$	3,382			$	-			$	-			$	16,779			$	11,277			$	2,932			$	-			$	-			$	14,209
General and administrative					2,243				657				129				3,284				6,313				1,600				698				133				3,369				5,800
Property evaluation and business development					-				-				12				71				83				-				-				42				171				213
Amortization included in general and administrative					(142	)			(101	)			(97	)			(158	)			(498	)			(136	)			(98	)			(100	)			(142	)			(476	)
Government fees and other taxes					345				96				5				-				446				320				89				-				-				409
Reclamation accretion					52				6				9				-				67				51				7				8				-				66
Lease payment					-				-				-				167				167				-				-				-				149				149
Adjustment for aggregate plant operations*					(48	)
Sustaining capital expenditures					6,790				1,013				5				5				7,813				5,674				730				193				8				6,605
All-in sustaining production cost		F		$	22,637			$	5,053			$	63			$	3,369			$	31,170			$	18,786			$	4,358			$	276			$	3,555			$	26,975
Non-sustaining capital expenditures					3,253				146				187				-				3,586				1,534				140				1,164				-				2,838
All in production cost		G		$	25,890			$	5,199			$	250			$	3,369			$	34,756			$	20,320			$	4,498			$	1,440			$	3,555			$	29,813
Ore mined (‘000s)		H			130.612				49.893				-				-				180.505				112.561				50.511				-				-				163.072
Ore shipped (‘000s)		I			129.256				49.893				-				-				179.149				117.205				50.511				-				-				167.716
Ore milled (‘000s)		J			131.731				50.939				-				-				182.670				131.725				48.949				-				-				180.674
Per tonne Production cost
Non-cash mining cost ($/tonne)		K=A/H			31.61				10.52				-				-				25.78				30.05				11.48				-				-				24.30
Non-cash milling cost ($/tonne)		L=B/J			2.79				2.57				-				-				2.73				2.44				2.43				-				-				2.44
Non-cash production cost ($/tonne)		M=K+L		$	34.40			$	13.09			$	-			$	-			$	28.51			$	32.49			$	13.91			$	-			$	-			$	26.74
Cash mining cost ($/tonne)		N=C/H			84.19				45.58				-				-				73.52				83.35				42.05				-				-				70.56
Shipping costs ($/tonne)		O=D/I			3.90				-				-				-				2.81				3.55				-				-				-				2.48
Cash milling costs ($/tonne)		P=E/J			14.40				21.75				-				-				16.45				11.23				16.51				-				-				12.66
Cash production costs ($/tonne)		Q=N+O+P		$	102.49			$	67.33			$	-			$	-			$	92.78			$	98.13			$	58.56			$	-			$	-			$	85.70
All-in sustaining production costs ($/tonne)		P=(F-C-D-E)/J+Q		$	172.63			$	100.13			$	-			$	-			$	171.56			$	155.14			$	87.69			$	-			$	-			$	156.36
All in costs ($/tonne)		S=P+(G-F)/J		$	197.33			$	103.00			$	-			$	-			$	191.19			$	166.78			$	90.55			$	-			$	-			$	172.07

*Adjustments to exclude the opera ting costs of the aggregate pl ant.

 

SILVERCORP METALS INC. Management’s Discussion and Analysis For the Year Ended March 31, 2022 (Tabular amounts are in thousands of U.S. dollars, except share, per share, unit cost, and production data, or unless otherwise stated)

 

 

13.

Critical Accounting Policies, Judgments, and Estimates

 

The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the amounts reported on the consolidated financial statements. These critical accounting estimates represent management estimates and judgements that are uncertain and any changes in these estimates could materially impact the Company’s consolidated financial statements. Management continuously reviews its estimates and assumptions using the most current information available. The Company’s critical accounting policies, judgements and estimates are described in Note 2 of the audited financial statements for the year ended March 31, 2022 and 2021.

 

14.

New Accounting Standards

 

(a)

Adoption of new accounting standards

 

Amendments to IAS 16 - Property, Plant and Equipment: Proceeds before Intended Use

 

The Company adopted Amendments to IAS 16 – Property, Plant and Equipment: Proceeds before Intended Use, on April 1, 2021 and the adoption has no material impact on the Company’s financial statements. In May 2021, the IASB issued Property, Plant and Equipment — Proceeds before Intended Use, which prohibits entities deducting from the cost of an item of property, plant and equipment, any proceeds from selling items produced while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Instead, an entity recognizes the proceeds from selling such items, and the costs of producing those items, in profit or loss. The amendment is effective for annual reporting periods beginning on or after January 1, 2022 and must be applied retrospectively to items of property, plant and equipment made available for use on or after the beginning of the earliest period presented when the entity first applies the amendment.

(b) Accounting standards not yet effective

 

Certain new accounting standards and interpretations have been published that are not mandatory for the current period and have not been early adopted.

 

Amendment to IAS 1 - Presentation of Financial Statements

 

The amendments to IAS 1, clarify the presentation of liabilities. The classification of liabilities as current or noncurrent is based on contractual rights that are in existence at the end of the reporting period and is affected by expectations about whether an entity will exercise its right to defer settlement. A liability not due over the next twelve months is classified as non-current even if management intends or expects to settle the liability within twelve months. The amendment also introduces a definition of ‘settlement’ to make clear that settlement refers to the transfer of cash, equity instruments, other assets, or services to the counterparty. The amendments are effective for annual reporting periods beginning on or after January 1, 2023. The implementation of this amendment is not expected to have a material impact on the Company.

 

Amendments to IAS 12 - Deferred Tax related to Assets and Liabilities arising from a Single Transaction

 

The amendment clarifies that the initial recognition exemption does not apply to transactions in which equal amounts of deductible and taxable temporary differences arise on initial recognition. The amendment is effective for annual reporting periods beginning on or after January 1, 2023. Early application is permitted. This amendment is not expected to have a material impact on the Company.

 

Amendments to IAS 1 and IFRS Practice Statement 2 - Disclosure of Accounting Policies

 

The amendments require that an entity discloses its material accounting policies, instead of its significant accounting policies. Further amendments explain how an entity can identify a material accounting policy. Examples of when an accounting policy is likely to be material are added. To support the amendment, the IASB has also developed guidance and examples to explain and demonstrate the application of the ‘four-step materiality process’ described in IFRS Practice Statement 2. The amendments are effective for annual reporting

 

 

SILVERCORP METALS INC. Management’s Discussion and Analysis For the Year Ended March 31, 2022 (Tabular amounts are in thousands of U.S. dollars, except share, per share, unit cost, and production data, or unless otherwise stated)

 

periods beginning on or after January 1, 2023. The Company is currently evaluating the impact of the amendment on its financial statements.

 

15.	Other MD&A Requirements

 

Additional information relating to the Company:

 

(a)	may be found on SEDAR at www.sedar.com;

 

(b)	may be found at the Company’s website www.silvercorp.ca;

 

(c)	may be found in the Company’s Annual Information Form; and

 

(d)	is also provided in the Company’s annual audited consolidated financial statements as of March 31, 2022.

 

16.	Outstanding Share Data

 

As at the date of this MD&A, the following securities were outstanding:

 

(a)	Share Capital

 

Authorized - unlimited number of common shares without par value

 

Issued and outstanding – 177,243,675 common shares with a recorded value of $256.2 million

 

Shares subject to escrow or pooling agreements - $nil.

 

(b)

Options

 

As at the date of this MD&A, the outstanding options comprise the following:

Number of Options			Exercise Price (CAD$)		Expiry Date
535,000			$3.93		4/26/2027
540,335			$5.46		5/26/2025
455,000			$9.45		11/11/2025
1,530,335

 

(c)	Restricted Share Units (RSUs)

 

Outstanding – 2,457,624 RSUs with an average grant date closing price of CAD$5.45 per share.

 

17.	Risks and Uncertainties

 

The Company is exposed to a number of risks in conducting its business, including but not limited to: metal price risk as the Company derives its revenue from the sale of silver, lead, zinc, and gold; credit risk in the normal course of dealing with other companies and financial institutions; foreign exchange risk as the Company reports its financial statements in USD whereas the Company operates in jurisdictions that utilize other currencies; equity price risk and interest rate risk as the Company has investments in marketable securities that are traded in the open market or earn interest at market rates that are fixed to maturity or at variable interest rates; inherent risk of uncertainties in estimating mineral reserves and mineral resources; political risks; economic and social risks related to conducting business in foreign jurisdictions such as China and Mexico; environmental risks; risks related to its relations with employees and local communities where the Company operates, and emerging risks relating to the spread of COVID-19, which has to date resulted in profound health and economic impacts globally and which presents future risks and uncertainties that are largely unknown at this time.

 

Management and the Board continuously assess risks that the Company is exposed to and attempt to mitigate these risks where practical through a range of risk management strategies.

 

These and other risks are described in the Company’s Annual Information Form, NI 43-101 technical reports, Form 40-F, and Audited Consolidated Financial Statements, which are available on SEDAR at www.sedar.com and on EDGAR at www.sec.gov. Readers are encouraged to refer to these documents for a more detailed description

 

 

SILVERCORP METALS INC. Management’s Discussion and Analysis For the Year Ended March 31, 2022 (Tabular amounts are in thousands of U.S. dollars, except share, per share, unit cost, and production data, or unless otherwise stated)

 

of some of the risks and uncertainties inherent to Silvercorp’s business.

 

●

COVID-19

 

The Company’s business, operations and financial condition could be materially adversely affected by the outbreak of pandemics or other health crises, such as the outbreak of COVID-19 that was designated as a pandemic by the World Health Organization on March 11, 2020. The international response to the spread of COVID-19 has led to significant restrictions on travel, temporary business closures, quarantines, global stock market volatility, and a general reduction in consumer activity. Such public health crises can result in operating, supply chain and project development delays and disruptions, global stock market and financial market volatility, declining trade and market sentiment, reduced movement of people and labour shortages, and travel and shipping disruption and shutdowns, including as a result of government regulation and prevention measures, or a fear of any of the foregoing, all of which could affect commodity prices, interest rates, credit risk and inflation. In addition, the current COVID-19 pandemic, and any future emergence and spread of similar pathogens could have an adverse impact on global economic conditions which may adversely impact the Company’s operations, and the operations of suppliers, contractors and service providers.

 

The Company may experience business interruptions, including suspended (whether government mandated or otherwise) or reduced operations relating to COVID-19 and other such events outside of the Company’s control, which could have a material adverse impact on its business, operations and operating results, financial condition and liquidity.

 

As at the date of this MD&A, the duration of the business disruptions internationally and related financial impact of COVID-19 cannot be reasonably estimated. It is unknown whether and how the Company may be affected if the pandemic persists for an extended period of time.

The Company’s exposure to such public health crises also includes risks to employee health and safety. Should an employee, contractor, community member or visitor become infected with a serious illness that has the potential to spread rapidly, this could place the Company’s workforce at risk.

 

●	Metal Price Risk

 

The Company’s sales prices for lead and zinc pounds are fixed against the Shanghai Metals Exchange as quoted at www.shmet.com; gold ounces are fixed against the Shanghai Gold Exchange as quoted at www.sge.com.cn and silver ounces are fixed against the Shanghai White Platinum & Silver Exchange as quoted at www.ex- silver.com.

 

The Company’s revenues, if any, are expected to be in large part derived from the mining and sale of silver, lead, zinc, and gold contained in metal concentrates. The prices of those commodities have fluctuated widely, particularly in recent years, and are affected by numerous factors beyond the Company’s control including international and regional economic and political conditions; expectations of inflation; currency exchange fluctuations; interest rates; global or regional supply and demand for jewellery and industrial products containing silver and other metals; sale of silver and other metals by central banks and other holders, speculators and producers of silver and other metals; availability and cost of metal substitutes; and increased production due to new mine developments and improved mining and production methods. The price of base and precious metals may have a significant influence on the market price of the Company’s shares and the value of its projects. The effect of these factors on the price of base and precious metals, and therefore the viability of the Company’s exploration projects and mining operations, cannot be accurately predicted.

 

If silver and other metals prices were to decline significantly or for an extended period of time, the Company may be unable to continue operations, develop its projects, or fulfil obligations under agreements with the Company’s joint venture partners or under its permits or licenses.

 

●	Permits, licenses and national security clearance

 

 

SILVERCORP METALS INC. Management’s Discussion and Analysis For the Year Ended March 31, 2022 (Tabular amounts are in thousands of U.S. dollars, except share, per share, unit cost, and production data, or unless otherwise stated)

 

 

All mineral resources and mineral reserves of the Company’s subsidiaries are owned by their respective governments, and mineral exploration and mining activities may only be conducted by entities that have obtained or renewed exploration or mining permits and licenses in accordance with the relevant mining laws and regulations. No guarantee can be given that the necessary exploration and mining permits and licenses will be issued to the Company or, if they are issued, that they will be renewed, or if renewed under reasonable operational and/or financial terms, or in a timely manner, or that the Company will be in a position to comply with all conditions that are imposed. No guarantee can be given that the national security clearance for Zhonghe Silver Project will be issued, or if it is issued, that it will be issued under reasonable operational and/or financial terms, or in a timely manner, or that the Company will be in a position to comply with all conditions that are imposed.

 

Nearly all mining projects require government approval. There can be no certainty that approvals necessary to develop and operate mines on the Company’s properties will be granted or renewed in a timely and/or economical manner, or at all.

 

In addition, China has further strengthened its national security review of foreign investment. The Measures will continue to create an additional layer of uncertainty with respect to foreign investment. Investment plans, timetables, terms and conditions for closing for investment must take into account the timing and contingency of obtaining approval from the national security review process.

 

●	Title to properties

 

With respect to the Company’s Chinese properties, while the Company has investigated title to all of its mineral claims and to the best of its knowledge, title to all of its properties is in good standing, the properties may be subject to prior unregistered agreements or transfers and title may be affected by undetected defects. There may be valid challenges to the title of the Company’s properties which, if successful, could impair development and/or operations. The Company cannot give any assurance that title to its properties will not be challenged.

 

Title insurance is generally not available for mineral properties and the Company’s ability to ensure that it has obtained secure claims to individual mineral properties or mining concessions may be severely constrained. The Company’s mineral properties in China have not been surveyed, and the precise location and extent thereof may be in doubt.

 

●	Operations and political conditions

 

All the Company’s material operations are located in China. These operations are subject to the risks normally associated with conducting business in China, which has different regulatory and legal standards than North America. Some of these risks are more prevalent in countries which are less developed or have emerging economies, including uncertain political and economic environments, as well as risks of civil disturbances or other risks which may limit or disrupt a project, restrict the movement of funds or result in the deprivation of contractual rights or the taking of property by nationalization or expropriation without fair compensation, risk of adverse changes in laws or policies, increases in foreign taxation or royalty obligations, license fees, permit fees, delays in obtaining or the inability to obtain necessary governmental permits, limitations on ownership and repatriation of earnings, and foreign exchange controls and currency devaluations.

 

In addition, the Company may face import and export regulations, including export restrictions, disadvantages of competing against companies from countries that are not subject to similar laws, restrictions on the ability to pay dividends offshore, and risk of loss due to disease and other potential endemic health issues. Although the Company is not currently experiencing any significant or extraordinary problems in China arising from such risks, there can be no assurance that such problems will not arise in the future. The Company currently does not carry political risk insurance coverage.

 

The Company’s interests in its mineral properties are held through joint venture companies established under and governed by the laws of China. The Company’s joint venture partners in China include state-sector entities and, like other state-sector entities, their actions and priorities may be dictated by government policies instead of purely commercial considerations. Additionally, companies with a foreign ownership component operating in

 

 

SILVERCORP METALS INC. Management’s Discussion and Analysis For the Year Ended March 31, 2022 (Tabular amounts are in thousands of U.S. dollars, except share, per share, unit cost, and production data, or unless otherwise stated)

 

China may be required to work within a framework which is different from that imposed on domestic Chinese companies. The Chinese government currently allows foreign investment in certain mining projects under central government guidelines. There can be no assurance that these guidelines will not change in the future.

 

●	Regulatory environment in China

 

The Company’s principal operations are in China. The laws of China differ significantly from those of Canada and all such laws are subject to change. Mining is subject to potential risks and liabilities associated with pollution of the environment and disposal of waste products occurring as a result of mineral exploration and production.

 

Failure to comply with applicable laws and regulations may result in enforcement actions and may also include corrective measures requiring capital expenditures, installation of additional equipment or remedial actions. Parties engaged in mining operations may be required to compensate those suffering loss or damage by reason of mining activities and may have civil or criminal fines or penalties imposed for violations of applicable laws and regulations.

 

China’s legislation is undergoing a relatively fast transformation with some old laws superseded by newly enacted laws. New laws and regulations, amendments to existing laws and regulations, administrative interpretation of existing laws and regulations, or more stringent enforcement of existing laws and regulations could create risks or uncertainty for investors in mineral projects or have a material adverse impact on future cash flow, results of operations and the financial condition of the Company.

 

New laws and regulations, amendments to existing laws and regulations, administrative interpretation of existing laws and regulations, or more stringent enforcement of existing laws and regulations could have a material adverse impact on future cash flow, results of operations and the financial condition of the Company.

 

●	Environmental risks

 

The Company’s activities are subject to extensive laws and regulations governing environmental protection and employee health and safety, including environmental laws and regulations in China. These laws address emissions into the air, discharges into water, management of waste, management of hazardous substances, protection of natural resources, antiquities and endangered species, and reclamation of lands disturbed by mining operations.

 

There are also laws and regulations prescribing reclamation activities on some mining properties. Environmental legislation in many countries, including China, is evolving and the trend has been toward stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects and increasing responsibility for companies and their officers, directors and employees. Compliance with environmental laws and regulations may require significant capital outlays on behalf of the Company and may cause material changes or delays in the Company’s intended activities. There can be no assurance that the Company has been or will be at all times in complete compliance with current and future environmental and health and safety laws and permits will not materially adversely affect the Company’s business, results of operations or financial condition. It is possible that future changes in these laws or regulations could have a significant adverse impact on some portion of the Company’s business, causing the Company to re- evaluate those activities at that time. The Company’s compliance with environmental laws and regulations entails uncertain cost.

 

●	Risks and hazards of mining operations

 

Mining is inherently dangerous and the Company’s operations are subject to a number of risks and hazards including, without limitation:

 

(i)

environmental hazards;

(ii)

discharge of pollutants or hazardous chemicals;

(iii)

industrial accidents;

 

SILVERCORP METALS INC. Management’s Discussion and Analysis For the Year Ended March 31, 2022 (Tabular amounts are in thousands of U.S. dollars, except share, per share, unit cost, and production data, or unless otherwise stated)

 

(iv)

failure of processing and mining equipment;

(v)

labour disputes;

(vi)

supply problems and delays;

(vii)

encountering unusual or unexpected geologic formations or other geological or grade problems;

(viii)

encountering unanticipated ground or water conditions;

(ix)

cave-ins, pit wall failures, flooding, rock bursts and fire;

(x)

periodic interruptions due to inclement or hazardous weather conditions;

(xi)

equipment breakdown;

(xii)

other unanticipated difficulties or interruptions in development, construction or production;

(xiii)

other acts of God or unfavourable operating conditions; and

(xiv)

health and safety risks associated with spread of COVID-19 pandemic, and any future emergence and spread of similar pathogens.

 

Such risks could result in damage to, or destruction of, mineral properties or processing facilities, personal injury or death, loss of key employees, environmental damage, delays in mining, monetary losses and possible legal liability. Satisfying such liabilities may be very costly and could have a material adverse effect on the Company’s future cash flow, results of operations and financial condition.

 

●	Cybersecurity Risks

 

The Company is subject to cybersecurity risks including unauthorized access to privileged information, destroy data or disable, degrade, or sabotage our systems, including through the introduction of computer viruses. Although we take steps to secure our configurations and manage our information system, including our computer systems, internet sites, emails and other telecommunications, and financial/geological data, there can be no assurance that measures we take to ensure the integrity of our systems will provide protection, especially because cyberattack techniques used change frequently or are not recognized until successful. The Company has not experienced any material cybersecurity incident in the past, but there can be no assurance that the Company would not experience in the future. If our systems are compromised, do not operate properly or are disable, we could suffer financial loss, disruption of business, loss of geology data which could affect our ability to conduct effective mine planning and accurate mineral resources estimates, loss of financial data which could affect our ability to provide accurate and timely financial reporting.

 

●	General Economic Conditions

 

General economic conditions may adversely affect our growth, profitability and ability to obtain financing. Events in global financial markets in the past several years have had a profound impact on the global economy. Many industries, including the silver and gold mining industry, have been and continue to be impacted by these market conditions. Some of the key impacts of the current financial market turmoil include contraction in credit markets resulting in a widening of credit risk, devaluations, high volatility in global equity, commodity, foreign exchange and precious metal markets and a lack of market confidence and liquidity. A continued or worsened slowdown in the financial markets or other economic conditions, including but not limited to, consumer spending, employment rates, business conditions, inflation, fuel and energy costs, consumer debt levels, lack of available credit, the state of the financial markets, interest rates and tax rates, may adversely affect our growth, profitability and ability to obtain financing. A number of issues related to economic conditions could have a material adverse effect on our business, financial condition and results of operations, including:

 

(i)

significant disruption to the global economic conditions caused by COVID-19 as discussed above;

(ii)

contraction in credit markets could impact the cost and availability of financing and our overall liquidity;

 

 

SILVERCORP METALS INC. Management’s Discussion and Analysis For the Year Ended March 31, 2022 (Tabular amounts are in thousands of U.S. dollars, except share, per share, unit cost, and production data, or unless otherwise stated)

 

(iii)

the volatility of silver, gold and other metal prices would impact our revenues, profits, losses and cash flow;

(iv)

recessionary pressures could adversely impact demand for our production;

(v)

volatile energy, commodity and consumables prices and currency exchange rates could impact our production costs; and

(vi)

the devaluation and volatility of global stock markets could impact the valuation of our equity and other securities.

 

18.	Corporate Governance, Safety, Environment and Social Responsibility

 

The Company’s core objectives are to be safe, efficient, and sustainable, and operate responsibly with the environment and cooperatively with the local communities. The Company strive to build a strong cooperate

 

culture centered around our key values of respect, equality, and responsibility, and aim to deliver social benefits while creating shareholder value.

 

As a responsible miner, the Company are committed to integrating environmental, social, and governance (“ESG”) factors into our business strategy and generating impactful change in the communities in which the Company work and live. Through the integration of ESG factors into our strategic planning, operations, and management, the Company are able to bring about sustainable economic, social, and environmental value to all stakeholders. Complete details of our ESG performance will be provided in the Company’s Fiscal 2022 Sustainability Report, which is expected to be available in the second quarter of Fiscal 2023.

 

(a)

Health, Safety, and Environment

 

The Company prioritizes environmental protection, as well as ensuring a safe workplace for all employees and contractors at all of our sites. In an effort to further illustrate the Company’s commitment to strengthening our management team, both the Ying Mining District and GC Mine applied for the environmental management system ISO 14001 certification and were certified in Fiscal 2022.

 

Safety is top priority at Silvercorp. In Fiscal 2022, the Company arranged more than 2,000 safety training sessions, which covered 100% of workers at the Ying Mining District and the GC Mine.

 

In response to health risks associated with the spread of Covid-19, the Company implemented a number of health and safety measures designed to protect employees at its operations in China and no case were reported in Fiscal 2022.

 

In addition to the “Green Mine” certification at SGX-HZG, TLP-LM, and HPG mines at the Ying Mining District and the GC Mine, the DCG mine at the Ying Mining District is also in the process to apply for the certification of the “Green Mine”. In Fiscal 2022, the Company completed the construction of the aggregate plant and recycled and processed approximately 428,000 tonnes of waste rock from the Ying Mining District. The Company also worked with Henan University of Science of Technology (“HAUST”) to implement an innovative technology to treat water from underground mines, and then through an automated control system to supply the treated water to the mill for ore processing and to local farmer for irrigation.

 

In Fiscal 2022, the Company spent approximately $1.4 million for the efforts to reduce its energy and water consumption, to minimize the negative impact on of greenhouse gas emissions and water quality, and to comply with the requirements of the “Green Mine” certification.

 

(b)

Social Responsibility and Economic Value

 

The Company is committed to creating sustainable value in the communities where our people work and live. Guided by research conducted by our local offices, the Company participates in, and contributes to numerous community programs that typically center on education and health, nutrition, environmental awareness, local infrastructure and fostering additional economic activity. In addition to the taxes and fees paid to various levels of government in China, in Fiscal 2022, the Company also contributed approximately $3.7 million to social programs, including:

 

 

SILVERCORP METALS INC. Management’s Discussion and Analysis For the Year Ended March 31, 2022 (Tabular amounts are in thousands of U.S. dollars, except share, per share, unit cost, and production data, or unless otherwise stated)

 

●	$3.1 million contribution to the local county to help improve local infrastructure and environmental protection;

 

●	$0.2 million donation to local community for a clean water access project;

 

●	$0.2 million donation to Red Cross for the flood relief after the heavy rainstorm in the Capital City of Henan Province in July 2021;

 

●	$0.1 million donation to the local communities to promoted community health and poverty reduction in the local communities, with an emphasis on children and seniors, with periodic visits and subsidies;

 

●	$0.1 million donation to institutions in scholarship or education assistance programs to support children’s education at the local and national levels;

 

(c)	Corporate Governance

 

In Fiscal 2022, a Sustainability Committee was established by the Board and a ESG management centre was formed to oversee the sustainability development and the disclosure compliance. The Corporate Governance Committee of the Board of the Company reviews the Company’s policies on an annual basis, including Anti- Corruption Policy, Code of Ethical Conduct, Clawback Policy, Corporate Disclosure Policy, and Whistleblower Policy, which are then approved by the Board of the Company. All of the Company’s directors and officers were re-certified with all the policies, confirming they are familiar with and acknowledge of the contents of the Company’s policies, and committing to fulfill them and to report any violation. The Company also regularly trains its critical employees in anti-corruption practices.

 

For more information on the Company’s Corporate Governance practices, please review the Company’s Annual Information Form and Management Information Circular available on the Company’s website at www.silvercorp.ca.

 

19.	Disclosure Controls and Procedures

 

Disclosure controls and procedures (a) under Canadian law, are designed to provide reasonable assurance that material information is gathered and reported to senior management, including the Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”), as appropriate to allow for timely decision about public disclosure, and (b) under U.S. law, are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the U.S. Securities Exchange Act of 1934, as amended (the “U.S. Exchange Act”) is recorded, processed, summarized and reported, within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms, and include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the U.S. Exchange Act is accumulated and communicated to the Company’s management, including its CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

 

Management of the Company, including the CEO and CFO, is responsible for establishing and maintaining adequate disclosure controls and procedures. Under the supervision and with the participation of the CEO and CFO, management has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures in accordance with requirements of National Instrument 52-109 of the Canadian Securities Commission (“NI 52-109”) and U.S. Exchange Act.

 

As of March 31, 2022, based on the evaluation, management concluded that the disclosure controls and procedures are effective in providing reasonable assurance that the information required to be disclosed in annual filings, interim filings, and other reports the Company filed or submitted under United States and Canadian securities legislation were recorded, processed, summarized and reported within the time periods specified in those rules.

 

 

SILVERCORP METALS INC. Management’s Discussion and Analysis For the Year Ended March 31, 2022 (Tabular amounts are in thousands of U.S. dollars, except share, per share, unit cost, and production data, or unless otherwise stated)

 

20.	Management’s Report on Internal Control over Financial Reporting

 

Management of the Company is responsible for establishing and maintaining an adequate system of internal control, including internal controls over financial reporting. Internal control over financial reporting is a process designed by and/or under the supervision of the CEO and CFO and effected by the Board, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS as issued by IASB. The Company’s internal control over financial reporting includes those policies and procedures that:

 

●

pertain to maintaining records, that in reasonable detail, accurately and fairly reflect our transactions and dispositions of the assets of the Company;

 

●

provide reasonable assurance that transactions are recorded as necessary for preparation of our consolidated financial statements in accordance with generally accepted accounting principles;

 

●

provide reasonable assurance that receipts and expenditures are made in accordance with authorizations of management and the directors of the Company; and

 

●

provide reasonable assurance that unauthorized acquisition, use or disposition of company assets that could have a material effect on the Company’s consolidated financial statements would be prevented or detected on a timely basis.

 

The Company’s management, including its Chief Executive Officer and Chief Financial Officer, believes that due to its inherent limitations, internal control over financial reporting may not prevent or detect misstatements on a timely basis. In addition, projections of any evaluation of the effectiveness of internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

The Company’s management evaluates the effectiveness of the Company’s internal control over financial reporting based upon the criteria set forth in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organization of the Treadway Commission. Based on the evaluation, management concluded that the Company’s internal control over financial reporting as of March 31, 2022 was effective and provides a reasonable assurance of the reliability of the Company’s financial reporting and preparation of the financial statements.

 

The effectiveness of the Company’s internal control over financial reporting as of March 31, 2022 has been audited by Deloitte LLP, the Company’s independent registered public accounting firm, who has also issued a report on the internal controls over financial reporting including with our annual consolidated financial statements.

 

21.	Changes in Internal Control over Financial Reporting

 

There has been no change in the Company’s internal control over financial reporting during the fiscal year ended March 31, 2022 that has materially affected or is reasonably likely to materially affect, its internal control over financial reporting.

 

22.	Directors and Officers

 

As at the date of this MD&A, the Company’s directors and officers are as follows:

 

Directors	Officers
Dr. Rui Feng, Director, Chairman	Rui Feng, Chief Executive Officer
Yikang Liu, Director	Derek Liu, Chief Financial Officer
Paul Simpson, Director	Yong-Jae Kim, General Counsel & Corporate Secretary
David Kong, Director	Lon Shaver, Vice President
Marina A. Katusa, Director

 

 

 

SILVERCORP METALS INC. Management’s Discussion and Analysis For the Year Ended March 31, 2022 (Tabular amounts are in thousands of U.S. dollars, except share, per share, unit cost, and production data, or unless otherwise stated)

 

Technical Information

 

Scientific and technical information contained in this MD&A has been reviewed and approved by Mr. Guoliang Ma, P.Geo., Manager of Exploration and Resources of the Company and a Qualified Person as such term is defined in NI 43-101.

 

Forward Looking Statements

 

Certain of the statements and information in this MD&A 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. 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 or information. Forward-looking statements or information relate to, among other things:

 

●

the price of silver and other metals;

 

●

estimates of the Company’s revenues and capital expenditures;

 

●

estimated ore production and grades from the Company’s mines in the Ying Mining District and the GC Mine;

 

●

projected cash operating costs and all-in sustaining costs, and budgets, on a consolidated and mine-by-mine basis;

 

●

statements regarding anticipated exploration, drilling, development, construction, and other activities or achievements of the Company;

 

●

plans, projections and estimates included in the Fiscal 2021 Guidance and the Fiscal 2022 Guidance;

 

●

timing of national security clearance related to acquisition of the Zhonghe Project by the relevant governmental authorities and the Company’s expectation that it will enter into the mineral rights transfer contract with respect to the Zhonghe Project; and

 

●

timing of receipt of permits, licenses, and regulatory approvals.

 

Forward-looking statements or information 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 or information, including, without limitation, risks relating to,

 

●

COVID–19;

 

●

fluctuating commodity prices;

 

●

fluctuating currency exchange rates;

 

●

increasing labour cost;

 

●

exploration and development programs;

 

●

feasibility and engineering reports;

 

●

permits and licenses;

 

●

operations and political conditions;

 

●

regulatory environment in China, Mexico and Canada;

 

●

environmental risks;

 

●

mining operations;

 

●

cybersecurity;

 

 

 

SILVERCORP METALS INC. Management’s Discussion and Analysis For the Year Ended March 31, 2022 (Tabular amounts are in thousands of U.S. dollars, except share, per share, unit cost, and production data, or unless otherwise stated)

●

general economic conditions; and

 

●

matters referred to in this MD&A under the heading “Risks and Uncertainties” and other public filings of the Company.

 

This list is not exhaustive of the factors that may affect any of the Company’s forward-looking statements or information. Forward-looking statements or information 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 expressed or implied in the forward-looking statements or information. 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 or information.

 

The Company’s forward-looking statements and information are necessarily based on a number of estimates, assumptions, beliefs, expectations and opinions of management as of the date of this MD&A that, while considered reasonable by management of the Company, are inherently subject to significant business, economic and competitive uncertainties and assumptions, beliefs, expectations and options include, but are not limited to, those related to the Company’s ability to carry on current and future operations, including: the duration and effects of COVID-19 on our operations and workforce; development and exploration activities; the timing, extent, duration and economic viability of such operations; the accuracy and reliability of estimates, projections, forecasts, studies and assessments; the Company’s ability to meet or achieve estimates, projections and forecasts; the availability and cost of inputs; the price and market for outputs; foreign exchange rates; taxation levels; the timely receipt of necessary approvals, licenses or permits; the ability to meet current and future obligations; the ability to obtain timely financing on reasonable terms when required; the current and future social, economic and political conditions; and other assumptions and factors generally associated with the mining industry.

 

Other than as required by applicable securities laws, the Company does not assume any obligation to update forward-looking statements and information if circumstances or management’s assumptions, beliefs, expectations or opinions should change, or changes in any other events affecting such statements or information. For the reasons set forth above, investors should not place undue reliance on forward-looking statements and information.

 

 

 

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