China Producer Expands to Ecuador with $250M EL DOMO Mine for 2026

• Silvercorp Metals, a profitable silver producer with operations in China, is diversifying by developing the EL DOMO mine in Ecuador to create a multi-asset platform generating positive free cash flow.
• The EL DOMO mine, with a capex of approximately $250 million, will be funded through a combination of Wheaton Precious Metals' stream of $175 million and Silvercorp's existing cash reserves, with production expected to begin in the second half of 2026.
• The company is also evaluating the Condor project in Ecuador as a potential high-grade underground gold operation, shifting away from the previous plan for a large open-pit mine with $600 million capex.
• Silvercorp believes its multi-jurisdiction strategy will help reduce the valuation discount it currently trades at relative to its peers, despite strong financial results from its Chinese operations.
• The company recently expanded production capacity at its Ying mine from 2,500 to 4,000 tons per day and accumulated substantial ore stockpiles, positioning it for continued strong financial performance.

In a recent interview, Silvercorp Metals President Lon Shaver outlined the company's growth strategy as it transitions from a China-focused silver producer to a multi-jurisdictional mining company with operations expanding into Ecuador. The discussion highlighted Silvercorp's ongoing efforts to diversify its asset base, optimize operations, and create sustainable shareholder value through strategic acquisitions and organic growth.

Diversification Strategy

Silvercorp's recent acquisition of Ecuador-focused projects represents a deliberate move to address what Shaver identifies as a persistent market discount applied to single-asset, single-jurisdiction mining companies. 

"Companies that are single asset single jurisdiction companies will trade at a discount... we don't think that's warranted given the quality of the assets and the financial results that we're delivering," 

This diversification strategy aims to expand the company's production base beyond China, where Silvercorp has established a profitable business model producing silver, lead, and zinc. The company's approach focuses on creating a multi-asset platform that can deliver consistent positive free cash flow from different jurisdictions, reducing operational and geopolitical risk while enhancing shareholder value.

Ecuador Expansion: The EL DOMO Mine

Central to Silvercorp's growth plans is the development of the EL DOMO mine in Ecuador, an advanced-stage project that came with the company's acquisition of Adventus Mining. The mine is fully permitted and construction-ready, with production targeted for the second half of 2026.

The EL DOMO project features a 10-year mine life with annual production estimates of 11,000 tons of copper, 26,000 ounces of gold, 12,000 tons of zinc, and 490,000 ounces of silver, plus a small amount of lead. From a cost perspective, the all-in sustaining cost is projected at $1.26 per pound on a copper equivalent basis.

Financing for the project appears well-structured, with Wheaton Precious Metals committed to providing $175 million through a gold and silver stream arrangement against the estimated total capex of $250 million. The remaining $75 million is well-covered by Silvercorp's cash reserves, which stood at approximately $200 million prior to the acquisition.

Operational Synergies

Silvercorp sees significant operational synergies between its existing Chinese operations and the EL DOMO project in Ecuador. Shaver highlighted that while geologically different (EL DOMO being a VMS deposit versus epithermal-type deposits in China), the mining and processing technologies are quite similar.

"The tonnage and the throughput through the mill is very similar to the tonnage expansion that we just completed at Ying, The Mill at EL DOMO will be a flotation mill producing concentrates, so very similar to what we're doing at Ying and GC in China."

This similarity allows Silvercorp to leverage its operational expertise and equipment knowledge as it develops the Ecuadorian asset. The company has recently expanded its Ying operation from 2,500 to 4,000 tons per day, providing valuable experience that will benefit the EL DOMO development.

Optimizing the EL DOMO Project

While Silvercorp considers the feasibility study numbers for EL DOMO to be robust and achievable, the company is working on further optimization. Management is exploring several areas for potential improvement, including trimming initial capital costs and enhancing precious metals recoveries.

One notable change in approach involves the contracting model for the project. Rather than using a cost-plus model that leaves the company exposed to price increases, Silvercorp is implementing a fixed per-ton pricing structure with contractors. This approach shifts some risk to service providers while providing Silvercorp with more cost certainty and potentially better economics than what was demonstrated in previous studies.

Interview with President Lon Shaver

The Condor Project: A New Approach

Alongside EL DOMO, Silvercorp acquired the Condor project in Ecuador, which it views as another significant growth opportunity. The company is taking a fundamentally different approach to this asset than previous owners, who had envisioned a large open-pit operation with a prohibitive $600 million capital requirement.

Silvercorp has scrapped this model in favor of a more discrete, evolutionary approach that aligns with the company's successful development strategy in China. This involves focusing on high-grade underground resources that can be developed incrementally, generating positive cash flow that then funds further expansion.

"What we've seen is in our minds enough to say - and again it comes down to if you've got good grades over decent widths in terms of gold - it doesn't take a lot of tons to be in a position where you're making money." 

The company's 2025 plans for Condor include modest drilling, redoing resource calculations with an underground focus, and seeking permits for exploration declines. This measured approach aims to validate the high-grade resource and development concept before committing to full-scale development.

Chinese Operations Remain Core

While expanding internationally, Silvercorp continues to view its Chinese operations as the backbone of its business. The company has successfully operated in China for many years, generating consistent profits and repatriating capital without significant issues.

Addressing concerns about operating in China, Shaver noted that the company follows established rules for foreign businesses, including paying a 10% withholding tax on dividends. 

"I like to joke that the only thing we export out of China is dividends."

The company's Chinese operations continue to perform strongly, with Shaver mentioning that the December quarter was a record period. Looking ahead to what would typically be a slower first calendar quarter due to Chinese New Year, the company is optimistic about maintaining strong production levels thanks to significant ore stockpiles (145,000 tons) and the recently expanded mill capacity.

Market Valuation and Future Catalysts

Silvercorp management believes the company is undervalued relative to peers, a situation they expect to improve as the market factors in the value of the Ecuadorian assets. As development milestones are achieved and production at EL DOMO approaches, Shaver anticipates this will be reflected in a higher valuation.

"I think people are starting to put EL DOMO, and to a lesser degree Condor, in their models or in their evaluation. What value to give for EL DOMO is going to be less than what you'll be giving it when it's on the cusp of production or it's delivered. So I think there's a quick build cycle when you think in terms of second half of 2026 compared to where we are—well into Q1 of 2025—it's a quick build cycle."

Near-term catalysts include completing the remaining two bid packages for EL DOMO construction in the coming months, which will provide more concrete guidance on budget, timing, and capital expenditures for the project.

Conclusion

Silvercorp Metals is positioning itself as a diversified precious metals producer with a clear growth trajectory. The company is leveraging its operational expertise and strong balance sheet to expand beyond its Chinese base into Ecuador, where it sees significant potential in both the EL DOMO and Condor projects.

With the EL DOMO mine on track for production in late 2026, ongoing optimization of existing Chinese operations, and a measured approach to developing the Condor asset, Silvercorp appears well-positioned to execute its growth strategy while maintaining its focus on generating positive cash flow and delivering shareholder value.

The company's approach demonstrates a balance between ambitious growth objectives and financial discipline, with a management team that emphasizes realistic development timelines, cost controls, and incremental scaling rather than overly aggressive expansion plans.

The Investment Thesis for Silvercorp Metals

• Cash Flow Generation: Strong and consistent cash flow from established Chinese operations provides financial stability and internal funding for growth projects.
• Valuation Upside: Currently trading at a discount to peers due to single-country focus, with potential re-rating as Ecuador assets are developed and multi-jurisdiction status is achieved.
• Production Growth: Clear path to increased production with the EL DOMO mine expected to come online in H2 2026, adding significant copper, gold, silver, and zinc output.
• Efficient Capital Allocation: Strategic financing through the Wheaton Precious Metals stream ($175M) minimizes equity dilution for the EL DOMO project development.
• Operational Expertise: Proven technical team with experience operating similar flotation plants and processing methods between Chinese assets and the Ecuador development project.
• Strong Balance Sheet: Approximately $200M in cash prior to Adventus acquisition, plus ongoing operating cash flow, positioning the company to fund growth without significant additional capital raises.
• Expansion Optionality: Potential future upside from Condor project being reimagined as a high-grade underground operation with lower initial capital requirements.
• Commodity Diversification: Increasing exposure to copper and gold through Ecuadorian assets complements existing silver focus, creating a more balanced metals portfolio.
• Disciplined Growth Strategy: Management approach focuses on incremental, high-return projects rather than capital-intensive mega-projects, prioritizing shareholder returns.

Macro Thematic Analysis: 

The fundamentals for precious and base metals appear increasingly favorable, creating a supportive backdrop for Silvercorp's expansion strategy. The company is strategically positioning itself to capitalize on positive trends in silver, gold, and copper markets through its diversification efforts.

Silver's unique dual characteristics as both a precious and industrial metal make it particularly well-positioned in the current macroeconomic environment. Industrial demand continues to grow from sectors like electronics, photovoltaics, and healthcare, while investment demand benefits from the metal's status as an inflation hedge and store of value. The structural supply constraints in the silver market, with few new projects being developed globally, further strengthen the long-term outlook.

For copper, electrification trends and the green energy transition continue to drive demand growth, while new mine development faces increasing challenges related to permitting, declining ore grades, and infrastructure requirements. With EL DOMO expected to produce 11,000 tons of copper annually, Silvercorp is gaining exposure to this critical metal at an opportune time.

The gold market, relevant to both the EL DOMO and Condor projects, continues to benefit from central bank purchasing, geopolitical uncertainty, and its traditional role as a safe-haven asset. By adding gold production to its portfolio, Silvercorp diversifies its revenue streams while maintaining its precious metals focus.

As Lon Shaver observed when discussing the fundamentals of the metals markets: 

"Our view for commodity prices is positive whether that be silver or others, just because of the fact that we see the economies continuing to grow, and there's not a lot of supply that we see coming on of the market. Mines are getting old and tired, getting into lower grade. New mines are very hard to permit."

This supply-demand imbalance across multiple metals provides a strong foundation for Silvercorp's growth strategy, particularly as the company leverages its operational expertise and strong balance sheet to bring new production online in a capital-efficient manner.

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