Silvercorp Q1 Fiscal 2026 Financial Result

• Revenue increase: Revenue of $81.3 million, up 13% from $72.2 million in Q1 fiscal 2025, due to higher metal production and commodity prices
• Adjusted earnings: Adjusted net income of $21.0 million ($0.10 per share) versus $20.6 million ($0.12 per share) in prior year quarter
• Operating cash flow: Cash flow from operations increased 21% to $48.3 million from $40.0 million year-over-year
• Production figures: Silver production rose 6% to 1.8 million ounces; gold production increased 79% to 2,050 ounces
• Production outlook: Safety incident at HZG mine expected to reduce current quarter production by 20-25% due to area closures

Silvercorp Metals Inc. (TSX: SVM) operates silver, gold, lead, and zinc mines with operations primarily in China and development projects in Ecuador. The company's stated strategy focuses on generating free cash flow from existing mines, exploration drilling, merger and acquisition activities, and environmental and social governance practices.

The Vancouver-based company operates the Ying Mining District and GC Mine in China. In July 2024, Silvercorp acquired Adventus Mining Corporation, adding the El Domo and Condor projects in Ecuador to its portfolio. The acquisition increased the company's share count by 38.8 million shares and expanded its geographic footprint beyond China.

Adjusted Net Income Performance

Adjusted net income attributable to equity shareholders was $21.0 million or $0.10 per share, after excluding the charge on the fair value of derivative liabilities and other non-cash or non-routine items, compared to $20.6 million or $0.12 per share in Q1 Fiscal 2025. The 2% increase in absolute terms contrasted with the 17% decrease in per-share metrics due to additional shares outstanding following the Adventus acquisition.

The company excluded a $4.8 million charge related to fair value adjustments on derivative liabilities from convertible notes issued in November 2024. Without these adjustments, reported net income was $18.1 million ($0.08 per share) compared to $21.9 million ($0.12 per share) in the prior year quarter. The derivative charge represented the primary difference between reported and adjusted earnings.

The increase in weighted average shares outstanding from 177.6 million to 218.0 million reflected the July 2024 Adventus acquisition. This 23% increase in share count affected all per-share calculations despite absolute earnings growth in adjusted terms.

Operating Cash Flow & Free Cash Flow

Cash flow provided by operating activities in Q1 Fiscal 2026 was $48.3 million, up $8.3 million, compared to $40.0 million in Q1 Fiscal 2025. The increase occurred alongside higher production costs due to increased ore processing volumes and mineral rights royalties implemented in China during fiscal 2025.

Free cash flow in Q1 Fiscal 2026 was $22.5 million, compared to $23.6 million in Q1 Fiscal 2025 as the Company funded $7.6 million in expenditures to advance construction at the El Domo Project and exploration at the Condor Project in Ecuador. Total capital expenditures increased to $25.8 million from $16.4 million in the prior year quarter.

Cash and short-term investments reached $377.1 million at quarter end, increasing $8.1 million from the previous quarter. The company maintains equity investments valued at $72.2 million and has access to a $175 million stream financing commitment from Wheaton Precious Metals for El Domo project construction.

Resource Allocation and Investment Focus

Capital expenditures totalled $24.2 million compared to $19.7 million in Q1 fiscal 2025, representing a 23% increase. Chinese operations received $18.8 million for exploration, development, and equipment, while Ecuador operations received $5.4 million for development and exploration activities.

The Ying Mining District received $16.7 million in total expenditures, including development work and exploration drilling. The GC Mine received $1.6 million for similar activities. Construction commenced at the Kuanping project during the quarter, representing a new development within the company's Chinese operations.

Ecuador project spending focused on El Domo construction advancement ($4.8 million) and Condor exploration activities ($0.7 million). These investments support the development of assets acquired through the Adventus transaction. The company paid $2.7 million in dividends to common shareholders during the quarter.

Production and Operational Impact

The Company reports a fatality involving a worker of the mining contractor at the HZG mine of the Ying Mining District. The incident occurred during a recruitment tour and was not initially reported to the company by the contractor. Following a government investigation initiated by a whistleblower report, certain mining areas were closed.

As a full investigation is currently underway, certain mining areas are closed, which will result in a production shortfall estimated at up to 20-25% for the current quarter. The company awaits the final government investigation report and any required safety facility improvements before resuming operations in affected areas.

The Ying Mining District produced 1,689 thousand ounces of silver and 2,050 ounces of gold in Q1, representing increases of 7% and 79% respectively compared to the prior year quarter. The GC Mine produced 138 thousand ounces of silver, a 5% decrease from the prior year quarter.

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