Silvercorp Metals Inc

Silvercorp Metals Inc (TSX: SVM) is a mining company based out of Canada. The Group is engaged in the business of production of zinc, lead and silvers metals from mines in the Chinese region. SVM operates in mines located in Henan Province and Guangdong Province in China. The Company will release Q1 FY2021 Financial update on 6 August 2020.

Production Update Q1 FY2021 (16 July 2020)

The production of mined ore stood at 254,555 tonnes, reflecting a decline of 1% versus Q1 FY2020. The production of Silver declined by 10% to around 1.8 million ounces versus Q1 FY2020 data. The production of lead increased by 1% and zinc increased by 4% to around 20.1 million pounds and 7.5 million pounds, respectively, versus Q1 FY2020 data.

Financial Highlights – Financial Year 2020 (31^st March 2020, USD, thousand)

(Source: Annual Report, Company Website) 

For the financial year ending 31^st March 2020, driven by lower sales from Henan Luoning and Guangdong for the period, the revenue declined to USD 158,829 thousand (FY2019: USD 170,519 thousand). The Group’s operating income stood at USD 52,162 thousand in the financial year 2020 (FY2019: USD 70,073 thousand), reflecting lower sales for the period. The profit before income tax stood at USD 54,112 thousand in the financial year 2020 (FY2019: USD 72,918 thousand). The net income declined to USD 45,203 thousand in FY2020 (FY2019: USD 52,047 thousand). The basic earnings per share stood at 0.20 cents for the financial year 2020 (FY2019: 0.24 cents). The cash balance as on 31^st March 2020 stood at USD 65,777 thousand versus USD 67,441 thousand as on 31^st March 2019

Share Price Performance

SVM 1 Year daily technical chart, source: Refinitiv, Thomson Reuters

Silvercorp Metals Inc shares closed at CAD 9.73 at the time of writing after the market close on 23 July 2020. Stock's 52 weeks High is CAD 10.76 and Low is CAD 2.12.

Key Risks

Any change in regulations and government policies could affect the overall business of the Company. Liquidity and interest rate risks could affect the operations of the Company. The market conditions in which the Company operates is full of challenges and might impact the operation performance and reduce financial performance as well.

Conclusion

The Company has shown a decline in financial performance in the financial year 2020. Both the top-line and the bottom-line performance have declined, with a decline in the profitability for the period. The liquidity position has declined, but the balance sheet remained well-positioned. The recent drilling program at Ying Mining District for mineralization of gold will help the Company to increase its financial performance as gold prices in the global markets are showing improvements. In Q1 FY2021, the production of lead and zinc has increased, while the production of silver and ore declined. SVM is actively seeking acquisitions to achieve growth in the long-term period. The Group operations are impacted by the outbreak of covid-19 pandemic and have been focusing on strengthening its balance sheet and return with capital discipline and reducing its costs to preserve cash.

Based on the above rationale, we have given a “Hold” recommendation at the closing price of CAD 9.73 (as on 23 July 2020).

Seabridge Gold Inc

Seabridge Gold Inc (TSX: SEA) is a mining company based out of Canada. It is engaged in the business of exploration of Gold. The Group’s principal properties include the Iskut project in British Columbia, Canada; Kerr-Sulphurets-Mitchell project in Northern British Columbia, Canada; The 3 Aces Project in Northwest Territories, Canada.

Recent Updates:

• Recently, the Company reported it had started drilling activities across its Owned Iskut project in British Columbia. The Company reported that two shallow drill campaigns discovered a promising diatreme below the Quartz Rise Lithocap located southeast of the old high-grade Johnny Mountain Mine.
• On July 9, 2020, the Company commenced its geotechnical drilling activities at the Mitchell Treaty Tunnels (MTT). The above tunnel is designed for efficient transfer of ore to the mill from the mine site and the supply of electricity and transportation of fuel and other consumables to the mine. 

Q1FY20 Financial Highlights: SEA declared its first quarter results, wherein the Company reported a lower net loss of CAD 3.198 million, as compared to a net loss of CAD 4.088 million in the previous corresponding period (pcp). The quarter was marked by lower corporate and administrative expenses and a higher finance cost. Interest income was significantly lower than the previous corresponding quarter. The Company ended the quarter with cash and cash equivalent of CAD 6.773 million while total assets stood at CAD 454.540 million.

Q1FY20 Income Statement Highlights (Source: Company Reports)

Risks: The company is in the exploration stage. Hence, any delay in drilling activities might hamper future prospects. Further, the company might not get the desired result from the drilling activities that would be a major setback.

Stock Recommendation: The stock soared ~35% and 53% in the last three months and six months, respectively amidst volatility in the equity market. The company reported improved liquidity of CAD 13.5 million, higher from CAD 12.5 million in FY19, which is impressive and likely to help the group in navigating the current challenging environment. The company recently raised capital via bought deal financing, which would further improve the liquidity. The company is an exploration stage and operates in gold mining and is yet to report its revenue. However, the company’s drilling activities reported promising result in the recent past, which is encouraging. Furthermore, the current upward trend in the gold price has supported the stock prices in the recent past. Investors should note that the stock of SEA is quoting above its 200-days simple moving average (SMA) of CAD 18.01, indicating a bullish trend. Considering the above mention facts, we give a ’Hold’ rating on to the stock at the current closing price of CAD 25.25 on July 23, 2020.

SEA Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Disclaimer

The advice given by Kalkine Canada Advisory Services Inc. and provided on this website is general information only and it does not take into account your investment objectives, financial situation and the particular needs of any particular person. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The website www.kalkine.ca is published by Kalkine Canada Advisory Services Inc. The link to our Terms & Conditions has been provided please go through them. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations later.