Silvercorp has slight increase in Production but big increase in Reserves
On October 15 Silvercorp (SVM),based in Vancouver, released it's production estimates for 2020.Silvercorp (SVM) produces silver,lead.zinc and gold in the Ying Mining District of China.The total ore mined for 2020 is up 3% over 2019;silver production is up with lead and zinc production almost constant from 2019.There was only 1100 ounces of gold mined.But Silvercorp had a technical update report done by the consultants called AMC Mining Consultants in Q2;it showed substantial increases in reserves for all minerals over the previous report done in 2014.In addition, SVM is moving ahead on a new mine which is adjacent to the north of their existing TLP mine.The new deposit at DGC will be ready for mining in late 2020.And it shows improved mineralization of gold over all other SVM mines in the Ying Mining District.
First Quarter Highlights
An earlier blog on Econothon II dated February 17,2020 reported the fact that a slight 1% drop in production lead to an immediate 40% drop in the price of SVM shares.This blog went on to say that the price would come back soon and it did.One of the main reasons is that the price of silver has increased by 35% from February to October.Secondly SVM found more silver,lead and zinc at extensions to it's 6 Ying mines and to the DGC mine.And lastly it found gold ore at 15to 20 grams per tonne at both mine sites.It was mainly the gold that has increased their e.p.s from $.07 in 2019 to $.09 in 2020.In fact,one of their mines had accumulated about 1100 ounces and sold it in Q2; a difference of $2 million.
Forecast for the Rest of 2020
It appears that Silvercorp was somewhat surprised and pleased that after mining 20 million ounces of silver that reserves of silver in place had increased by almost 20%.And everyone in the silver industry knows that Silvercorp mines have an extremely high grade of silver.The amount of lead and zinc will be mined at a constant level for the rest of the year.The wild card for SVM this year will be the amount of gold found and mined.
This blog foresees a further increase in the price of gold and silver in 2020 and 2021.Consequently Silvercorp will be able to increase earnings with a small increase in silver and gold production.This however will only keep SVM's share price in the $10-$12 price range. But if SVM expects to hit $13-$15 a share, shareholders will expect both a 3-5% increase in silver production and the development (perhaps partial) of at least one new mine.
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