Exhibit 99.3

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders 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, 2018, 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, 2018, 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) and Canadian generally accepted auditing standards, the consolidated financial statements as at and for the year ended March 31, 2018, of the Company and our report dated May 23, 2018, expressed unmodified/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 International Financial Reporting Standards as issued by the International Accounting Standards Board. 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 International Financial Reporting Standards as issued by the International Accounting Standards Board, 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.

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Silvercorp Metals Inc.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated financial statements of Silvercorp Metals Inc. and subsidiaries (the “Company”), which comprise the consolidated statements of financial position as at March 31, 2018 and March 31, 2017, the consolidated statements of income, consolidated statements of comprehensive income (loss), consolidated statements of cash flows and consolidated statements of changes in equity for the years then ended, and the related notes, including a summary of significant accounting policies and other explanatory information (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 at March 31, 2018 and March 31, 2017, and its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.

Report on Internal Control over Financial Reporting

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, 2018, 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 23, 2018 expressed an unqualified opinion on the Company’s internal control over financial reporting.

Basis for Opinion

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards and 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 from material misstatement, whether due to fraud or error. Those standards also require that we comply with ethical requirements. 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. Further, we are required to be independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada and to fulfill our other ethical responsibilities in accordance with these requirements.

An audit includes performing procedures to assess the risks of material misstatement of the financial statements, whether due to fraud or error, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies and principles used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a reasonable basis for our audit opinion.

/s/ Deloitte LLP

Chartered Professional Accountants

Vancouver, Canada

May 23, 2018

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

SILVERCORP METALS INC.

Consolidated Statements of Financial Position

(Expressed in thousands of U.S. dollars)


			As at March 31,			As at March 31,
	Notes		2018			2017
ASSETS
Current Assets
Cash and cash equivalents	23	$	49,199		$	73,003
Short-term investments	3		56,910			23,466
Trade and other receivables			676			1,311
Inventories	4		11,018			8,710
Due from a related party	14		11			92
Income tax receivable			534			-
Prepaids and deposits			4,456			4,250
			122,804			110,832
Non-current Assets
Long-term prepaids and deposits			954			959
Reclamation deposits			5,712			5,054
Investment in an associate	5		38,001			8,517
Other investments	6		6,132			1,207
Plant and equipment	7		71,211			65,201
Mineral rights and properties	8		232,080			206,200
TOTAL ASSETS		$	476,894		$	397,970
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable and accrued liabilities		$	25,198		$	30,374
Deposits received			6,806			6,798
Income tax payable			303			2,985
			32,307			40,157
Non-current Liabilities
Deferred income tax liabilities	18		33,310			27,692
Environmental rehabilitation	9		13,098			12,186
Total Liabilities			78,715			80,035
Equity
Share capital			228,729			232,155
Share option reserve			14,690			13,325
Reserves	11		25,409			25,409
Accumulated other comprehensive loss	12		(25,875	)		(50,419	)
Retained earnings			86,283			42,651
Total equity attributable to the equity holders of the Company			329,236			263,121

Non-controlling interests	13		68,943			54,814
Total Equity			398,179			317,935

TOTAL LIABILITIES AND EQUITY		$	476,894		$	397,970
Commitments and contingencies	22

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)


			Years Ended March 31,
	Notes		2018			2017

Sales	21(c)	$	170,039		$	163,471
Cost of sales
Production costs			59,144			53,822
Mineral resource taxes			4,764			3,777
Depreciation and amortization			18,247			17,686
			82,155			75,285
Gross profit			87,884			88,186

General and administrative	15		18,685			16,818
Government fees and other taxes	16		2,971			4,007
Foreign exchange loss (gain)			1,628			(339	)
Loss on disposal of plant and equipment	7		329			538
Gain on disposal of NSR	6		(4,320	)		-
Share of loss (income) in associate	5		700			(282	)
Dilution gain on investment in associate	5		(822	)		-
Reclassification of other comprehensive loss upon ownership dilution of
investment in associate	5		18			-
Impairment reversal of investment in associate	5		(4,714	)		(5,278	)
Impairment of plant and equipment and mineral rights and properties			-			181
Other income			(2,016	)		(748	)
Income from operations			75,425			73,289

Finance income	17		2,839			2,206
Finance costs	17		(449	)		(760	)
Income before income taxes			77,815			74,735

Income tax expense	18		18,919			19,237
Net income		$	58,896		$	55,498

Attributable to:
Equity holders of the Company		$	46,994		$	43,674
Non-controlling interests	13		11,902			11,824
		$	58,896		$	55,498

Earnings per share attributable to the equity holders of the Company
Basic earnings per share	10(e)	$	0.28		$	0.26
Diluted earnings per share	10(e)	$	0.27		$	0.25
Weighted Average Number of Shares Outstanding - Basic			167,848,117			167,185,234
Weighted Average Number of Shares Outstanding - Diluted			171,405,904			171,350,024

See accompanying notes to the consolidated financial statements

SILVERCORP METALS INC.

Consolidated Statements of Comprehensive Income (Loss)

(Expressed in thousands of U.S. dollars)


			Years Ended March 31,
	Notes		2018		2017

Net income		$	58,896	$	55,498
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			28,831		(17,550	)
Share of other comprehensive income (loss) in associate	5		461		(12	)
Reclassification to net income upon ownership dilution of investment in associate	5		18		-
Items that will not subsequently be reclassified to net income or loss:
Change in fair value on equity investments designated as FVTOCI, net of tax of $nil	6		378		196
Other comprehensive income (loss), net of taxes		$	29,688	$	(17,366	)
Attributable to:
Equity holders of the Company		$	24,544	$	(14,425	)
Non-controlling interests	13		5,144		(2,941	)
		$	29,688	$	(17,366	)
Total comprehensive income		$	88,584	$	38,132

Attributable to:
Equity holders of the Company		$	71,538	$	29,249
Non-controlling interests			17,046		8,883
		$	88,584	$	38,132

See accompanying notes to the consolidated financial statements

SILVERCORP METALS INC.

Consolidated Statements of Cash Flows

(Expressed in thousands of U.S. dollars)


			Years Ended March 31,
	Notes		2018			2017
Cash provided by
Operating activities
Net income		$	58,896		$	55,498
Add (deduct) items not affecting cash:
Finance costs	17		449			760
Depreciation, amortization and depletion			19,442			18,913
Share of loss (income) in associate	5		700			(282	)
Dilution gain on investment in associate	5		(822	)		-
Reclassification of other comprehensive loss upon wonership dilution of
investment in associate	5		18			-
Gain on disposal of NSR	6		(4,320	)		-
Impairment reversal of investment in associate	5		(4,714	)		(5,278	)
Impairment of plant and equipment and mineral rights and properties			-			181
Income tax expense	18		18,919			19,237
Finance income	17		(2,839	)		(2,206	)
Loss on disposal of plant and equipment	7		329			538
Share-based compensation	10(b)		1,566			1,015
Reclamation			(194	)		(2,967	)
Income taxes paid			(19,743	)		(13,667	)
Interest received			2,839			2,206
Interest paid			-			(963	)
Changes in non-cash operating working capital	23		(2,625	)		4,485
Net cash provided by operating activities			67,901			77,470

Investing activities
Mineral rights and properties
Capital expenditures			(20,948	)		(27,814	)
Plant and equipment
Additions			(6,152	)		(7,987	)
Proceeds on disposals	7		33			51
Other investments
Acquisition			-			(782	)
Proceeds on disposals			-			33
Investment in associate	5		(23,861	)		-
Net purchases of short-term investments			(30,803	)		(4,094	)
Net cash used in investing activities			(81,731	)		(40,593	)

Financing activities
Bank loan
Repayment			-			(4,325	)
Non-controlling interests
Distribution	13		(7,785	)		(2,222	)
Cash dividends distributed	10(c)		(3,362	)		(1,585	)
Proceeds from issuance of common shares			550			904
Common shares repurchased as part of normal course issuer bid	10(d)		(4,177	)		-
Net cash used in financing activities			(14,774	)		(7,228	)
Effect of exchange rate changes on cash and cash equivalents			4,800			1,391

(Decrease) increase in cash and cash equivalents			(23,804	)		31,040
Cash and cash equivalents, beginning of the year			73,003			41,963
Cash and cash equivalents, end of the year		$	49,199		$	73,003
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
			Number of						Share option					Accumulated other comprehensive			Retained			Total equity attributable to the equity holders of			Non-controlling
	Notes		shares			Amount			reserve			Reserves		loss			earnings			the Company			interests			Total equity
Balance, April 1, 2016			166,846,356		$	230,933		$	12,628		$	25,409	$	(35,994	)	$	562		$	233,538		$	53,021		$	286,559
Options exercised			1,043,280			1,222			(318	)		-		-			-			904			-			904
Share-based compensation			-			-			1,015			-		-			-			1,015			-			1,015
Dividends declared			-			-			-			-		-			(1,585	)		(1,585	)		-			(1,585	)
Distribution to non-controlling interests			-			-			-			-		-			-			-			(7,090	)		(7,090	)
Comprehensive (loss) income			-			-			-			-		(14,425	)		43,674			29,249			8,883			38,132
Balance, March 31, 2017			167,889,636		$	232,155		$	13,325		$	25,409	$	(50,419	)	$	42,651		$	263,121		$	54,814		$	317,935
Options exercised			857,020			751			(201	)		-		-			-			550			-			550
Share-based compensation	10(b)		-			-			1,566			-		-			-			1,566			-			1,566
Dividends declared	10(c)		-			-			-			-		-			(3,362	)		(3,362	)		-			(3,362	)
Common shares repurchased as part of normal course issuer bid	10(d)		(1,717,100	)		(4,177	)		-			-		-			-			(4,177	)		-			(4,177	)
Distribution to non-controlling interests	13		-			-			-			-		-			-			-			(2,917	)		(2,917	)
Comprehensive income			-			-			-			-		24,544			46,994			71,538			17,046			88,584
Balance, March 31, 2018			167,029,556		$	228,729		$	14,690		$	25,409	$	(25,875	)	$	86,283		$	329,236		$	68,943		$	398,179

See accompanying notes to the consolidated financial statements

SILVERCORP METALS INC.

Notes to Consolidated Financial Statements

(Expressed in thousands of U.S. dollars, unless otherwise stated)


1.	CORPORATE INFORMATION

Silvercorp Metals Inc., along with its subsidiary companies (collectively the “Company”), is engaged in the acquisition, exploration, development, and mining of precious and base metal mineral properties. The Company’s producing mines and other current exploration and development projects are in China.

The Company is a publicly listed company incorporated in 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 the NYSE American Stock Exchange.

The head office, registered address and records office of the Company are located at 200 Granville Street, Suite 1378, Vancouver, British Columbia, Canada, V6C 1S4.


2.	SIGNIFICANT ACCOUNTING POLICIES

(a)Statement of Compliance

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”). The policies applied in these consolidated financial statements are based on IFRS in effect as of March 31, 2018.

These consolidated financial statements were authorized for issue in accordance with a resolution of the Board of Directors dated on May 23, 2018.

(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 statements 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.

SILVERCORP METALS INC.

Notes to Consolidated Financial Statements

(Expressed in thousands of U.S. dollars, unless otherwise stated)

Balances, transactions, revenues and expenses between the Company and its subsidiaries are eliminated on consolidation.

Details of the Company’s significant subsidiaries which are consolidated are as follows:


			Proportion of ownership interest held
		Place of	March 31,	March 31,
Name of subsidiaries	Principal activity	incorporation	2018	2017	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%	RZY
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%
Henan Huawei Mining Co. Ltd. ("Henan Huawei")	Mining	China	80%	80%
Henan Found Mining Co. Ltd. ("Henan Found")	Mining	China	77.5%	77.5%	Ying Mining District
Songxian Gold Mining Co., Ltd. ("SX Gold")	Mining	China	77.5%	77.5%	XHP
Xinshao Yunxiang Mining Co., Ltd. ("Yunxiang")	Mining	China	70%	70%	BYP
Guangdong Found Mining Co. Ltd. (Guangdong Found")	Mining	China	95%	95%	GC
(i) British Virgin Island ("BVI")

(c) Investments in Associates

An associate is an entity over which the Company has significant influence, and is not a subsidiary or joint venture. Significant influence is presumed to exist when the Company has power to be actively involved and influential in financial and operating policy decisions of the associate but does not have control or joint control over those policies.

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.

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

SILVERCORP METALS INC.

Notes to Consolidated Financial Statements

(Expressed in thousands of U.S. dollars, unless otherwise stated)

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 associate are as follows:


			Proportion of ownership interest held
		Place of	March 31,	March 31,
Name of associate	Principal activity	incorporation	2018	2017
New Pacific Metals Corp. ("NUAG")	Mining	Canada	29.8%	16.1%

(d)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.

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. 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”).

Foreign currency monetary assets and liabilities are translated into the functional currency using exchange rates prevailing at the balance sheet 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 balance sheet 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

SILVERCORP METALS INC.

Notes to Consolidated Financial Statements

(Expressed in thousands of U.S. dollars, unless otherwise stated)

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

Sales of all metals products, which are contained in direct smelting ore or concentrates, are recognized as revenue. Revenue is recognized when the significant risks and rewards of ownership have passed to the buyer, it is probable that economic benefits associated with the transaction will flow to the Company, the sale price can be measured reliably, the Company has no significant continuing involvement and the costs incurred or to be incurred in respect of the transaction can be measured reliably.

These conditions for revenue are satisfied when the title passes to the customer. The passing of title to the customer is based on the terms of the sales contract, which is generally upon shipment of the products. Product pricing is determined at the point revenue is recognized by reference to active and freely traded commodity markets. Under the Company’s concentrate sales contracts with its customers, final commodity prices are set on a specified quotation period, typically ranging from ten to fifteen days around shipment date. Refining and treatment charges are netted against revenue from metal concentrate sales.

(g)Cash and Cash Equivalents

Cash and cash equivalents include cash, and short-term money market instruments that are readily convertible to cash with original terms of three months or less.

(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 commercial paper with original terms of three months or more, but less than one year. Bonds traded on open markets are also included in short-term investments.

(i) Inventories

Inventories include metals contained in concentrates, direct smelting ore, stockpile ore and operating materials and supplies. The classification of metals inventory is determined by the stage at which the ore is in the production process. Mined materials that do not contain a minimum quantity of metal needed to compensate the estimated processing expenses for recovery of the contained metal, are not classified as inventory and are assigned no value.

Direct smelting ore and stockpiled ore 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.

SILVERCORP METALS INC.

Notes to Consolidated Financial Statements

(Expressed in thousands of U.S. dollars, unless otherwise stated)

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.

(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 its 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 are recognized in net income.

(k) Mineral Rights and Properties

The cost of acquiring mineral rights and properties as part of a business combination is capitalized and represents the property’s fair value at the date of acquisition. Fair value is determined by estimating the value of the property’s reserves, resources and exploration potential. The cost of acquiring or renewing an exploration or mining permit or mineral rights and properties not as part of a business combination is recognized at the amount paid and capitalized.

Exploration and evaluation costs incurred associated with specific mineral rights and properties prior to demonstrable technical feasibility and commercial viability of extracting a mineral resource are capitalized.

The Company determines that a property is in the development stage when it has completed a positive economic analysis of the mineral deposit. Subsequent development costs incurred prior to the commercial production stage are capitalized and included in the carrying amount of the related property in the period incurred. Proceeds from sales during this period, if any, are offset against costs capitalized.

SILVERCORP METALS INC.

Notes to Consolidated Financial Statements

(Expressed in thousands of U.S. dollars, unless otherwise stated)

When a property has achieved operational results that are expected to remain at a sustainable operational level over a period of time, it enters the commercial production stage. Quantitative and qualitative factors indicating the achievement of commercial production stage include but are not limited to the following:

A significant portion of planned capacity, production levels, grades and recovery rate are achieved at a sustainable level;
completion of major mine and plant components;
significant milestones such as obtaining necessary permits and production inputs are achieved to allow continuous and sustainable operations; and
management’s intended operating results are being achieved consistently for a period of time.

Production costs incurred during commercial production stage are included in cost of sales. Development costs incurred during commercial production stage that provide access to reserve and resources that will be produced in future periods that would not have otherwise been accessible are capitalized.

Upon commencement of commercial production, mineral rights and properties and capitalized expenditures, other than the mine right fee to renew a mining permit, 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. Amounts capitalized for the mine right fee are depleted using the units of production method based on the mineral resources which were used to determine the mine right fee payable.

(l) Impairment of Long-lived Assets

Long-lived assets, including mineral rights and properties, plant and equipment are reviewed and tested for impairment when indicators of impairment are considered to exist. Impairment assessments are conducted at the level of cash-generating units (“CGU”), which is the lowest level for which identifiable cash inflows are largely independent of the cash inflows of other assets. An impairment loss is recognized for any excess of carrying amount of a CGU over its recoverable amount, which is the greater of its fair value less costs to sell and value in use. For mineral rights and properties and processing facilities, the recoverable amount is estimated as the discounted future net cash flows expected to be derived from expected future production, metal prices, and net proceeds from the disposition of assets on retirement, less operating and capital costs. Impairment losses are recognized in the period they are incurred.

For exploration and evaluation assets, indication of impairment includes but is not limited to, expiration of the right to explore, abandonment of the property, substantive expenditures in the specific area are neither budgeted nor planned, and exploration for and evaluation of mineral resources in the specific area have not led to the discovery of commercially viable quantities of mineral resources.

Impairment losses are reversed if the conditions that gave rise to the impairment are no longer present and it has been determined that the asset is no longer impaired as a result. This reversal is recognized in net income in the period the reversal occurs limited by the carrying value that would have been determined, net of any depreciation, had no impairment charge been recognized in prior years.

SILVERCORP METALS INC.

Notes to Consolidated Financial Statements

(Expressed in thousands of U.S. dollars, unless otherwise stated)

(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 expenses. Closure and decommissioning provisions are also adjusted for changes in estimates. Those adjustments are accounted for as a change in the corresponding capitalized cost.

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.

SILVERCORP METALS INC.

Notes to Consolidated Financial Statements

(Expressed in thousands of U.S. dollars, unless otherwise stated)

(n) 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.

(o) Share-based Payments

The Company recognizes share-based compensation expense for all stock options awarded to employees, officers, directors, and consultants using the fair value method. The fair value of the stock options at the date of grant is expensed over the vesting periods of the stock options with a corresponding increase to equity. The fair value of options granted to employees, officers, and directors is determined using the Black-Scholes option pricing model with market related inputs as of the date of grant. 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. Forfeitures are accounted for using estimates based on historical actual forfeiture data. Share-based compensation expenses for options granted to those working in exploration are capitalized in mineral rights and properties.

Upon the exercise of the stock option, consideration received and the related amount transferred from contributed surplus are recorded as share capital.

(p)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 balance sheet 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.

SILVERCORP METALS INC.

Notes to Consolidated Financial Statements

(Expressed in thousands of U.S. dollars, unless otherwise stated)

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.

(q)Earnings per Share

Earnings per share is 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 our 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.

(r) Financial Instruments

The Company had previously early adopted IFRS 9 (2010) to account for its 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 (2010) 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 cash flows; and
	ii.	All contractual cash flows represent only principal and interest on that principal.

SILVERCORP METALS INC.

Notes to Consolidated Financial Statements

(Expressed in thousands of U.S. dollars, unless otherwise stated)

		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 it as either FVTPL or fair value through other comprehensive income (“FVTOCI”).

Financial assets classified as amortized cost are measured using the effective interest method. Amortized cost is calculated by taking into account any discount or premiums on acquisition and fees that are an integral part of the effective interest method. Amortization 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.

Impairment of financial assets carried at amortized cost:

The Company assesses at the end of each reporting period whether there is objective evidence that financial assets or group of financial assets measured at amortized cost are impaired. Impairment losses and reversal of impairment losses, if any, are recognized in profit or loss in the period they are incurred.

Subsequent measurement of financial liabilities:

Financial liabilities classified as amortized cost are measured using the effective interest method. Amortized cost is calculated by taking into account any discount or premiums on acquisition and fees that are an integral part of the effective interest method. Amortization 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 and other investments - warrants;
Financial assets classified as FVTOCI: other investments - common shares;
Financial assets classified as amortized cost: short-term investments, 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.

SILVERCORP METALS INC.

Notes to Consolidated Financial Statements

(Expressed in thousands of U.S. dollars, unless otherwise stated)

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, although the cumulative gain or loss may be transferred within equity.

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 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.

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.

(s) 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.

(t) 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.

SILVERCORP METALS INC.

Notes to Consolidated Financial Statements

(Expressed in thousands of U.S. dollars, unless otherwise stated)

Areas of significant judgments include:

Capitalization of expenditures with respect to exploration, evaluation and development costs to be included in mineral rights and properties.
Anticipated reinvestment of undistributed earnings of foreign subsidiaries, therefore no withholding taxes was accrued.
Accounting and impairment or impairment reversal assessment for equity investments and investment in associates.
Accounting and impairment or impairment reversal assessment for mineral rights and properties.
Determination of functional currency for all entities in the group.
Determination of the components of each CGU.

Areas of significant estimates include:

Ore reserve and mineral resource estimates

Ore reserves are estimates of the amount of ore that can be economically and legally extracted from the Company’s mining properties. The Company estimates its ore reserves and mineral resources based on information compiled by appropriately qualified persons relating to the geological and technical data on the size, depth, shape and grade of the ore body and suitable production techniques and recovery rates. Such an analysis requires complex engineering and geological judgements to interpret the data. The estimation of recoverable reserves is based upon factors such as estimates of foreign exchange rates, commodity prices, future capital requirements, and production costs along with engineering and geological assumptions and judgements made in estimating the size and grade of the ore body.

The Company estimates ore reserves in accordance with National Instrument 43-101, “Standards of Disclosure for Mineral Projects”, issued by the Canadian Securities Administrators. There are numerous assumptions including:

Future production estimates – which include proved and probable reserves, resource estimates and committed expansions;
Expected future commodity prices, based on current market price, forward prices and the Company’s assessment of the long-term average price; and
Future cash costs of production, capital expenditure and rehabilitation obligations.

As the economic assumptions change and as additional geological information is produced during the operation of a mine, estimates of reserves may change. Such changes may impact the Company’s reported financial position and results which include:

The carrying value of mineral rights and properties and plant and equipment may be affected due to changes in estimated future cash flows;
Depreciation and depletion charges in net income may change where such charges are determined using the units of production method, or where the useful life of the related assets change; and
The recognition and carrying value of deferred income tax assets may change due to changes in the judgements regarding the existence of such assets and in estimates of the likely recovery of such assets.

Impairment of assets

Where an indicator of impairment exists, a formal estimate of the recoverable amount is made, which is determined as the higher of the fair value less costs to sell and value in use. These assessments require the use of estimates and assumptions such as long-term commodity prices (considering current and historical prices, price trends and related factors), discount rates, operating costs, future capital requirements,

SILVERCORP METALS INC.

Notes to Consolidated Financial Statements

(Expressed in thousands of U.S. dollars, unless otherwise stated)

closure and rehabilitation costs, exploration potential, reserves and operating performance (which includes production and sales volumes). These estimates and assumptions are subject to risk and uncertainty. Therefore, there is a possibility that changes in circumstances will impact these projections, which may impact the recoverable amount of assets and/or CGUs. Fair value is determined as the amount that would be obtained from the sale of the asset in an arm’s length transaction between knowledgeable and willing parties. Fair value for mineral assets is generally determined as the present value of estimated future cash flows arising from the continued use of the asset, which includes estimates such as the cost of future expansion plans and eventual disposal, using assumptions that an independent market participant may take into account. Cash flows are discounted to their present value using a discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

(u) Accounting standards issued but not yet in effect

IFRS 9 (2014) – Financial Instruments (amended 2014): In July 2014, the IASB issued the final version of IFRS 9 – Financial Instruments (“IFRS 9”). The Company adopted IFRS 9 (2010) – Financial Instruments effective April 1, 2011. The Company has reviewed its financial instruments to determine the impact that the adoption of IFRS 9 (2014) will have on its financial statements. The Company does not anticipate that there will be any changes to the classification or the carrying values of the Company’s financial instruments as a result of the adoption. The Company does not currently apply hedge accounting to its risk management contracts and does not intend to apply hedge accounting to any of its existing risk management contracts on adoption of IFRS 9 (2014). The Company will apply IFRS 9 (2014) on April 1, 2018.

IFRS 15 – Revenue from contracts with customers, the standard on revenue from contacts with customers was issued in September 2015 and is effective for annual reporting periods beginning on or after January 1, 2018 with early adoption permitted. Entities have the option of using either a full retrospective or a modified retrospective approach to adopt the guidance. IFRS 15 introduces a revenue recognition model under which an entity recognizes revenue to reflect the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or serviceds. IFRS 15 also introduces the concept of performance obligations that are defined as “distinct” promised goods or services, and requires entities to apportion revenue earned to the distinct performance obligation on a relative stand alone selling price basis. The Company will apply IFRS 15 using the modified restrospective transition approach, whereby the cumulative impact of the application, if any, is recognized in retained earning as April 1, 2018 and comparative period balances are not restated. The Company has reviewed its revenue streams and underlying contracts with customers and determined that the application of IFRS 15 will have no material impact on its financial statements.

IFRS 16 – Leases (“IFRS 16”) was issued by the IASB and will replace Leases (“IAS 17”) and Determining whether an arrangement contains a lease (“IFRIC 4”). IFRS 16 applies a control model to the identification of leases, distinguishing between a lease and a non-lease component on the basis of whether the customer controls the specific asset. For those contracts that are or contain a lease, IFRS 16 introduces significant changes to the accounting for contracts that are or contain a lease, introducing a single, on-balance sheet accounting model that is similar to current finance lease accounting, with limited exceptions for short-term leases or leases of low value assets. Lessor accounting remains similar to current accounting practice. The standard is effective for annual periods beginning on or after January 1, 2019, with early application permitted for entities that apply IFRS 15. The Company anticipates that the application of IFRS 16 will result in an increase in the recognition of right of use assets and lease liabilities

SILVERCORP METALS INC.

Notes to Consolidated Financial Statements

(Expressed in thousands of U.S. dollars, unless otherwise stated)

related to leases with terms greater than 12 months on the Consolidated Statements of Financial Position on April 1, 2019. IFRS 16 will further result in increased depreciation and amortization on these right of use assets and increased interest on these additional lease liabilities. These lease payments will be recorded as financing outflows on the Consolidated Statements of Cash Flows. The Company expects to identify and collect data relating to existing lease agreements during Fiscal 2019.


3.	SHORT-TERM INVESTMENTS

As at March 31, 2018, short-term investments consist of the following:


		Carrying value	Interest rates	Maturity
Term deposits	$	36,596	3.6% - 4.15%	April 11 - August 3, 2018
Bonds		20,314	3.88% - 8.75%	June 4, 2018 - October 31, 2046
	$	56,910

As at March 31, 2017, short-term investments consist of the following:


		Carrying value	Interest rates	Maturity
Term deposits		7,141	3.38% - 3.66%	May 19 - 22, 2017
Bonds		16,325	3% - 8.7%	April 17, 2017 - December 10, 2020
	$	23,466

All bonds were purchased on open markets and are readily tradable.


4.	INVENTORIES

Inventories consist of the following:


		March 31, 2018		March 31, 2017
Direct smelting ore and stockpile ore	$	1,071	$	833
Concentrate inventory		5,513		4,853
Total stockpile and concentrate		6,584		5,686
Material and supplies		4,434		3,024
	$	11,018	$	8,710

The amount of inventories recognized as expense during the years ended March 31, 2018 was $77,391 (year ended March 31, 2017 - $71,508).


5.	INVESTMENT IN AN ASSOCIATE

New Pacific Metals Corp. (“NUAG”) is a Canadian public company listed on the TSX Venture Exchange (symbol: NUAG). NUAG is a related party of the Company by way of two common directors and 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.

In July 2017, the Company participated in NUAG’s private placement and subscribed 25,000,000 common shares of NUAG for $20.0 million.

SILVERCORP METALS INC.

Notes to Consolidated Financial Statements

(Expressed in thousands of U.S. dollars, unless otherwise stated)

In November 2017, the Company participated in NUAG’s strategic private placement. The placement was for 19,000,000 units, and the Company subscribed 3,000,000 units while Pan American Silver Corp. subscribed 16,000,000 units, at a price of CAD$1.42 per unit. Each unit is comprised of one common share of NUAG and one half of one common share purchase warrant. Arising from this strategic private placement, the Company’s ownership in NUAG was diluted from 32.2% to 29.8% and a dilution gain of $0.8 million was recorded along with the reclassification of loss of $18 from other comprehensive income to net income.

The Company also acquired additional 474,600 shares from the public market for $0.5 million during the year ended March 31, 2018.

As at March 31, 2018, the Company owned 39,280,900 common shares (March 31, 2017 – 10,806,300) of NUAG, representing an ownership interest of 29.8% (March 31, 2017 – 16.1%). The summary of the investment in NUAG common shares and its market value as at the respective balance sheet dates are as follows:


						Value of NUAG's
	Number of					common shares per
	shares		Amount			quoted market price
Balance, April 1, 2016	10,806,300	$	3,133		$	2,333
Share of net income			282
Share of other comprehensive loss			(12	)
Impairment recovery			5,278
Foreign exchange impact			(164	)
Balance, March 31, 2017	10,806,300		8,517			8,517
Participate in Private placement	28,000,000		23,352
Purchase from open market	474,600		509
Share of net loss			(700	)
Share of other comprehensive income			461
Impairment recovery			4,714
Dilution gain			822
Foreign exchange impact			326
Balance March 31, 2018	39,280,900	$	38,001		$	50,266

For the year ended March 31, 2018, an impairment recovery of $4,714 (year ended March 31, 2017 -$5,278) was recognized for the investment in NUAG based on the quoted market price of NUAG common shares.

SILVERCORP METALS INC.

Notes to Consolidated Financial Statements

(Expressed in thousands of U.S. dollars, unless otherwise stated)

Summarized financial information for the Company's investment in NUAG on a 100% basis is as follows:


		Years ended March 31,
		2018	⁽¹⁾		2017	⁽¹⁾
(Loss) income from investments	$	(976	)	$	3,999
General and administrative expense		(2,527	)		(1,197	)
Foreign exchange (loss) gain		(358	)		388
Impairment charge		-			(2,933	)
Other income		372			100
Net (loss) income of associate	$	(3,489	)	$	357
Adjustments to net (loss) income of associate		760			1,391
Net (loss) income of associate qualified for pick-up	$	(2,729	)	$	1,748
Company's share of net (loss) income	$	(700	)	$	282

		March 31, 2018⁽¹⁾			March 31, 2017⁽¹⁾
Current assets	$	28,279		$	16,152
Non-current assets		57,268			9,248
Total assets	$	85,547		$	25,400

Current liabilities		970			600
Long-term liabilities		4,839			-
Total liabilities		5,809			600

Net assets	$	79,738		$	24,800
Company's share of net assets of associate	$	23,730		$	4,003

⁽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.


6.	OTHER INVESTMENTS


		March 31,2018		March 31, 2017
Equity investments designated as FVTOCI
Publicly-traded companies	$	6,132	$	1,207

(a) Investments in publicly-traded companies with no significant influence

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. These equity interests are for long-term investment purposes and consist of common shares and warrants. As of March 31, 2018, none of the shares held by the Company represented more than 10% of the respective outstanding shares of investees.

SILVERCORP METALS INC.

Notes to Consolidated Financial Statements

(Expressed in thousands of U.S. dollars, unless otherwise stated)

The continuity of such investments is as follows:


		Fair value			Accumulated fair value change included in OCI
April 1, 2016	$	287		$	(6,429	)
Change in fair value on equity investments designated as FVTOCI		196			196
Purchase of equity investments		782			-
Impact of foreign currency translation		(58	)		-
March 31, 2017	$	1,207		$	(6,233	)
Change in fair value on equity investments designated as FVTOCI		378			378
Equity investments received as consideration for disposal of NSR		4,320			-
Impact of foreign currency translation		227			-
March 31, 2018	$	6,132		$	(5,855	)

On April 5, 2017, the Company entered into a royalty purchase and sale agreement (the “Agreement”) with Maverix Metals Inc. (“Maverix”), a publicly traded (TSX-V: MMX) Canadian precious metals royalty and streaming company, to sell its 2.5% net smelter return (“NSR”) on the Silvertip Mine for consideration of up to 6,600,000 of Maverix’s common shares payable as follows:

3,800,000 common shares of Maverix on closing of the transaction; and
2,800,000 common shares of Maverix when the Silvertip Mine achieves (i) commercial production, and (ii) a cumulative throughput of 400,000 tonnes of ore through the processing plant.

On April 19, 2017, the transaction closed and the Company received a total of 3,800,000 Maverix common shares valued at $4,320 (CAD$5.8 million) and recognized a gain of $4,320 on disposal of the NSR.


7.	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, 2016	$	91,162		$	6,442		$	27,255		$	7,103		$	9,075		$	141,037
Additions		1,748			215			850			300			1,656			4,769
Disposals		(267	)		(323	)		(321	)		(837	)		(3	)		(1,751	)
Reclassification of asset groups⁽¹⁾		7,841			-			318			-			(8,159	)		-
Impact of foreign currency translation		(6,000	)		(370	)		(1,750	)		(435	)		(426	)		(8,981	)
Balance as at March 31, 2017	$	94,484		$	5,964		$	26,352		$	6,131		$	2,143		$	135,074
Additions		1,497			1,156			1,084			559			1,540			5,836
Disposals		(246	)		(194	)		(298	)		(515	)		-			(1,253	)
Reclassification of asset groups⁽¹⁾		344			-			4			-			(348	)		-
Impact of foreign currency translation		9,086			829			2,271			555			267			13,008
Ending balance as at March 31, 2018	$	105,165		$	7,755		$	29,413		$	6,730		$	3,602		$	152,665

Impairment, accumulated depreciation and amortization
Balance as at April 1, 2016	$	(42,658	)	$	(4,693	)	$	(17,177	)	$	(5,407	)	$	(57	)	$	(69,992	)
Disposals		82			276			187			617			-			1,162
Depreciation and amortization		(2,893	)		(507	)		(1,674	)		(480	)		-			(5,554	)
Impact of foreign currency translation		2,763			258			1,144			342			4			4,511
Balance as at March 31, 2017	$	(42,706	)	$	(4,666	)	$	(17,520	)	$	(4,928	)	$	(53	)	$	(69,873	)
Disposals		68			175			208			440			-			891
Depreciation and amortization		(3,180	)		(438	)		(1,643	)		(390	)		-			(5,651	)
Impact of foreign currency translation		(4,198	)		(383	)		(1,768	)		(467	)		(5	)		(6,821	)
Ending balance as at March 31, 2018	$	(50,016	)	$	(5,312	)	$	(20,723	)	$	(5,345	)	$	(58	)	$	(81,454	)

Carrying amounts
Balance as at March 31, 2017	$	51,778		$	1,298		$	8,832		$	1,203		$	2,090		$	65,201
Ending balance as at March 31, 2018	$	55,149		$	2,443		$	8,690		$	1,385		$	3,544		$	71,211

⁽¹⁾when an asset is available for use, it is reclassified from construction in progress to one of the appropriate plant and equipment categories.

SILVERCORP METALS INC.

Notes to Consolidated Financial Statements

(Expressed in thousands of U.S. dollars, unless otherwise stated)


Carrying amounts as at March 31, 2018		Ying Mining District		BYP		GC		Other		Total
Land use rights and building	$	37,431	$	2,527	$	14,039	$	1,151	$	55,148
Office equipment		2,053		46		168		176		2,443
Machinery		5,651		339		2,652		50		8,692
Motor vehicles		1,270		33		80		2		1,385
Construction in progress		1,528		1,966		49		-		3,543
Total	$	47,933	$	4,911	$	16,988	$	1,379	$	71,211

Carrying amounts as at March 31, 2017		Ying Mining District		BYP		GC		Other		Total
Land use rights and building	$	35,079	$	2,533	$	13,087	$	1,079	$	51,778
Office equipment		1,009		51		160		78		1,298
Machinery		5,817		372		2,643		-		8,832
Motor vehicles		1,138		44		21		-		1,203
Construction in progress		255		1,831		4		-		2,090
Total	$	43,298	$	4,831	$	15,915	$	1,157	$	65,201

During the year ended March 31, 2018, certain plant and equipment were disposed for proceeds of $33 (year ended March 31, 2017 - $51) and loss of $329 (year ended March 31, 2017 – loss of $538).


8.	MINERAL RIGHTS AND PROPERTIES

Mineral rights and properties consist of:


		Producing and development properties									Exploration and evaluation properties
Cost		Ying Mining District			BYP			GC			XHP			RZY			Total
Balance as at April 1, 2016	$	232,127		$	64,815		$	109,478		$	21,257		$	179		$	427,856
Capitalized expenditures		18,058			-			714			-			-			18,772
Mine right fee		1,337			-			-			-			-			1,337
Environmental rehabiliation		(1,448	)		(101	)		(57	)		-			-			(1,606	)
Foreign currecy translation impact		(15,227	)		(968	)		(6,933	)		(1,351	)		(5	)		(24,484	)
Balance as at March 31, 2017	$	234,847		$	63,746		$	103,202		$	19,906		$	174		$	421,875
Capitalized expenditures		20,125			14			323			231			-			20,693
Environmental rehabiliation		(589	)		(52	)		(36	)		(17	)		-			(694	)
Foreign currecy translation impact		23,351			1,346			9,755			1,904			6			36,362
Ending balance as at March 31, 2018	$	277,734		$	65,054		$	113,244		$	22,024		$	180		$	478,236

Impairment and accumulated depletion
Balance as at April 1, 2016	$	(55,524	)	$	(57,386	)	$	(77,609	)	$	(21,257	)	$	-		$	(211,776	)
Impairment loss		-			-			-			-			(181	)		(181	)
Depletion		(12,457	)		-			(1,869	)		-			-			(14,326	)
Foreign currecy translation impact		3,824			495			4,931			1,351			7			10,608
Balance as at March 31, 2017	$	(64,157	)	$	(56,891	)	$	(74,547	)	$	(19,906	)	$	(174	)	$	(215,675	)
Depletion		(12,196	)		-			(1,837	)		-			-			(14,033	)
Foreign currecy translation impact		(6,746	)		(693	)		(7,111	)		(1,892	)		(6	)		(16,448	)
Ending balance as at March 31, 2018	$	(83,099	)	$	(57,584	)	$	(83,495	)	$	(21,798	)	$	(180	)	$	(246,156	)

Carrying amounts
Balance as at March 31, 2017	$	170,690		$	6,855		$	28,655		$	-		$	-		$	206,200
Ending balance as at March 31, 2018	$	194,635		$	7,470		$	29,749		$	226		$	-		$	232,080

On June 16, 2016, the Company paid a mine right fee of $1,337 (RMB ¥8.7 million) to the Chinese government as part of its requirement to renew the mining permit for its TLP and LM mine (part of the Ying Mining District).


9.	ENVIRONMENTAL REHABILITATION

The following table presents the reconciliation of the beginning and ending obligations associated with the retirement of the properties:

SILVERCORP METALS INC.

Notes to Consolidated Financial Statements

(Expressed in thousands of U.S. dollars, unless otherwise stated)


		Total
Balance, April 1, 2016	$	14,328
Unwinding of discount of environmental rehabilitation		382
Revision of provision		(1,606	)
Foreign exchange impact		(918	)
Balance, March 31, 2017	$	12,186
Reclamation expenditures		(25	)
Unwinding of discount of environmental rehabilitation		449
Revision of provision		(694	)
Foreign exchange impact		1,182
Balance, March 31, 2018	$	13,098

As at March 31, 2018, the total undiscounted amount of estimated cash flows required to settle the Company’s environmental rehabilitation provision is $20,836 (March 31, 2017 - $18,683) over the next twenty-nine years, which has been discounted using an average discount rate of 3.84% (March 31, 2017 –3.48%).


10.	SHARE CAPITAL

(a) Authorized

Unlimited number of common shares without par value. All shares issued as at March 31, 2018 were fully paid.

(b) Stock options

The Company has a stock option plan which allows for the maximum number of common shares to be reserved for issuance on the exercise of options granted under the stock option plan to be a rolling 10% of the issued and outstanding common shares from time to time. The maximum exercise period may not exceed 10 years from the date of the grant of the options to employees, officers, and consultants. The following is a summary of option transactions:


				Weighted average
				exercise price per
	Number of shares			share CAD$
Balance, April 1, 2016	9,174,025		$	2.39
Options granted	1,173,000			3.77
Options exercised	(1,043,280	)		1.13
Options forfeited	(847,238	)		3.61
Options expired	(777,000	)		8.92
Balance, March 31, 2017	7,679,507		$	1.97
Option granted	2,192,500			3.30
Options exercised	(857,020	)		0.81
Options forfeited	(195,626	)		3.00
Options expired	(672,562	)		5.25
Balance, March 31, 2018	8,146,799		$	2.15

SILVERCORP METALS INC.

Notes to Consolidated Financial Statements

(Expressed in thousands of U.S. dollars, unless otherwise stated)

During the year ended March 31, 2018, a total of 2,192,500 options with a life of three years (year ended March 31, 2017 – 1,173,000 options with a life of three years) were granted to directors, officers, and employees at exercise prices of CAD$3.23 and CAD$3.36 per share (year ended March 31, 2017 – prices of CAD$3.63 to CAD$5.58) subject to a vesting schedule over a two-year term with 25% of the options vesting every six months from the date of grant.

The fair value of stock options granted during the years ended March 31, 2018 and 2017 were calculated as of the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions:


				Years ended March 31,
		2018		2017
Risk free interest rate		1.70%		0.78%
Expected life of option in years		2.27 years		2.25 years
Expected volatility		69%		72%
Expected dividend yield		1.36%		0.47%
Estimated forfeiture rate		10%		11%
Weighted average share price at date of grant	$	3.30%	$	3.77

The weighted average grant date fair value of options granted during the year ended March 31, 2018 was CAD$1.27 (US$0.99) (year ended March 31, 2016 - CAD$1.53 (US$1.17)). Volatility was determined based on the historical volatility of the Company’s shares over the estimated life of stock options. For the year ended March 31, 2018, a total of $1,566 (year ended March 31, 2017 - $1,015) in share-based compensation expense was recognized and included in the general and administrative expenses on the consolidated statements of income.

The following table summarizes information about stock options outstanding at March 31, 2018:


								Weighted
			Weighted average		Weighted	Number of		average
		Number of options	remaining		average	options		exercise
	Exercise price in	outstanding at	contractual life		exercise price	exercisable at		price in
	CAD$	March 31, 2018	(Years)		in CAD$	March 31, 2018		CAD$
$	0.66	2,385,044	0.75	$	0.66	2,385,044		0.66
$	1.43	1,405,591	2.17	$	1.43	1,273,506		1.43
$	1.75	344,375	1.16	$	1.75	320,813		1.75
$	1.76	235,353	1.54	$	1.76	188,510		1.76
$	2.98	126,437	0.81	$	2.98	126,437		2.98
$	3.23	1,072,500	2.95	$	3.23	-		-
$	3.25	168,375	0.17	$	3.25	168,375		3.25
$	3.36	1,070,000	2.51	$	3.36	-		-
$	3.41	266,124	0.45	$	3.41	266,124		3.41
$	3.63	900,000	1.80	$	3.63	450,000		3.63
$	4.34	143,000	1.47	$	4.34	107,250		4.34
$	5.58	30,000	1.90	$	5.58	15,000		5.58
$	0.66 - 5.58	8,146,799	1.67	$	2.15	5,301,059	$	1.57

Subsequent to March 31, 2018, a total of 94,970 options with exercise prices ranging from CAD$0.66 to CAD$3.41 were exercised.

SILVERCORP METALS INC.

Notes to Consolidated Financial Statements

(Expressed in thousands of U.S. dollars, unless otherwise stated)

(c) Cash dividends declared and distributed

During the year ended March 31, 2018, dividends of $3,362 (year ended March 31, 2017 - $1,585) were declared and paid.

(d) Normal course issuer bid

On November 23, 2017, the Company announced a normal course issuer bid (“NCIB”) which allows it to acquire up to 8,409,712 of its own common shares until November 26, 2018.

As at March 31, 2018, the Company acquired a total of 1,717,100 common shares at a cost of $4,177 under the NCIB program. Transaction costs related to the acquisition of the common shares were $13. All shares bought were subsequently cancelled.

(e) Earnings per share (basic and diluted)


			For the years ended March 31,
				2018					2017
		Income		Shares		Per-Share		Income	Shares		Per-Share
		(Numerator)		(Denominator)		Amount		(Numerator)	(Denominator)		Amount
Net income attributable to equity holders of the Company	$	46,994					$	43,674

Basic earnings per share		46,994		167,848,117	$	0.28	$	43,674	167,185,234	$	0.26
Effect of dilutive securities:
Stock options				3,557,787					4,164,790
Diluted earnings per share	$	46,994		171,405,904	$	0.27	$	43,674	171,350,024	$	0.25

Anti-dilutive options that are not included in the diluted EPS calculation were 1,073,000 for the year ended March 31, 2018 (year ended March 31, 2017 – 1,845,562).


11.	RESERVES

Pursuant to Chinese company law applicable to foreign investment enterprises, the Company’s Chinese subsidiaries are required to maintain dedicated reserves. The amounts are appropriated at a percentage, at the discretion of the Board of Directors of each Chinese subsidiary, of their respective after tax net income determined in accordance with accounting principles and relevant financial regulations applicable to Chinese enterprises each year. Once the dedicated reserves appropriated reach 50% of a subsidiary's registered capital, it is not required to appropriate more earnings into the reserves.

Dedicated reserves for all periods presented include an Enterprise Reserve Fund of $2,903 and an Enterprise Expansion Fund of $22,506, which are recorded as a component of equity, and are not available for distribution to shareholders other than upon liquidation.

As of March 31, 2018, the Company had two subsidiaries, Henan Found and Henan Huawei, which had appropriated the dedicated reserves. No dedicated reserves were appropriated for the years ended March 31, 2018 and 2017 for Henan Found and Henan Huawei since the balance has reached the required amount in prior years.

SILVERCORP METALS INC.

Notes to Consolidated Financial Statements

(Expressed in thousands of U.S. dollars, unless otherwise stated)


12.	ACCUMULATED OTHER COMPREHENSIVE INCOME


		March 31, 2018			March 31, 2017
Change in fair value on equity investments designated as FVTOCI	$	(37,508	)	$	(37,886	)
Share of other comprehensive loss in associate		281			(198	)
Currency translation adjustment		11,352			(12,335	)
Balance, end of the year	$	(25,875	)	$	(50,419	)

The unrealized loss on equity investments designated as FVTOCI and on currency translation adjustment are net of tax of $nil for all periods presented.


13.	NON-CONTROLLING INTERESTS

The continuity of non-controlling interests is summarized as follows:


		Henan			Henan						Guangdong
		Found			Huawei			Yunxiang			Found			SX Gold			Total
Balance, April 1, 2016	$	51,596		$	4,231		$	4,197		$	(3,082	)	$	(3,921	)	$	53,021
Share of net income (loss)		11,247			756			(340	)		186			(25	)		11,824
Share of other comprehensive income (loss)		(2,703	)		(141	)		(193	)		48			48			(2,941	)
Distributions		(6,328	)		(762	)		-			-			-			(7,090	)
Balance, March 31, 2017	$	53,812		$	4,084		$	3,664		$	(2,848	)	$	(3,898	)	$	54,814
Share of net income (loss)		10,230			1,313			(374	)		341			392			11,902
Share of other comprehensive income (loss)		4,476			512			242			(38	)		(48	)		5,144
Distributions		(2,917	)		-			-			-			-			(2,917	)
Balance, March 31, 2018	$	65,601		$	5,909		$	3,532		$	(2,545	)	$	(3,554	)	$	68,943

As at March 31, 2018, non-controlling interests in Henan Found, Henan Huawei, Yunxiang, Guangdong Found and SX Gold were 22.5%, 20%, 30%, 5% and 22.5%, 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, 2018, Henan Found declared and paid dividends of $2,269 along with dividends of $3,786 that was declared and accrued in the prior year to Henan Non-ferrous (year ended March 31, 2017 – declared dividends of $4,922, of which $1,136 was paid during the year and $3,786 was in accounts payable and accrued liabilities as at March 31, 2017).

Henan Xinxiangrong Mining Ltd. (“Henan Xinxiangrong”) is the 5% equity interest holder of Henan Found. During the year ended March 31, 2018, Henan Found declared and paid dividends of $648 along with dividends of $1,082 that was declared and accrued in the prior year to Henan Xinxiangrong, of which $324 was paid during the year and $1,082 was in accounts payable and accrued liabilities as at March 31, 2017 (year ended March 31, 2017 – declared dividends of $1,406, of which $324 was paid during the year and $1,082 was in accounts payable and accued liabilities as at March 31, 2017).

Henan Xinhui Mining Co., Ltd. (“Henan Xinhui”) is a 20% equity interest holder of Henan Huawei. For the year ended March 31, 2018, Henan Huawei did not declare any dividends (year ended March 31, 2017 –declared and paid dividends of $762) to Henan Xinhui.

SILVERCORP METALS INC.

Notes to Consolidated Financial Statements

(Expressed in thousands of U.S. dollars, unless otherwise stated)


14.	RELATED PARTY TRANSACTIONS

Related party transactions not disclosed elsewhere in the consolidated financial statements are as follows:


Due from a related party		March 31, 2018		March 31, 2017
NUAG (a)	$	11	$	92

(a)

According to a services and administrative costs reallocation agreement between the Company and NUAG, the Company recovers costs for services rendered to NUAG and expenses incurred on behalf of NUAG. During the year ended March 31, 2018, the Company recovered $433 (year ended March 31, 2017 - $194) 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.

Transactions with related parties are made under terms agreed upon by the two parties. The balances with related parties are unsecured, non-interest bearing, and due on demand.

(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, 2018 and 2017 were as follows:


		Years Ended March 31,
		2018		2017
Directors' fees	$	168	$	151
Salaries and bonus for key management personnel		2,656		2,031
Share-based compensation		981		727
	$	3,805	$	2,909

Share-based compensation expenses were measured at grant date fair value.


15.	GENERAL AND ADMINISTRATIVE

General and administrative expenses consist of:


		Years ended March 31,
General and administrative		2018		2017
Office and administrative expenses	$	6,667	$	5,520
Amortization and depreciation		1,196		1,227
Salaries and benefits		8,395		7,397
Share-based compensation		1,566		1,015
Professional fees		861		1,659
	$	18,685	$	16,818

SILVERCORP METALS INC.

Notes to Consolidated Financial Statements

(Expressed in thousands of U.S. dollars, unless otherwise stated)


16.	GOVERNMENT FEES AND OTHER TAXES

Government fees and other taxes consist of:


		Years ended March 31,
		2018		2017
Government fees	$	351	$	1,314
Other taxes		2,620		2,693
	$	2,971	$	4,007

Government fees include mineral resource compensation fees and 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.


17.	FINANCE ITEMS

Finance items consist of:


		Years ended March 31,
Finance income		2018		2017
Interest income	$	2,839	$	2,206

		Years ended March 31,
Finance costs		2018		2017
Interest on mine right fee	$	-	$	226
Interest on bank loan		-		152
Unwinding of discount of environmental rehabilitation provision		449		382
	$	449	$	760


18.	INCOME TAX

(a) Income tax expense

The significant components of income tax expense recognized in the statements of income are as follows:


		Years ended March 31,
Income tax expense		2018		2017
Current	$	16,086	$	13,150
Deferred		2,833		6,087
	$	18,919	$	19,237

SILVERCORP METALS INC.

Notes to Consolidated Financial Statements

(Expressed in thousands of U.S. dollars, unless otherwise stated)

The reconciliation of the Canadian statutory income tax rates to the effective tax rate are as follows:


		Years ended March, 31
		2018			2017
Canadian statutory tax rate		26.25	%		26.00	%

Income before income taxes	$	77,815		$	74,735

Income tax expense computed at Canadian statutory rates		20,426			19,431
Foreign tax rates different from statutory rate		(467	)		(634	)
Change in tax rates		(681	)		-
Permanent items and other		1,008			728
Withholding taxes		1,023			760
Change in unrecognized deferred tax assets		(2,378	)		(1,136	)
Other		(12	)		88
Income tax expense	$	18,919		$	19,237

(b) Deferred income tax

The continuity of deferred income tax assets (liabilities) is summarized as follows:


		Years ended March, 31
		2018			2017
Net deferred income tax liabilities, beginning of the year	$	(27,692	)	$	(23,224	)
Deferred income tax expense recognized in net income for the year		(2,833	)		(6,087	)
Foreign exchange impact		(2,785	)		1,619
Net deferred income tax liabilities, end of the year	$	(33,310	)	$	(27,692	)

The significant components of the Company’s deferred income tax are as follows:


		March 31, 2018			March 31, 2017
Deferred income tax assets
Plant and equipment	$	1,442		$	996
Environmental rehabilitation		2,980			2,775
Other deductible temporary difference		890			382
Total deferred income tax assets		5,312			4,153
Deferred income tax liabilities
Plant and equipment		(261	)		(246	)
Mineral rights and properties		(37,308	)		(31,434	)
Unrealized gain on investments		(876	)		-
Other taxable temporary difference		(177	)		(165	)
Total deferred income tax liabilities		(38,622	)		(31,845	)
Net deferred income tax liabilities	$	(33,310	)	$	(27,692	)

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

SILVERCORP METALS INC.

Notes to Consolidated Financial Statements

(Expressed in thousands of U.S. dollars, unless otherwise stated)

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, 2018		March 31, 2017

Non-capital loss carry forward	$	82,882	$	77,886
Plant and equipment		27,050		23,529
Mineral rights and properties		15,539		20,602
Other deductible temporary difference		18,876		23,806
	$	144,347	$	145,823

As at March 31, 2018, the Company has the following net operating losses, expiring in various years to 2039 and available to offset future taxable income in Canada and China, respectively.


		Canada		China		Total

2019	$	-	$	4,205	$	4,205
2020		-		5,003		5,003
2021		-		7,435		7,435
2022		-		3,388		3,388
2023		-		4,345		4,345
2027		1,530		-		1,530
2029		2		-		2
2030		3,858		-		3,858
2031		6,749		-		6,749
2032		9,658		-		9,658
2033		9,898		-		9,898
2034		9,446		-		9,446
2035		7,042		-		7,042
2036		993		-		993
2037		1,673		-		1,673
2038		2,476		-		2,476
2039		5,181		-		5,181
	$	58,506	$	24,376	$	82,882

As at March 31, 2018, temporary differences of $196,435 (March 31, 2017 - $162,380) 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.	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.

SILVERCORP METALS INC.

Notes to Consolidated Financial Statements

(Expressed in thousands of U.S. dollars, unless otherwise stated)

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.


20.	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 at March 31, 2018 and March 31, 2017 that are not otherwise disclosed. As required by IFRS 13, 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, 2018
Recurring measurements		Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	49,199	$	-	$	-	$	49,199
Investments in publicly traded companies		6,132		-		-		6,132

		Fair value as at March 31, 2017
Recurring measurements		Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	73,003	$	-	$	-	$	73,003
Investments in publicly traded companies		1,207		-		-		1,207

SILVERCORP METALS INC.

Notes to Consolidated Financial Statements

(Expressed in thousands of U.S. dollars, unless otherwise stated)

Fair value of the other financial instruments excluded from the table above approximates their carrying amount as at March 31, 2018 and March 31, 2017, respectively, due to the short-term nature of these instruments.

There were no transfers into or out of level 3 during the years ended March 31, 2018 and 2017.

(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, 2018						March 31, 2017
		Within a year		2-3 years		4-5 years		Total		Total
Accounts payable and accrued liabilities	$	25,198	$	-	$	-	$	25,198	$	30,374

(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 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 follow:


		March 31, 2018		March 31, 2017
Financial assets denominated in U.S. Dollars	$	27,256	$	29,093
Financial assets denominated in Chinese RMB	$	-	$	7,115

As at March 31, 2018, with other variables unchanged, a 10% strengthening (weakening) of the CAD against the USD would have decreased (increased) net income by approximately $2.7 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, 2018, 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 rate 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 the financial instruments, fluctuations in interest rates would not have a significant impact on the Company’s after-tax net income.

SILVERCORP METALS INC.

Notes to Consolidated Financial Statements

(Expressed in thousands of U.S. dollars, unless 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 on the balance sheet 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. The Company has trade receivables from time to time from its major customers primarily in China engaged in the mining and milling of base and polymetallic metals. The historical level of customer default is zero and aging of trade receivables are no more than 180 days, and, as a result, the credit risk associated with trade receivables from customers as at March 31, 2018 is considered to be immaterial. There were no amounts in receivables which were past due at March 31, 2018 (at March 31, 2017 - $nil) for which no provision is recognized.

(f) Equity price risk

The Company holds certain marketable securities that will fluctuate in value as a result of trading on Canadian financial markets. As the Company’s marketable securities holding are mainly in mining companies, the value will also fluctuate based on commodity prices. Based upon the Company’s portfolio at March 31, 2018, 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 comprehensive income of approximately $610.


21.	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	SX Gold and 0875786 B.C. Ltd.	XHP
Administrative
Vancouver	Silvercorp Metals Inc., BVI and Barbados' holding companies	RZY
Beijing	Silvercorp Metals (China) Inc.

SILVERCORP METALS INC.

Notes to Consolidated Financial Statements

(Expressed in thousands of U.S. dollars, unless otherwise stated)

(a) Segmented information for assets and liabilities are as follows:


March 31, 2018
				Mining						Administrative
		Henan												Total
Statement of financial position items:		Luoning		Hunan		Guangdong		Other		Beijing		Vancouver

Current assets	$	82,567	$	1,833	$	7,911	$	699	$	1,574	$	28,220	$	122,804
Plant and equipment		47,933		4,911		16,988		137		1,104		138		71,211
Mineral rights and properties		194,635		7,470		29,749		226		-		-		232,080
Investment in an associate		-		-		-		-		-		38,001		38,001
Other investments		-		-		-		4,863		-		1,269		6,132
Reclamation deposits		5,544		-		160		-		-		8		5,712
Long-term prepaids and deposits		311		108		325		210		-		-		954
Total assets	$	330,990	$	14,322	$	55,133	$	6,135	$	2,678	$	67,636	$	476,894

Current liabilities	$	22,419	$	1,652	$	3,485	$	2,745	$	474	$	1,532	$	32,307
Deferred income tax liabilities		32,382		928		-		-		-		-		33,310
Environmental rehabilitation		10,929		989		887		293		-		-		13,098
Total liabilities	$	65,730	$	3,569	$	4,372	$	3,038	$	474	$	1,532	$	78,715

March 31, 2017
				Mining						Administrative
		Henan												Total
Statement of financial position items:		Luoning		Hunan		Guangdong		Other		Beijing		Vancouver

Current assets	$	64,298	$	1,869	$	4,796	$	523	$	823	$	38,523	$	110,832
Plant and equipment		43,297		4,832		15,915		-		1,081		76		65,201
Mineral rights and properties		170,690		6,855		28,655		-		-		-		206,200
Investment in an associate		-		-		-		-		-		8,517		8,517
Other investments		-		-		-		-		-		1,207		1,207
Reclamation deposits		4,901		-		145		-		-		8		5,054
Long-term prepaids and deposits		432		99		306		122		-		-		959
Total assets	$	283,618	$	13,655	$	49,817	$	645	$	1,904	$	48,331	$	397,970

Current liabilities	$	29,951	$	1,425	$	3,860	$	2,959	$	184	$	1,778	$	40,157
Deferred income tax liabilities		26,846		846		-		-		-		-		27,692
Environmental rehabilitation		10,183		918		813		272		-		-		12,186
Total liabilities	$	66,980	$	3,189	$	4,673	$	3,231	$	184	$	1,778	$	80,035

SILVERCORP METALS INC.

Notes to Consolidated Financial Statements

(Expressed in thousands of U.S. dollars, unless otherwise stated)

(b) Segmented information for operating results are as follows:


Year ended March 31, 2018
					Mining									Administrative
		Henan																		Total
Statement of income:		Luoning			Hunan⁽¹⁾			Guangdong			Other			Beijing			Vancouver
Sales	$	142,113		$	-		$	27,926		$	-		$	-		$	-		$	170,039
Cost of sales		(64,321	)		-			(17,834	)		-			-			-			(82,155	)
Gross profit		77,792			-			10,092			-			-			-			87,884

Operating (expenses) income		(8,136	)		(1,164	)		(2,726	)		6,075			(1,321	)		(9,901	)		(17,173	)
Impairment recovery, net		-			-			-			-			-			4,714			4,714
Finance items, net		580			(83	)		9			(11	)		250			1,645			2,390
Income tax expenses		(17,894	)		(1	)		-			-			(1	)		(1,023	)		(18,919	)
Net income (loss)	$	52,342		$	(1,248	)	$	7,375		$	6,064		$	(1,072	)	$	(4,565	)	$	58,896

Attributable to:
Equity holders of the Company		40,799			(874	)		7,034			5,672			(1,072	)		(4,565	)		46,994
Non-controlling interests		11,543			(374	)		341			392			-			-			11,902
Net income (loss)	$	52,342		$	(1,248	)	$	7,375		$	6,064		$	(1,072	)	$	(4,565	)	$	58,896

⁽¹⁾Hunan's BYP project was placed on care and maintenance in August 2014;


Year ended March 31, 2017
					Mining									Administrative
		Henan																		Total
Statement of income:		Luoning			Hunan			Guangdong			Other			Beijing			Vancouver
Sales	$	142,761		$	-		$	20,710		$	-		$	-		$	-		$	163,471
Cost of sales		(60,994	)		-			(14,291	)		-			-			-			(75,285	)
Gross profit		81,767			-			6,419			-			-			-			88,186

Operating expenses		(8,864	)		(1,098	)		(2,194	)		(131	)		(1,354	)	(6,353		)		(19,994	)
Impairment recovery, net		-			-			-			-			-		5,097				5,097
Finance items, net		146			(69	)		35			18			266		1,050				1,446
Income tax (expenses) recovery		(18,509	)		33			-			-			(2	)		(759	)		(19,237	)
Net income (loss)	$	54,540		$	(1,134	)	$	4,260		$	(113	)	$	(1,090	)	$	(965	)	$	55,498

Attributable to:
Equity holders of the Company		42,537			(794	)		4,074			(88	)		(1,090	)		(965	)		43,674
Non-controlling interests		12,003			(340	)		186			(25	)		-			-			11,824
Net income (loss)	$	54,540		$	(1,134	)	$	4,260		$	(113	)	$	(1,090	)	$	(965	)	$	55,498

SILVERCORP METALS INC.

Notes to Consolidated Financial Statements

(Expressed in thousands of U.S. dollars, unless otherwise stated)

The sales generated for the years ended March 31, 2018 and 2017 was all earned in China and is comprised of:


		Year ended March 31, 2018
		Henan Luoning		Guangdong		Total
Silver (Ag)	$	75,891	$	6,463	$	82,354
Gold (Au)		3,232		-		3,232
Lead (Pb)		55,488		6,763		62,251
Zinc (Zn)		7,000		14,462		21,462
Other		502		238		740
	$	142,113	$	27,926	$	170,039

		Year ended March 31, 2017
		Henan Luoning		Guangdong		Total
Silver (Ag)	$	83,606	$	5,950	$	89,556
Gold (Au)		3,344		-		3,344
Lead (Pb)		51,479		5,373		56,852
Zinc (Zn)		4,332		8,909		13,241
Other		-		478		478
	$	142,761	$	20,710	$	163,471

(d) Major customers

For the year ended March 31, 2018, three major customers (year ended March 31, 2017 - three) accounted for 22%, 25% and 28%, (year ended March 31, 2017 - 15%, 29% and 33%) and collectively 75% (year ended March 31, 2017 - 77%) of the total sales of the Company as reported across the Henan Luoning and Guangdong segments.


22.	COMMITMENTS AND CONTINGENCIES

Commitments, not disclosed elsewhere in these financial statements, are as follows:


		Total		Less than 1 year		1-5 years		After 5 years
Operating leases	$	3,353	$	888	$	2,465	$	-
Commitments	$	6,418	$	-	$	-	$	6,418

As of March 31, 2018, the Company has two office rental agreements totaling $3,353 for the next four years and commitments of $6,418 related to the GC property. During the year ended March 31, 2018, the Company incurred rental expenses of $684 (year ended March 31, 2017 - $611), which were included in office and administrative expenses on the consolidated statement of income.

Although the Company has taken steps to verify title to properties in which it has an interest, these procedures do not guarantee the Company's title. Property title may be subject to, among other things, unregistered prior agreements or transfers and may be affected by undetected defects.

SILVERCORP METALS INC.

Notes to Consolidated Financial Statements

(Expressed in thousands of U.S. dollars, unless otherwise stated)

Due to the size, complexity and nature of the Company’s operations, the Company is subject to various claims, legal and tax matters arise in the ordinary course of business. Each of these matters is subject to various uncertainties and it is possible that some of these matters may be resolved unfavorably to the Company. The Company accrues for such items when a liability is both probable and the amount can be reasonably estimated.

In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company and its legal counsel evaluate the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought. Major legal proceedings against the Company are summarized as follows:

On August 19, 2014, an action was commenced against the Company in the Supreme Court of British Columbia seeking an unspecified amount of damages for a claim of false imprisonment and defamation (the “Huang Action”). The case was scheduled for a 60 day jury trial, commencing February 2018. The Company also commenced third party proceedings against other parties (the “Third Parties”), claiming contribution and indemnity. On August 22, 2016, the Company commenced an action against the parties to Huang Action and others seeking damages (the “Silvercorp Action”). In January 2018, the parties to the Huang Action and Silvercorp Action reached a confidential settlement agreement. The settlement resolves all claims between the Company, Mr.
Huang, and the Third Parties in all actions, including the Huang Action and the Silvercorp Action, all of which have been dismissed by consent. Nothing contained in this settlement represents an admission of liability, fault, or wrongdoing on the part of any of the parties.
During the year ended March 31, 2016, an action was initiated by Luoyang Mining Group Co., Ltd. (“Luoyang Mining”) against Henan Found seeking payment of $1.6 million (RMB10.0 million) plus interest related to the acquisition agreements Henan Found entered into in August 2012 to acquire the XHP Project. The $1.6 million has been included into the accounts payable and accrued liabilities on the consolidated statements of financial position of the Company. Henan Found did not make the final payment as certain commercial conditions were not fulfilled by Luoyang Mining. In April 2016, Henan Found filed a counter claim in Luoyang People’s Court against Luoyang Mining to have the original acquisition agreements nullified and is seeking repayment of the amount paid to date of $9.7 million (RMB62.8 million) plus compensation of direct loss of $2.5 million (RMB16.5 million) arising from the XHP Project. A trial was heard in March 2017 and the court decision is pending. The acquisition costs of the XHP Project was impaired to $nil in fiscal year 2015.
During the year ended March 31, 2016, SX Gold, a 100% owned subsidiary of Henan Found, commenced a legal action against Luoyang HA Mining Co. Ltd. (“HA Mining”) to seek payment of $4.0 million (RMB26.0 million) plus interest related to a share transfer agreement that SX Gold entered into with HA Mining in September 2013. Pursuant to the agreement, SX Gold was to transfer all shares it held in Songxian Zhongxin Mining Co. Ltd. to HA Mining for $11.8 million (RMB76.0 million).
SX Gold fulfilled its responsibilities and the title of the shares was transferred to HA Mining, who paid $7.8 million (RMB50.0 million). The remaining $4.0 million (RMB26.0 million) was not paid and was written off by the Company in prior years. In April 2016, HA Mining filed a counter claim for $2.2 million (RMB14.0 million). On June 17, 2016, the court issued an order in favor of SX Gold. The Luoyang Intermediate People’s Court, Henan, China issued a court order demanding HA Mining to pay $3.4 million (RMB22.75 million) to SX Gold. On July 1, 2016, HA Mining filed an appeal to the Henan High People’s Count, China. A trial was heard in April 2017 and on June 16, 2017, the Henan High

SILVERCORP METALS INC.

Notes to Consolidated Financial Statements

(Expressed in thousands of U.S. dollars, unless otherwise stated)

People’s Court, China dismissed HA Mining’s appeal and upheld the rulings made by the Luoyang Intermediate People’s Court, Henan, China. On August 4, 2017, HA Mining submitted an application to the Supreme People’s Court of China (the “Supreme Court”) to rehear the case, the application was rejected by the Supreme Court on November 24, 2017. On December 6, 2017, SX Gold and HA Mining reached a mutual settlement agreement that HA Mining would pay $2.3 million (RMB15.0 million) to SX Gold. As of March 31, 2018, HA Mining paid $2.3 million (RMB15.0 million) to the Company, which was included in other income of the consolidated statements of income, and the case was closed.


23.	SUPPLEMENTARY CASH FLOW INFORMATION


		March 31, 2018		March 31, 2017
Cash on hand and at bank	$	31,281	$	39,243
Bank term deposits and GICs		17,918		33,760
Total cash and cash equivalents	$	49,199	$	73,003


Changes in non-cash operating working capital:		Years Ended March 31,
		2018			2017
Trade and other receivables	$	715		$	632
Inventories		(1,164	)		355
Prepaids and deposits		86			(495	)
Accounts payable and accrued liabilities		(1,743	)		7,830
Deposits received		(603	)		1,350
Due from a related party		84			(5,187	)
	$	(2,625	)	$	4,485


24.	SUBSEQUENT EVENT

As reported on the Company’s new releases dated April 16, 2018 and May 1, 2018, the Company reported a spillage incident at the Ying Mining District that a small amount of tailings leaking from the No. 2 tailing facility to Chong-Yang Creek at approximately 9:30 pm on April 12, 2018. Silvercorp’s subsidiary, Henan Found, took immediate actions and the leakage was fully controlled and stopped as of 12:00 pm of April 13, 2018. No personal injuries were incurred and the results of ongoing water tests from Chong-Yang Creek are within the acceptable national water quality standards. Due to the incident, milling operations at the Ying Mining District were temporarily suspended.

On April 28, 2018, one floatation line of 1,000 tonnes per day at the No. 2 mill, using the No. 1 tailing storage facility resumed operation, and full mill operations resumed on May 23, 2018. As the milling capacity of Henan Found is approximately 25% greater than the mining capacity, the temporary suspension of the milling operations is expected to have minimal impact on overall annual production.