EX-99.2 3 exhibit99-2.htm SILVERCORP METALS INC. FINANCIAL STATEMENTS FOR JUNE 30, 2018 Exhibit 99.2

Exhibit 99.2


SILVERCORP METALS INC.

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three months ended June 30, 2018 and 2017
(Expressed in thousands of US dollars, unless otherwise stated)
(Unaudited)




SILVERCORP METALS INC.
Condensed Consolidated Interim Statements of Financial Position
(Unaudited) (Expressed in thousands of U.S. dollars)

 

      As at June 30,     As at March 31,  
  Notes   2018     2018  
ASSETS              
Current Assets              

Cash and cash equivalents

 19 $ 72,869   $ 49,199  

Short-term investments

     41,949     56,910  

Trade and other receivables

     480     676  

Inventories

     13,304     11,018  

Due from a related party

 11   19     11  

Income tax receivable

     -     534  

Prepaids and deposits

     5,283     4,456  
      133,904     122,804  
 
Non-current Assets              

Long-term prepaids and deposits

     1,015     954  

Reclamation deposits

     5,431     5,712  

Investment in an associate

 3   37,191     38,001  

Other investments

 4   6,108     6,132  

Plant and equipment

 5   68,105     71,211  

Mineral rights and properties

 6   222,862     232,080  
TOTAL ASSETS   $ 474,616   $ 476,894  
 
LIABILITIES AND EQUITY              
Current Liabilities              

Accounts payable and accrued liabilities

   $ 30,044   $ 25,198  

Bank loan

 7   4,541     -  

Deposits received

     2,953     6,806  

Income tax payable

     2,215     303  
      39,753     32,307  
 
Non-current Liabilities              

Deferred income tax liabilities

     32,175     33,310  

Environmental rehabilitation

     12,563     13,098  
Total Liabilities     84,491     78,715  
 
Equity              

Share capital

     229,416     228,729  

Share option reserve

     14,961     14,690  

Reserves

     25,409     25,409  

Accumulated other comprehensive loss

 9   (39,500 )   (25,875 )

Retained earnings

     95,109     86,283  
Total equity attributable to the equity holders of the Company   325,395     329,236  
 
Non-controlling interests 10   64,730     68,943  
Total Equity     390,125     398,179  
 
TOTAL LIABILITIES AND EQUITY   $ 474,616   $ 476,894  
Commitments and contingencies 18            


Approved on behalf of the Board:

(Signed) David Kong
Director

(Signed) Rui Feng
Director

See accompanying notes to the condensed consolidated interim financial statements

1




SILVERCORP METALS INC.
Condensed Consolidated Interim Statements of Income
(Unaudited)(Expressed in thousands of U.S. dollars, except numbers for share and per share figures)

 

      Three Months Ended June 30,  
  Notes   2018     2017  
 
Sales 17(c) $ 45,125   $ 39,697  
Cost of sales              

Production costs

     14,277     14,109  

Mineral resource taxes

     1,249     1,111  

Depreciation and amortization

     4,748     4,472  
      20,274     19,692  
Gross profit     24,851     20,005  
 
General and administrative 12   4,472     4,570  
Government fees and other taxes 13   802     841  
Foreign exchange (gain) loss     (788 )   1,615  
Loss on disposal of plant and equipment 5   10     170  
Gain on disposal of NSR     -     (4,320 )
Share of loss in associate 3   279     244  
Other expense (income)     63     (181 )
Income from operations     20,013     17,066  
 
Finance income 14   796     574  
Finance costs 14   (134 )   (105 )
Income before income taxes     20,675     17,535  
 
Income tax expense 15   6,498     4,021  
Net income   $ 14,177   $ 13,514  
 
Attributable to:              

Equity holders of the Company

   $ 10,921   $ 10,937  

Non-controlling interests

 10   3,256     2,577  
    $ 14,177   $ 13,514  
 
Earnings per share attributable to the equity holders of the Company              
Basic earnings per share   $ 0.07   $ 0.07  
Diluted earnings per share   $ 0.06   $ 0.06  
Weighted Average Number of Shares Outstanding - Basic     167,263,945     167,890,187  
Weighted Average Number of Shares Outstanding - Diluted     170,230,705     169,784,602  


See accompanying notes to the condensed consolidated interim financial statements

2




SILVERCORP METALS INC.
Condensed Consolidated Interim Statements of Comprehensive Income
(Unaudited) (Expressed in thousands of U.S. dollars)

 

      Three Months Ended June 30,  
  Notes   2018     2017  
 
Net income   $ 14,177   $ 13,514  
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

     (17,114 )   6,219  

Share of other comprehensive income (loss) in associate

 3   259     (5 )
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

 4   92     (194 )
 
Other comprehensive (loss) income, net of taxes   $ (16,763 ) $ 6,020  
 
Attributable to:              

Equity holders of the Company

   $ (13,625 ) $ 5,197  

Non-controlling interests

 10   (3,138 )   823  
    $ (16,763 ) $ 6,020  
Total comprehensive (loss) income   $ (2,586 ) $ 19,534  
 
Attributable to:              

Equity holders of the Company

   $ (2,704 ) $ 16,134  

Non-controlling interests

     118     3,400  
    $ (2,586 ) $ 19,534  


See accompanying notes to the condensed consolidated interim financial statements

3




SILVERCORP METALS INC.
Condensed Consolidated Interim Statements of Cash Flows
(Unaudited) (Expressed in thousands of U.S. dollars)

 

      Three Months Ended June 30,  
  Notes   2018     2017  
Cash provided by              
Operating activities              

Net income

   $ 14,177   $ 13,514  

Add (deduct) items not affecting cash:

              

Finance costs

 14   134     105  

Depreciation, amortization and depletion

     5,053     4,752  

Share of loss (income) in associate

 3   279     244  

Gain on disposal of NSR

     -     (4,320 )

Income tax expense

 15   6,498     4,021  

Finance income

 14   (796 )   (574 )

Loss on disposal of plant and equipment

 5   10     170  

Share-based compensation

 8(b)   456     403  

Reclamation

     (4 )   (4 )

Income taxes paid

     (3,088 )   (4,137 )

Interest received

     796     574  

Changes in non-cash operating working capital

 19   (2,367 )   2,144  
Net cash provided by operating activities     21,148     16,892  
 
Investing activities              

Mineral rights and properties

              

Capital expenditures

     (5,729 )   (5,911 )

Plant and equipment

              

Additions

     (1,221 )   (1,211 )

Proceeds on disposals

 5   27     -  

Net redemption (purchases) of short-term investments

     13,262     (3,704 )
Net cash used in investing activities     6,339     (10,826 )
 
Financing activities              

Bank loan

              

Proceeds

 7   4,527     -  

Non-controlling interests

              

Distribution

 10   (3,329 )   (4,891 )

Cash dividends distributed

 8(c)   (2,095 )   (1,679 )

Proceeds from issuance of common shares

     502     3  
Net cash used in financing activities     (395 )   (6,567 )
Effect of exchange rate changes on cash and cash equivalents     (3,422 )   1,798  
 
Increase in cash and cash equivalents     23,670     1,297  
 
Cash and cash equivalents, beginning of the period     49,199     73,003  
Cash and cash equivalents, end of the period   $ 72,869   $ 74,300  
Supplementary cash flow information 19            


See accompanying notes to the condensed consolidated interim financial statements

4




SILVERCORP METALS INC.
Condensed Consolidated Interim Statements of Changes in Equity
(Unaudited) (Expressed in thousands of U.S. dollars, except numbers for share figures)

 

      Share capital                                          
                  Share         Accumulated other       Total equity attributable   Non-        
      Number of           option       comprehensive     Retained to the equity holders of     controlling        
  Notes   shares     Amount     reserve     Reserves     loss     earnings     the Company     interests     Total equity  
Balance, April 1, 2017     167,889,636   $ 232,155   $ 13,325   $ 25,409 $ (50,419 ) $ 42,651   $ 263,121   $ 54,814   $ 317,935  
Options exercised     2,387     4     (1 )   -   -     -     3     -     3  
Share-based compensation     -     -     403     -   -     -     403     -     403  
Dividends declared     -     -     -     -   -     (1,679 )   (1,679 )   -     (1,679 )
Comprehensive income     -     -     -     -     5,197     10,937     16,134     3,400     19,534  
Balance, June 30, 2017     167,892,023   $ 232,159   $ 13,727   $ 25,409 $ (45,222 ) $ 51,909   $ 277,982   $ 58,214   $ 336,196  
Options exercised     854,633     747     (200 )   -   -     -     547     -     547  
Share-based compensation     -     -     1,163     -   -     -     1,163     -     1,163  
Dividends declared     -     -     -     -   -     (1,683 )   (1,683 )   -     (1,683 )
Distribution to non-controlling interests     -     -     -     -   -     -     -     (2,917 )   (2,917 )
Common shares repurchased as part of normal course issuer bid     (1,717,100 )   (4,177 )   -     -   -     -     (4,177 )   -     (4,177 )
Comprehensive income     -     -     -     -     19,347     36,057     55,404     13,646     69,050  
Balance, March 31, 2018     167,029,556   $ 228,729   $ 14,690   $ 25,409 $ (25,875 ) $ 86,283   $ 329,236   $ 68,943   $ 398,179  
Options exercised     651,457     687     (185 )   -   -     -     502     -     502  
Share-based compensation 8(b) -     -     456     -   -     -     456     -     456  
Dividends declared 8(c) -     -     -     -   -     (2,095 )   (2,095 )   -     (2,095 )
Distribution to non-controlling interests 10   -     -     -     -   -     -     -     (3,329 )   (3,329 )
Disposition of non-controlling interests upon wound-up of a subsidiary 10   -     -     -     -   -     -     -     (1,002 )   (1,002 )
Comprehensive (loss) income     -     -     -     -     (13,625 )   10,921     (2,704 )   118     (2,586 )
Balance, June 30, 2018     167,681,013   $ 229,416   $ 14,961   $ 25,409   $ (39,500 ) $ 95,109   $ 325,395   $ 64,730   $ 390,125  


See accompanying notes to the condensed consolidated interim financial statements

5




SILVERCORP METALS INC.
Notes to Condensed Consolidated Interim Financial Statements as at June 30,
2018 and for three months ended June 30, 2018 and 2017
(Unaudited)(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 listed on the Toronto Stock Exchange and 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.

Operating results for the three months ended June 30, 2018, are not necessarily indicative of the results that may be expected for the year ending March 31, 2019.

2.     

SIGNIFICANT ACCOUNTING POLICIES

 
(a) Statement of Compliance

These condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard 34 – Interim Financial Reporting (“IAS 34”) of the International Financial Reporting Standards as issued by the International Accounting Standards Board (“IASB”). These condensed consolidated interim financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended March 31, 2018. These condensed consolidated interim financial statements follow the same significant accounting policies set out in note 2 to the audited consolidated financial statements for the year ended March 31, 2018 except for the following:

IFRS 9 (2014) – Financial Instruments (amended 2014)

On April 1, 2018, the Company adopted, retrospectively without restatement, IFRS 9 – Financial Instruments, the final version issued in 2014 by IASB (“IFRS 9 2014”). As the Company has applied IFRS 9 (2010) effective April 1, 2011, the adoption of IFRS 9 (2014) has no impact on the classification or the carrying value of the Company’s financial instruments. IFRS 9 (2014) introduced a single expected credit loss impairment model for the financial assets measured at amortized cost and for debt instrument at fair value through other comprehensive income, which is based on changes in credit quality since initial recognition. The adoption of the expected credit loss impairment model did not have a significant impact on the Company’s financial statements. IFRS 9 (2014) change the requirements for hedge effectiveness and consequently for the application of hedge accounting. As the Company does not apply hedge accounting, the adoption of IFRS 9 (2014) with regards to hedge accounting did not impact the Company or its accounting policies.

IFRS 15 – Revenue from contracts with customers

On April 1, 2018, the Company adopted IFRS 15 – Revenue from Contracts with Customers ("IFRS 15") which supersedes IAS 18 – Revenue ("IAS 18"). IFRS 15 establishes a single five-step model framework for

6




SILVERCORP METALS INC.
Notes to Condensed Consolidated Interim Financial Statements as at June 30,
2018 and for three months ended June 30, 2018 and 2017
(Unaudited)(Expressed in thousands of U.S. dollars, unless otherwise stated)

determining the nature, amount, timing and uncertainty of revenue and cash flows arising from a contract with a customer. The standard is effective for annual periods beginning on or after January 1, 2018.

IFRS 15 requires entities to recognize revenue when ‘control’ of goods or services transfers to the customer whereas the previous standard, IAS 18, required entities to recognize revenue when the ‘risks and rewards’ of the goods or services transfer to the customer. The Company concluded there is no change in the timing of revenue recognition of its concentrate sales under the new standard as the point of transfer of risks and rewards of goods and services and transfer of control occur at the same time. As such, no adjustment was required to the Company's financial statements.

IFRS 15 requires that variable consideration should only be recognized to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur. The Company concluded that the adjustments relating to the final assay results for the quantity and quality of concentrate sold and the retroactive pricing adjustment for the new pricing terms are not significant and does not constrain the recognition of revenue.

The company concluded after review of its revenue streams and underlying contracts with customers that the adoption of IFRS 15 has no material impact on the Company’s financial statements.

Other narrow scope amendments

The Company has adopted IFRIC interpretation 22 – Foreign currency transaction and advanced consideration, and narrow scope amendments to IFRS 2 – Share-based payment, which did not have a material impact on the Company’s financial statements.

These condensed consolidated interim financial statements were authorized for issue in accordance with a resolution of the Board of Directors dated on August 8, 2018.

(b) Basis of Consolidation

These condensed consolidated interim 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 balance sheets. 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

7




SILVERCORP METALS INC.
Notes to Condensed Consolidated Interim Financial Statements as at June 30,
2018 and for three months ended June 30, 2018 and 2017
(Unaudited)(Expressed in thousands of U.S. dollars, unless otherwise stated)

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.

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 June 30, March 31,  
Name of subsidiaries Principal activity  incorporation 2018 2018 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)     

Accounting standards issued but not yet in effect

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 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 rights 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.

8




SILVERCORP METALS INC.
Notes to Condensed Consolidated Interim Financial Statements as at June 30,
2018 and for three months ended June 30, 2018 and 2017
(Unaudited)(Expressed in thousands of U.S. dollars, unless otherwise stated)

 

3.     

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.

As at June 30, 2018, the Company owned 39,280,900 common shares (March 31, 2018 – 39,280,900) of NUAG, representing an ownership interest of 29.8% (March 31, 2018 – 29.8%). 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, 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
Share of net loss     (279 )    
Share of other comprehensive income     259      
Foreign exchange impact     (790 )      
Balance June 30, 2018 39,280,900 $ 37,191   $ 49,220  

 

4.     

OTHER INVESTMENTS

    June 30, 2018   March 31, 2018   
 
Equity investments designated as FVTOCI        
 

Publicly-traded companies

 $ 6,108 $ 6,132  

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 June 30, 2018, none of the investments held by the Company represented more than 10% of the respective interest of investees.

9




SILVERCORP METALS INC.
Notes to Condensed Consolidated Interim Financial Statements as at June 30,
2018 and for three months ended June 30, 2018 and 2017
(Unaudited)(Expressed in thousands of U.S. dollars, unless otherwise stated)

The continuity of such investments is as follow:

          Accumulated fair value change  
    Fair value     included in OCI  
April 1, 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 )

Change in fair value on equity investments designated as FVTOCI

   92     92  

Impact of foreign currency translation

   (116 )   -  
June 30, 2018 $ 6,108   $ (5,760 )

 

5.     

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, 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  
Balance as at March 31, 2018 $ 105,165   $ 7,755   $ 29,413   $ 6,730   $ 3,602   $ 152,665  

Additions

   95     88     541     378     883     1,985  

Disposals

   (31 )   (1 )   (23 )   (26 )   -     (81 )

Reclassification of asset groups(1)

   48     -     -     -     (48 )   -  

Impact of foreign currency translation

   (5,240 )   (350 )   (1,501 )   (350 )   (210 )   (7,651 )
Ending balance as at June 30, 2018 $ 100,037   $ 7,492   $ 28,430   $ 6,732   $ 4,227   $ 146,918  
 
Impairment, accumulated depreciation and amortization                                    
Balance as at April 1, 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 )
Balance as at March 31, 2018 $ (50,016 ) $ (5,312 ) $ (20,723 ) $ (5,345 ) $ (58 ) $ (81,454 )

Disposals

   5     1     12     26     -     44  

Depreciation and amortization

   (829 )   (139 )   (434 )   (82 )   -     (1,484 )

Impact of foreign currency translation

   2,512     233     1,063     270     3     4,081  
Ending balance as at June 30, 2018 $ (48,328 ) $ (5,217 ) $ (20,082 ) $ (5,131 ) $ (55 ) $ (78,813 )
 
Carrying amounts                                    
Balance as at March 31, 2018 $ 55,149   $ 2,443   $ 8,690   $ 1,385   $ 3,544   $ 71,211  
Ending balance as at June 30, 2018 $ 51,709   $ 2,275   $ 8,348   $ 1,601   $ 4,172   $ 68,105  

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

10




SILVERCORP METALS INC.
Notes to Condensed Consolidated Interim Financial Statements as at June 30,
2018 and for three months ended June 30, 2018 and 2017
(Unaudited)(Expressed in thousands of U.S. dollars, unless otherwise stated)

 

Carrying amounts as at June 30, 2018   Ying Mining District     BYP     GC     Other     Total  
Land use rights and building $ 35,032 $ 2,367 $ 13,243 $ 1,067 $ 51,709
Office equipment   1,907   41   162   165   2,275
Machinery   5,497   307   2,412   132   8,348
Motor vehicles   1,452   30   105   14   1,601
Construction in progress   2,304     1,868     -     -     4,172  
Total $ 46,192   $ 4,613   $ 15,922   $ 1,378   $ 68,105  
 
Carrying amounts as at March 31, 2018    Ying Mining District     BYP     GC     Other     Total  
Land use rights and building $ 37,432 $ 2,527 $ 14,039 $ 1,151 $ 55,149
Office equipment   2,053   46   168   176   2,443
Machinery   5,649   339   2,652   50   8,690
Motor vehicles   1,270   33   80   2   1,385
Construction in progress    1,529     1,966     49     -     3,544  
Total $ 47,933   $ 4,911   $ 16,988   $ 1,379   $ 71,211  

During the three months ended June 30, 2018, certain plant and equipment were disposed for proceeds of $27 (three months ended June 30, 2017 - $nil) and loss of $10 (three months ended June 30, 2017 – loss of $170).

6.     

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, 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  
Balance as at March 31, 2018 $ 277,734   $ 65,054   $ 113,244   $ 22,024   $ 180   $ 478,236  

Capitalized expenditures

   6,012     31     466     84     -     6,593  

Foreign currecy translation impact

   (14,056 )   (773 )   (5,632 )   (1,102 )   (4 )   (21,567 )
Ending balance as at June 30, 2018 $ 269,690   $ 64,312   $ 108,078   $ 21,006   $ 176   $ 463,262  
 
Impairment and accumulated depletion                                    
Balance as at April 1, 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 )
Balance as at March 31, 2018 $ (83,099 ) $ (57,584 ) $ (83,495 ) $ (21,798 ) $ (180 ) $ (246,156 )

Depletion

   (3,544 )   -     (618 )   -     -     (4,162 )

Foreign currecy translation impact

   4,276     398     4,153     1,087     4     9,918  
Ending balance as at June 30, 2018 $ (82,367 ) $ (57,186 ) $ (79,960 ) $ (20,711 ) $ (176 ) $ (240,400 )
 
Carrying amounts                                    
Balance as at March 31, 2018 $ 194,635   $ 7,470   $ 29,749   $ 226   $ -   $ 232,080  
Ending balance as at June 30, 2018 $ 187,323   $ 7,126   $ 28,118   $ 295   $ -   $ 222,862  

 

7.     

BANK LOAN

    Total  
Balance, April 1, 2018 $ -
Addition   4,527
Interest accrued   10
Foreign exchange impact   4  
Balance, June 30, 2018 $ 4,541  


On June 14, 2018, the Company's 77.5% owned subsidiary Henan Found borrowed a loan of $4,527 (RMB ¥30 million) from Bank of China. The loan bears Chinese prevailing loan prime interest rate plus four basis

11




SILVERCORP METALS INC.
Notes to Condensed Consolidated Interim Financial Statements as at June 30,
2018 and for three months ended June 30, 2018 and 2017
(Unaudited)(Expressed in thousands of U.S. dollars, unless otherwise stated)

points per annum and matures on June 14, 2019. As of June 30, 2018, the Chinese prevailing loan prime interest rate was 4.35%. For the three months ended June 30, 2018, interest of $10 (three months ended June 30, 2017 - $nil) was accrued and expensed through finance costs (see note 14).

8.     

SHARE CAPITAL

 

(a)     

Authorized

Unlimited number of common shares without par value. All shares issued as at June 30, 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, 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
Options exercised (651,457 )   1.00
Options forfeited (27,825 )   3.39
Options expired (130,375 )   3.25  
Balance, June 30, 2018 7,337,142     2.23  

For the three months ended June 30, 2018, a total of $456 (three months ended June 30, 2017 - $403) in share-based compensation expense was recognized and included in the general and administrative expenses on the condensed consolidated interim statements of income.

12




SILVERCORP METALS INC.
Notes to Condensed Consolidated Interim Financial Statements as at June 30,
2018 and for three months ended June 30, 2018 and 2017
(Unaudited)(Expressed in thousands of U.S. dollars, unless otherwise stated)

The following table summarizes information about stock options outstanding at June 30, 2018:

                Weighted
      Weighted average   Weighted Number of   average
    Number of options remaining   average options   exercise
  Exercise price in outstanding at June contractual life   exercise price exercisable at   price in
  CAD$     30, 2018     (Years)     in CAD$     June 30, 2018     CAD$  
$ 0.66 1,853,880 0.50 $ 0.66 1,853,880   0.66
$ 1.43 1,360,938 1.92 $ 1.43 1,360,938   1.43
$ 1.75 340,375 0.91 $ 1.75 340,375   1.75
$ 1.76 231,575 1.29 $ 1.76 200,670   1.76
$ 2.98 119,437 0.56 $ 2.98 119,437   2.98
$ 3.23 1,062,500 2.70 $ 3.23 -   -
$ 3.36 1,050,000 2.26 $ 3.36 255,000   3.36
$ 3.41 255,437 0.20 $ 3.41 255,437   3.41
$ 3.63 890,000 1.55 $ 3.63 445,000   3.63
$ 4.34 143,000 1.22   $ 4.34 107,250   4.34
$ 5.58      30,000     1.65   $ 5.58     15,000     5.58  
  $0.66 - 5.58     7,337,142     1.52   $ 2.23     4,952,987 $   1.69  

Subsequent to June 30, 2018, a total of 198,599 options with exercise prices ranging from CAD$0.66 to CAD$3.63 were exercised and 86,250 options with exercise prices ranging from CAD$1.76 to CAD$3.63 were cancelled.

(c)     

Cash dividends declared

During the three months ended June 30, 2018, dividends of $2,095 (three months ended June 30, 2017 -$1,679) were declared and paid.

9.     

ACCUMULATED OTHER COMPREHENSIVE INCOME

    June 30, 2018     March 31, 2018  
Change in fair value on equity investments designated as FVTOCI $ (37,416 ) $ (37,508 )
Share of other comprehensive loss in associate   540     281  
Currency translation adjustment   (2,624 )   11,352  
Balance, end of the period $ (39,500 ) $ (25,875 )

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

13




SILVERCORP METALS INC.
Notes to Condensed Consolidated Interim Financial Statements as at June 30,
2018 and for three months ended June 30, 2018 and 2017
(Unaudited)(Expressed in thousands of U.S. dollars, unless otherwise stated)

 

10.     

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, 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  
Share of net income (loss)   2,902     355     (96 )   121     (26 )   3,256  
Share of other comprehensive (loss) income   (2,963 )   (226 )   (144 )   175     20     (3,138 )
Distributions   (2,313 )   (1,016 )   -     -     -     (3,329 )
Disposition upon wound-up of a subsidiary   -     -     -     (1,002 )   -     (1,002 )
Balance, June 30, 2018 $ 63,227   $ 5,022   $ 3,292   $ (3,251 ) $ (3,560 ) $ 64,730  

As at June 30, 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 three months ended June 30, 2018, Henan Found declared and paid dividends of $1,804 to Henan Non-ferrous (three months ended June 30, 2017 – $3,804).

Henan Xinxiangrong Mining Ltd. (“Henan Xinxiangrong”) is the 5% equity interest holder of Henan Found. During the three months ended June 30, 2018, Henan Found declared and paid dividends of $509 to Henan Xinxiangrong (three months ended June 30, 2017 – $1,087).

Henan Xinhui Mining Co., Ltd. (“Henan Xinhui”) is a 20% equity interest holder of Henan Huawei. During the three months ended June 30, 2018, Henan Huawei declared and paid dividends of $1,016 to Henan Xinhui (three months ended June 30, 2017 – $nil).

11.     

RELATED PARTY TRANSACTIONS

Related party transactions are made on terms agreed upon by the related parties. The balances with related parties are unsecured, non-interest bearing, and due on demand. Related party transactions not disclosed elsewhere in the condensed consolidated interim financial statements are as follows:

(a)     

Transactions with NUAG

Due from a related party   June 30, 2018     March 31, 2018  
NUAG (a) $ 19   $ 11  

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 three months ended June 30, 2018, the Company recovered $82 (three months ended June 30, 2017 - $110) from NUAG for services rendered and expenses incurred on behalf of NUAG. The costs

14




SILVERCORP METALS INC.
Notes to Condensed Consolidated Interim Financial Statements as at June 30,
2018 and for three months ended June 30, 2018 and 2017
(Unaudited)(Expressed in thousands of U.S. dollars, unless otherwise stated)

recovered from NUAG were recorded as a direct reduction of general and administrative expenses on the condensed consolidated interim statements of income.

(b)     

Transactions with key management personnel

The Company has identified its directors and senior officers as its key management personnel as they have authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly. The compensation costs for key management personnel, including the grant date fair value for options granted to key management personnel and fees paid or payable to company controlled by key management personnel, were as follows:

     Three Month ended June 30,   
    2018     2017   
Salaries and bonuses $ 419    $ 404   

 

12.     

GENERAL AND ADMINISTRATIVE

General and administrative expenses consist of:

     Three months ended June 30,  
General and administrative   2018     2017  
Office and administrative expenses $ 1,458 $ 1,208
Amortization and depreciation   305   280
Salaries and benefits   2,142   2,192
Share-based compensation   456   403
Professional fees   111      487  
  $ 4,472   $ 4,570  

 

13.     

GOVERNMENT FEES AND OTHER TAXES

Government fees and other taxes consist of:

    Three months ended June 30,   
    2018     2017   
Government fees $ 105 $ 255
Other taxes   697     586   
  $ 802   $ 841   

Government fees include 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.

15




SILVERCORP METALS INC.
Notes to Condensed Consolidated Interim Financial Statements as at June 30,
2018 and for three months ended June 30, 2018 and 2017
(Unaudited)(Expressed in thousands of U.S. dollars, unless otherwise stated)

 

14.     

FINANCE ITEMS

Finance items consist of:

    Three months ended June 30,  
Finance income   2018     2017  
Interest income $ 796   $ 574  

 

    Three months ended June 30,  
Finance costs   2018     2017  
Interest on bank loan $ 10 $ -
Unwinding of discount of environmental rehabilitation provision   124     105  
  $ 134   $ 105  

 

15.     

INCOME TAX

The significant components of income tax expense are as follows:

    Three months ended June 30,  
Income tax expense   2018     2017  
Current $ 5,949 $ 3,227
Deferred   549     794  
  $ 6,498   $ 4,021  

 

16.     

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.

16




SILVERCORP METALS INC.
Notes to Condensed Consolidated Interim Financial Statements as at June 30,
2018 and for three months ended June 30, 2018 and 2017
(Unaudited)(Expressed in thousands of U.S. dollars, unless otherwise stated)

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 June 30, 2018 and March 31, 2018 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 June 30, 2018  
Recurring measurements   Level 1     Level 2     Level 3      Total   
Financial assets            
Cash and cash equivalents $ 72,869 $ - $ - $ 72,869
Investments in publicly traded companies   6,108     -      -      6,108   

 

    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 of the other financial instruments excluded from the table above approximates their carrying amount as of June 30, 2018 and March 31, 2018, respectively, due to the short-term nature of these instruments.

There were no transfers into or out of level 3 during the three months ended June 30, 2018 and 2017.

(a) 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.

     June 30, 2018           March 31, 2018  
     Within a year     2-3 years     4-5 years      Total     Total  
Bank loan $ 4,541 $ - $ - $ 4,541 $ -
Accounts payable and accrued liabilities    30,044      -     -      30,044      25,198  

 

(b)     

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:

17




SILVERCORP METALS INC.
Notes to Condensed Consolidated Interim Financial Statements as at June 30,
2018 and for three months ended June 30, 2018 and 2017
(Unaudited)(Expressed in thousands of U.S. dollars, unless otherwise stated)

 

    June 30, 2018     March 31, 2018  
Financial assets denominated in U.S. Dollars $ 36,263   $ 27,256  

As at June 30, 2018, with other variables unchanged, a 10% strengthening (weakening) of the CAD against the USD would have decreased (increased) net income by approximately $3.6 million.

(c)     

Interest rate risk

The Company is exposed to interest rate risk on its cash equivalents, short term investments, and bank loan payable. As at June 30, 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.

The outstanding bank loan is subject to Chinese prevailing loan prime interest rate plus four basis points. If the prime interest rate was increased (decreased) by 1%, interest expenses would be increased (decreased) by approximately $0.5 million per annum. However, the Company does not believe there is significant interest rate risk as the Chinese central bank has maintained stable interest rates to ensure economic stability, with less than 1% fluctuation in base interest rate in the last three years.

(d)     

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 no trade receivables from customers as at June 30, 2018. There were no amounts in other receivables which were past due at June 30, 2018 (at March 31, 2018 - $nil) for which no provision is recognized.

(e)     

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 June 30, 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.

17.     

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

18




SILVERCORP METALS INC.
Notes to Condensed Consolidated Interim Financial Statements as at June 30,
2018 and for three months ended June 30, 2018 and 2017
(Unaudited)(Expressed in thousands of U.S. dollars, unless otherwise stated)

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. and BVI's holding companies RZY

Beijing

 Silvercorp Metals (China) Inc.  

 

(a)     

Segmented information for assets and liabilities are as follows:

June 30, 2018
  Mining Administrative    
    Henan                       Total
Statement of financial position items:   Luoning     Hunan   Guangdong     Other     Beijing     Vancouver        
 
Current assets $ 80,669 $ 1,562 $ 10,574 $ 665 $ 3,672 $ 36,762 $ 133,904
Plant and equipment   46,192   4,613   15,922   225   1,028   125   68,105
Mineral rights and properties   187,323   7,126   28,118   295   -   -   222,862
Investment in an associate   -   -   -   -   -   37,191   37,191
Other investments   -   -   -   4,935   -   1,173   6,108
Reclamation deposits   5,271   -   152   -   -   8   5,431
Long-term prepaids and deposits   334     103     415     163     -     -     1,015  
Total assets $ 319,789   $ 13,404   $ 55,181   $ 6,283   $ 4,700   $ 75,259   $ 474,616  
 
Current liabilities $ 28,498 $ 1,566 $ 5,179 $ 2,503 $ 179 $ 1,828 $ 39,753
Deferred income tax liabilities   31,212   963   -   -   -   -   32,175
Environmental rehabilitation   10,483     949     850     281     -     -     12,563  
Total liabilities $ 70,193   $ 3,478   $ 6,029   $ 2,784   $ 179   $ 1,828 $ 84,491  

 

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  

19




SILVERCORP METALS INC.
Notes to Condensed Consolidated Interim Financial Statements as at June 30,
2018 and for three months ended June 30, 2018 and 2017
(Unaudited)(Expressed in thousands of U.S. dollars, unless otherwise stated)

 

(b)     

Segmented information for operating results are as follows:

Three months ended June 30, 2018
  Mining   Administrative        
    Henan                                   Total  
Statement of income:   Luoning     Hunan(1)   Guangdong     Other     Beijing     Vancouver        
Sales $ 36,967   $ -   $ 8,158   $ -   $ -   $ -   $ 45,125  
Cost of sales   (15,336 )   -     (4,938 )   -     -     -     (20,274 )
Gross profit   21,631     -     3,220     -     -     -     24,851  
 
Operating (expenses) income   (1,976 )   (205 )   (693 )   (112 )   (381 )   (1,471 )   (4,838 )
Finance items, net   166     (29 )   20     (3 )   54     454     662  
Income tax expenses   (4,942 )   (85 )   -     -     (1 )   (1,470 )   (6,498 )
Net income (loss) $ 14,879   $ (319 ) $ 2,547   $ (115 ) $ (328 ) $ (2,487 ) $ 14,177  
 
Attributable to:                                          
Equity holders of the Company   11,622     (223 )   2,426     (89 )   (328 )   (2,487 )   10,921  
Non-controlling interests   3,257     (96 )   121     (26 )   -     -     3,256  
Net income (loss) $ 14,879   $ (319 ) $ 2,547   $ (115 ) $ (328 ) $ (2,487 ) $ 14,177  

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

Three months ended June 30, 2017
          Mining             Administrative        
    Henan                                   Total  
Statement of income:   Luoning     Hunan   Guangdong     Other     Beijing     Vancouver        
Sales $ 31,757   $ -   $ 7,940   $ -   $ -   $ -   $ 39,697  
Cost of sales   (14,123 )   -     (5,569 )   -     -     -     (19,692 )
Gross profit   17,634     -     2,371     -     -     -     20,005  
Operating (expenses) income   (2,014 )   (148 )   (662 )   4,249     (262 )   (4,102 )   (2,939 )
Finance items, net   (12 )   (19 )   (3 )   (1 )   64     440     469  
Income tax expenses   (4,004 )   (17 )   -     -     -     -     (4,021 )
Net income (loss) $ 11,604   $ (184 ) $ 1,706   $ 4,248   $ (198 ) $ (3,662 ) $ 13,514  
Attributable to:                                          
Equity holders of the Company   9,032     (129 )   1,629     4,265     (198 )   (3,662 )   10,937  
Non-controlling interests   2,572     (55 )   77     (17 )   -     -     2,577  
Net income (loss) $ 11,604   $ (184 ) $ 1,706   $ 4,248   $ (198 ) $ (3,662 ) $ 13,514  

20




SILVERCORP METALS INC.
Notes to Condensed Consolidated Interim Financial Statements as at June 30,
2018 and for three months ended June 30, 2018 and 2017
(Unaudited)(Expressed in thousands of U.S. dollars, unless otherwise stated)

 

(c)     

Sales by metal

The sales generated for the three months ended June 30, 2018 and 2017 was all earned in China and is comprised of:

  Three months ended June 30, 2018  
    Henan Luoning   Guangdong   Total  
Silver (Ag) $ 18,350 $ 1,473 $ 19,823
Gold (Au)   692   -   692
Lead (Pb)   15,275   1,776   17,051
Zinc (Zn)   2,516   4,896   7,412
Other   134   13   147  
  $ 36,967 $ 8,158 $ 45,125  

 

  Three months ended June 30, 2017  
    Henan Luoning   Guangdong   Total  
Silver (Ag) $ 18,204 $ 1,979 $ 20,183
Gold (Au)   959   -   959
Lead (Pb)   11,647   1,801   13,448
Zinc (Zn)   739   3,942   4,681
Other   208   218   426  
  $ 31,757 $ 7,940 $ 39,697  

 

(d)     

Major customers

For the three months ended June 30, 2018, three major customers (three months ended June 30, 2017 -three) accounted for 10% to 40%, (three months ended June 30, 2017 - 12% to 35%) and collectively 70% (three months ended June 30, 2017 - 78%) of the total sales of the Company.

18.     

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 $ 2,962 $ 706 $ 2,256 $ -
Commitments $ 6,418 $ - $ - $ 6,418  

As of June 30, 2018, the Company has two office rental agreements totaling $2,962 for the next five years and commitments of $6,418 related to the GC property. During the three months ended June 30, 2018, the Company incurred rental expenses of $196 (three months ended June 30, 2017 - $158), which were included in office and administrative expenses on the condensed consolidated interim 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.

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SILVERCORP METALS INC.
Notes to Condensed Consolidated Interim Financial Statements as at June 30,
2018 and for three months ended June 30, 2018 and 2017
(Unaudited)(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 arising 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:

  • During the year ended March 31, 2016, an action was initiated by Luoyang Mining Group Co., Ltd. (“Luoyang Mining”) at the Luoyang Luolong District People’s Court (the “District Court’) 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 Intermediate People’s Court (the “Intermediate 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 by the Intermediate Court. In July 2018, the Intermediate Court decided to combine Luoyang Mining’s claim and Henan Found’s counter claim as one case but the date for a trial has not yet been set. The carrying value of XHP Project was impaired to $nil in fiscal year 2015.

19.     

SUPPLEMENTARY CASH FLOW INFORMATION

    June 30, 2018   March 31, 2018  
Cash on hand and at bank $ 49,933 $ 31,281
Bank term deposits and GICs   22,936   17,918  
Total cash and cash equivalents $ 72,869 $ 49,199  

 

Changes in non-cash operating working capital:   Three Months Ended June 30,  
    2018     2017  

Trade and other receivables

 $ 171   $ 68  

Inventories

   (2,367 )   (399 )

Prepaids and deposits

   (1,040 )   97  

Accounts payable and accrued liabilities

   4,524     1,486  

Deposits received

   (3,648 )   836  

Due from a related party

   (7 )   56  
  $ (2,367 ) $ 2,144  

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