EX-99.4 5 exhibit99-4.htm SILVERCORP METALS INC FINANCIAL STATEMENTS FOR 3RD QUARTER ENDED DECEMBER 31, 2019 Exhibit 99.4
Exhibit 99.4


SILVERCORP METALS INC.

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three and nine months ended December 31, 2019 and 2018
(Expresse 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 December 31,     As at March 31,  
  Notes   2019     2019  
ASSETS              
Current Assets              

Cash and cash equivalents

 19 $ 61,894   $ 67,441  

Short term investments

     93,236     47,836  

Trade and other receivables

     1,738     467  

Current portion of lease receivable

 8   203      

Inventories

     10,497     10,836  

Due from related parties

 12   95     3,022  

Income tax receivable

     1,146     1,301  

Prepaids and deposits

     2,789     3,958  
      171,598     134,861  
 
Non current Assets              

Long term prepaids and deposits

     420     769  

Long term portion lease receivable

 8   429      

Reclamation deposits

     9,217     7,953  

Investment in an associate

 3   47,460     38,703  

Other investments

 4   10,136     9,253  

Plant and equipment

 5   69,161     68,617  

Mineral rights and properties

 6   231,162     238,920  
TOTAL ASSETS   $ 539,583   $ 499,076  
 
LIABILITIES AND EQUITY              
Current Liabilities              

Accounts payable and accrued liabilities

   $ 32,514   $ 29,856  

Current portion of lease obligation

 8   615      

Bank loan

 7       4,475  

Deposits received

     2,253     3,040  

Income tax payable

     2,511     502  
      37,893     37,873  
 
Non current Liabilities              

Long term portion of lease obligation

 8   1,783      

Deferred income tax liabilities

     35,956     34,334  

Environmental rehabilitation

     12,923     13,688  
Total Liabilities     88,555     85,895  
 
Equity              

Share capital

     242,026     231,269  

Share option reserve

     15,235     15,898  

Reserves

     25,409     25,409  

Accumulated other comprehensive loss

 10   (45,299 )   (41,864 )

Retained earnings

     142,735     116,734  
Total equity attributable to the equity holders of the Company     380,106     347,446  
 
Non controlling interests 11   70,922     65,735  
Total Equity     451,028     413,181  
 
TOTAL LIABILITIES AND EQUITY   $ 539,583   $ 499,076  

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 December 31,     Nine Months Ended December 31,  
  Notes   2019     2018     2019     2018  
 
Sales 18(b)(c) $ 44,508   $ 42,351   $ 139,970   $ 135,567  
Cost of sales                          

Production costs

     18,395     16,941     53,685     49,456  

Mineral resource taxes

     1,322     1,220     3,981     3,861  

Depreciation and amortization

     5,886     4,887     17,569     15,396  
      25,603     23,048     75,235     68,713  
Gross profit     18,905     19,303     64,735     66,854  
 
General and administrative 13   5,148     5,339     14,597     14,416  
Government fees and other taxes 14   787     625     1,877     2,194  
Foreign exchange loss (gain)     1,277     (2,315 )   1,334     (2,395 )
Loss on disposal of plant and equipment 5   110     254     373     388  
Gain on disposal of mineral rights and properties 6           (1,477 )    
Share of loss (gain) in associate 3   322     (172 )   847     212  
Dilution gain on investment in associate 3           (723 )    
Reclassification of other comprehensive income upon ownership dilution of investment in associate 3           (21 )    
Other (income) expense     (182 )   400     308     676  
Income from operations     11,443     15,172     47,620     51,363  
 
Finance income 15   1,122     981     2,869     2,602  
Finance costs 15   (134 )   (166 )   (445 )   (463 )
Income before income taxes     12,431     15,987     50,044     53,502  
 
Income tax expense 16   3,715     5,134     8,366     17,395  
Net income   $ 8,716   $ 10,853   $ 41,678   $ 36,107  
 
Attributable to:                          

Equity holders of the Company

   $ 6,283   $ 8,660   $ 31,111   $ 27,618  

Non controlling interests

 11   2,433     2,193     10,567     8,489  
    $ 8,716   $ 10,853   $ 41,678   $ 36,107  
 
Earnings per share attributable to the equity holders of the Company                          
Basic earnings per share   $ 0.04   $ 0.05   $ 0.18   $ 0.16  
Diluted earnings per share   $ 0.04   $ 0.05   $ 0.18   $ 0.16  
Weighted Average Number of Shares Outstanding Basic     172,691,444     168,871,756     171,179,368     168,083,532  
Weighted Average Number of Shares Outstanding Diluted     174,760,433     170,314,907     172,963,914     170,306,321  

 

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 December 31,     Nine Months Ended December 31,  
  Notes   2019     2018     2019     2018  
 
Net income   $ 8,716   $ 10,853   $ 41,678   $ 36,107  
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

     10,749     (5,119 )   (7,905 )   (32,387 )

Share of other comprehensive (loss) income in associate

 3   (314 )   540     (536 )   1,157  

Reclassification to net income upon ownership dilution of investment in associate

             (21 )    
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   1,903     365     2,739     2,042  
Other comprehensive income (loss), net of taxes   $ 12,338   $ (4,214 ) $ (5,723 ) $ (29,188 )
Attributable to:                          

Equity holders of the Company

   $ 10,767   $ (4,579 ) $ (3,602 ) $ (24,275 )

Non controlling interests

 11   1,571     365     (2,121 )   (4,913 )
    $ 12,338   $ (4,214 ) $ (5,723 ) $ (29,188 )
Total comprehensive income   $ 21,054   $ 6,639   $ 35,955   $ 6,919  
 
Attributable to:                          

Equity holders of the Company

   $ 17,050   $ 4,081   $ 27,509   $ 3,343  

Non controlling interests

     4,004     2,558     8,446     3,576  
    $ 21,054   $ 6,639   $ 35,955   $ 6,919  

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 December 31,     Nine Months Ended December 31,  
  Notes   2019     2018     2019     2018  
Cash provided by                          
Operating activities                          

Net income

   $ 8,716   $ 10,853   $ 41,678   $ 36,107  

Add (deduct) items not affecting cash:

                          

Finance costs

 15   134     166     445     463  

Depreciation, amortization and depletion

     6,268     5,207     18,691     16,308  

Share of loss (gain) in associate

 3   322     (172 )   847     212  

Dilution gain on investment in associate

 3           (723 )    

Reclassification of other comprehensive loss upon ownership dilution of investment in associate

 3           (21 )    

Income tax expense

 16   3,715     5,134     8,366     17,395  

Finance income

 15   (1,122 )   (981 )   (2,869 )   (2,602 )

Loss on disposal of plant and equipment

 5   110     254     373     388  

Gain on disposal of mineral rights and properties

 6           (1,477 )    

Share based compensation

     947     506     1,973     1,418  

Reclamation expenditures

     (222 )   (46 )   (296 )   (67 )

Income taxes paid

     (485 )   (4,004 )   (3,415 )   (12,480 )

Interest received

     1,122     981     2,869     2,602  

Interest paid

     (30 )   (48 )   (135 )   (96 )

Changes in non cash operating working capital

 19   5,377     1,917     4,662     2,358  
Net cash provided by operating activities     24,852     19,767     70,968     62,006  
 
Investing activities                          

Mineral rights and properties

                          

Capital expenditures

     (7,912 )   (7,617 )   (21,921 )   (19,410 )

Proceeds on disposals

 6           6,146      

Plant and equipment

                          

Additions

     (1,909 )   (2,682 )   (6,238 )   (4,325 )

Proceeds on disposals

 5   5         8     29  

Reclamation deposits

                          

Paid

     (11 )   (222 )   (1,560 )   (267 )

Other investments

                          

Acquisition

     (2,133 )       (3,859 )    

Proceeds on disposals

     4,875         6,141      

Investment in associate

 3   (3,820 )       (7,030 )    

Net (purchases) redemptions of short term investments

     (11,866 )   12,613     (45,484 )   (4,606 )

Principal received on lease receivable

 8   35            71         
Net cash (used in) provided by investing activities     (22,736 )   2,092     (73,726 )   (28,579 )
 
Financing activities                          

Related parties

                          

Repayments received

     2,922         2,922      

Bank loan

                          

Proceeds

 7               4,527  

Repayment

 7           (4,369 )    

Principal payments on lease obligation

 8   (81 )       (369 )    

Non controlling interests

                          

Distribution

 11       (3,292 )   (3,259 )   (9,926 )

Acquisition

 14       (1,121 )       (1,121 )

Cash dividends distributed

 9(c)   (2,162 )   (2,113 )   (4,287 )   (4,208 )

Proceeds from issuance of common shares

     1,917     623     6,994     1,643  
Net cash provided by (used in) financing activities     2,596     (5,903 )   (2,368 )   (9,085 )
Effect of exchange rate changes on cash and cash equivalents     1,090     (1,340 )   (421 )   (5,403 )
 
Increase (decrease) in cash and cash equivalents     5,802     14,616     (5,547 )   18,939  
 
Cash and cash equivalents, beginning of the period     56,092     53,522     67,441     49,199  
Cash and cash equivalents, end of the period   $ 61,894   $ 68,138   $ 61,894   $ 68,138  
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, 2018   167,029,556 $ 228,729 $ 14,690   $ 25,409 $ (25,875 )  $ 86,283   $ 329,236   $ 68,943   $ 398,179  
Options exercised   2,652,484   2,258   (616 )   -   -   -     1,642     -     1,642  
Share based compensation   -   -   1,418     -   -   -     1,418     -     1,418  
Dividends declared   -   -   -     -   -   (4,208 )   (4,208 )   -     (4,208 )
Distribution to non controlling interests   -   -   -     -   -   -     -     (9,926 )   (9,926 )
Disposition of non controlling interests upon wound up of a subsidiary   -   -   -     -   -   -     -     (1,002 )   (1,002 )
Comprehensive (loss) income   -   -   -     -   (24,275 )   27,618     3,343     3,576     6,919  
Balance, December 31, 2018   169,682,040 $ 230,987 $ 15,492   $ 25,409 $ (50,150 ) $ 109,693   $ 331,431   $ 61,591   $ 393,022  
Options exercised   160,012   282   (72 )   -   -   -     210     -     210  
Share based compensation   -   -   478     -   -   -     478     -     478  
Dividends declared   -   -   -     -   -   -     -     -      
Distribution to non controlling interests   -   -   -     -   -   -     -     (3,333 )   (3,333 )
Acquisition of non controlling interest   -   -   -     -   -   (5,065 )   (5,065 )   1,794     (3,271 )
Comprehensive income   -   -   -     -   8,286     12,106     20,392     5,683     26,075  
Balance, March 31, 2019   169,842,052 $ 231,269 $ 15,898   $ 25,409 $ (41,864 )  $ 116,734   $ 347,446   $ 65,735   $ 413,181  
Adjustment upon adoption of IFRS 16 2(a) -   -   -     -   167   (823 )   (656 )   -     (656 )
Options exercised   3,247,406   9,630   (2,636 )   -   -   -     6,994     -     6,994  
Share based compensation   -   -   1,973     -   -   -     1,973     -     1,973  
Dividends declared 9(c) -   -   -     -   -   (4,287 )   (4,287 )   -     (4,287 )
Distribution to non controlling interests 11 -   -   -     -   -   -     -     (3,259 )   (3,259 )
Disposal of common shares held by associate 3 -   1,127   -     -   -   -     1,127     -     1,127  
Comprehensive (loss) income   -   -   -     -   (3,602 )   31,111     27,509     8,446     35,955  
Balance, December 31, 2019   173,089,458 $ 242,026 $ 15,235   $ 25,409 $ (45,299 ) $ 142,735   $ 380,106   $ 70,922   $ 451,028  

See accompanying notes to the condensed consolidated interim financial statements

5


SILVERCORP METALS INC.
Notes to Condensed Consolidated Interim Financial Statements as at December 31, 2019 and for three and nine months ended December 31, 2019 and 2018
(Unaudited) (Expressed in thousands of U.S. dollars, except numbers for share and per share figures or 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 mineral properties. The Company’s producing mines and other current exploration and development projects are located in China.

The Company is a publicly listed company incorporated in the Province of British Columbia, 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 NYSE American.

The head office, registered address and records office of the Company are located at 1066 West Hastings Street, Suite 1750, Vancouver, British Columbia, Canada, V6E 3X1.

Operating results for the three and nine months ended December 31, 2019, are not necessarily indicative of the results that may be expected for the year ending March 31, 2020.

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 (“IFRS”) 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, 2019. 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, 2019 except for the following:

IFRS 16 – Leases (“IFRS 16”) was issued by the IASB and replaced IAS 17 Leases (“IAS 17”) and IFRIC 4 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. Control is considered to exist if the customer has the right to obtain substantially all of the economic benefits from the use of an identified asset and the right to direct the use of that asset. For those contracts that are or contain a lease, IFRS 16 introduces significant changes to the accounting for such contracts, 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, apart from a specific exception in respect of sublease, remains similar to current accounting practice. The standard was effective for annual periods beginning on or after January 1, 2019.

The Company applied IFRS 16 on April 1, 2019 retrospectively, with the cumulative effect of initially applying the standard as an adjustment to retained earnings and no restatement of comparative information. The Company has elected to apply the available exemptions as permitted by IFRS 16 to recognize a lease expense on a straight basis for short term leases (lease term of 12 months or less) and low value assets. The Company has also elected to apply the practical expedient whereby leases whose

6


SILVERCORP METALS INC.
Notes to Condensed Consolidated Interim Financial Statements as at December 31, 2019 and for three and nine months ended December 31, 2019 and 2018
(Unaudited) (Expressed in thousands of U.S. dollars, except numbers for share and per share figures or otherwise stated)

term ends within 12 months of the date of initial application would be accounted for in the same way as short term lease.

Policy applicable from April 1, 2019

Lease Definition
At inception of a contract, the Company assesses whether the contract is, or contains, a lease. A contract is, or contains, a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration. An identified asset may be implicitly or explicitly specified in a contract, but must be physically distinct, and must not have the ability for substitution by a lessor. A lessee has the right to control an identified asset if it obtains substantially all of its economic benefits and either pre determines or directs how and for what purposes the asset is used.

Measurement of Right of Use (“ROU”) Assets and Lease Obligations
At the commencement of a lease, the Company, if acting in capacity as a lessee, recognizes an ROU asset and a lease obligation. The ROU asset is initially measured at cost, which comprises the initial amount of the lease obligation adjusted for any lease payments made at, or before, the commencement date, plus any initial direct costs incurred, less any lease incentives received.

The ROU asset is subsequently amortized on a straight line basis over the shorter of the term of the lease, or the useful life of the asset determined on the same basis as the Company’s plant and equipment. The ROU asset is periodically adjusted for certain remeasurements of the lease obligation, and reduced by impairment losses, if any. If an ROU asset is subsequently leased to a third party (a “sublease”) and the sublease is classified as a finance lease, the carrying value of the ROU asset to the extent of the sublease is derecognized. Any difference between the ROU asset and the lease receivable arising from the sublease is recognized in profit or loss.

The lease obligation is initially measured at the present value of the lease payments remaining at the lease commencement date, discounted using the Company’s incremental borrowing rate. Lease payments included in the measurement of the lease obligation, when applicable, may comprise of fixed payments, variable payments that depend on an index or rate, amounts expected to be payable under a residual value guarantee and the exercise price under a purchase, extension or termination option that the Company is reasonably certain to exercise.

The lease obligation is subsequently measured at amortized cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Company’s estimate of the amount expected to be payable under a residual value guarantee, or if the Company changes its assessment of whether it will exercise a purchase, extension or termination option. When the lease obligation is remeasured, a corresponding adjustment is made to the carrying amount of the ROU asset.

Measurement of Lease Receivable
At the commencement of a lease, the Company, if acting in capacity as a lessor, will classify the lease as finance lease and recognize a lease receivable at an amount equal to the net investment in the lease if it transfers substantially all the risks and rewards incidental to ownership of an underlying asset or if the lease is a sublease, by reference to the ROU asset arising from the original lease (the “head lease”). A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to

7


SILVERCORP METALS INC.
Notes to Condensed Consolidated Interim Financial Statements as at December 31, 2019 and for three and nine months ended December 31, 2019 and 2018
(Unaudited) (Expressed in thousands of U.S. dollars, except numbers for share and per share figures or otherwise stated)

ownership of an underlying asset or the lease is a short term lease. Cash received from an operating lease is included in other income in the Company’s consolidated statement of income on a straight line basis over the period the lease.

The lease receivable is initially measure at the present value of the lease payments remaining at the lease commencement date, discounting the interest rate implicated in the lease or the Company’s incremental borrowing rate if the lease is a sublease. The lease receivable is subsequently measured at amortized cost using the effective interest rate method, and reduced by the amount received and impairment losses, if any.

Recognition Exemptions
The Company has elected not to recognize the ROU asset and lease obligations for short term leases that have a lease term of 12 months or less or for lease of low value assets. Payments associated with these leases are recognized as general and administrative expense on a straight line basis over the lease term on the consolidated statement of income.

Adjustments upon Adoption
Upon adoption of IFRS 16 on April 1, 2019, the Company recognized lease receivable, ROU asset, and lease obligation of $447, $360, and $1,463, respectively, related to the Company’s office lease agreement and sublease agreements. The Company also recognized cumulative adjustments to retained earnings and accumulated other comprehensive income of $(823) and $167, respectively.

These condensed consolidated interim financial statements were authorized for issue in accordance with a resolution of the Board of Directors dated on February 5, 2020.

(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 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.

8


SILVERCORP METALS INC.
Notes to Condensed Consolidated Interim Financial Statements as at December 31, 2019 and for three and nine months ended December 31, 2019 and 2018
(Unaudited) (Expressed in thousands of U.S. dollars, except numbers for share and per share figures or 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  
    Country of December 31, March 31,  
Name of subsidiaries Principal activity incorporation 2019 2019 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% Ying Mining District
Henan Found Mining Co. Ltd. ("Henan Found") Mining China 77.5% 77.5%  
Songxian Gold Mining Co., Ltd. ("SX Gold") Mining China 0.0% 77.5% XHP
Xinshao Yunxiang Mining Co., Ltd. ("Yunxiang") Mining China 70% 70% BYP
Guangdong Found Mining Co. Ltd. (Guangdong Found") Mining China 99% 99% GC
(i) British Virgin Islands ("BVI")          

SX Gold was disposed in April 2019 and all assets and liabilities were derecognized upon disposal.

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.

On May 22, 2019, the Company exercised its warrants to acquire 1,500,000 common shares of NUAG for a total cost of $2,349. Pan American Silver Corp. also exercised its warrants to acquire 8,000,000 common shares of NUAG on the same day. As a result of the exercise of these warrants, the Company’s ownership in NUAG was diluted from 29.8% to 28.9% and a dilution gain of $723 was recorded along with the reclassification of gain of $21 from other comprehensive income to net income.

On October 25, 2019, the Company participated in an offering of common shares of NUAG underwritten by BMO Capital Markets and acquired an additional 1,247,606 common shares of NUAG for a cost of $3,820.

For the three and nine months ended December 31, 2019, the Company also acquired additional nil and 502,600 common shares of NUAG, respectively, from the public market (three and nine months ended December 31, 2018 – nil and nil, respectively) for a total cost of $nil and $861, respectively (three and nine months ended December 31, 2018 $nil and $nil, respectively).

9


SILVERCORP METALS INC.
Notes to Condensed Consolidated Interim Financial Statements as at December 31, 2019 and for three and nine months ended December 31, 2019 and 2018
(Unaudited) (Expressed in thousands of U.S. dollars, except numbers for share and per share figures or otherwise stated)

As at December 31, 2019, the Company owned 42,596,506 common shares of NUAG (March 31, 2019 –39,346,300), representing an ownership interest of 28.9% (March 31, 2019 – 29.6%). 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, 2018 39,280,900 $ 38,001   $ 50,266
Purchase from open market 65,400   107      
Share of net loss     (330 )    
Share of other comprehensive income     398      
Impairment recovery     1,899      
Foreign exchange impact     (1,372 )      
Balance March 31, 2019 39,346,300 $ 38,703   $ 69,783  
Purchase from open market 502,600   861      
Exercise of warrants 1,500,000   2,349      
Participation in public offering 1,247,606   3,820      
Share of net loss     (847 )    
Share of other comprehensive loss     (536 )    
Dilution gain     723      
Disposal of common shares held by the associate     1,127      
Foreign exchange impact     1,260        
Balance December 31, 2019 42,596,506 $ 47,460   $ 193,829  

 

4. OTHER INVESTMENTS

 

    December 31, 2019   March 31, 2019   
Equity investments designated as FVTOCI        

Public companies

 $ 7,982 $ 9,253

Private companies

   2,154        
Total $ 10,136 $ 9,253   

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.

10


SILVERCORP METALS INC.
Notes to Condensed Consolidated Interim Financial Statements as at December 31, 2019 and for three and nine months ended December 31, 2019 and 2018
(Unaudited) (Expressed in thousands of U.S. dollars, except numbers for share and per share figures or otherwise stated)

The continuity of such investments is as follows:

          Accumulated fair value change  
    Fair value     included in OCI  
April 1, 2018 $ 6,132   $ (37,508 )

Change in fair value on equity investments designated as FVTOCI

   2,380     2,380  

Acquisition of equity investments

   1,018     -  

Impact of foreign currency translation

   (277 )   -  
March 31, 2019 $ 9,253   $ (35,128 )

Change in fair value on equity investments designated as FVTOCI

   2,739     2,739  

Acquisition of equity investments

   3,859     -  

Proceeds on disposal

   (6,141 )   -  

Impact of foreign currency translation

   426     -  
December 31, 2019 $ 10,136   $ (32,389 )

In October 2019, through its subsidiary Henan Found, the Company invested $2,154 (RMB¥15 million) in an arm’s length private company in China. As at December 31, 2019, the Company’s investment in that private company was $2,154 (March 31, 2019 $nil), representing 15% (March 31, 2019 – nil) of its equity interest. The Company assessed the fair value using a market based approach taking into consideration that the transaction was incurred recently and determined that the carrying value was an approximation of the fair value as at December 31, 2019.

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, 2018 $ 105,165   $ 7,755   $ 29,413   $ 6,730   $ 3,602   $ 152,665  

Additions

   1,586     553     2,266     792     2,750     7,947  

Disposals

   (316 )   (126 )   (505 )   (376 )   -     (1,323 )

Reclassification of asset groups(1)

   189     -     145     -     (334 )   -  

Impact of foreign currency translation

   (6,596 )   (447 )   (1,867 )   (424 )   (228 )   (9,562 )
Balance as at March 31, 2019 $ 100,028   $ 7,735   $ 29,452   $ 6,722   $ 5,790   $ 149,727  

Adjustment upon adoption of IFRS 16

   360     -     -     -     -     360  

Additions

   1,731     813     1,071     459     3,647     7,721  

Disposals

   (6,825 )   (329 )   (3,201 )   (586 )   (52 )   (10,993 )

Reclassification of asset groups(1)

   4,705     -     -     -     (4,705 )   -  

Impact of foreign currency translation

   (3,796 )   (206 )   (1,075 )   (244 )   (209 )   (5,530 )
Ending balance as at December 31, 2019 $ 96,203   $ 8,013   $ 26,247   $ 6,351   $ 4,471   $ 141,285  
 
Impairment, accumulated depreciation and amortization                                  
Balance as at April 1, 2018 $ (50,016 ) $ (5,312 )   $ (20,723 )  $ (5,345 )  $  (58 )  $  (81,454 )

Disposals

   128     108     317     338     -     891  

Depreciation and amortization

   (3,172 )   (500 )   (1,615 )   (347 )   -     (5,634 )

Impact of foreign currency translation

   3,131     295     1,320     337     4     5,087  
Balance as at March 31, 2019 $ (49,929 ) $ (5,409 )   $ (20,701 )  $ (5,017 )  $  (54 )  $  (81,110 )

Disposals

   6,768     242     3,016     534     52     10,612  

Depreciation and amortization

   (2,561 )   (384 )   (1,233 )   (293 )   -     (4,471 )

Impact of foreign currency translation

   1,771     132     758     182     2     2,845  
Ending balance as at December 31, 2019 $ (43,951 ) $ (5,419 )   $ (18,160 )  $ (4,594 )  $ -   $ (72,124 )
 
Carrying amounts                                    
Balance as at March 31, 2019 $ 50,099   $ 2,326   $ 8,751   $ 1,705   $ 5,736   $ 68,617  
Ending balance as at December 31, 2019 $ 52,252   $ 2,594   $ 8,087   $ 1,757   $ 4,471   $ 69,161  
(1) when an asset is available for use, it is reclassified from construction in progress to one of the appropriate plant and equipment categories.

11


SILVERCORP METALS INC.
Notes to Condensed Consolidated Interim Financial Statements as at December 31, 2019 and
for three and nine months ended December 31, 2019 and 2018
(Unaudited) (Expressed in thousands of U.S. dollars, except numbers for share and per share figures or otherwise stated)

 

Carrying amounts as at December 31, 2019   Ying Mining District   BYP   GC   Other   Total  
Land use rights and building $ 35,887 $ 1,909 $ 12,077 $ 2,379 $ 52,252
Office equipment   2,006   28   217   343   2,594
Machinery   6,105   203   1,779   -   8,087
Motor vehicles   1,537   23   197   -   1,757
Construction in progress   1,408   1,862   1,201   -   4,471  
Total $ 46,943 $ 4,025 $ 15,471 $ 2,722 $ 69,161  
 
Carrying amounts as at March 31, 2019   Ying Mining District   BYP   GC   Other   Total  
Land use rights and building $ 34,160 $ 2,158 $ 12,860 $ 921 $ 50,099
Office equipment   1,800   35   214   277   2,326
Machinery   6,294   257   2,071   129   8,751
Motor vehicles   1,521   27   140   17   1,705
Construction in progress   3,825   1,842   69   -   5,736  
Total $ 47,600 $ 4,319 $ 15,354 $ 1,344 $ 68,617  

Upon adoption of IFRS 16 on April 1, 2019, the Company recognized an ROU asset of $360 under land use rights and building related to a few office lease and sublease agreements. During the three and nine months ended December 31, 2019, an additional ROU asset of $nil and $1,241, respectively, was recognized related to a new office lease and ROU asset of $nil and $85, respectively, was disposed of based on a new sub lease arrangement.

During the three and nine months ended December 31, 2019, certain plant and equipment were disposed for proceeds of $5 and $8, respectively (three and nine months ended December 31, 2018 $nil and $29, respectively) and loss of $110 and $373, respectively (three and nine months ended December 31, 2018 –loss of $254 and $388, respectively).

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, 2018 $ 277,734   $ 65,054   $ 113,244   $ 22,024   $ 180   $ 478,236  

Capitalized expenditures

   23,238     189     1,014     261     -     24,702  

Mine right fee

   3,839     -     -     -     -     3,839  

Environmental rehabiliation

   1,091     35     (12 )   8     -     1,122  

Foreign currecy translation impact

   (17,449 )   (973 )   (7,085 )   (1,384 )   (6 )   (26,897 )
Balance as at March 31, 2019 $ 288,453   $ 64,305   $ 107,161   $ 20,909 $ 174   $ 481,002  

Capitalized expenditures

   20,988     6     1,039     -     -     22,033  

Mine right fee

   797     -     -     -     -     797  

Disposition

   -     -     -     (20,485 )   -     (20,485 )

Foreign currecy translation impact

   (10,403 )   (527 )   (3,785 )   (424 )   5     (15,134 )
Ending balance as at December 31, 2019 $ 299,835   $ 63,784   $ 104,415   $ -   $ 179   $ 468,213  
 
Impairment and accumulateddepletion                                    
Balance as at April 1, 2018 $ (83,099 )   $ (57,584 )  $  (83,495 ) $ (21,798 ) $ (180 ) $ (246,156 )

Impairment reversal

   -     -     -     7,279     -     7,279  

Depletion

   (13,312 )   -     (2,209 )   -     -     (15,521 )

Foreign currecy translation impact

   5,232     501     5,213     1,364     6     12,316  
Balance as at March 31, 2019 $ (91,179    $ (57,083 )    (80,491 ) $ (13,155 ) $ (174 ) $ (242,082 )

Depletion

   (12,652 )   -     (1,873 )   -     -     (14,525 )

Disposition

   -     -     -     12,888     -     12,888  

Foreign currecy translation impact

   3,302     271     2,833     267     (5 )   6,668  
Ending balance as at December 31, 2019 $ (100,529 )   $ (56,812 )  $ (79,531 ) $ -   $ (179 ) $ (237,051 )
 
Carrying amounts                                    
Balance as at March 31, 2019 $ 197,274   $ 7,222   $ 26,670   $ 7,754 $  -   $ 238,920  
Ending balance as at December 31, 2019 $ 199,306   $ 6,972   $ 24,884   $ -   $  -   $ 231,162  

12


SILVERCORP METALS INC.
Notes to Condensed Consolidated Interim Financial Statements as at December 31, 2019 and for three and nine months ended December 31, 2019 and 2018
(Unaudited) (Expressed in thousands of U.S. dollars, except numbers for share and per share figures or otherwise stated)

In April 2019, the Company’s subsidiary, Henan Found, entered into a purchase agreement (the “Agreement”) with an arm’s length private Chinese company to dispose the XHP project. Pursuant to the Agreement, Henan Found sold its 100% equity interest in SX Gold, the holding company of the XHP project, for $7.3 million (RMB¥50 million), and forgave the amount of $1.1 million (RMB¥7.5 million) SX Gold owed to Henan Found.

The transaction closed in July 2019 and the Company received partial payment of $6,146 (RMB¥42.5 million). The remaining consideration of $1,049 (RMB¥7.5 million) was included in trade and other receivables as at December 31, 2019. The assets and liabilities disposed of are as follows:

    XHP  
Total consideration per share transfer agreement (RMB ¥50) $ 7,330  
Less: amounts owed to Henan Found   (1,112 )
Net consideration $ 6,218  
 
Prepaids and deposits   124  
Inventories   198  
Plant and equipment   247  
Mineral rights and properties   7,597  
Accounts payable and accrued liabilities   (2,211 )
Deposits received   (925 )
Environmental rehabilitation   (289 )
Total assets and liabilities disposed of $ 4,741  
Gain on disposal of mineral rights and properties $ 1,477  

A gain of $1,477 was recognized in gain on disposal of mineral rights and properties when the transaction completed.

In November 2019, the Company paid a mine right fee of $797 (RMB¥5.5 million) to the Chinese government for the additional mineral resources of HPG mine (part of the Ying Mining District).

7. BANK LOAN

 

    Total  
Balance, April 1, 2018 $  
Addition   4,527  
Interest accrued   152  
Interest paid   (144 )
Foreign exchange impact   (60 )
Balance, March 31, 2019 $ 4,475  
Interest accrued   45  
Interest paid   (50 )
Principal repayment   (4,369 )
Foreign exchange impact   (101 )
Balance, December 31, 2019 $  

13


SILVERCORP METALS INC.
Notes to Condensed Consolidated Interim Financial Statements as at December 31, 2019 and for three and nine months ended December 31, 2019 and 2018
(Unaudited) (Expressed in thousands of U.S. dollars, except numbers for share and per share figures or otherwise stated)

On June 14, 2018, Henan Found borrowed a loan of $4,527 (RMB ¥30 million) bearing an interest rate of 4.35% from the Bank of China. The loan was fully repaid in June 2019. For the three and nine months ended December 31, 2019, interests of $nil and $45, respectively (three and nine months ended December 31, 2018 $49 and $104, respectively) were recorded and expensed through finance costs.

8. LEASES

The following table summarizes changes in the Company’s lease receivable and lease obligation related to the Company’s office lease and sublease.

    Lease Receivable     Lease Obligation  
Adjustment upon adoption of IFRS 16, April 1, 2019 $ 447   $ 1,463  

Addition

   239     1,244  

Interest accrual

   20     84  

Interest received or paid

   (20 )   (84 )

Principal repayment

   (71 )   (369 )

Foreign exchange impact

   17     60  
Balance, December 31, 2019 $ 632   $ 2,398  

Less: current portion

   (203 )   (615 )
Non current portion $ 429   $ 1,783  

The following table presents a reconciliation of the Company’s undiscounted cash flows to their present value for its lease receivable and lease obligation:

    Lease Receivable     Lease Obligation  

Within 1 year

 $ 224   $ 670  

Between 2 to 5 years

   458     1,884  

Over 5 years

   -     104  
Total undiscounted amount   682     2,658  
Less future interest   (50 )   (260 )
Total discounted amount $ 632   $ 2,398  

Less: current portion

   (203 )   (615 )
Non current portion $ 429   $ 1,783  

The lease receivable and lease obligation were discounted using an estimated incremental borrowing rate of 5%.

9. SHARE CAPITAL

(a) Authorized

Unlimited number of common shares without par value. All shares issued as at December 31, 2019 were fully paid.

14


SILVERCORP METALS INC.
Notes to Condensed Consolidated Interim Financial Statements as at December 31, 2019 and for three and nine months ended December 31, 2019 and 2018
(Unaudited) (Expressed in thousands of U.S. dollars, except numbers for share and per share figures or otherwise stated)

(b) Sharebased compensation

The Company has a share based compensation plan (the “Plan”) which consists of stock options, restricted share units (the “RSUs”) and performance share units (the “PSUs”). The Plan allows for the maximum number of common shares to be reserved for issuance on any share based compensation to be a rolling 10% of the issued and outstanding common shares from time to time. Furthermore, no more than 3% of the reserve may be granted in the form of RSUs and PSUs.

For the three and nine months ended December 31, 2019, a total of $947 and $1,973, respectively (three and nine months ended December 31, 2018 $506 and $1,418, respectively) in share based compensation expense was recognized and included in the general and administrative expenses on the condensed consolidated interim statements of income.

(i) Stock options

The following is a summary of option transactions:

    Weighted average
    exercise price per
  Number of shares     share CAD$   
Balance, March 31, 2018 8,146,799 $ 2.15
Option granted 1,815,000   3.10
Options exercised (2,812,496 )   0.87
Options forfeited (164,075 )   3.34
Options expired (504,312 )   3.27   
Balance, March 31, 2019 6,480,916 $ 2.86
Options exercised (3,247,406 )   2.86
Options forfeited (78,750 )   3.33
Options expired (100,000 )   1.75   
Balance, December 31, 2019 3,054,760   $ 2.89   

 

The following table summarizes information about stock options outstanding at December 31, 2019:

    Number of options           Weighted
    outstanding at Weighted average Weighted average Number of options   average
  Exercise price in December 31, remaining contractual   exercise price in exercisable at exercise price
  CAD$ 2019 life (Years)   CAD$ Decemebr 31, 2019   in CAD$
$ 1.43 501,260 0.42 $ 1.43 501,260   1.43
$ 2.60 587,500 1.88 $ 2.60 250,000   2.60
$ 3.23 618,750 1.20 $ 3.23 389,375   3.23
$ 3.36 501,250 0.76 $ 3.36 501,250   3.36
$ 3.40 796,000 1.65 $ 3.40 271,000   3.40
$ 3.63 50,000 0.05 $ 3.63 50,000   3.63
  $ 1.43 - 3.63 3,054,760 1.23 $ 2.89 1,962,885 $ 2.76

Subsequent to December 31, 2019, a total of 150,000 options with exercise prices ranging from CAD$2.60 to CAD$3.63 were exercised.

15


SILVERCORP METALS INC.
Notes to Condensed Consolidated Interim Financial Statements as at December 31, 2019 and for three and nine months ended December 31, 2019 and 2018
(Unaudited) (Expressed in thousands of U.S. dollars, except numbers for share and per share figures or otherwise stated)

(ii) RSUs

The following is a summary of RSUs transactions:

        Weighted average
        grant date closing
  Number of shares     price per share $CAD  
Balance, April 1, 2019 -   $ -

Granted

 850,500     4.94

Cancelled

 (14,500 )   4.94  
Balance, December 31, 2019 836,000   $ 4.94  

During the nine months ended December 31, 2019, a total of 850,500 RSUs were granted to directors, officers, and employees of the Company at grant date closing price of CAD$4.94 per share subject to a vesting schedule over a two year term with 25% of the RSUs vesting every six months from the date of grant.

(c) Cash dividends declared

During the three and nine months ended December 31, 2019, dividends of $2,162 and $4,287, respectively (three and nine months ended December 31, 2018 $2,113 and $4,028, respectively) were declared and paid.

10. ACCUMULATED OTHER COMPREHENSIVE LOSS

 

    December 31, 2019     March 31, 2019  
Change in fair value on equity investments designated as FVTOCI $ 32,389   $ 35,128  
Share of other comprehensive income in associate   (122 )   (679 )
Currency translation adjustment   13,032     7,415  
Balance, end of the period $ 45,299   $ 41,864  

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

16


SILVERCORP METALS INC.
Notes to Condensed Consolidated Interim Financial Statements as at December 31, 2019 and for three and nine months ended December 31, 2019 and 2018
(Unaudited) (Expressed in thousands of U.S. dollars, except numbers for share and per share figures or otherwise stated)

 

11. NON CONTROLLING INTERESTS

The continuity of non controlling interests is summarized as follows:

    Henan     Henan           Guangdong        
    Found     Huawei     Yunxiang     Found     Total  
Balance, April 1, 2018 $ 62,047   $ 5,909   $ 3,532   $ (2,545 ) $ 68,943  
Share of net income (loss)   11,444     892     (365 )   352     12,323  
Share of other comprehensive (loss) income   (3,664 )   (204 )   (150 )   954     (3,064 )
Distributions   (11,565 )   (1,694 )   -     -     (13,259 )
Acquisition of non controlling interest   -     -     -     1,794     1,794  
Disposition   -     -     -     (1,002 )   (1,002 )
Balance, March 31, 2019 $ 58,262   $ 4,903   $ 3,017   $ (447 ) $ 65,735  
Share of net income (loss)   10,027     665     (169 )   44     10,567  
Share of other comprehensive loss   (1,845 )   (117 )   (99 )   (60 )   (2,121 )
Distributions   (2,603 )   (656 )   -     -     (3,259 )
Balance, December 31, 2019 $ 63,841   $ 4,795   $ 2,749   $ (463 ) $ 70,922  

As at December 31, 2019, non controlling interests in Henan Found, Henan Huawei, Yunxiang, and Guangdong Found were 22.5%, 20%, 30%, and 1%, respectively (March 31, 2019 – 22.5%, 20%, 30% and 1%, respectively).

12. 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:

Due from related parties   December 31, 2019   March 31, 2019   
NUAG (a) $ 95 $ 33
Henan Non ferrous (b)   -   2,989   
  $ 95 $ 3,022   

 

(a) The Company recovers costs for services rendered to NUAG and expenses incurred on behalf of NUAG pursuant to a services and administrative costs reallocation agreement. During the three and nine months ended December 31, 2019, the Company recovered $183 and $397, respectively (three and nine months ended December 31, 2018 $52 and $151, respectively), 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.
 
(b) In March 2019, Henan Found advanced a loan of $2,989 (RMB¥20.0 million) to Henan Non ferrous. The loan bears an interest rate of 4.35% per annum. In December 2019, the loan, including accumulated interest, of $2,922 (RMB¥20.7 million) was repaid.

The balances with related parties are unsecured.

17


SILVERCORP METALS INC.
Notes to Condensed Consolidated Interim Financial Statements as at December 31, 2019 and for three and nine months ended December 31, 2019 and 2018
(Unaudited) (Expressed in thousands of U.S. dollars, except numbers for share and per share figures or otherwise stated)

 

13. GENERAL AND ADMINISTRATIVE

General and administrative expenses consist of:

    Three months ended December 31,   Nine months ended December 31,  
General and administrative   2019   2018   2019   2018  
Office and administrative expenses $ 1,404 $ 1,559 $ 3,901 $ 4,650
Amortization and depreciation   382   320   1,122   912
Salaries and benefits   2,242   2,736   6,855   6,928
Share based compensation   947   506   1,973   1,418
Professional fees   173   218   746   508  
  $ 5,148 $ 5,339 $ 14,597 $ 14,416  

 

14. GOVERNMENT FEES AND OTHER TAXES

Government fees and other taxes consist of:

    Three months ended December 31,   Nine months ended December 31,  
    2019   2018   2019   2018  
Government fees $ 91 $ 44 $ 197 $ 149
Other taxes   696   581   1,680   2,045  
  $ 787 $ 625 $ 1,877 $ 2,194  

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. FINANCE ITEMS

Finance items consist of:

    Three months ended December 31,   Nine months ended December 31,   
Finance income   2019   2018   2019   2018   
Interest income $ 1,122 $ 981 $ 2,869 $ 2,602   
 
    Three months ended December 31,   Nine months ended December 31,   
Finance costs   2019   2018   2019   2018   
Interest on bank loan $ $   49 $ 45 $ 104
Interest on lease obligation   29   -   84   -
Unwinding of discount of environmental   -    -    -    - 
rehabilitation provision   105   117   316   359   
  $ 134 $ 166 $ 445 $ 463   

 

16. INCOME TAX

The significant components of income tax expense are as follows:

    Three months ended December 31,   Nine months ended December 31,  
Income tax expense   2019   2018   2019   2018  
Current $ 2,786 $ 4,354 $ 5,498 $ 15,375
Deferred   929   780   2,868   2,020  
  $ 3,715 $ 5,134 $ 8,366 $ 17,395  

18


SILVERCORP METALS INC.
Notes to Condensed Consolidated Interim Financial Statements as at December 31, 2019 and for three and nine months ended December 31, 2019 and 2018
(Unaudited) (Expressed in thousands of U.S. dollars, except numbers for share and per share figures or otherwise stated)

The disposal of the XHP project (also see Note 6) resulted in approximately $29.9 million deductible loss for income tax purpose. The relevant income tax recovery amount for the three and nine months ended December 31, 2019 of approximately $nil and $7.5 million, respectively were recognized under current and deferred income taxexpenses.

17. 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 as at December 31, 2019 and March 31, 2019 that are not otherwise disclosed. The 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 December 31, 2019  
Recurring measurements   Level 1   Level 2   Level 3   Total  
Financial assets            
Cash and cash equivalents $ 61,894 $ - $ - $ 61,894
Short term investments money market instruments   64,555   - - 64,555
Investments in publiccompanies   7,982   - - 7,982
Investments in private company   -   -   2,154   2,154  
   
    Fair value as at March 31, 2019  
Recurring measurements   Level 1   Level 2   Level 3   Total  
Financial assets            
Cash and cash equivalents $ 67,441 $ - $ - $ 67,441
Short term investments money market instruments   22,850   - - 22,850
Investments in public companies   9,253   -   -   9,253  

19


SILVERCORP METALS INC.
Notes to Condensed Consolidated Interim Financial Statements as at December 31, 2019 and for three and nine months ended December 31, 2019 and 2018
(Unaudited) (Expressed in thousands of U.S. dollars, except numbers for share and per share figures or otherwise stated)

Fair value of the other financial instruments excluded from the table above approximates their carrying amount as at December 31, 2019 and March 31, 2019, due to the short term nature of these instruments.

There were no transfers into or out of Level 3 during the nine months ended December 31, 2019.

(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.

    December 31, 2019   March 31, 2019    
    Within a year   2-5  years   Over 5 years   Total   Total    
Bank loan $ $ - $ -  $ - $ 4,475
Accounts payable and accrued liabilities   32,514   -   -   32,514   29,856
Lease obligation   615   1,693   90   2,398   -    
  $ 33,129 $ 1,693 $ 90 $ 34,912 $ 34,331    

(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 follows:

    December 31, 2019   March 31, 2019  
Financial assets denominated in U.S. Dollars $ 62,382 $ 45,912  

As at December 31, 2019, with other variables unchanged, a 10% strengthening (weakening) of the CAD against the USD would have decreased (increased) net income by approximately $6.2 million.

(d)Interest rate risk

The Company is exposed to interest rate risk on its cash equivalents, short term investments, and loan to one of the related parties. As at December 31, 2019, 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 rates with terms of less than one year. The Company monitors its exposure to changes in interest rates on cash equivalents, short term investments, and loan to the related party. Due to the short term nature of these financial instruments, fluctuations in interest rates would not have a significant impact on the Company’s net income.

20


SILVERCORP METALS INC.
Notes to Condensed Consolidated Interim Financial Statements as at December 31, 2019 and for three and nine months ended December 31, 2019 and 2018
(Unaudited) (Expressed in thousands of U.S. dollars, except numbers for share and per share figures or 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. There were no amounts in trade or other receivables which were past due on December 31, 2019 (at March 31, 2019 $nil) for which no provision is recognized. The amount of $1,049 (RMB¥7.5 million) related to the XHP project disposal (also see Note 6) contained in other receivables was outstanding for approximately 90 days as of December 31, 2019.

(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 holdings are mainly in mining companies, the value will also fluctuate based on commodity prices. Based upon the Company’s portfolio as at December 31, 2019, 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 $1.0 million.

18. 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. and BVI's holding companies RZY

Beijing

 Silvercorp Metals (China) Inc.  

21


SILVERCORP METALS INC.
Notes to Condensed Consolidated Interim Financial Statements as at December 31, 2019 and for three and nine months ended December 31, 2019 and 2018
(Unaudited) (Expressed in thousands of U.S. dollars, except numbers for share and per share figures or otherwise stated)

 

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

 

December 31, 2019  
    Mining     Administrative       
    Henan                         Total
Statement of financial position items:   Luoning   Hunan    Guangdong   Other      Beijing     Vancouver          
     
Current assets $ 85,100 $ 1,434 $ 7,674 $ - $ 4,656   $ 72,734 $ 171,598
Plant and equipment   46,943   4,025   15,471   -   903     1,819   69,161
Mineral rights and properties   199,306   6,972   24,884   -   -     -   231,162
Investment in an associate   -   -   -   -   -     47,460   47,460
Other investments   2,154   -   -   -   -     7,982   10,136
Reclamation deposits   5,142   -   4,067   -   -     8   9,217
Long term prepaids and deposits   205   101   114   -   -     -   420
Long term portion of lease receivable   -   -   -   -      -     429      429  
Total assets $ 338,850 $ 12,532 $ 52,210 $ -    $ 5,559   $ 130,432    $ 539,583  
 
Current liabilities $ 25,528 $ 1,409 $ 6,882 $ - $ 736   $ 3,338 $ 37,893
Long term portion of lease obligation   -   -   -   -   -     1,783   1,783
Deferred income tax liabilities   34,954   1,002   -   -   -     -   35,956
Environmental rehabilitation   11,244   985   694   -      -     -      12,923  
Total liabilities $ 71,726 $ 3,396 $ 7,576 $ -    $ 736   $ 5,121    $ 88,555  
 
March 31, 2019  
    Mining      Administrative    
    Henan                         Total
Statement of financial position items:   Luoning   Hunan   Guangdong    Other      Beijing     Vancouver        
     
Current assets $ 66,992 $ 1,540 $ 11,870 $ 529 $ 5,435   $ 48,495 $ 134,861
Plant and equipment   47,600   4,319   15,354   255   932     157   68,617
Mineral rights and properties   197,274   7,222   26,670   7,754   -     -   238,920
Investment in an associate   -   -   -   -   -     38,703   38,703
Other investments   -   -   -   -   -     9,253   9,253
Reclamation deposits   5,330   -   2,616   -   -     7   7,953
Long term prepaids and deposits   369   104   170   126      -     -     769  
Total assets $ 317,565 $ 13,185 $ 56,680 $ 8,664    $ 6,367   $ 96,615   $ 499,076  
 
Current liabilities $ 27,000 $ 1,391 $ 4,036 $ 2,548 $ 1,102   $ 1,796 $ 37,873
Deferred income tax liabilities   33,337   997   -   -   -     -   34,334
Environmental rehabilitation   11,623   998   774   293      -     -     13,688  
Total liabilities $ 71,960 $ 3,386 $ 4,810 $ 2,841    $ 1,102   $ 1,796   $ 85,895  

22


SILVERCORP METALS INC.
Notes to Condensed Consolidated Interim Financial Statements as at December 31, 2019 and for three and nine months ended December 31, 2019 and 2018
(Unaudited) (Expressed in thousands of U.S. dollars, except numbers for share and per share figures or otherwise stated)

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

Three months ended December 31, 2019
    Mining     Administrative        
  Henan                                Total  
Statement of operations:   Luoning      Hunan(1)      Guangdong       Other     Beijing      Vancouver         
Sales $ 35,681   $ -   $ 8,827   $ -   $ -   $ -   $ 44,508  
Cost of sales   (19,225 )   -     (6,378 )   -     -     -     (25,603 )
Gross profit   16,456     -   2,449     -     -   -     18,905  
 
Operating expenses   (1,972 )   (199 ) (1,009 )   -     (443 ) (3,839 )   (7,462 )
Finance items   445     (35 ) 29     -     32   517     988  
Income tax expenses    (3,582 )    (12 )   (113 )   -     (1 )   (7 )    (3,715 )
Net income (loss) $ 11,347   $ (246 ) $ 1,356   $ -   $ (412 ) $ (3,329 ) $ 8,716  
 
Attributed to:                            
Equity holders of the Company   8,854     (172 ) 1,342     -     (412 ) (3,329 )   6,283  
Non controlling interests    2,493      (74 )   14     -     -     -      2,433  
Net income (loss) $ 11,347   $ (246 ) $ 1,356   $ -    $ (412 ) $ (3,329 ) $ 8,716  
(1) Hunan's BYP project was placed on care and maintenance starting August 2014;                        
 
Three months ended December 31, 2018
      Mining           Administrative           
  Henan                                Total  
Statement of operations:    Luoning     Hunan       Guangdong     Other      Beijing      Vancouver         
Sales $ 35,184   $ -   $ 7,167   $ -   $ -   $ -   $ 42,351  
Cost of sales   (18,598 )   -     (4,450 )   -     -     -     (23,048 )
Gross profit   16,586     -   2,717     -     -   -     19,303  
 
Operating expenses   (2,463 )   (427 ) (777 )   (462 )   (410 ) 408     (4,131 )
Finance items   356     (34 ) 8     (3 )   42   446     815  
Income tax expenses    (3,725 )    (16 )   -     -     -     (1,393 )    (5,134 )
Net income (loss) $ 10,754   $ (477 ) $ 1,948   $ (465 ) $ (368 ) $ (539 ) $ 10,853  
 
Attributed to:                                      
Equity holders of the Company   8,412     (334 ) 1,850     (361 )   (368 ) (539 )   8,660  
Non controlling interests    2,342      (143 )   98      (104 )   -     -      2,193  
Net income (loss) $ 10,754   $ (477 ) $ 1,948   $ (465 ) $ (368 ) $ (539 ) $ 10,853  

23


SILVERCORP METALS INC.
Notes to Condensed Consolidated Interim Financial Statements as at December 31, 2019 and for three and nine months ended December 31, 2019 and 2018
(Unaudited) (Expressed in thousands of U.S. dollars, except numbers for share and per share figures or otherwise stated)

 

Nine months ended December 31, 2019
    Mining     Administrative        
  Henan                               Total  
Statement of income:   Luoning     Hunan(1)       Guangdong     Other     Beijing     Vancouver        
Sales $ 115,753   $ -   $ 24,217   $ -   $ -   -   $ 139,970  
Cost of sales   (58,691 )   -     (16,544 )   -     -     -     (75,235 )
Gross profit 57,062     -   7,673     -     -   -     64,735  
 
Operating expenses (4,906 )   (417 ) (2,330 )   (60 )   (1,265 ) (8,137 )   (17,115 )
Finance items, net 1,013     (105 ) 73     -     94   1,349     2,424  
Income tax expenses   (4,483 )   (41 )   (1,049 )   -     (1 )   (2,792 )   (8,366 )
Net income (loss) $ 48,686   $ (563 ) $ 4,367   $ (60 ) $ (1,172 )  (9,580 ) $ 41,678  
 
Attributable to:                                    
Equity holders of the Company 37,994     (394 ) 4,323     (60 )   (1,172 ) (9,580 )   31,111  
Non controlling interests   10,692     (169 )   44     -     -     -     10,567  
Net income (loss) $ 48,686   $ (563 ) $ 4,367   $ (60 ) $ (1,172 )    (9,580 ) $ 41,678  
(1) Hunan's BYP project was placed on care and maintenance in August 2014;                        
 
Nine months ended December 31, 2018
        Mining     Administrative        
  Henan                               Total  
Statement of income:   Luoning     Hunan      Guangdong     Other     Beijing     Vancouver        
Sales $ 113,897   $ -   $ 21,670   $ -   $ -   -   $ 135,567  
Cost of sales   (54,812 )   -     (13,901 )   -     -     -     (68,713 )
Gross profit 59,085     -   7,769     -     -   -     66,854  
 
Operating expenses (6,935 )   (806 ) (2,213 )   (691 )   (1,177 ) (3,669 )   (15,491 )
Finance items, net 813     (94 ) 45     (8 )   112   1,271     2,139  
Income tax expenses   (13,292 )   (115 )   -     -     (1 )   (3,987 )   (17,395 )
Net income (loss) $ 39,671   $ (1,015 ) $ 5,601   $ (699 ) $ (1,066 )  (6,385 ) $ 36,107  
 
Attributable to:                                    
Equity holders of the Company 30,994     (711 ) 5,328     (542 )   (1,066 ) (6,385 )   27,618  
Non controlling interests   8,677     (304 )   273     (157 )   -     -     8,489  
Net income (loss) $ 39,671   $ (1,015 ) $ 5,601   $ (699 ) $ (1,066 )    (6,385 ) $ 36,107  

24


SILVERCORP METALS INC.
Notes to Condensed Consolidated Interim Financial Statements as at December 31, 2019 and for three and nine months ended December 31, 2019 and 2018
(Unaudited) (Expressed in thousands of U.S. dollars, except numbers for share and per share figures or otherwise stated)

(c) Sales by metal

The sales generated for the three and nine months ended December 31, 2019 and 2018 were all earned in China and were comprised of:

    Three months ended December 31, 2019  
    Henan Luoning   Guangdong   Total  
Silver (Ag) $ 21,437 $ 2,603 $ 24,040
Gold (Au)   890   -   890
Lead (Pb)   11,112   3,021   14,133
Zinc (Zn)   1,836   3,203   5,039
Other   406   -   406  
  $ 35,681 $ 8,827 $ 44,508  
 
    Three months ended December 31, 2018  
    Henan Luoning   Guangdong   Total  
Silver (Ag) $ 19,075 $ 1,585 $ 20,660
Gold (Au)   1,167   -   1,167
Lead (Pb)   14,324   2,527   16,851
Zinc (Zn)   297   3,055   3,352
Other   321   -   321  
  $ 35,184 $ 7,167 $ 42,351  
 
    Nine months ended December 31, 2019  
    Henan Luoning   Guangdong   Total  
Silver (Ag) $ 68,648 $ 6,389 $ 75,037
Gold (Au)   3,286   -   3,286
Lead (Pb)   37,750   7,763   45,513
Zinc (Zn)   4,460   9,776   14,236
Other   1,609   289   1,898  
  $ 115,753 $ 24,217 $ 139,970  
 
    Nine months ended December 31, 2018  
    Henan Luoning   Guangdong   Total  
Silver (Ag) $ 59,565 $ 4,357 $ 63,922
Gold (Au)   2,883   -   2,883
Lead (Pb)   46,421   6,270   52,691
Zinc (Zn)   4,277   10,848   15,125
Other   751   195   946  
  $ 113,897 $ 21,670 $ 135,567  

(d) Major customers

For the nine months ended December 31, 2019, four major customers (nine months ended December 31, 2018 – three major customers) each accounted for between 12% and 22%, (nine months ended December 31, 2018 13% to 30%) and collectively 71% (nine months ended December 31, 2018 58%) of the total sales of the Company.

25


SILVERCORP METALS INC.
Notes to Condensed Consolidated Interim Financial Statements as at December 31, 2019 and for three and nine months ended December 31, 2019 and 2018
(Unaudited) (Expressed in thousands of U.S. dollars, except numbers for share and per share figures or otherwise stated)

 

19. SUPPLEMENTARY CASH FLOWINFORMATION

 

    December 31, 2019     March 31, 2019   
Cash on hand and at bank $ 61,367 $ 67,215
Bank term deposits and GICs   527     226   
Total cash and cash equivalents $ 61,894   $ 67,441   

 

Changes in non cash operating working capital:   Three Months Ended December 31,       Nine Months Ended December 31,  
    2019     2018       2019     2018  

Trade and other receivables

 $ 233 $ (395 ) $ (205 ) $ (212 )

Inventories

   (593 ) (336 )   44   (2,066 )

Prepaids and deposits

   2,505   2,298     736   1,199  

Accounts payable and accrued liabilities

   2,304   3,451     4,003   6,155  

Deposits received

   975   (3,093 )   233   (2,690 )

Due from a related party

   (47 )   (8 )   (149 )   (28 )
  $ 5,377   $ 1,917   $ 4,662   $ 2,358  

26