Exhibit 99.4
SILVERCORP METALS INC.
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three and nine months ended December 31, 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 December 31, | As at March 31, | ||||||
Notes | 2018 | 2018 | |||||
ASSETS | |||||||
Current Assets | |||||||
Cash and cash equivalents | 19 | $ | 68,138 | $ | 49,199 | ||
Short-term investments | 57,069 | 56,910 | |||||
Trade and other receivables | 828 | 676 | |||||
Inventories | 12,430 | 11,018 | |||||
Due from a related party | 11 | 38 | 11 | ||||
Income tax receivable | - | 534 | |||||
Prepaids and deposits | 4,081 | 4,456 | |||||
142,584 | 122,804 | ||||||
Non-current Assets | |||||||
Long-term prepaids and deposits | 781 | 954 | |||||
Reclamation deposits | 5,429 | 5,712 | |||||
Investment in an associate | 3 | 36,821 | 38,001 | ||||
Other investments | 4 | 7,751 | 6,132 | ||||
Plant and equipment | 5 | 68,027 | 71,211 | ||||
Mineral rights and properties | 6 | 219,843 | 232,080 | ||||
TOTAL ASSETS | $ | 481,236 | $ | 476,894 | |||
LIABILITIES AND EQUITY | |||||||
Current Liabilities | |||||||
Accounts payable and accrued liabilities | $ | 33,117 | �� | $ | 25,198 | ||
Bank loan | 7 | 4,366 | - | ||||
Deposits received | 3,609 | 6,806 | |||||
Income tax payable | 2,498 | 303 | |||||
43,590 | 32,307 | ||||||
Non-current Liabilities | |||||||
Deferred income tax liabilities | 32,419 | 33,310 | |||||
Environmental rehabilitation | 12,205 | 13,098 | |||||
Total Liabilities | 88,214 | 78,715 | |||||
Equity | |||||||
Share capital | 230,987 | 228,729 | |||||
Share option reserve | 15,492 | 14,690 | |||||
Reserves | 25,409 | 25,409 | |||||
Accumulated other comprehensive loss | 9 | (50,150 | ) | (25,875 | ) | ||
Retained earnings | 109,693 | 86,283 | |||||
Total equity attributable to the equity holders of the Company | 331,431 | 329,236 | |||||
Non-controlling interests | 10 | 61,591 | 68,943 | ||||
Total Equity | 393,022 | 398,179 | |||||
TOTAL LIABILITIES AND EQUITY | $ | 481,236 | $ | 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 December 31, | Nine Months Ended December 31, | ||||||||||||
Notes | 2018 | 2017 | 2018 | 2017 | |||||||||
Sales | 17(c) | $ | 42,351 | $ | 44,352 | $ | 135,567 | $ | 131,590 | ||||
Cost of sales | |||||||||||||
Production costs | 16,941 | 15,553 | 49,456 | 45,839 | |||||||||
Mineral resource taxes | 1,220 | 1,255 | 3,861 | 3,683 | |||||||||
Depreciation and amortization | 4,887 | 4,378 | 15,396 | 13,291 | |||||||||
23,048 | 21,186 | 68,713 | 62,813 | ||||||||||
Gross profit | 19,303 | 23,166 | 66,854 | 68,777 | |||||||||
General and administrative | 12 | 5,339 | 4,915 | 14,416 | 13,958 | ||||||||
Government fees and other taxes | 13 | 625 | 902 | 2,194 | 2,433 | ||||||||
Foreign exchange (gain) loss | (2,315 | ) | (236 | ) | (2,395 | ) | 2,490 | ||||||
Loss on disposal of plant and equipment | 5 | 254 | 148 | 388 | 324 | ||||||||
Gain on disposal of NSR | - | - | - | (4,320 | ) | ||||||||
Share of (income) loss in associate | 3 | (172 | ) | 142 | 212 | 511 | |||||||
Dilution gain on investment in associate | - | (822 | ) | - | (822 | ) | |||||||
Reclassification of other comprehensive loss upon | |||||||||||||
ownership dilution of investment in associate | - | 18 | - | 18 | |||||||||
Other expense (income) | 400 | (1,560 | ) | 676 | (1,867 | ) | |||||||
Income from operations | 15,172 | 19,659 | 51,363 | 56,052 | |||||||||
Finance income | 14 | 981 | 822 | 2,602 | 2,046 | ||||||||
Finance costs | 14 | (166 | ) | (112 | ) | (463 | ) | (329 | ) | ||||
Income before income taxes | 15,987 | 20,369 | 53,502 | 57,769 | |||||||||
Income tax expense | 15 | 5,134 | 4,302 | 17,395 | 13,586 | ||||||||
Net income | $ | 10,853 | $ | 16,067 | $ | 36,107 | $ | 44,183 | |||||
Attributable to: | |||||||||||||
Equity holders of the Company | $ | 8,660 | $ | 12,718 | $ | 27,618 | $ | 34,800 | |||||
Non-controlling interests | 2,193 | 3,349 | 8,489 | 9,383 | |||||||||
$ | 10,853 | $ | 16,067 | $ | 36,107 | $ | 44,183 | ||||||
Earnings per share attributable to the equity holders of the Company | |||||||||||||
Basic earnings per share | $ | 0.05 | $ | 0.08 | $ | 0.16 | $ | 0.21 | |||||
Diluted earnings per share | $ | 0.05 | $ | 0.07 | $ | 0.16 | $ | 0.20 | |||||
Weighted Average Number of Shares Outstanding - Basic | 168,871,756 | 168,077,624 | 168,083,532 | 168,003,035 | |||||||||
Weighted Average Number of Shares Outstanding - Diluted | 170,314,907 | 169,782,024 | 170,306,321 | 169,992,421 |
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 | 2018 | 2017 | 2018 | 2017 | |||||||||
Net income | $ | 10,853 | $ | 16,067 | $ | 36,107 | $ | 44,183 | |||||
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 | (5,119 | ) | 6,519 | (32,387 | ) | 20,662 | |||||||
Share of other comprehensive income (loss) in associate | 3 | 540 | (38 | ) | 1,157 | (51 | ) | ||||||
Reclassification to net income upon ownership dilution of investment in associate | - | 18 | - | 18 | |||||||||
Items that will not subsequently be reclassified to net income or loss: | |||||||||||||
Change in fair value on equity investments designated as FVTOCI, net of tax of $nil | 4 | 365 | 338 | 2,042 | 859 | ||||||||
Other comprehensive (loss) income, net of taxes | $ | (4,214 | ) | $ | 6,837 | $ | (29,188 | ) | $ | 21,488 | |||
Attributable to: | |||||||||||||
Equity holders of the Company | $ | (4,579 | ) | $ | 5,471 | $ | (24,275 | ) | $ | 18,255 | |||
Non-controlling interests | 365 | 1,366 | (4,913 | ) | 3,233 | ||||||||
$ | (4,214 | ) | $ | 6,837 | $ | (29,188 | ) | $ | 21,488 | ||||
Total comprehensive income | $ | 6,639 | $ | 22,904 | $ | 6,919 | $ | 65,671 | |||||
Attributable to: | |||||||||||||
Equity holders of the Company | $ | 4,081 | $ | 18,189 | $ | 3,343 | $ | 53,055 | |||||
Non-controlling interests | 2,558 | 4,715 | 3,576 | 12,616 | |||||||||
$ | 6,639 | $ | 22,904 | $ | 6,919 | $ | 65,671 |
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 | 2018 | 2017 | 2018 | 2017 | |||||||||
Cash provided by | |||||||||||||
Operating activities | |||||||||||||
Net income | $ | 10,853 | $ | 16,067 | $ | 36,107 | $ | 44,183 | |||||
Add (deduct) items not affecting cash: | |||||||||||||
Finance costs | 14 | 166 | 112 | 463 | 329 | ||||||||
Depreciation, amortization and depletion | 5,207 | 4,683 | 16,308 | 14,176 | |||||||||
Share of (income) loss in associate | 3 | (172 | ) | 142 | 212 | 511 | |||||||
Dilution gain on investment in associate | - | (822 | ) | - | (822 | ) | |||||||
Reclassification of other comprehensive loss upon ownership | |||||||||||||
dilution of investment in associate | - | 18 | - | 18 | |||||||||
Gain on disposal of NSR | - | - | - | (4,320 | ) | ||||||||
Income tax expense | 15 | 5,134 | 4,302 | 17,395 | 13,586 | ||||||||
Finance income | 14 | (981 | ) | (822 | ) | (2,602 | ) | (2,046 | ) | ||||
Loss on disposal of plant and equipment | 5 | 254 | 148 | 388 | 324 | ||||||||
Share-based compensation | 8(b) | 506 | 458 | 1,418 | 1,144 | ||||||||
Reclamation | (268 | ) | (17 | ) | (334 | ) | (36 | ) | |||||
Income taxes paid | (4,004 | ) | (2,065 | ) | (12,480 | ) | (9,647 | ) | |||||
Interest received | 981 | 822 | 2,602 | 2,046 | |||||||||
Interest paid | (48 | ) | - | (96 | ) | - | |||||||
Changes in non-cash operating working capital | 19 | 1,917 | 4,431 | 2,358 | 5,598 | ||||||||
Net cash provided by operating activities | 19,545 | 27,457 | 61,739 | 65,044 | |||||||||
Investing activities | |||||||||||||
Mineral rights and properties | |||||||||||||
Capital expenditures | (7,617 | ) | (5,705 | ) | (19,410 | ) | (16,638 | ) | |||||
Plant and equipment | |||||||||||||
Additions | (2,682 | ) | (1,724 | ) | (4,325 | ) | (4,455 | ) | |||||
Proceeds on disposals | 5 | - | - | 29 | 19 | ||||||||
Investment in associate | - | (3,836 | ) | - | (23,861 | ) | |||||||
Net redemption (purchases) of short-term investments | 12,613 | 10,422 | (4,606 | ) | (21,345 | ) | |||||||
Net cash provided by (used in) investing activities | 2,314 | (843 | ) | (28,312 | ) | (66,280 | ) | ||||||
Financing activities | |||||||||||||
Bank loan | |||||||||||||
Proceeds | 7 | - | - | 4,527 | - | ||||||||
Non-controlling interests | |||||||||||||
Distribution | 10 | (3,292 | ) | - | (9,926 | ) | (4,891 | ) | |||||
Acquisition | 10 | (1,121 | ) | - | (1,121 | ) | - | ||||||
Cash dividends distributed | 8(c) | (2,113 | ) | (1,683 | ) | (4,208 | ) | (3,362 | ) | ||||
Proceeds from issuance of common shares | 623 | 174 | 1,643 | 342 | |||||||||
Common shares repurchased as part of normal course issuer bid | - | (1,779 | ) | - | (1,779 | ) | |||||||
Net cash used in financing activities | (5,903 | ) | (3,288 | ) | (9,085 | ) | (9,690 | ) | |||||
Effect of exchange rate changes on cash and cash equivalents | (1,340 | ) | 1,579 | (5,403 | ) | 4,197 | |||||||
Increase in cash and cash equivalents | 14,616 | 24,905 | 18,939 | (6,729 | ) | ||||||||
Cash and cash equivalents, beginning of the period | 53,522 | 41,369 | 49,199 | 73,003 | |||||||||
Cash and cash equivalents, end of the period | $ | 68,138 | $ | 66,274 | $ | 68,138 | $ | 66,274 | |||||
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 | 564,619 | 468 | (126 | ) | - | - | - | 342 | - | 342 | ||||||||||||||||||
Share-based compensation | - | - | 1,144 | - | - | - | 1,144 | - | 1,144 | |||||||||||||||||||
Dividends declared | - | - | - | - | - | (3,362 | ) | (3,362 | ) | - | (3,362 | ) | ||||||||||||||||
Common shares repurchased as part of normal course issuer bid | (788,000 | ) | (1,779 | ) | - | - | - | - | (1,779 | ) | - | (1,779 | ) | |||||||||||||||
Comprehensive income | - | - | - | - | 18,255 | 34,800 | 53,055 | 12,616 | 65,671 | |||||||||||||||||||
Balance, December 31, 2017 | 167,666,255 | $ | 230,844 | $ | 14,343 | $ | 25,409 | $ | (32,164 | ) | $ | 74,089 | $ | 312,521 | $ | 67,430 | $ | 379,951 | ||||||||||
Options exercised | 292,401 | 283 | (75 | ) | - | - | - | 208 | - | 208 | ||||||||||||||||||
Share-based compensation | - | - | 422 | - | - | - | 422 | - | 422 | |||||||||||||||||||
Distribution to non-controlling interests | - | - | - | - | - | - | - | (2,917 | ) | (2,917 | ) | |||||||||||||||||
Common shares repurchased as part of normal course issuer bid | (929,100 | ) | (2,398 | ) | - | - | - | - | (2,398 | ) | - | (2,398 | ) | |||||||||||||||
Comprehensive income | - | - | - | - | 6,289 | 12,194 | 18,483 | 4,430 | 22,913 | |||||||||||||||||||
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 | 2,652,484 | 2,258 | (616 | ) | - | - | - | 1,642 | - | 1,642 | ||||||||||||||||||
Share-based compensation | 8(b) | - | - | 1,418 | - | - | - | 1,418 | - | 1,418 | ||||||||||||||||||
Dividends declared | 8(c) | - | - | - | - | - | (4,208 | ) | (4,208 | ) | - | (4,208 | ) | |||||||||||||||
Distribution to non-controlling interests | 10 | - | - | - | - | - | - | - | (9,926 | ) | (9,926 | ) | ||||||||||||||||
Disposition of non-controlling interests upon wound-up of a subsidiary | 10 | - | - | - | - | - | - | - | (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 |
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, 2018 and for three and nine months ended December 31, 2018 and 2017 |
(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 a Canadian mining company 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 located in China.
The Company is a publicly listed company incorporated pursuant to the laws of the Province of British Columbia, Canada. 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 and nine months ended December 31, 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 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.
6
SILVERCORP METALS INC. |
Notes to Condensed Consolidated Interim Financial Statements as at December |
31, 2018 and for three and nine months ended December 31, 2018 and 2017 |
(Unaudited)(Expressed in thousands of U.S. dollars, except numbers for share and per share figures or otherwise stated) |
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 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 adopted IFRIC 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 February 13, 2019.
(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
7
SILVERCORP METALS INC. |
Notes to Condensed Consolidated Interim Financial Statements as at December |
31, 2018 and for three and nine months ended December 31, 2018 and 2017 |
(Unaudited)(Expressed in thousands of U.S. dollars, except numbers for share and per share figures or otherwise stated) |
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.
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 | December 31, | 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% | 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 | 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 replaceLeases(“IAS 17”) anddetermining 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 is currently identifying and collecting data relating to existing lease agreements for Fiscal 2019.
8
SILVERCORP METALS INC. |
Notes to Condensed Consolidated Interim Financial Statements as at December |
31, 2018 and for three and nine months ended December 31, 2018 and 2017 |
(Unaudited)(Expressed in thousands of U.S. dollars, except numbers for share and per share figures or 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 December 31, 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 | (212 | ) | |||||||
Share of other comprehensive income | 1,157 | ||||||||
Foreign exchange impact | (2,125 | ) | |||||||
Balance December 31, 2018 | 39,280,900 | $ | 36,821 | $ | 41,751 |
4. | OTHER INVESTMENTS |
December 31, 2018 | March 31, 2018 | |||||
Equity investments designated as FVTOCI | ||||||
| ||||||
Publicly-traded companies | $ | 7,751 | $ | 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 December 31, 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 December |
31, 2018 and for three and nine months ended December 31, 2018 and 2017 |
(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 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 | 2,042 | 2,042 | ||||
Impact of foreign currency translation | (423 | ) | - | |||
December 31, 2018 | $ | 7,751 | $ | (3,813 | ) |
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 | 971 | 419 | 2,123 | 769 | 3,354 | 7,636 | ||||||||||||
Disposals | (317 | ) | (107 | ) | (493 | ) | (270 | ) | - | (1,187 | ) | |||||||
Reclassification of asset groups(1) | 48 | - | - | - | (48 | ) | - | |||||||||||
Impact of foreign currency translation | (9,016 | ) | (622 | ) | (2,588 | ) | (592 | ) | (400 | ) | (13,218 | ) | ||||||
Ending balance as at December 31, 2018 | $ | 96,851 | $ | 7,445 | $ | 28,455 | $ | 6,637 | $ | 6,508 | $ | 145,896 | ||||||
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 | 128 | 90 | 309 | 243 | - | 770 | ||||||||||||
Depreciation and amortization | (2,374 | ) | (385 | ) | (1,208 | ) | (251 | ) | - | (4,218 | ) | |||||||
Impact of foreign currency translation | 4,331 | 415 | 1,823 | 459 | 5 | 7,033 | ||||||||||||
Ending balance as at December 31, 2018 | $ | (47,931 | ) | $ | (5,192 | ) | $ | (19,799 | ) | $ | (4,894 | ) | $ | (53 | ) | $ | (77,869 | ) |
Carrying amounts | ||||||||||||||||||
Balance as at March 31, 2018 | $ | 55,149 | $ | 2,443 | $ | 8,690 | $ | 1,385 | $ | 3,544 | $ | 71,211 | ||||||
Ending balance as at December 31, 2018 | $ | 48,920 | $ | 2,253 | $ | 8,656 | $ | 1,743 | $ | 6,455 | $ | 68,027 |
(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 December |
31, 2018 and for three and nine months ended December 31, 2018 and 2017 |
(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, 2018 | Ying Mining District | BYP | GC | Other | Total | ||||||||||
Land use rights and building | $ | 33,187 | $ | 2,164 | $ | 12,642 | $ | 927 | $ | 48,920 | |||||
Office equipment | 1,779 | 36 | 212 | 226 | 2,253 | ||||||||||
Machinery | 6,155 | 266 | 2,105 | 130 | 8,656 | ||||||||||
Motor vehicles | 1,554 | 27 | 143 | 19 | 1,743 | ||||||||||
Construction in progress | 4,596 | 1,797 | 62 | - | 6,455 | ||||||||||
Total | $ | 47,271 | $ | 4,290 | $ | 15,164 | $ | 1,302 | $ | 68,027 | |||||
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 and nine months ended December 31, 2018, certain plant and equipment were disposed for proceeds of $nil and $29, respectively (three and nine months ended December 31, 2017 - $nil and $19, respectively) and loss of $254 and $388, respectively (three and nine months ended December 31, 2017 –loss of $148 and $324, 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, 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 | 19,185 | 100 | 801 | 223 | - | 20,309 | ||||||||||||
Foreign currecy translation impact | (24,300 | ) | (1,328 | ) | (9,689 | ) | (1,893 | ) | (10 | ) | (37,220 | ) | ||||||
Ending balance as at December 31, 2018 | $ | 272,619 | $ | 63,826 | $ | 104,356 | $ | 20,354 | $ | 170 | $ | 461,325 | ||||||
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 | (10,701 | ) | - | (1,765 | ) | - | - | (12,466 | ) | |||||||||
Foreign currecy translation impact | 7,415 | 684 | 7,164 | 1,867 | 10 | 17,140 | ||||||||||||
Ending balance as at December 31, 2018 | $ | (86,385 | ) | $ | (56,900 | ) | $ | (78,096 | ) | $ | (19,931 | ) | $ | (170 | ) | $ | (241,482 | ) |
Carrying amounts | ||||||||||||||||||
Balance as at March 31, 2018 | $ | 194,635 | $ | 7,470 | $ | 29,749 | $ | 226 | $ | - | $ | 232,080 | ||||||
Ending balance as at December 31, 2018 | $ | 186,234 | $ | 6,926 | $ | 26,260 | $ | 423 | $ | - | $ | 219,843 |
7. | BANK LOAN |
Total | |||
Balance, April 1, 2018 | $ | - | |
Addition | 4,527 | ||
Interest accrued | 104 | ||
Interest paid | (96 | ) | |
Foreign exchange impact | (169 | ) | |
Balance, December 31, 2018 | $ | 4,366 |
11
SILVERCORP METALS INC. |
Notes to Condensed Consolidated Interim Financial Statements as at December |
31, 2018 and for three and nine months ended December 31, 2018 and 2017 |
(Unaudited)(Expressed in thousands of U.S. dollars, except numbers for share and per share figures or otherwise stated) |
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 and matures on June 14, 2019. As of December 31, 2018, the Chinese prevailing loan prime interest rate was 4.35%. For the three and nine months ended December 31, 2018, interests of $49 and $104, respectively (three and nine months ended December 31, 2017 - $nil) were accrued and expensed through finance costs (see note 14).
8. | SHARE CAPITAL |
|
(a) | Authorized |
Unlimited number of common shares without par value. All shares issued as at December 31, 2018 were fully paid.
(b) | Stock options |
The Company has a stock option plan which allows for the maximum number of common shares to be reserved for issuance on the exercise of options granted under the stock option plan to be a rolling 10% of the issued and outstanding common shares from time to time. The maximum exercise period may not exceed 10 years from the date of the grant of the options to employees, officers, and consultants. The following is a summary of option transactions:
Weighted average | |||||
exercise price per | |||||
Number of shares | share CAD$ | ||||
Balance, April 1, 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 | ||
Option granted | 1,815,000 | 3.10 | |||
Options exercised | (2,652,484 | ) | 0.82 | ||
Options forfeited | (114,075 | ) | 3.38 | ||
Options expired | (385,812 | ) | 3.36 | ||
Balance, December 31, 2018 | 6,809,428 | 2.84 |
During the nine months ended December 31, 2018, a total of 1,815,000 options with a life of three years were granted to directors, officers, and employees at exercise prices of CAD$3.40 and CAD$2.60 per share subject to a vesting schedule over a two-year term with 25% of the options vesting every six months from the date of grant.
12
SILVERCORP METALS INC. |
Notes to Condensed Consolidated Interim Financial Statements as at December |
31, 2018 and for three and nine months ended December 31, 2018 and 2017 |
(Unaudited)(Expressed in thousands of U.S. dollars, except numbers for share and per share figures or otherwise stated) |
The fair value of stock options granted during the nine months ended December 31, 2018 was calculated as of the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions:
Nine months ended December 31, | ||||||
2018 | 2017 | |||||
Risk free interest rate | 2.16% | 1.54% | ||||
Expected life of option in years | 2.27 years | 2.25 years | ||||
Expected volatility | 58% | 72% | ||||
Expected dividend yield | 2.10% | 1.17% | ||||
Estimated forfeiture rate | 10% | 10% | ||||
Weighted average share price at date of grant | $ | 3.10 | $ | 3.36 |
The weighted average grant date fair value of the options granted during the nine months ended December 31, 2018 was CAD$1.00 (nine months ended December 31, 2017 – CAD$1.33). Volatility was determined based on the historical volatility of the Company’s shares over the estimated life of stock options. For the three and nine months ended December 31, 2018, a total of $506 and $1,418, respectively (three and nine months ended December 31, 2017 - $458 and $1,144, respectively) in share-based compensation expense was recognized and included in the general and administrative expenses on the condensed consolidated interim statements of income.
The following table summarizes information about stock options outstanding at December 31, 2018:
Number of options | Weighted | |||||||||||||||||
outstanding at | Weighted average | Weighted average | Number of options | average | ||||||||||||||
Exercise price in | December 31, | remaining contractual | exercise price in | exercisable at | exercise price | |||||||||||||
CAD$ | 2018 | life (Years) | CAD$ | December 31, 2018 | in CAD$ | |||||||||||||
$ | 1.43 | 1,259,260 | 1.42 | $ | 1.43 | 1,259,260 | 1.43 | |||||||||||
$ | 1.75 | 340,000 | 0.41 | $ | 1.75 | 340,000 | 1.75 | |||||||||||
$ | 1.76 | 221,168 | 0.79 | $ | 1.76 | 221,168 | 1.76 | |||||||||||
$ | 2.60 | 685,000 | 2.88 | $ | 2.60 | - | - | |||||||||||
$ | 2.98 | 118,500 | 0.06 | $ | 2.98 | 118,500 | 2.98 | |||||||||||
$ | 3.23 | 1,032,500 | 2.20 | $ | 3.23 | 258,125 | 3.23 | |||||||||||
$ | 3.36 | 1,010,000 | 1.75 | $ | 3.36 | 500,000 | 3.36 | |||||||||||
$ | 3.40 | 1,130,000 | 2.65 | $ | 3.40 | - | - | |||||||||||
$ | 3.63 | 840,000 | 1.05 | $ | 3.63 | 630,000 | 3.63 | |||||||||||
$ | 4.34 | 143,000 | 0.71 | $ | 4.34 | 143,000 | 4.34 | |||||||||||
$ | 5.58 | 30,000 | 1.15 | $ | 5.58 | 22,500 | 5.58 | |||||||||||
$ 1.43 - 5.58 | 6,809,428 | 1.78 | $ | 2.49 | 3,492,553 | $ | 2.49 |
Subsequent to December 31, 2018, a total of 11,600 options with a price range from CAD$1.43 to CAD$1.76 were exercised and a total of 118,500 options with an exercise price of CAD$2.98 expired.
(c) | Cash dividends declared |
During the three and nine months ended December 31, 2018, dividends of $1,933 and $4,028, respectively (three and nine months ended December 31, 2017 - $1,683 and $3,362, respectively) were declared and paid.
13
SILVERCORP METALS INC. |
Notes to Condensed Consolidated Interim Financial Statements as at December |
31, 2018 and for three and nine months ended December 31, 2018 and 2017 |
(Unaudited)(Expressed in thousands of U.S. dollars, except numbers for share and per share figures or otherwise stated) |
9. | ACCUMULATED OTHER COMPREHENSIVE INCOME |
December 31, 2018 | March 31, 2018 | |||||
Change in fair value on equity investments designated as FVTOCI | $ | (35,466 | ) | $ | (37,508 | ) |
Share of other comprehensive income in associate | 1,438 | 281 | ||||
Currency translation adjustment | (16,122 | ) | 11,352 | |||
Balance, end of the period | $ | (50,150 | ) | $ | (25,875 | ) |
The unrealized loss 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.
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) | 8,022 | 655 | (304 | ) | 273 | (157 | ) | 8,489 | ||||||||||
Share of other comprehensive (loss) income | (4,930 | ) | (429 | ) | (193 | ) | 602 | 37 | (4,913 | ) | ||||||||
Distributions | (8,910 | ) | (1,016 | ) | - | - | - | (9,926 | ) | |||||||||
Disposition upon wound-up of a subsidiary | - | - | - | (1,002 | ) | - | (1,002 | ) | ||||||||||
Balance, December 31, 2018 | $ | 59,783 | $ | 5,119 | $ | 3,035 | $ | (2,672 | ) | $ | (3,674 | ) | $ | 61,591 |
As at December 31, 2018, non-controlling interests in Henan Found, Henan Huawei, Yunxiang, Guangdong Found and SX Gold were 22.5%, 20%, 30%, 5% and 22.5%, respectively.
Henan Non-ferrous Geology Minerals Ltd. (“Henan Non-ferrous”) is the 17.5% equity interest holder of Henan Found. During the three and nine months ended December 31, 2018, Henan Found declared and paid dividends of $2,560 and $6,930, respectively to Henan Non-ferrous (three and nine months ended December 31, 2017 – $nil and $3,804, respectively).
Henan Xinxiangrong Mining Ltd. (“Henan Xinxiangrong”) is the 5% equity interest holder of Henan Found. During the three and nine months ended December 31, 2018, Henan Found declared and paid dividends of $732 and $1,980, respectively to Henan Xinxiangrong (three and nine months ended December 31, 2017 –$nil and $1,087, respectively).
Henan Xinhui Mining Co., Ltd. (“Henan Xinhui”) is the 20% equity interest holder of Henan Huawei. During the three and nine months ended December 31, 2018, Henan Huawei declared and paid dividends of $nil and $1,016, respectively to Henan Xinhui (three and nine months ended December 31, 2017 – $nil).
GRT Mining Investment (Beijing) Co., Ltd. (“GRT”) is the 5% equity holder of Guangdong Found and a related party of the Company as it is controlled by a relative of an officer and director of the Company. In October 2018, the Company exercised its first right of refusal and entered into an agreement with GRT to acquire its 4% ownership in Guangdong Found for cash consideration of $2.2 million (RMB¥15 million). As
14
SILVERCORP METALS INC. |
Notes to Condensed Consolidated Interim Financial Statements as at December |
31, 2018 and for three and nine months ended December 31, 2018 and 2017 |
(Unaudited)(Expressed in thousands of U.S. dollars, except numbers for share and per share figures or otherwise stated) |
at December 31, 2018, cash consideration of $1,121 (RMB¥7.5 million) were paid to GRT. The transaction was subsequently completed in January 2019, and the non-controlling interest in Guangdong Found was reduced to 1%.
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 | December 31, 2018 | March 31, 2018 | ||||
NUAG (a) | $ | 38 | $ | 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 and nine months ended December 31, 2018, the Company recovered $52 and $151, respectively (three and nine months ended December 31, 2017 - $137 and $387, 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 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 companies controlled by key management personnel, were as follows:
Three month ended December 31, | Nine month ended December 31, | |||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||
Salaries and bonuses | $ | 1,536 | $ | 376 | $ | 2,295 | $ | 1,908 | ||||
Share-based compensation | 288 | 433 | 729 | 433 | ||||||||
$ | 1,824 | $ | 809 | $ | 3,024 | $ | 2,341 |
12. | GENERAL AND ADMINISTRATIVE |
General and administrative expenses consist of:
Three months ended December 31, | Nine months ended December 31, | |||||||||||
General and administrative | 2018 | 2017 | 2018 | 2017 | ||||||||
Office and administrative expenses | $ | 1,559 | $ | 1,894 | $ | 4,650 | $ | 4,886 | ||||
Amortization and depreciation | 320 | 305 | 912 | 885 | ||||||||
Salaries and benefits | 2,736 | 2,176 | 6,928 | 6,315 | ||||||||
Share-based compensation | 506 | 458 | 1,418 | 1,144 | ||||||||
Professional fees | 218 | 82 | 508 | 728 | ||||||||
$ | 5,339 | $ | 4,915 | $ | 14,416 | $ | 13,958 |
15
SILVERCORP METALS INC. |
Notes to Condensed Consolidated Interim Financial Statements as at December |
31, 2018 and for three and nine months ended December 31, 2018 and 2017 |
(Unaudited)(Expressed in thousands of U.S. dollars, except numbers for share and per share figures or otherwise stated) |
13. | GOVERNMENT FEES AND OTHER TAXES |
Government fees and other taxes consist of:
Three months ended December 31, | Nine months ended December 31, | |||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||
Government fees | $ | 44 | $ | 67 | $ | 149 | $ | 341 | ||||
Other taxes | 581 | 835 | 2,045 | 2,092 | ||||||||
$ | 625 | $ | 902 | $ | 2,194 | $ | 2,433 |
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.
14. | FINANCE ITEMS |
Finance items consist of:
Three months ended December 31, | Nine months ended December 31, | |||||||||||
Finance income | 2018 | 2017 | 2018 | 2017 | ||||||||
Interest income | $ | 981 | $ | 822 | $ | 2,602 | $ | 2,046 |
Three months ended December 31, | Nine months ended December 31, | |||||||||||
Finance costs | 2018 | 2017 | 2018 | 2017 | ||||||||
Interest on bank loan | 49 | - | $ | 104 | $ | - | ||||||
Unwinding of discount of environmental rehabilitation provision | 117 | 112 | 359 | 329 | ||||||||
$ | 166 | $ | 112 | $ | 463 | $ | 329 |
15. | 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 | 2018 | 2017 | 2018 | 2017 | ||||||||
Current | $ | 4,354 | $ | 3,712 | $ | 15,375 | $ | 11,455 | ||||
Deferred | 780 | 590 | 2,020 | 2,131 | ||||||||
$ | 5,134 | $ | 4,302 | $ | 17,395 | $ | 13,586 |
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”).
16
SILVERCORP METALS INC. |
Notes to Condensed Consolidated Interim Financial Statements as at December |
31, 2018 and for three and nine months ended December 31, 2018 and 2017 |
(Unaudited)(Expressed in thousands of U.S. dollars, except numbers for share and per share figures or otherwise stated) |
Level 1 – Unadjusted quoted prices at the measurement date for identical assets or liabilities in active markets.
Level 2 – Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3 – Unobservable inputs which are supported by little or no market activity.
The following tables set forth the Company’s financial assets and liabilities that are measured at fair value level on a recurring basis within the fair value hierarchy at December 31, 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 December 31, 2018 | ||||||||||||
Recurring measurements | Level 1 | Level 2 | Level 3 | Total | ||||||||
Financial assets | ||||||||||||
Cash and cash equivalents | $ | 68,138 | $ | - | $ | - | $ | 68,138 | ||||
Investments in publicly traded companies | 7,751 | - | - | 7,751 |
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 December 31, 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 and nine months ended December 31, 2018 and 2017.
(b) Liquidity risk |
Liquidity risk is the risk that the Company will not be able to meet its short-term business requirements. The Company has in place a planning and budgeting process to help determine the funds required to support the Company’s normal operating requirements on an ongoing basis and its expansion plans.
In the normal course of business, the Company enters into contracts that give rise to commitments for future minimum payments. The following summarizes the remaining contractual maturities of the Company’s financial liabilities.
December 31, 2018 | March 31, 2018 | ||||||||||||||
Within a year | 2-3 years | 4-5 years | Total | Total | |||||||||||
Bank loan | $ | 4,366 | $ | - | $ | - | $ | 4,366 | $ | - | |||||
Accounts payable and accrued liabilities | 33,117 | - | - | 33,117 | 25,198 |
17
SILVERCORP METALS INC. |
Notes to Condensed Consolidated Interim Financial Statements as at December |
31, 2018 and for three and nine months ended December 31, 2018 and 2017 |
(Unaudited)(Expressed in thousands of U.S. dollars, except numbers for share and per share figures or otherwise stated) |
(c)Foreign exchange risk |
The Company reports its financial statements in US dollars. The functional currency of the head office, Canadian subsidiaries and all intermediate holding companies is CAD and the functional currency of all Chinese subsidiaries is RMB. The Company is exposed to foreign exchange risk when the Company undertakes transactions and holds assets and liabilities in currencies other than its functional currencies. The Company currently does not engage in foreign exchange currency hedging. The Company's exposure to currency risk affect net income is summarized as follow:
December 31, 2018 | March 31, 2018 | |||||
Financial assets denominated in U.S. Dollars | $ | 50,669 | $ | 27,256 |
As at December 31, 2018, with other variables unchanged, a 10% strengthening (weakening) of the CAD against the USD would have decreased (increased) net income by approximately $5.1 million.
(d) Interest rate risk |
The Company is exposed to interest rate risk on its cash equivalents, short term investments, and bank loan payable. As at December 31, 2018, all of its interest-bearing cash equivalents and short term investments earn interest at market rates that are fixed to maturity or at variable interest rate with terms of less than one year. The Company monitors its exposure to changes in interest rates on cash equivalents and short term investments. Due to the short term nature of the financial instruments, fluctuations in interest rates would not have a significant impact on the Company’s after-tax net income.
The outstanding bank loan is subject to Chinese prevailing loan prime interest rate. If the prime interest rate 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.
(e)Credit risk |
Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The Company is exposed to credit risk primarily associated to accounts receivable, due from related parties, cash and cash equivalents and short-term investments. The carrying amount of assets included on the balance sheet represents the maximum credit exposure.
The Company undertakes credit evaluations on counterparties as necessary, requests deposits from customers prior to delivery, and has monitoring processes intended to mitigate credit risks. The Company has no trade receivables from customers as at December 31, 2018. There were no amounts in other receivables which were past due on December 31, 2018 (at March 31, 2018 - $nil) for which no provision is recognized.
18
SILVERCORP METALS INC. |
Notes to Condensed Consolidated Interim Financial Statements as at December |
31, 2018 and for three and nine months ended December 31, 2018 and 2017 |
(Unaudited)(Expressed in thousands of U.S. dollars, except numbers for share and per share figures or otherwise stated) |
(f)Equity price risk |
The Company holds certain marketable securities that will fluctuate in value as a result of trading on Canadian financial markets. As the Company’s marketable securities holding are mainly in mining companies, the value will also fluctuate based on commodity prices. Based upon the Company’s portfolio as at December 31, 2018, a 10% increase (decrease) in the market price of the securities held, ignoring any foreign currency effects would have resulted in an increase (decrease) to comprehensive income of approximately $775.
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 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. |
19
SILVERCORP METALS INC. |
Notes to Condensed Consolidated Interim Financial Statements as at December |
31, 2018 and for three and nine months ended December 31, 2018 and 2017 |
(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, 2018 | |||||||||||||||||||||
Mining | Administrative | ||||||||||||||||||||
Henan | Total | ||||||||||||||||||||
Statement of financial position items: | Luoning | Hunan | Guangdong | Other | Beijing | Vancouver | |||||||||||||||
Current assets | $ | 70,548 | $ | 1,749 | $ | 11,375 | $ | 502 | $ | 7,013 | $ | 51,622 | $ | 142,809 | |||||||
Plant and equipment | 47,271 | 4,290 | 15,164 | 259 | 936 | 107 | 68,027 | ||||||||||||||
Mineral rights and properties | 186,234 | 6,926 | 26,260 | 423 | - | - | 219,843 | ||||||||||||||
Investment in an associate | - | - | - | - | - | 36,821 | 36,821 | ||||||||||||||
Other investments | - | - | - | 6,741 | - | 1,010 | 7,751 | ||||||||||||||
Reclamation deposits | 5,197 | - | - | - | - | 7 | 5,204 | ||||||||||||||
Long-term prepaids and deposits | 282 | 99 | 277 | 123 | - | - | 781 | ||||||||||||||
Total assets | $ | 309,532 | $ | 13,064 | $ | 53,076 | $ | 8,048 | $ | 7,949 | $ | 89,567 | $ | 481,236 | |||||||
Current liabilities | $ | 32,736 | $ | 1,413 | $ | 5,548 | $ | 2,585 | $ | 243 | $ | 1,065 | $ | 43,590 | |||||||
Deferred income tax liabilities | 31,459 | 960 | - | - | - | - | 32,419 | ||||||||||||||
Environmental rehabilitation | 10,218 | 931 | 781 | 275 | - | - | 12,205 | ||||||||||||||
Total liabilities | $ | 74,413 | $ | 3,304 | $ | 6,329 | $ | 2,860 | $ | 243 | $ | 1,065 | $ | 88,214 |
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 |
20
SILVERCORP METALS INC. |
Notes to Condensed Consolidated Interim Financial Statements as at December |
31, 2018 and for three and nine months ended December 31, 2018 and 2017 |
(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 30, 2018 | |||||||||||||||||||||
Mining | Administrative | ||||||||||||||||||||
Henan | Total | ||||||||||||||||||||
Statement of operations: | Luoning | Hunan(1) | 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) income | (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 |
Three months ended December 31, 2017 | |||||||||||||||||||||
Mining | Administrative | ||||||||||||||||||||
Henan | Total | ||||||||||||||||||||
Statement of operations: | Luoning | Hunan | Guangdong | Other | Beijing | Vancouver | |||||||||||||||
Sales | $ | 34,832 | $ | - | $ | 9,520 | $ | - | $ | - | $ | - | $ | 44,352 | |||||||
Cost of sales | (15,616 | ) | - | (5,570 | ) | - | - | - | (21,186 | ) | |||||||||||
Gross profit | 19,216 | - | 3,950 | - | - | - | 23,166 | ||||||||||||||
Operating (expenses) income | (2,249 | ) | (380 | ) | (984 | ) | 2,095 | (380 | ) | (1,609 | ) | (3,507 | ) | ||||||||
Finance items | 292 | (20 | ) | 3 | (2 | ) | 63 | 374 | 710 | ||||||||||||
Income tax (expenses) recovery | (4,314 | ) | 12 | - | - | - | - | (4,302 | ) | ||||||||||||
Net income (loss) | $ | 12,945 | $ | (388 | ) | $ | 2,969 | $ | 2,093 | $ | (317 | ) | $ | (1,235 | ) | $ | 16,067 | ||||
Attributed to: | |||||||||||||||||||||
Equity holders of the Company | 10,092 | (271 | ) | 2,826 | 1,623 | (317 | ) | (1,235 | ) | 12,718 | |||||||||||
Non-controlling interests | 2,853 | (117 | ) | 143 | 470 | - | - | 3,349 | |||||||||||||
Net income (loss) | $ | 12,945 | $ | (388 | ) | $ | 2,969 | $ | 2,093 | $ | (317 | ) | $ | (1,235 | ) | $ | 16,067 |
21
SILVERCORP METALS INC. |
Notes to Condensed Consolidated Interim Financial Statements as at December |
31, 2018 and for three and nine months ended December 31, 2018 and 2017 |
(Unaudited)(Expressed in thousands of U.S. dollars, except numbers for share and per share figures or otherwise stated) |
Nine months ended December 31, 2018 | |||||||||||||||||||||
Mining | Administrative | ||||||||||||||||||||
Henan | Total | ||||||||||||||||||||
Statement of income: | Luoning | Hunan(1) | 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 |
(1) Hunan's BYP project was placed on care and maintenance in August 2014;
Nine months ended December 31, 2017 | |||||||||||||||||||||
Mining | Administrative | ||||||||||||||||||||
Henan | Total | ||||||||||||||||||||
Statement of income: | Luoning | Hunan | Guangdong | Other | Beijing | Vancouver | |||||||||||||||
Sales | $ | 107,125 | $ | - | $ | 24,465 | $ | - | $ | - | $ | - | $ | 131,590 | |||||||
Cost of sales | (47,454 | ) | - | (15,359 | ) | - | - | - | (62,813 | ) | |||||||||||
Gross profit | 59,671 | - | 9,106 | - | - | - | 68,777 | ||||||||||||||
Operating (expenses) income | (6,091 | ) | (896 | ) | (2,222 | ) | 6,202 | (999 | ) | (8,719 | ) | (12,725 | ) | ||||||||
Finance items, net | 355 | (59 | ) | 2 | (7 | ) | 193 | 1,233 | 1,717 | ||||||||||||
Income tax (expenses) recovery | (13,587 | ) | 2 | - | - | (1 | ) | - | (13,586 | ) | |||||||||||
Net income (loss) | $ | 40,348 | $ | (953 | ) | $ | 6,886 | $ | 6,195 | $ | (807 | ) | $ | (7,486 | ) | $ | 44,183 | ||||
Attributable to: | �� | ||||||||||||||||||||
Equity holders of the Company | 31,423 | (667 | ) | 6,563 | 5,774 | (807 | ) | (7,486 | ) | 34,800 | |||||||||||
Non-controlling interests | 8,925 | (286 | ) | 323 | 421 | - | - | 9,383 | |||||||||||||
Net income (loss) | $ | 40,348 | $ | (953 | ) | $ | 6,886 | $ | 6,195 | $ | (807 | ) | $ | (7,486 | ) | $ | 44,183 |
22
SILVERCORP METALS INC. |
Notes to Condensed Consolidated Interim Financial Statements as at December |
31, 2018 and for three and nine months ended December 31, 2018 and 2017 |
(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, 2018 and 2017 were all earned in China and are comprised of:
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 | ||||
Three months ended December 31, 2017 | |||||||||
Henan Luoning | Guangdong | Total | |||||||
Silver (Ag) | $ | 17,718 | $ | 2,088 | $ | 19,806 | |||
Gold (Au) | 632 | - | 632 | ||||||
Lead (Pb) | 14,045 | 2,378 | 16,423 | ||||||
Zinc (Zn) | 2,337 | 5,048 | 7,385 | ||||||
Other | 100 | 6 | 106 | ||||||
$ | 34,832 | $ | 9,520 | $ | 44,352 |
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 | ||||
Nine months ended December 31, 2017 | |||||||||
Henan Luoning | Guangdong | Total | |||||||
Silver (Ag) | $ | 56,850 | $ | 5,735 | $ | 62,585 | |||
Gold (Au) | 2,448 | - | 2,448 | ||||||
Lead (Pb) | 41,728 | 5,948 | 47,676 | ||||||
Zinc (Zn) | 5,604 | 12,548 | 18,152 | ||||||
Other | 495 | 234 | 729 | ||||||
$ | 107,125 | $ | 24,465 | $ | 131,590 |
(d) | Major customers |
For the nine months ended December 31, 2018, three major customers (nine months ended December 31, 2017 - three) accounted for 13% to 30%, (nine months ended December 31, 2017 - 22% to 27%) and collectively 58% (nine months ended December 31, 2017 - 74%) of the total sales of the Company.
23
SILVERCORP METALS INC. |
Notes to Condensed Consolidated Interim Financial Statements as at December |
31, 2018 and for three and nine months ended December 31, 2018 and 2017 |
(Unaudited)(Expressed in thousands of U.S. dollars, except numbers for share and per share figures or otherwise stated) |
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 | $ | 2,709 | $ | 380 | $ | 2,329 | $ | - | ||||
Commitments | $ | 6,418 | $ | - | $ | - | $ | 6,418 |
As of December 31, 2018, the Company has two office rental agreements totaling $2,709 for the next five years and commitments of $6,418 related to the GC property. During the three and nine months ended December 31, 2018, the Company incurred rental expenses of $213 and $598, respectively (three and nine months ended December 31, 2017 - $165 and $490, respectively), 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.
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. 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 sought 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. In September 2018, the Company reached mutual settlement agreement with Luoyang Mining and paid the $1.6 million (RMB10.0 million) to Luoyang Mining and the case was closed. The settlement has no material impact on the Company’s financial results as the $1.6 million was accrued and included into the accounts payable and accrued liabilities on the consolidated statements of financial position of the Company in prior years.
24
SILVERCORP METALS INC. |
Notes to Condensed Consolidated Interim Financial Statements as at December |
31, 2018 and for three and nine months ended December 31, 2018 and 2017 |
(Unaudited)(Expressed in thousands of U.S. dollars, except numbers for share and per share figures or otherwise stated) |
19. | SUPPLEMENTARY CASH FLOW INFORMATION |
December 31, 2018 | March 31, 2018 | |||||
Cash on hand and at bank | $ | 58,942 | $ | 31,281 | ||
Bank term deposits and GICs | 9,196 | 17,918 | ||||
Total cash and cash equivalents | $ | 68,138 | $ | 49,199 |
Changes in non-cash operating working capital: | Three Months Ended December 31, | Nine Months Ended December 31, | ||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||
Trade and other receivables | $ | (395 | ) | $ | 115 | $ | (212 | ) | $ | 179 | ||
Inventories | (336 | ) | (2,645 | ) | (2,066 | ) | (3,074 | ) | ||||
Prepaids and deposits | 2,298 | 652 | 1,199 | 438 | ||||||||
Accounts payable and accrued liabilities | 3,451 | 7,945 | 6,155 | 7,835 | ||||||||
Deposits received | (3,093 | ) | (1,670 | ) | (2,690 | ) | 149 | |||||
Due from a related party | (8 | ) | 34 | (28 | ) | 71 | ||||||
$ | 1,917 | $ | 4,431 | $ | 2,358 | $ | 5,598 |
25