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Silvercorp Corporate Presentation

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Silvercorp Corporate Presentation

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Silvercorp Corporate Presentation

  1. 1. Corporate Presentation October 1, 2018 SVM:TSX/NYSE AMERICAN
  2. 2. FORWARD LOOKING STATEMENTS Safe Harbor Statement under the United States Private Securities Litigation Reform Act of 1995 Except for the statements of historical fact contained herein, the information presented constitutes "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995. Such forward-looking statements, including but not limited, to those with respect to the price of silver, lead and zinc, the possibility, timing and amount of estimated future production, costs of production, and reserve determination and reserve conversion rates, involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievement of Silvercorp Metals Inc. (“Silvercorp” or the “Company”) to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, risks related to international operations, risks related to Chinese government issuance of mining and related development permits, risks related to joint venture operations, the actual results of current exploration activities, conclusions of economic evaluations, changes in project parameters as plans continue to be refined, commodity price fluctuations especially in prices of silver, lead and zinc, as well as other factors. Readers should review the Company’s most recent Form 40-F for a more complete discussion of these factors and other risks, particularly under the heading “Risk Factors”. Although Silvercorp has attempted to identify important factors that could cause actual results to differ materially, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such forward- looking statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such forward-looking statements. Accordingly, readers should not place undue reliance on forward-looking statements. No securities regulatory authority has in any way passed on the merits of this presentation nor any securities referred herein. Cautionary Note to U.S. Investors concerning estimates of Measured, Indicated and Inferred Resources This presentation uses the terms “Measured”, “Indicated” and Inferred” Resources. U.S. investors are advised that while such terms are recognized and required by Canadian regulations, the Securities and Exchange Commission does not recognize them. “Inferred Resources” have a great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of an Inferred Resource will ever be upgraded to a higher category. Under Canadian rules, estimates of Inferred Resources may not form the basis of feasibility or other economic studies. U.S. investors are cautioned not to assume that all or any part of Measured or Indicated Resources will ever be converted into reserves. U.S. investors are also cautioned not to assume that all or any part of an Inferred Resource exists, or is economically or legally mineable. 2SVM:TSX/NYSE AMERICAN
  3. 3. SVM:TSX/NYSE AMERICAN 3 Ying Mining District, Henan Province GC Mine, Guangdong Province CHINA’S PREMIER SILVER PRODUCER BYP Mine, Hunan Province (On Care and Maintenance) * Ying Mining District Historical Production (April 2006 – June 2018) ▸ Silver: 58M ounces ▸ Lead+Zinc: 855M lbs ▸ Profit Distribution*: US$404M 15+ year mine life remaining
  4. 4. 58 MILLION OUNCES OF SILVER PRODUCED OVER 12 YEARS SVM:TSX/NYSE AMERICAN 4 * Silvercorp’s fiscal year end is April 1-March 31 ** FY2019E equals actual production from April – June 2018 plus production guidance July 2018 – March 2019 (5.1) (5.7) Red numbers in brackets are fiscal year’s guidance
  5. 5. 855 MILLION POUNDS OF LEAD AND ZINC PRODUCED OVER 12 YEARS SVM:TSX/NYSE AMERICAN 5 * Silvercorp’s fiscal year end is April 1-March 31 ** FY2019E equals actual production from April – June 2018 plus production guidance July 2018 – March 2019 (76.3) (81.4) Red numbers in brackets are fiscal year’s guidance
  6. 6. IMPROVED AND STEADY HEAD GRADES AT YING MINING DISTRICT SVM:TSX/NYSE AMERICAN 6 Dilution Control Improvement * Per Technical Reports for Ying Mine dated December 31, 2016 & December 31, 2013 - LOM production plans, as revised. Adopted Enterprise Blog (EB)
  7. 7. “ENTERPRISE BLOG” USED TO REDUCE DILUTION, IMPROVE SAFETY AND PRODUCTION EFFICIENCY “EB” is an internet social media system that makes the collection, distribution and flow of work-related knowledge and information easy and transparent for parties at different locations and different organization levels. SVM:TSX/NYSE AMERICAN 7 This supporting photo posted by a frontline technician shows an inspected stope with clearly marked ore boundaries and drill hole locations. This supporting photo posted by an onsite technician clearly shows the CO reading for the stope is less than 24 ppm as required by the government.
  8. 8. REVENUE PERCENTAGE BY METAL SVM:TSX/NYSE AMERICAN 8 Lead and Zinc price increases boosted Lead and Zinc revenue percentage * Revenue percentage is indicated in calendar quarters
  9. 9. FINANCIAL PERFORMANCE (VALUE & PROFIT PER TONNE ORE MINED) SVM:TSX/NYSE AMERICAN 9 * Realized silver price is calculated using Shanghai Metal Exchange price, less smelter deduction and Value Added Tax (reduced from 17% to 16% effective May 1, 2018). ** Financial performance is indicated in calendar quarters PerTonneValue(US$) SilverPrice(US$perounce) Profit per tonne of ore was US$104 for Q1 FY2019
  10. 10. FINANCIAL HIGHLIGHTS SVM:TSX/NYSE AMERICAN 10 ▸ Cash + short term investments: US$114.8M (Jun. 30, 2018) ▸ Annual dividend of US$0.025/share ▸ No Receivables ▸ Invested US$23 million in New Pacific ▸ Bought back 14 million shares since 2005 for approx. US$56 million ▸ Total dividends paid to shareholders of approx. US$97 million ▸ Total return to shareholders amounted to approx. US$153 million (vs. total capital raised by the company of US$199 million)
  11. 11. QUARTERLY ADJUSTED NET INCOME & FREE CASH FLOW SVM:TSX/NYSE AMERICAN 11 Free cash flow = operating cash flow less capital expenditures less capital lease payments Adjusted net income = adjusted from one time non-cash items * Adjusted net income and free cash flow are indicated in calendar quarters
  12. 12. STEADY AND REDUCED SHARES OUTSTANDING SVM:TSX/NYSE AMERICAN 12 * Share structure is indicated in calendar quarters
  13. 13. COMPARISON WITH PEERS: ALL-IN SUSTAINING COST & RETURN ON EQUITY SVM:TSX/NYSE AMERICAN 13 * Comparison with peers in calendar quarters
  14. 14. COMPARISON WITH PEERS: KEY VALUATION RATIOS SVM:TSX/NYSE AMERICAN 14 * Stock prices as of September 20, 2018
  15. 15. GROWTH: GROW SHARES OUTSTANDING OR FREE CASH FLOW? SVM:TSX/NYSE AMERICAN 15 Free cash flow=operating cash flow less capital expenditures less capital lease payments Silvercorp bought back 5,754,552 common shares of the Company since 2015 167.68M * Comparison with peers on calendar quarters
  16. 16. GROWING RESERVES & RESOURCES - SILVER SVM:TSX/NYSE AMERICAN 16 2 Excludes Lead and Zinc. Gold was converted to Silver equivalent at a rate of 65:1. 1 Measured & Indicated Resources inclusive of Reserves. See Appendix III, IV and V for breakout of Measured, Indicated and Inferred, Proven and Probable categories.
  17. 17. GROWING RESERVES & RESOURCES - LEAD & ZINC SVM:TSX/NYSE AMERICAN 17 1 Measured & Indicated Resources inclusive of Reserves. See Appendix III, IV and V for breakout of Measured, Indicated and Inferred, Proven and Probable categories.
  18. 18. OUR STRATEGY Steady production and cost control to support “quality growth” Current Production: ▸Maintain steady production, with stable or reduced costs Growth: ▸Grow existing assets organically through drilling ▸Bring BYP back into production at approx. 30,000 oz. gold/year ▸Acquired approx. 30% equity interest in New Pacific Metals Corp. (TSX- V:NUAG; OTCQX:NUPMF) ▸Acquire high grade exploration projects with defined resources that can quickly be brought into profitable operation with reasonable capital expenditures 18SVM:TSX/NYSE AMERICAN
  19. 19. SVM:TSX/NYSE AMERICAN 19 OWNERSHIP AND COVERAGE Ownership Top 10 Institutional Investors % O/S 1 Van Eck Associates Corporation 8.13 2 Old Mutual Global Investors (UK), LTD 3.11 3 Quilter Cheviot, LTD 2.91 4 DZ Privatbank S.A. 1.47 5 Global X Management Company, LLC 1.46 6 Stabilitas GmbH 1.37 7 Renaissance Technologies, LLC 1.06 8 Marshall Wace North America, L.P. 0.92 9 Morgan Stanley Canada, LTD 0.89 10 Goldman Sachs Asset Management International 0.82 Source: BD Corporate September 2018 Data Joe Reagor Roth Capital Bhakti Pavani Euro Pacific Analyst Coverage Under Review Raymond James Ryan Thompson BMO Capital Markets
  20. 20. YING MINING DISTRICT IN HENAN: SILVERCORP’S FLAGSHIP ASSET SVM:TSX/NYSE AMERICAN 20 ▸ SGX, TLP, LME, LMW, HPG and HZG underground mines working over 200 veins within 68.74km² mining permits ▸ Two centralized mills of 3,200 tpd capacity to produce silver-lead and zinc concentrates ▸ 6 smelters within 200km ▸ Produced 56.1 million oz of silver plus 773 million lbs of lead & zinc since 2006 ▸ Over 1.5 million metres of drilling yields 15+ years remaining mine life after 12 years’ production ▸ Opportunity for further acquisitions in adjacent area * The Ying Mining District mines are held by Henan Found Mining Co. Ltd., owned 77.5% by Silvercorp SGX TLP HZG HPG LME LMW
  21. 21. GC MINE IN GUANGDONG: THE SECOND MINE Our Newest Mine ▸ Commercial production commenced in 2014 ▸ Underground silver/zinc mine ▸ Excellent infrastructure and access ▸ Profitable operations SVM:TSX/NYSE AMERICAN 21 Main Access Ramp
  22. 22. BYP GOLD MINE : PREPARING FOR PRODUCTION Status: ▸ Suspended mining operations in August 2014 ▸ Capital requirements for upgrades to sustain ongoing production are being considered ▸ Continuing to review alternatives for this project ▸ Approx. US$10 million to bring the project back into production SVM:TSX/NYSE AMERICAN 22 500 tpd Mill at the BYP Mine
  23. 23. SVM:TSX/NYSE AMERICAN 23 BYP MINE RESOURCE CLASS Cut-off Grades (g/t) Resource Grades Contained Metal Resources Tonnes (Million) Gold (g/t) Gold (oz) Indicated 1.0 3.51 2.59 292,000 Inferred 1.0 2.47 1.84 146,000 Mineral Resources for Gold Zones: CLASS Cut-off Grades (%) Resource Grades Contained Metal Resources Tonnes (Million) Lead (%) Zinc (%) Lead (Tonnes) Zinc (Tonnes) Indicated 2.0 Lead+Zinc 7.33 1.16 2.52 85,000 184,700 Inferred 2.0 Lead+Zinc 7.55 0.85 2.75 64,200 207,600 Mineral Resources for Lead and Zinc Zones: Notes to Resource Tables: 1. Resources as of December 31, 2011 2. Technical Report for BYP Mine dated June 30, 2012 and available under the Company’s profile on SEDAR at www.sedar.com
  24. 24. METAL PRICES SVM:TSX/NYSE AMERICAN 24 Silver US$ Per Ounce Lead US$ Per Pound Zinc US$ Per Pound Shanghai Metal Exchange quoted prices on August 24, 2018: Silver=3.481 RMB/gram, lead=18,300 RMB/tonne, Zinc=21,460 RMB/tonne, all including 16% value added tax (VAT). Conversion to net realized selling prices as follows: Silver in US$ =3.481/1.16*31.1035/6.85*90%=$12.26 Lead in US$=(18300-1900 smelter deduction)/1.16/2204.62/6.85=$0.94 Zinc in US$=(21460-5400 smelter deduction)/1.16/2204.62/6.85=$0.92
  25. 25. FY2019 PRODUCTION GUIDANCE 25SVM:TSX/NYSE AMERICAN * Estimated as per metal balance sheet Fiscal year end is March 31 F2019 Q1 Actual F2019 Guidance F2019 Q1 Actual F2019 Guidance F2019 Q1 Actual F2019 Guidance Ore (000' tonne) 156 630 82 250 238 880 Silver (gram/tonne) 323 285 87 98 Lead (%) 4.5 4.3 1.3 1.6 Zinc (%) 1.1 0.9 2.9 3.0 Silver (million ounces) 1.3 5.4 0.2 0.6 1.5 6.0 Lead (million pounds) 13.3 56.1 1.6 7.5 15.0 63.6 Zinc (million pounds) 2.1 6.2 4.2 13.6 6.3 19.8 Cash production costs 78 75 51 57 69 70 122 124 62 70 113 122 Metal Production* Costs ($/tonne of ore) AISCproduction costs Production and cash costs Head Grades YingMiningDistrict GCMine Consolidated
  26. 26. FY2019 CAPITAL EXPENDITURE GUIDANCE 26SVM:TSX/NYSE AMERICAN * For FY2019, total tunneling at Ying Mining District is budgeted at 83,000 metres, of which 66,000 metres will be capitalized and 17,000 metres will be expensed. * For FY2019, total tunneling at GC is budgeted at 16,000 metres, of which 1,000 metres will be capitalized and 15,000 metres will be expensed. Mine Development and Facilities Work (meters) Amount (US$ million) Work (meters) Amount (US$ million) Work (meters) Amount (US$ million) Tunneling* 66,000 18.8 1,000 0.6 67,000 19.4 Ramp development (4.2x3.8 meter in dimension) 4,000 4.4 1,000 0.8 5,000 5.2 Facilities and equipment - 8.6 - 1.3 - 9.9 Total Capital Expenditures 70,000 31.8 2,000 2.7 72,000 34.5 Tunneling* 17,000 3.9 15,000 3.8 32,000 7.7 Drilling 75,000 1.7 30,000 1.0 105,000 2.7 Ying Mining District GCMine Consolidated Mine Development and Capitalized Amount Expensed Tunneling and Drilling
  27. 27. SVM:TSX/NYSE AMERICAN 27 Suite #1378 - 200 Granville St., Vancouver, BC, Canada V6C 1S4 Tel: 604-669-9397 Fax: 604-669-9387 Toll-Free: 1-888-224-1881 HEAD OFFICE Silvercorp’s disclosure documents are available from the System for Electronic Document Analysis and Retrieval (SEDAR) at www.sedar.com SVM:TSX/NYSE AMERICAN investor@silvercorp.ca www.silvercorp.ca
  28. 28. APPENDICES SVM:TSX/NYSE AMERICAN 28
  29. 29. APPENDIX II SVM:TSX/NYSE AMERICAN 29 MANAGEMENT & BOARD Management Rui Feng, Ph.D., Geology Chairman and CEO, Director Derek Liu, MBA, CGA, CPA Chief Financial Officer Yong-Jae Kim, LL.B. General Counsel and Corporate Secretary Lon Shaver, CFA Vice President Board of Directors Rui Feng, Ph.D., Geology David Kong, CA, CPA (ILLINOIS), Former Ernst & Young LLP Partner; over 30 years PubCo. experience Yikang Liu, Former Dep. Gen. Sec. of the China Mining Assoc.; over 40 years geological experience Paul Simpson, Securities lawyer; 20 years experience advising natural resources companies Marina Katusa, BSc., MBA, over 10 years experience in geology and corporate development
  30. 30. APPENDIX III: SVM:TSX/NYSE AMERICAN 30 SUMMARY OF RESERVES1 Project Reserve Category Tonnes (Million) Average Grades Contained Metal Reserves Silver (g/t) Lead (%) Gold (g/t) Zinc (%) Silver (Moz) Silver² Eq. (Moz) Lead (t) Zinc (t) Ying Mining District Proven 4.67 252 4.15 0.11 1.55 37.85 1.07 193,950 72,240 Probable 7.63 233 3.50 0.04 1.09 57.16 0.70 267,010 83,450 GC Mine Proven 1.69 96 1.43 3.21 5.22 24,191 54,237 Probable 1.87 97 1.42 2.92 5.84 26,542 54,701 Consolidate d Proven 6.36 43.07 1.07 218,141 126,477 Probable 9.50 63.00 0.70 293,552 138,151 Total 15.86 106.07 1.77 511,693 264,628 1. Technical Report for Ying Mine effective December 31, 2016; Technical Report for GC Mine effective June 30, 2018; Table includes HPG mine proven reserves of 16,430 oz Gold (470,000 tonnes grading 1.10 g/t Gold) and HPG mine probable reserves of 10,840 oz Gold (290,000 tonnes grading 1.15 g/t Gold). 2. Gold was converted to Silver equivalent at a rate of 65:1.
  31. 31. APPENDIX IV: SVM:TSX/NYSE AMERICAN 31 SUMMARY OF RESOURCES1 Project Resource Category Tonnes (Million) Average Grades Contained Metal Resources (Inclusive of Reserves) Silver (g/t) Gold (g/t) Lead (%) Zinc (%) Silver (Moz) Silver Eq.² (Moz) Lead (t) Zinc (t) Ying Mining District Measure d 5.91 266 0.13 4.36 1.64 50.55 1.56 257,600 96,690 Indicated 10.40 233 0.07 3.59 1.13 77.76 1.43 373,000 117,660 Inferred 10.47 230 0.12 3.91 1.10 77.25 2.54 409,400 115,220 GC Mine Measure d 2.74 101 1.39 3.24 8.84 38,052 88,674 Indicated 3.64 92 1.22 2.70 10.82 44,272 98,266 Inferred 7.48 107 1.19 2.60 25.66 88,902 194,539 BYP Mine Indicated 2.59 1.16 2.52 18.98 85,000 184,700 Inferred 1.84 0.85 2.75 9.49 64,200 207,600 Consolidate d Measure d 8.65 59.39 1.56 295,652 185,364 Indicate d 14.04 88.58 20.41 502,272 400,626 Inferred 17.95 102.91 12.03 562,502 517,359 1. Technical Report for Ying Mine effective December 31, 2016; Technical Report for GC Mine effective June 30, 2018; Technical Report for BYP Mine dated June 30, 2012; Table includes HPG mine measured resources of 24,000 oz Gold (690,000 tonnes grading 1.10 g/t Gold), indicated resources of 22,000 oz Gold (630,000 tonnes grading 1.10 g/t Gold), inferred resources of 39,000 oz Gold (1,010,000 tonnes grading 1.21 g/t Gold). Table also includes BYP mine resources. 2. Gold was converted to Silver equivalent at a rate of 65:1.
  32. 32. END NOTES AND CAUTIONARY STATEMENTS Guoliang Ma, P. Geo., is the Qualified Person within the meaning of National Instrument 43-101 – Standards Of Disclosure for Mineral Projects (“NI 43-101”) who supervised the preparation of the scientific and technical information of Silvercorp included in this presentation. For more information on Silvercorp’s projects, readers should refer to Silvercorp’s Annual Information Form dated June 22, 2018, and its technical reports, each of which is available on SEDAR at www.sedar.com. The scientific and technical information related to Silvercorp’s projects included in this investor presentation are derived from the technical reports entitled: - NI 43-101 Technical Report for Ying Gold-Silver-Lead-Zinc Property, Henan Province, China, effective date 31 December, 2016 by P R Stephenson, P. Geo., H A Smith, P.Eng., A Ross, P. Geo, H Muller, Beng, MAusIMM, CP. - NI 43-101 Technical Report on the GC Ag-Zn-Pb Project in Guangdong Province, People’s Republic of China, effective date 30 June 2018 prepared by D. Nussipakynova, P.Geo., H. Smith, P.Eng., A. Riles, MAIG (QP), P. Stephenson, P.Geo., MAIG. - Technical Report for BYP Gold-Lead-Zinc Property, Hunan Province, China, effective date 30 June, 2012, prepared by P R Stephenson, P. Geo., H A Smith, P.Eng., A Riles, MAIG, M Molavi, P.Eng, D. Nussipakynova, P.Geo., A. Ross, P.Geo. 32SVM:TSX/NYSE AMERICAN

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