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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 June 26, 2019 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. CHINA’S PREMIER SILVER PRODUCER SVM:TSX/NYSE AMERICAN 3 Ying Mining District, Henan Province GC Mine, Guangdong Province BYP Mine, Hunan Province (Care and Maintenance) * Ying Mining District Historical Production (April 2006 – March 2019) ▸ Silver: 64M ounces ▸ Lead+Zinc: 921M lbs ▸ Profit Distribution*: US$434M 15+ year mine life remaining
  4. 4. 64 MILLION OUNCES OF SILVER PRODUCED OVER 12 YEARS SVM:TSX/NYSE AMERICAN 4 * Silvercorp’s fiscal year is April 1-March 31 * Red numbers in brackets are fiscal year’s guidance (5.7) (6.0) (6.1)
  5. 5. 921 MILLION POUNDS OF LEAD & ZINC PRODUCED OVER 12 YEARS SVM:TSX/NYSE AMERICAN 5 (76.3) (81.4) (86.9) * Silvercorp’s fiscal year is April 1-March 31 * Red numbers in brackets are fiscal year’s guidance
  6. 6. IMPROVED AND STEADY HEAD GRADES AT YING MINING DISTRICT SVM:TSX/NYSE AMERICAN 6 Dilution Control Improvement * Per Technical Reports for Ying Mine dated December 31, 2016 & December 31, 2013 - LOM production plans, as revised. Adopted Enterprise Blog (EB)
  7. 7. INNOVATION TO REDUCE DILUTION, IMPROVE SAFETY AND INCREASE PRODUCTION EFFICIENCY “Enterprise Blog” (EB) - an internet social media system that collects and distributes work- related information more effectively between parties and locations across the organization. SVM:TSX/NYSE AMERICAN 7 Post showing an inspected stope with clearly marked ore boundaries and drill hole locations ready for mining. Post showing the stope’s CO reading is clearly below the 24 ppm government limit. Posted Posted Time & date stamp User ID
  8. 8. FINANCIAL PERFORMANCE (VALUE & PROFIT PER TONNE ORE MINED) SVM:TSX/NYSE AMERICAN 8 * Realized silver price is calculated using Shanghai Metal Exchange price, less smelter deduction and Value Added Tax (reduced from 16% to 13% effective April 1, 2019). * Financial performance is indicated in calendar quarters PerTonneValue(US$) SilverPrice(US$perounce) Profit per tonne of ore was US$30 for Q4 FY2019
  9. 9. METAL PRICES SVM:TSX/NYSE AMERICAN 9 Silver US$ Per Ounce Lead US$ Per Pound Zinc US$ Per Pound Shanghai Metal Exchange quoted prices on May 30, 2019: Silver=3.475 RMB/gram, lead=16,200 RMB/tonne, Zinc=20,970 RMB/tonne, all including 13% value added tax (VAT). Conversion to net realized selling prices as follows: Silver in US$ =3.475/1.13*31.1035/6.9019*90%=$12.47 Lead in US$=(16200-1900 smelter deduction)/1.13/2204.62/6.9019=$0.83 Zinc in US$=(20970-7000 smelter deduction)/1.13/2204.62/6.9019=$0.81
  10. 10. REVENUE PERCENTAGE BY METAL SVM:TSX/NYSE AMERICAN 10 * Revenue percentage is indicated in calendar quarters Lead and Zinc price increases boosted Lead and Zinc revenue percentage
  11. 11. FINANCIAL HIGHLIGHTS SVM:TSX/NYSE AMERICAN 11 ▸ Cash + short term investments: US$115.3M (Mar.31, 2019) ▸ Annual dividend of US$0.025/share ▸ No Receivables ▸ Invested US$27 million in New Pacific since 2017 ▸ Bought back 14 million shares since 2005 for approx. US$56 million ▸ Total dividends paid to shareholders of approx. US$99 million ▸ Total return to shareholders amounted to approx. US$155 million (vs. total capital raised by the company of US$199 million)
  12. 12. QUARTERLY ADJUSTED NET INCOME & FREE CASH FLOW SVM:TSX/NYSE AMERICAN 12 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
  13. 13. STEADY SHARES OUTSTANDING SVM:TSX/NYSE AMERICAN 13 * Shares outstanding indicated in calendar quarters
  14. 14. PEER COMPARISON: OPERATING PERFORMANCE SVM:TSX/NYSE AMERICAN 14 * Comparison with peers in calendar quarters * All-In Sustaining Cost—net of by-products credits * EBITDA Margin Data Source: Capital IQ
  15. 15. COMPARISON WITH PEERS: KEY VALUATION RATIOS SVM:TSX/NYSE AMERICAN 15 * Stock prices as of June 7, 2019
  16. 16. GROWTH: GROW SHARES OUTSTANDING OR FREE CASH FLOW? SVM:TSX/NYSE AMERICAN 16 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 169.8M * Comparison with peers on calendar quarters
  17. 17. GROWING RESERVES & RESOURCES - SILVER 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. 2. Excludes Lead and Zinc. Gold was converted to Silver equivalent at a rate of 65:1.
  18. 18. GROWING RESERVES & RESOURCES - LEAD & ZINC SVM:TSX/NYSE AMERICAN 18 1. Measured & Indicated Resources inclusive of Reserves. See Appendix III, IV and V for breakout of Measured, Indicated and Inferred, Proven and Probable categories.
  19. 19. OUR STRATEGY TO SUPPORT QUALITY GROWTH Maintain steady production with a focus on cost control Pursue growth opportunities capitalizing on corporate strengths: ▸ Grow existing assets organically through drilling ▸ Bring BYP back into production; targeting approx. 30,000 oz. gold/year ▸ New Pacific Metals Corp. (TSX-V:NUAG; OTCQX:NUPMF) –approx. 28.87% interest • Flagship “Silver Sand Project” in Bolivia • Near surface mineralization in 190/195 holes from 55,010 m 2018 drill program • Another 55,000 m drill program commenced April 2019 ▸ Acquire exposure to additional projects that meet criteria • Through acquisitions, joint ventures and strategic investments • Defined resources that have high margin (i.e. high grade) and/or long life potential • Can be advanced quickly to profitable operation with reasonable capital expenditures • Apply technical team’s skills in geology, mine development, and operations 19SVM:TSX/NYSE AMERICAN
  20. 20. NEW PACIFIC METALS’ SILVER SAND PROJECT 20SVM:TSX/NYSE AMERICAN
  21. 21. OWNERSHIP AND COVERAGE 21SVM:TSX/NYSE AMERICAN Top 10 Institutional Investors % O/S 1 Van Eck Associates Corporation 6.57 2 Merian Global Investors (UK), LTD 3.12 3 Renaissance Technologies, LLC 1.73 4 Global X Management Company, LLC 1.72 5 RBC Global Asset Management, Inc. 1.26 6 DZ Privatbank S.A. 1.18 7 Morgan Stanley & Company, LLC 1.09 8 Stabilitas GmbH 1.06 9 Marshall Wace North America, L.P. 0.83 10 J.P. Morgan Securities, LLC (Broker) 0.83 Analyst Coverage Canada Ryan Thompson BMO Capital Markets Craig Stanley Eight Capital US Joe Reagor Roth Capital Bhakti Pavani Alliance Global Partners Source: BD Corporate May 2019 Data
  22. 22. YING MINING DISTRICT IN HENAN: SILVERCORP’S FLAGSHIP ASSET SVM:TSX/NYSE AMERICAN 22 ▸ SGX, TLP, LME, LMW, HPG and HZG underground mines working over 200 veins within 68.74km²mining permits ▸ Two centralized mills of 3,200 tpd capacity to produce silver-lead and zinc concentrates ▸ 6 smelters within 200km ▸ Produced 60.6 million oz of silver plus 821.1 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
  23. 23. 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 23 Main Access Ramp
  24. 24. BYP GOLD MINE: PREPARING FOR PRODUCTION Status: ▸ Lead-Zinc mine suspended operations in August 2014 ▸ Continuing to review alternatives for this project, including capital requirements for upgrades to sustain ongoing production ▸ 2019 NI 43-101 gold resource identified 421,000 ounces measured and indicated and 110,000 ounces inferred ▸ Permitting activities to add gold to the mining permit ongoing; awaiting approval SVM:TSX/NYSE AMERICAN 24 500 tpd Mill at the BYP Mine
  25. 25. PRODUCTION GUIDANCE 25SVM:TSX/NYSE AMERICAN * Estimated as per metal balance sheet * Fiscal year end is March 31 F2019 Actual F2019 Guidance F2020 Guidance F2019 Actual F2019 Guidance F2020 Guidance F2019 Actual F2019 Guidance F2020 Guidance Ore (000' tonne) 620 630 630 289 250 270 909 880 900 Silver (gram/tonne) 311 285 290 86 98 96 Lead (%) 4.4 4.3 4.3 1.5 1.6 1.7 Zinc (%) 0.9 0.9 0.9 3.0 3.0 3.1 Silver (million ounces) 5.8 5.4 5.5 0.6 0.6 0.6 6.4 6.0 6.1 Lead (million pounds) 56.2 56.1 56.2 8.7 7.5 8.9 64.9 63.6 65.1 Zinc (million pounds) 6.5 6.2 6.3 16.2 13.6 15.5 22.7 19.8 21.8 Cash production costs 78.0 75.4 78.2 52.1 57.2 56.7 68.9 70.2 72.0 126.9 123.7 130.2 63.6 75.5 77.4 115.5 122.2 125.5 Metal Production* Costs ($/tonne of ore) AISC production costs Production and cash costs Ying Mining District GC Mine Consolidated Head Grades
  26. 26. FY2020 EXPENDITURE GUIDANCE 26SVM:TSX/NYSE AMERICAN * For FY2020, total tunneling at Ying Mining District is budgeted at 78,818 metres, of which 60,205 metres will be capitalized and 18,613 metres will be expensed. * For FY2020, total tunneling at GC is budgeted at 18,192 metres, of which 715 metres will be capitalized and 17,477 metres will be expensed. Mine Development and Facilities Work (meters) Amount (US$ million) Work (meters) Amount (US$ million) Work (meters) Amount (US$ million) Tunneling* 60,205 20.0 715 0.9 60,920 20.9 Ramp development (4.2x3.8 meter in dimension) 4,258 4.4 1,540 1.6 5,798 6.0 Facilities and equipment - 7.3 - 2.7 - 10.0 Total Capital Expenditures 64,463 31.7 2,255 5.2 66,718 36.9 Tunneling* 18,613 5.5 17,477 4.6 36,090 10.1 Drilling 67,648 1.9 20,000 0.6 87,648 2.5 Ying Mining District GC Mine 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) Silver²Eq. (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 Consolidated 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 Measured 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 Measured 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 Consolidated Measured 8.65 - - - - 59.39 1.56 295,652 185,364 Indicated 14.04 - - - - 88.58 1.43 417,272 215,926 Inferred 17.95 - - - - 102.91 2.54 498,302 309,759 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 April 19, 2019; 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 excludes BYP mine resources. 2. Gold was converted to Silver equivalent at a rate of 65:1.
  32. 32. APPENDIX IV: SVM:TSX/NYSE AMERICAN 32 SUMMARY OF RESOURCES - BYP MINE Notes to Resource Tables: 1. All Mineral Resources as of November 30th, 2018 2. Technical Report for BYP Mine dated April 30, 2019 and available under the Company’s profile on SEDAR at www.sedar.com Domain Categories Quantity Au Grade Pb Grade Zn Grade Au Metal Pb Metal Zn Metal Mt g/t % % koz kt kt Gold area Measured 2.8 3 - - 269 - - Indicated 1.5 3.1 - - 149 - - Measured & Indicated 4.3 3.1 - - 418 - - Inferred 1.3 2.5 - - 109 - - Lead and Zinc area Indicated 4 - 0.7 2.3 - 28 89 Inferred 6.1 - 1.4 3.1 - 83 187 Overlap area Indicated 0.12 0.8 1.2 1.7 3 2 2 Inferred 0.03 1 2.7 3.5 1 1 1
  33. 33. ENDNOTES AND CAUTIONARY STATEMENTS Guoliang Ma, P. Geo., is a 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 Silvercorp’s 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. - NI 43-101 Technical Report for BYP Gold-Lead-Zinc Property, Hunan Province, China, effective date 30 April, 2019, prepared by Tony Cameron, Principle Mining Engineer, Robert William Dennis, Executive Consultant, and Song Huang, Consulting Geologist. 33SVM:TSX/NYSE AMERICAN

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