Silvercorp Metals & New Pacific Metals
A growth-oriented philosophy for tomorrow’s silver mining industry
Canada is the 9th largest economy in the world by GDP according to the World Bank, and ranks as the world’s 8th wealthiest country, with a total private wealth of US $6.2T. Largely shielded from the geopolitical fallout of Russia’s war with Ukraine, Canada posted a standout economic growth rate of 3.3% in Q2 2022, and Deloitte expects the country to see a 16.8% increase in its imports of services this year. Canada is an attractive destination for international investors and offers preferential market access through 14 trade agreements with 49 countries – a total of 1.5B consumers and a combined GDP of US $60T – and 117 border crossings with the USA.
Canada’s mining industry played a vital role in advancing exploration discoveries, and the development of mineral resources worldwide, thanks to its resource focused Toronto Stock Exchange, well respected securities and financing regulations for mineral resource sectors, experienced geological, engineering, and legal professionals, as well as natural resource focused financial institutions. Canada is home to almost half of the world’s publicly listed mining and mineral exploration companies (S&P Market Intelligence, 2021). According to Natural Resource Canada (2022), a total of 1,348 Canadian mining and exploration companies had a total market valuation of CAD 273.4 B in 2020, and there are 730 companies with mining assets located in 97 foreign countries, worth CAD 188.2 B.
Silvercorp Metals, listed on Toronto Stock Exchange, is one of these Canadian mining companies operating abroad, it is also one of the most profitable, producing silver, gold, lead, and zinc from multiple mines in China. Silvercorp is China’s largest primary silver producer, generating US $1.62 B in revenue from its operations at an average gross margin of 51% over the past 10 years and has an undemanding market capitalisation of US $510M. Positioned as a major supplier of silver for the expanding green energy sector, Silvercorp is a key player in the mining industry’s low-carbon, Esg-conscious transformation.
Silvercorp was founded in 2003 by Rui Feng, PH.D., Chairman & CEO, who arrived in Canada in 1988 with US $100 and a willingness to take calculated risks to realise the substantial opportunities he foresaw in mining exploration, using the Canadian public market to finance and develop oversea mining assets. Dr. Feng obtained his PH.D in Geological Sciences from the University of Saskatchewan, Canada in 1992 before receiving a Post-doctoral fellowship from the National Sciences and Engineering Council of Canada. Prior to founding Silvercorp, Dr. Feng was integral in the discovery and development of Jinshan Gold’s CSH Gold Mine, located in China. The CSH Mine is now one of China’s largest open-pit gold mines.
As one of the most successful Canadian mining entrepreneurs, Dr. Feng oversaw Silvercorp’s operational launch in China between 2003-2006 with only US 10M in capital, raised from Canada. The company has since produced more than 85 million ounces (Moz) of silver and 1 billion pounds of lead & zinc, and also returned US $175M to its shareholders since its inception through share buybacks and dividends. Thanks to its profitable mining operations, Silvercorp’s last financing was in 2010 and has since accumulated over US 200M cash and remains debt free. After 16 years of profitable mining operations, Silvercorp’s mines still have 15 years of mine life remaining based on defined mineral reserves.
While Silvercorp is maintaining its stable and profitable operations, it will continue to identify, acquire, and invest in value-creating projects across multiple jurisdictions across the globe to secure further success for investors. Not only would such expansion increase production, but it is also fundamental to Dr. Feng’s strategy of minimising the company’s risk exposure to geopolitical volatility, in order to leverage the company’s low-risk strategy and financial strength.
Previously in 2020, Silvercorp identified struggling Canada-based Guyana Goldfields and assessed the potential to remodel its proposed mine into a higher-grade underground operation. Silvercorp offered US $160M to buy the company and despite being eventually outbid, it realised a total profit of US $20M on its investment. Today, Silvercorp targets projects that have the potential for more than a US $50M annual free cash flow and defined resources that it can develop with reasonable capital expenditures and timelines.
Additionally, Silvercorp is generating organic growth through extensive exploration at its producing mines. From 2020 to 2021, the company completed 629,000 m of drilling at its mines, which supported an increase in the FY23 production guidance by 17%, 9%, 24%, and 109% in silver, lead, zinc, and gold, respectively. Furthermore, Silvercorp is heavily investing in research and innovation to improve the efficiency and effectiveness of its technical programs, as evident by the implementation of 3D modelling digital insights at its mines. Additional recent acquisitions, such as the Kuanping Project – acquired at a competitive price of US $13.5M – are set to boost both economic growth and future production levels.
Silvercorp is publicly traded on the Toronto Stock Exchange (TSX) and the New York Stock
Exchange (NYSE) and today, Silvercorp’s stock is fundamentally undervalued. Silvercorp’s key competitive advantage is having its mining base in China, a free market for metal and a manufacturing hub for major companies such as Apple, Tesla, BASF, and General Motors – representing major markets for metals.
Being a serial mining entrepreneur, Dr. Feng ventured into Bolivia in 2017 with Silvercorp incubating a new company, New Pacific Metals, to minimize the perceived risk. Silvercorp financed and led New Pacific’s exploration efforts in Bolivia and in just four years, three world-class silver-gold deposits were discovered and drill tested by New Pacific. Following this incredible progress New Pacific’s market valuation grew 3,900% from US 25M in 2017 to US $1B by 2021. New Pacific has a pipeline of projects including, the permitting stage, Silver Sand Silver Project, a resource definition stage, Carangas Silver-gold Project, and a new discovery at the Silverstrike Silver-gold Project. The flagship Silver Sand Project is Bolivia’s most momentous silver discovery in the last 30 years with over 200 million ounces of silver resources that are amenable to open pit mining operations, it is also one of the most significant new global primary silver discoveries in the last decade.
Benefiting from the first mover advantage, New Pacific acquired the Carangas and Silverstrike projects in 2020 and two new discoveries were made since 2021. Situated along the same metallogenic belt as Argentina, Chile, and Peru, Bolivia is only famous for its vast silver resources due to limited exploration activities for other metals. The Carangas discovery highlights the great potential within Bolivia for finding additional gold and copper deposits underneath the near-surface silver deposits. In Carangas, a vast gold deposit was discovered below the near-surface silver deposit, and 55,000 m over 121 drill holes have been completed since June 2021, each hole intersected silver and or gold mineralization over broad intercepts.
The discovery of a 200-metre-thick near-surface oxidized gold zone at Silverstrike in 2022 marks another important milestone for New Pacific, following the discovery of Silver Sand and Carangas. The discoveries illustrate the company’s ability to create shareholder value through careful project identification, smart acquisition and well-planned drilling.
Along with driving new growth, Dr. Feng is committed to improving New Pacific Metal’s ESG profile in line with Silvercorp’s. Silvercorp boasts nearly two decades of uninterrupted ESG activity and won the ‘2022 ESG Award’ at the China Finance Summit for the continual improvement of its ESG management systems.
“At Silvercorp, we consider sustainability to be one of our fundamental responsibilities. We operate safely and responsibly to protect the ecological environment in a collaborative approach with local communities.” Internally, this means constantly optimising and integrating ESG management into operations and reducing the company’s carbon footprint by wholly operating in China – eliminating the need to constantly ship equipment and product across the Pacific Ocean. Externally, Silvercorp’s high levels of silver production make it a natural leader and contributor to economic decarbonisation and electrification.
Silvercorp’s focus on carbon peaking and carbon neutrality stems from a genuine desire to build a harmonious environment for its mining communities. In FY22, Silvercorp contributed approximately US $3.7M to social programs, local infrastructure, environmental protection, and a clean water access project. However, the company also acknowledges the need to remove other underlying barriers to Esg-driven mining. To this end, Silvercorp has invested in transforming its water supply and reducing its wastage, with 74% of its total supply now coming from reused mine water, saving 2,280,224m3 of water in FY22 alone. Subsequently, Silvercorp’s Ying Mining District operation received the Chinese ‘National Green Mine’ certification at the end of FY22.
Silvercorp also stands out for its occupational health and safety systems, with 100% of operations ISO 45001 certified and zero work-related fatalities. The company involves all employees in its sustainability mission through an extensive educational program, and in FY22, Silvercorp employees completed 1,118 hours of environmental training.
Headquartered in Vancouver, Silvercorp is a proudly Canadian business and recognises the lucrative investment opportunities in the country’s mining industry. Canada’s focus on education and regulation of the mining sector and broader financial industry not only constitutes a launchpad for many future leaders but also creates the ideal environment for international organisations looking to get involved.