Silvercorp Reports Financial and Operating Results for the Third Quarter of Fiscal Year 2014

VANCOUVER, BRITISH COLUMBIA--(Marketwired - Feb 13, 2014) - Silvercorp Metals Inc. ("Silvercorp" or the "Company") (TSX:SVM)(NYSE:SVM) reported its financial and operating results for the third quarter ended December 31, 2013 ("Q3 Fiscal 2014").

THIRD QUARTER HIGHLIGHTS

• Silver production of 0.9 million ounces and gold production of 1,985 ounces;
• Lead production of 9.0 million pounds and zinc production of 1.7 million pounds;
• Sales of $24.0 million;
• Gross margin of 44%;
• Cash flow from operations of $9.9 million, or $0.06 per share;
• Net income of $2.2 million, or $0.01 per share; and
• Cash cost per ounce of silver, net of by-product credits, of $2.00.

FINANCIALS

In Q3 Fiscal 2014, net income attributable to equity holders of the Company was $2.2 million or $0.01 per share compared to $5.2 million, or $0.03 per share for the three months ended December 31, 2012 ("Q3 Fiscal 2013").

In Q3 Fiscal 2014, the Company realized sales of $24.0 million, a decrease of 59% from $58.7 million in Q3 Fiscal 2013. The Company's financial results were mainly impacted by the following: (i) lower metal production as silver, lead and zinc production decreased 42%, 45%, and 58% respectively, compared to Q3 Fiscal 2013; and (ii) a significantly lower net realized silver price of $16.20 per ounce in this quarter, down $8.70 per ounce or 35% from $24.90 per ounce in Q3 Fiscal 2013.

Cost of sales in Q3 Fiscal 2014 was $13.5 million compared to $21.2 million in Q3 Fiscal 2013 and included cash costs of $10.9 million compared to $17.1 million in Q3 Fiscal 2013. The decrease of cost of sales was due to the reduction in ore production in this quarter.

The gross profit margin in Q3 Fiscal 2014 was 44%, compared to 64% in Q3 Fiscal 2013.

Cash flow from operations in Q3 Fiscal 2014 was $9.9 million or $0.06 per share, compared to $27.8 million, or $0.16 per share, in Q3 Fiscal 2013.

For the nine months ended December 31, 2013, net loss, attributable to the equity holders of the Company, was $36.5 million or $0.21 per share, which included impairment charges of $42.8 million, net of tax. The impairment reduced the carrying value of the BYP mine, as well as the XBG and Silvertip projects, both of which are sold. Adjusted net income was $6.5 million or $0.04 per share, compared to net income of $20.9 million or $0.12 per share, in the same prior year period. During the same comparative period, sales were $92.3 million compared to $148.5 million, cost of sales was $50.8 million compared to $57.0 million, which resulted in a gross profit margin of 45% compared to 62%.

Cash flow from operations was $33.1 million compared to $71.0 million in the same comparative period. As of December 31, 2013, the Company has $98.0 million in cash and short-term investments.

OPERATIONS

In Q3 Fiscal 2014, on a consolidated basis, the Company produced 0.9 million ounces of silver, 1,985 ounces of gold, 9.0 million pounds of lead, and 1.7 million pounds of zinc, compared to 1.5 million ounces of silver, 5,676 ounces of gold, 16.4 million pounds of lead, and 4.0 million pounds of zinc, respectively, in Q3 Fiscal 2013.

For the nine months ended December 31, 2013, the Company produced 3.3 million ounces of silver, 8,774 ounces of gold, 32.0 million pounds of lead, and 7.6 million pounds of zinc, compared to 4.0 million ounces of silver, 10,810 ounces of gold, 44.1 million pounds of lead and 10.5 million pounds of zinc, in the same prior year period.

1. Ying Mining District, Henan Province, China

In Q3 Fiscal 2014, the Ying Mining District mined 148,850 tonnes of ore, producing 0.9 million ounces of silver, 911 ounces of gold, 8.8 million pounds of lead, and 1.6 million pounds of zinc, compared to 236,694 tonnes of ore in Q3 Fiscal 2013, producing 1.5 million ounces of silver, 1,285 ounces of gold, 15.6 million pounds of lead, and 3.2 million pounds of zinc, respectively.

In Q3 Fiscal 2014, head grades at the Ying Mining District were 202 grams per tonne ("g/t") for silver, 2.9% for lead, and 0.7% for zinc, compared to 222 g/t for silver, 3.2% for lead, and 1.0% for zinc, respectively, in Q3 Fiscal 2013.

In the quarter, mine production and head grades were adversely impacted by a number of factors. Firstly, underground safety standardization work was undertaken in the main production portal of PD924 at the LM West mine and the CM105-S2 Shaft at the SGX mine to comply with new safety regulations. The required safety work included rebuilding the refuge stations, enlarging main access tunnels, and replacing sections of the PVC compress air lines with steel ones, suspending production for approximately one month.

Second, as explained in the prior quarter, the Company identified that dilutive practices of certain mining contractors resulted in head grade declines and took remedial action by modifying the method of calculating the amount of ore mined for the purpose of compensating the contractors and miners. This change in compensation method resulted in miner shortages as some miners felt uncertain about their pay and left the mine sites. Unfortunately, our contractors have experienced difficulty in replacing the departed miners, particularly prior to the Chinese New Year. For this reason, mining in the PD16 Shaft, one of the main portals at the SGX mine, was suspended for approximately two months in this quarter.

Finally, the change in mining strategy, which began approximately a year ago, has yielded mixed results in its initial year of application. The change in mining strategy focused on reducing the use of re-suing method and increasing the use of shrinkage method. The key requirement of this strategy is the ability to control dilution. Certain mines, such as the LM mine, yielded good results, where dilution was low and cash mining cost were reduced. However, in other mines, such as SGX mine, dilution control was inadequate which negatively impacted head grades.

The Company has performed a comprehensive review of its operation at the Ying Mining District. From the review, a series of improvements covering all aspects of operations, including mine planning and strategy, contractor compensation methods, quality control, and a performance-based (linked to tonnage and grade) compensation package for mine management, were enacted. In the next quarter, the Company will monitor the effects of the new improvements and expect to be in a position to provide normalized production guidance for the Ying Mining District when we release our quarterly results in May.

In Q3 Fiscal 2014, total and cash mining costs per tonne were $60.89 and $50.59 compared to $64.47 and $54.92 in Q3 Fiscal 2013, respectively. The decrease in cash mining cost was mainly due to the reduction of contractor fees in this quarter.

For the nine months ended December 31, 2013, the Ying Mining District mined 535,210 tonnes of ore, producing 3.3 million ounces of silver, 3,066 ounces of gold, 31.4 million pounds of lead, and 6.7 million pounds of zinc, compared to 623,523 tonnes of ore producing 4.0 million ounces of silver, 3,352 ounces of gold, 42.8 million pounds of lead, and 9.6 million pounds of zinc in the same prior year period, respectively. During the same comparative period, head grades were 206 g/t for silver, 2.8% for lead, and 0.9% for zinc, compared to 224 g/t for silver, 3.4% for lead and 1.1% for zinc, respectively.

In Q3 Fiscal 2014, total ore milled was 149,755 tonnes, a decrease of 34% compared to 226,764 tonnes in Q3 Fiscal 2013. Cash milling costs per tonne were $16.00 compared to $12.61 in Q3 Fiscal 2013. The increase in unit cost is mainly due to the reduced tonnage milled. For the nine months ended December 31, 2013, total ore milled was 543,221 tonnes compared to 616,389 tonnes in the same prior year period. During the same time period, cash milling costs per tonne were $13.98 compared to $12.92.

In Q3 Fiscal 2014, the consolidated total production cost and cash cost per ounce of silver, net of by-product credits, were $4.39 and $2.00 compared to $1.52 and negative $0.17, respectively, in Q3 Fiscal 2013. For the nine months ended December 31, 2013, the consolidated total production cost and cash cost per ounce of silver, net of by-product credits, were $4.47 and $2.04 compared to $1.66 and negative $0.26, respectively, in the same prior year period.

The overall increase in cash cost per ounce of silver, net of by-product credits, is mainly due to decreases in by-product credits. Compared to the nine months ended December 31, 2012, lead and zinc production in the current fiscal year decreased 27% and 30%, respectively, along with decreases in realized selling price for lead and zinc of 6% and 2%, respectively.

The consolidated operational results for the past five quarters at the Ying Mining District are summarized in the table below:

2. BYP Mine, Hunan Province, China

In Q3 Fiscal 2014, the BYP mine processed 19,574 tonnes of ore compared to 32,699 tonnes in Q3 Fiscal 2013. During the same comparative periods, the Company sold 1,050 ounces of gold at a cash cost per ounce of gold of $502 compared to 4,309 ounces of gold at a cash cost per ounce of gold of $266, respectively. Gold head grade for Q3 Fiscal 2014 was 2.7 g/t compared to 3.7 g/t in Q3 Fiscal 2013. In Q3 Fiscal 2014, total and cash mining costs per tonne were $53.22 and $22.81 compared to $70.48 and $24.72 in Q3 Fiscal 2013, respectively.

DEVELOPMENT AND EXPLORATION

1. Ying Mining District, Henan Province, China

As at the end of Q3 Fiscal 2014, approximately 2,500 metres ("m") of the development work for the 4,800m access ramp at the LM Mine West are complete.

During the quarter, the Company also completed approximately 18,000m of horizontal tunnels, raises and declines. During the quarter the Company decided to suspend the construction of Shaft 969 at LM Mine West and certain other surface facilities within the Ying Mining District to better allocate resources during the current market.

In Q3 Fiscal 2014, exploration and development expenditures for the Ying Mining District were $8.5 million compared to $9.1 million in Q3 Fiscal 2013. For the nine months ended December 31, 2013, exploration and development expenditures for the Ying Mining District were $26.7 million compared to $28.1 million in the same prior year period.

2. GC Project, Guangdong Province, China

The required surface environmental protection facilities together with water and soil conservation engineering work are complete and have undergone test operations. During the quarter, the concrete rooms for the pumping station and underground main power station at the -50m elevation was completed and the pumps and pipes were installed, which represented the key component prior to the safety inspection, in accordance with safety requirements in the Mine Design.

A temporary Safety Production Permit, valid until the end of June 2014, has been issued to the Company, which allows the Company to conduct trial mine production. A final Safety Production Permit is expected to be issued around the end of June 2014. Before obtaining the Safety Production Permit and commencing significant mining, in the next few quarters, the Company will focus on trial mining and stope preparation work.

As the Company has completed the first phase of mine development and moves to trial mine production, the existing mine contractor, which was originally contracted to carry out mine development, was terminated and is being replaced with a mining contractor specializing in longhole and shrinkage stope mining. Transitioning to the new contractor will take some time and may cause some delays to the start-up of the trial mining.

The Company continued to use development ore to test mill equipment and to fine tune the mill circuits to achieve the desired metallurgical recoveries for silver, lead, zinc, tin, and sulphur. The testing process has identified numerous issues and many improvements were made in the mill circuits. While the floatation test results are approaching the designed recovery rates for silver (60%), lead (85%), zinc (86%), and sulphur, the gravity circuit only recovers approximately 5% tin, significantly lower than the 40% recovery rate in the metallurgic tests. The Company will focus on improving the tin recovery in the next several months.

The tailing dewatering facility for dry stacking has also been improved with modifications to equipment achieving desired results. The construction of the tailing dry stacking dam and reservoir facility has been completed and has passed government inspection.

During Q3 Fiscal 2014, approximately 4,800m of tunnels, including 700m of development tunnels, 2,000m of exploration tunnels and 2,100m of mining preparation tunnels, were completed.

In Q3 Fiscal 2014, $4.6 million (Q3 Fiscal 2013 - $4.7 million) of exploration and development expenditures were incurred at the GC mine. For the nine months ended December 31, 2013, $13.9 million (nine months ended December 31, 2012 - $10.9 million) of exploration and development expenditures were incurred at the GC mine.

3. BYP Mine, Hunan Province, China

In Q3 Fiscal 2014, the construction of the head frame continued. Once completed, the newly completed shaft will facilitate mining of the #3 gold mineralization body and the #5 zinc and lead ore body. In addition, the construction of a 1,500 t/d tailings-backfill facility is complete and trial runs are ongoing. Exploration and development expenditures at the BYP mine were $1.3 million in the current fiscal year compared to $4.6 million in the prior year.

4. X Mines, Henan Province, China

The X Mines consist of two mining projects: the XBG project and XHP project.

During the nine months ended December 31, 2013, the Company entered into a share transfer agreement with an arm's length private Chinese company. Pursuant to the agreement, the Company's subsidiary, Henan Found Mining Co. Ltd., sold its 90% equity interest in Zhongxing Mining Co. Ltd. (XBG project) for $12.5 million (RMB 76 million). This transaction was completed in this quarter.

Since the end of the first quarter, the Company has suspended major activities at the XHP project as part of its cost saving measures.

QUARTERLY DIVIDEND

To maintain the Company's strong balance sheet and liquidity during the current lower metal price environment, on February 12, 2014, the Board of Directors decided to reduce the quarterly dividend from CAD$0.025 to CAD$0.005 per share per quarter. This measure will save the Company approximately $12 million over the next full year, and ensure that the Company remains in a strong position to act on opportunities that develop in the current downturn. The declaration and payment of future dividends is at the discretion of the Board of Directors and any future decision to increase, or eliminate dividend payments will be based on a number of factors including commodity prices, market conditions, financial results, cash requirements and other relevant factors.

Myles Gao, P.Geo., President & CEO, is the Qualified Person for Silvercorp under NI 43-101 and has reviewed and given consent to the technical information contained in this News Release.

This earnings release should be read in conjunction with the Company's Management Discussion & Analysis, Financial Statements and Notes to Financial Statements for the corresponding period, which have been posted on SEDAR at www.sedar.com and are also available on the Company's website at www.silvercorp.ca. All figures are in United States dollars unless otherwise stated.

About Silvercorp

Silvercorp is a low-cost silver-producing Canadian mining company with multiple mines in China. The Company is currently developing the GC project in southern China which it expects will become its next operating mine. The Company's vision is to deliver shareholder value by focusing on the acquisition of under developed projects with resource potential and the ability to grow organically. For more information, please visit our website at www.silvercorp.ca.

CAUTIONARY DISCLAIMER - FORWARD LOOKING STATEMENTS

Certain of the statements and information in this press release constitute "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 and "forward-looking information" within the meaning of applicable Canadian provincial securities laws. Any statements or information that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always, using words or phrases such as "expects", "is expected", "anticipates", "believes", "plans", "projects", "estimates", "assumes", "intends", "strategies", "targets", "goals", "forecasts", "objectives", "budgets", "schedules", "potential" or variations thereof or stating that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved, or the negative of any of these terms and similar expressions) are not statements of historical fact and may be forward-looking statements or information. Forward-looking statements or information relate to, among other things: the price of silver and other metals; the accuracy of mineral resource and mineral reserve estimates at the Company's material properties; the sufficiency of the Company's capital to finance the Company's operations; estimates of the Company's revenues and capital expenditures; estimated production from the Company's mines in the Ying Mining District; timing of receipt of permits and regulatory approvals; availability of funds from production to finance the Company's operations; and access to and availability of funding for future construction, use of proceeds from any financing and development of the Company's properties.

Forward-looking statements or information are subject to a variety of known and unknown risks, uncertainties and other factors that could cause actual events or results to differ from those reflected in the forward-looking statements or information, including, without limitation, risks relating to: fluctuating commodity prices; calculation of resources, reserves and mineralization and precious and base metal recovery; interpretations and assumptions of mineral resource and mineral reserve estimates; exploration and development programs; feasibility and engineering reports; permits and licences; title to properties; property interests; joint venture partners; acquisition of commercially mineable mineral rights; financing; recent market events and conditions; economic factors affecting the Company; timing, estimated amount, capital and operating expenditures and economic returns of future production; integration of future acquisitions into the Company's existing operations; competition; operations and political conditions; regulatory environment in China and Canada; environmental risks; foreign exchange rate fluctuations; insurance; risks and hazards of mining operations; key personnel; conflicts of interest; dependence on management; internal control over financial reporting as per the requirements of the Sarbanes-Oxley Act; and bringing actions and enforcing judgments under U.S. securities laws.

This list is not exhaustive of the factors that may affect any of the Company's forward-looking statements or information. Forward-looking statements or information are statements about the future and are inherently uncertain, and actual achievements of the Company or other future events or conditions may differ materially from those reflected in the forward-looking statements or information due to a variety of risks, uncertainties and other factors, including, without limitation, those referred to in the Company's Annual Information Form for the year ended March 31, 2013 under the heading "Risk Factors". Although the Company 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, described or intended. Accordingly, readers should not place undue reliance on forward-looking statements or information.

The Company's forward-looking statements and information are based on the assumptions, beliefs, expectations and opinions of management as of the date of this press release, and other than as required by applicable securities laws, the Company does not assume any obligation to update forward-looking statements and information if circumstances or management's assumptions, beliefs, expectations or opinions should change, or changes in any other events affecting such statements or information. For the reasons set forth above, investors should not place undue reliance on forward-looking statements and information.