Management’s Discussion and Analysis - Silvercorp or the Company - Management Assignment Help

Assignment Task:

Task:

Management’s Discussion and Analysis (“MD&A”) is intended to help the reader understand the significant factors that have affected Silvercorp Metals Inc. and its subsidiaries’ (“Silvercorp” or the “Company”) performance and such factors that may affect its future performance. This MD&A should be read in conjunction with the Company’s audited consolidated financial statements for the year ended March 31, 2011 and the related notes contained therein. The Company reports its financial position, results of operations and cash flows in accordance with Canadian generally accepted accounting principles (“Canadian GAAP”). Silvercorp’s significant accounting policies are set out in Note 2 of the audited consolidated financial statements. Differences between Canadian and United States generally accepted accounting principles (“US GAAP”) that would have affected the Company’s reported financial results are set out in Note 25 of the audited consolidated financial statements. This MD&A refers to various non-GAAP measures, such as cash flows from operating activities per share, cash and total production cost per ounce of silver, which are used by the Company to manage and evaluate operating performance and ability to generate cash and are widely reported in the silver mining industry as benchmarks for performance. Non-GAAP measures do not have standardized meaning. Accordingly, non-GAAP measures should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. To facilitate a better understanding of these measures as calculated by the Company, we have provided detailed descriptions and reconciliations where applicable.
 

This MD&A is prepared as of May 31, 2011.
1. Core Business and Strategy
Silvercorp Metals Inc. is engaged in the acquisition, exploration, development and mining of high-grade silver-related mineral properties in China and Canada. Silvercorp is the largest primary silver producer in China through the operation of the four silver-lead-zinc mines at the Ying Mining Camp in the Henan Province of China. Silvercorp is currently building the GC silver-lead-zinc project in Guangdong Province as its second China production base and foothold, and this will be followed by the third production foothold at the recently acquired BYP gold-lead-zinc project in Hunan Province. In Canada, Silvercorp is preparing to apply for a Small Mine Permit for the Silvertip high grade silver-lead-zinc mine project in northern British Columbia to provide a further platform for growth and geographic diversification. The Company’s shares are traded on the New York Stock Exchange and Toronto Stock Exchange and are included as a component of the S&P/TSX Composite and the S&P/TSX Global Mining Indexes.
 

2. Fiscal Year 2011 Highlights and Significant Events

•  Record net earnings of $68.8 million, or $0.41 per share, a 79% increase compared to earnings of $38.5 million, or $0.24 per share, last year;
•  Record sales of $167.3 million, 56% higher than last year;
•  Record cash flows from operations of $104.2 million, or $0.62 per share, up 60% from $65.3 million last year;
• Record production of 5.3 million ounces of silver, or 5.46 million ounces of silver equivalent if including 3,200 ounces gold produced. Silver production was up 15% from 4.6 million ounces last year;
•  Total production costs of negative $5.58 per ounce of silver and cash costs of negative $6.80 per ounce of silver, representing 4% and 9% improvements, respectively;
•  Paid cash dividends totaling CAD$0.08 per share, representing $13.1 million for the year;
•  Raised $110.4 million net proceeds from an equity financing; and
•  Increased total cash and short term investments to $206.3 million from $94.4 million a year ago, up by 119%.

3. Fiscal Year 2011 Operating Performance
(a) Overall View

In fiscal 2011, the Company mined a record 592,330 tonnes of ore, a 46% increase from last year of 406,753 tonnes. The record mine production was mainly due to the improvement from TLP, HPG, and LM projects as mine development progressed.
In fiscal 2011, 596,735 tonnes of ore was milled, which was 188,842 tonnes, or 46%, more compared to 407,893 tonnes last year. The increased mill throughput was achieved as the second mill at Ying Mining Camp commenced operations towards the end of last fiscal year, which increased our total milling capacity to 2,500 tonnes per day, providing room to accommodate future mine production growth. For the year ended March 31, 2011, metals production were 5.3 million ounces of silver, 3,200 ounces of gold, 69.0 million pounds of lead and 16.3 million pounds of zinc, which was 15%, 100%, 11% and 11% respectively higher than the same period last year. The increases were attributable to greater mine and mill throughputs.

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