Silvercorp Reports Q1 Results: Net Income Up 134% to $10.9 Million, $0.07 Per Share

Silvercorp Metals (TSX:SVM, NYSEMKT:SVM) reported its financial and operating results for the first quarter endedJune 30, 2017. All amounts are expressed in US Dollars.

FIRST QUARTER HIGHLIGHTS

• Net income attributable to equity shareholders of$10.9 million, or$0.07per share¹, up 134% compared to net income attributable to equity shareholders of$4.7 million, or$0.03per share in the prior year quarter;
• Sales of$39.7 million, up 13% compared to$35.3 millionin the prior year quarter;
• Gross margin of 50% compared with 45% in the prior year quarter;
• Cash flow from operations of$16.9 million, compared to$20.2 millionin the prior year quarter;
• Dividend of$1.7 million, or$0.01per share, paid to the equity shareholders;
• Ended the quarter with$102.1 millionin cash and cash equivalents and short-term investments, an increase of$5.6 millionor 6% compared to$96.5 millionas atMarch 31, 2017;
• Silver, lead, and zinc metals sold amounted to approximately 1.5 million ounces silver, 15.9 million pounds lead, and 5.0 million pounds zinc, down 8%, 5%, and 4%, respectively from the prior year quarter;
• Head grades were 304 grams per ton (g/t) for silver, 4.6% for lead, and 0.8% for zinc at the Ying Mining District, compared to 308 g/t for silver, 4.4% for lead and 1.1% for zinc in the prior year quarter;
• Total and cash mining costs per tonne ore²of$68.12and$50.29, respectively, compared to$68.70and$47.24in the prior year quarter;
• Cash cost per ounce of silver², net of by-product credits, of negative$3.57, compared to positive$0.08in the prior year quarter;
• All-in sustaining cost per ounce of silver², net of by-product credits, of$4.70, compared to$7.06in the prior year quarter; and,
• Realized a gain of$4.3 millionon the disposal of the Company’s 2.5% net smelter return (NSR) in the Silvertip mine.

FINANCIALS

Net income attributable to equity shareholders of the Companyin Q1 Fiscal 2018 was$10.9 million, or$0.07per share, compared to$4.7 million, or$0.03per share in Q1 Fiscal 2017.

The Company’s financial results in Q1 Fiscal 2018 were mainly impacted by the following: i) the increase of metal prices, as the realized selling price for silver, lead, and zinc increased by 5%, 35%, and 65%, compared to the prior year quarter; ii) a$4.3 milliongain on disposal of Silvertip Mine’s NSR; offset by i) a$1.6 millionforeign exchange loss, ii) less metals sold, and iii) a 3% increase in per tonne cash production costs.

Salesin Q1 Fiscal 2018 were$39.7 million, up 13% compared to$35.3 millionin the same quarter last year. Silver and gold sales represented$20.2 millionand$1.0 million, respectively, while base metals represented$18.5 millionof total sales compared to silver, gold and base metals sales of$20.8 million,$0.9 million, and$13.6 million, respectively, in the prior year quarter.

Cost of salesin Q1 Fiscal 2018 was$19.7 millioncompared to$19.5 millionin Q1 Fiscal 2017. The cost of sales included$14.1 million(Q1 Fiscal 2017 $14.2 million) production costs,$1.1 millionmineral resources tax (Q1 Fiscal 2017 $0.4 million), and$4.5 million(Q1 Fiscal 2017 $5.0 million) depreciation and amortization charges. The increase of mineral resources tax was mainly because the mineral resources tax was levied based on a certain percentage of sales in the current quarter while it was levied based on the tonnage of ore milled in the prior year quarter. The decrease of depreciation and amortization charges was mainly due to higher mineral reserves at the Ying Mining District as defined in the NI43-101 technical report released inFebruary 2017, resulting in lower depreciation and amortization charges per unit of metal production.

Gross profit marginin Q1 Fiscal 2018 improved to 50%, compared to 45% in Q1 Fiscal 2017. The improvement of gross profit margin was mainly due to the increase of metal prices. Ying Mining District’s gross margin was 56% compared to a 49% gross profit margin in the prior year quarter, while GC Mine’s profit margin was 30% compared to a 17% gross profit margin in the prior year.

General andadministrative expensesin Q1 Fiscal 2018 were$4.6 million, an increase of 4% or$0.2 million, compared to$4.4 millionin Q1 Fiscal 2017.

Gain on disposal of mineral rights and propertiesin Q1 Fiscal 2018 was$4.3 millioncompared to $nil in the prior year quarter, as the Company’s 2.5% NSR in the Silvertip mine was disposed in the current quarter.

Income tax expensesin Q1 Fiscal 2018 were$4.0 millioncompared to$2.8 millionin Q1 Fiscal 2017. The income tax expenses recorded in Q1 Fiscal 2018 included current income tax expenses of$3.2 million(Q1 Fiscal 2017 $0.7 million) and deferred income taxes expenses of$0.8 million(Q1 Fiscal 2017 $2.1 million).

Cash flows provided by operating activitiesin Q1 Fiscal 2018 were$16.9 million, a decrease of$3.2 millionor 16%, compared to$20.2 millionin the prior year quarter. Before changes in non-cash operating working capital, cash flows provided by operating activities in Q1 Fiscal 2018 were$14.8 million, a decrease of$0.7 millionor 5%, compared to$15.5 millionin the prior year quarter. The decrease in cash flow provided by operating activities is mainly due to$4.1 millionincome tax paid in the current quarter while net tax refunds of$0.1 millionwere received in the prior year quarter.

The Company also paid dividend of$1.7 million, or$0.01per share to the equity shareholders, and ended the quarter with$102.1 millionin cash and short-term investments, an increase of$5.6 millionor 6%, compared to$96.5 millionas atMarch 31, 2017.

Working capital as atJune 30, 2017was$80.7 million, an increase of$10.0 millionor 14%, compared to$70.7 millionworking capital as atMarch 31, 2017.

OPERATIONS AND DEVELOPMENT

In Q1 Fiscal 2018, the Company sold 1.5 million ounces of silver, 900 ounces of gold, 15.9 million pounds of lead, and 5.0 million pounds of zinc, compared to 1.6 million ounces of silver, 900 ounces of gold, 16.7 million pounds of lead, and 5.2 million pounds of zinc, respectively, in Q1 Fiscal 2017. The decrease of metals sold was mainly due to not all metals produced in the quarter being sold in the same quarter as the Company intentionally increased its concentrate inventory at the Ying Mining District. As atJune 30, 2017, lead concentrate inventory at the Ying Mining District was 4,050 tonnes, an increase of 1,757 tonnes, compared to 2,293 tonnes of lead concentrate inventory as atMarch 31, 2017.

In Q1 Fiscal 2018, the consolidated total mining costs and cash mining costs were$68.12and$50.29per tonne, compared to$68.70and$47.24per tonne, respectively, in Q1 Fiscal 2017. The increase in cash mining costs were mainly due to a$0.7 millionincrease in mining preparation costs resulting from more underground drilling and tunnelling expensed in the current quarter.

The consolidated total production costs and cash costs per ounce of silver, net of by-product credits, were negative$0.62and negative$3.57in Q1 Fiscal 2018 compared to$3.11and$0.08respectively, in the prior year quarter. The overall decrease in cash cost per ounce of silver, net of by-product credits, is mainly due to a 35% increase in by-product credits, mainly arising from 35% and 65% increase in lead and zinc net realized selling prices. Sales from lead and zinc accounted for 46% of the total sales and amounted to$18.1 million, an increase of$4.7 million, compared to$13.5 millionin the prior year quarter.

In Q1 Fiscal 2018, the consolidated all-in sustaining cost per ounce of silver, net of by-product credits, is$4.70compared to$7.06in Q1 Fiscal 2017, and the decrease is mainly due to the 35% increase in by-product credits.

1. Ying Mining District,Henan Province,China

In Q1 Fiscal 2018, the total ore mined at the Ying Mining District was 160,408 tonnes, a decrease of 8%, compared to 173,508 tonnes mined in the prior year quarter. The decrease was mainly due to additional downtime arising from several power down days due to power grid upgrade by State Grid Corporation ofChinaimpacting the TLP, LMW and LME mines and hoist maintenance and cable steel replacement at the SGX and HZG mines. Correspondingly, ore milled decreased by 2% to 164,959 tonnes from 167,747 tonnes in the prior year quarter. Head grades were 304 grams per ton (g/t) for silver, 4.6% for lead, and 0.8% for zinc, compared to 308 g/t for silver, 4.4% for lead and 1.1% for zinc in the prior year quarter.

In Q1 Fiscal 2018, the Ying Mining District sold approximately 1.3 million ounces silver, 13.8 million pounds lead, and 0.7 million pounds zinc, compared to 1.5 million ounces silver, 14.9 million pounds lead, and 1.8 million pounds of zinc in the prior year quarter. The decrease of metals sold at the Ying Mining District was mainly due to: i) a 2% decrease of ore milled; and ii) not all metals produced were sold in the same quarter as the Company intentionally increased its concentrate inventory at the Ying Mining District. As atJune 30, 2017, Ying Mining District had 4,050 tonnes of lead concentrate inventory and 980 tonnes of zinc concentrate inventory, an increase of 1,759 and 500 tonnes, respectively, compared to 2,293 tonnes of lead concentrate and 480 tonnes of zinc concentrate held as atMarch 31, 2017.

Total and cash mining costs per tonne at the Ying Mining District in Q1 Fiscal 2018 were$76.67and$54.78per tonne, respectively, compared to$78.64and$52.33per tonne in the prior year. The increase in cash mining costs was mainly due to a$0.3 millionincrease in mining preparation costs resulting from more underground drilling and tunnelling expensed in the current quarter. Total and cash milling costs per tonne at the Ying Mining District in Q1 Fiscal 2018 were$10.10and$8.07, a decrease of 18% and 20%, respectively, compared to$12.25and$10.07in Q1 Fiscal 2017. The decrease in cash milling costs was mainly due to the exclusion of mineral resources tax from milling costs.

Correspondingly, cash production cost per tonne of ore processed in Q1 Fiscal 2018 at the Ying Mining District was$66.93, an 1% increase compared to$66.27in the prior year due to the increase in per tonne cash mining offset by the decrease in per tonne milling costs as discussed above.

Cash cost per ounce of silver, net of by-product credits, in Q1 Fiscal 2018 at the Ying Mining District, was negative$2.97compared to$0.12in the prior year quarter. The improvement was mainly due to a$2.2 millionor 20% increase in by-product credits offset by the 1% increase in the per tonne cash production costs as discussed above.

All in sustaining costs per ounce of silver, net of by-product credits, in Q1 Fiscal 2018 at the Ying Mining District was$3.66compared to$5.80in the prior year quarter. The improvement was mainly due to lower cash cost per ounce of silver as discussed above.

In Q1 Fiscal 2018, approximately 31,064 m or$0.7 millionof underground diamond drilling (Fiscal Q1 2017 16,498 m or$0.4 million) and 5,337 m or$1.4 millionof preparation tunnelling (Fiscal Q1 2017 4,836 m or$1.4 million) were completed and expensed as mining preparation costs at the Ying Mining District. In addition, approximately 18,890 m or$5.2 millionof horizontal tunnel, raises and declines (Q1 Fiscal 2017 16,685 m or$4.9 million) were completed and capitalized.

2. GC Mine,Guangdong Province,China

In Q1 Fiscal 2018, the total ore mined at the GC Mine was 64,865 tonnes, comparable to 64,349 tonnes of mined in Q1 Fiscal 2017. Ore milled increased by 4% to 65,944 tonnes from 63,587 tonnes in the prior year quarter. Head grades were 98 g/t for silver, 1.6% for lead, and 2.7% for zinc compared to 99 g/t for silver, 1.5% for lead, and 2.9% for zinc in the prior year quarter.

In Q1 Fiscal 2018, GC Mine sold 189 thousand ounces of silver, 2.1 million pounds of lead, 4.2 million pounds of zinc compared to 149 thousand ounces of silver, 1.9 million pounds of lead, and 3.4 million pounds of zinc sold in the prior year.

Total and cash mining costs per tonne at the GC Mine in Q1 Fiscal 2018 were$46.99and$39.20per tonne, compared to$41.91and$33.50per tonne in Q1 Fiscal 2017. The increase in cash mining costs was mainly due to a 31% or$0.4 millionincrease in mining preparation costs resulting from more underground drilling and tunnelling expensed in the current quarter.

Total and cash milling costs per tonne at the GC Mine in Q1 Fiscal 2018 were$19.85and$16.73, compared to$18.81and$15.60, respectively, in Q1 Fiscal 2017. The slight increase in milling costs was mainly due to additional efforts in improving the milling recovery rates resulting in additional labor costs and material consumption.

The cash production costs per tonne of ore processed in Q1 Fiscal 2018 at the GC Mine increased to$55.93from$49.10in the prior year quarter.

Cash costs per ounce of silver, net of by-product credits, at the GC Mine, was negative$7.80compared to negative$0.28in the prior year quarter. The decrease was mainly due to$2.8 millionor 91% increase in by-product credits as a 40% and 66% increase in net realized lead and zinc selling prices and more lead and zinc metals sold at the GC Mine.

All in sustaining costs per ounce of silver, net of by-product credits, in Q1 Fiscal 2018 at the GC Mine was negative$2.48compared to$4.76in the prior year quarter as a 40% and 66% increase in net realized lead and zinc selling prices and more lead and zinc metals sold.

In Q1 Fiscal 2018, approximately 4,972 m or$0.3 millionof underground diamond drilling (Q1 Fiscal 2017 3,309 m or$0.2 million) and 5,292 m or$1.3 millionof tunnelling (Q1 Fiscal 2017 3,486 m or$1.0 million) were completed and expensed as mining preparation costs at the GC Mine. In addition, approximately 158 m or$0.1 millionof horizontal tunnel, raises and declines (Q1 Fiscal 2017 582 m or$0.2 million) were completed and capitalized.

Alex Zhang, P.Geo., Vice President, Exploration, 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 atwww.sedar.comand are also available on the Company’s website atwww.silvercorp.ca.All figures are inUnited Statesdollars unless otherwise stated.

About Silvercorp

Silvercorp is a low-cost silver-producing Canadian mining company with multiple mines inChina. 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 atwww.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 inChinaand 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 endedMarch 31, 2017under 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.

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