Earnings Transcript for SVM - Q1 Fiscal Year 2013

Executives: Jonathan Hackshaw Rui Feng - Chairman and Chief Executive Officer

Analysts: Alexandra Syrnyk - BMO Capital Markets Canada Brad Humphrey - Raymond James Ltd., Research Division

Operator: Good morning. My name is Gail, and I will be your operator today. At this time, I would like to welcome everyone to Silvercorp Metals Incorporated Fiscal 2013 First Quarter Analyst Conference Call. [Operator Instructions] It is now my pleasure to turn the floor over to your host, Mr. Jonathan Hackshaw, Investor Relations Director of Silvercorp Metal Incorporated. Sir, you may begin your conference.

Jonathan Hackshaw: Thank you, operator, and good morning, everyone. Welcome to Silvercorp's analyst conference call for the first quarter of fiscal 2013. Joining me today on the call are

Operator: [Operator Instructions] And we'll go to the line of Alex Syrnyk with BMO Capital Markets.

Alexandra Syrnyk - BMO Capital Markets Canada: I just have a question regarding the costs side. The comments were mentioned that quarter-over-quarter costs improved. Are you seeing a stabilization in some of that labor cost inflation that had been experienced in over the past year or so?

Rui Feng: Okay. This is Rui, a very good question. I think [indiscernible] in terms of our labor costs escalation increase, right?

Unknown Executive: And then to add what Rui just said is the increase is partially because the benefits, the Social Security are in before, we don't have the requirements to give everybody the social security starting this year. We, basically, gave everybody the full Social Security. That's the reason that's why the cost has increased, which hasn't been done already.

Alexandra Syrnyk - BMO Capital Markets Canada: Okay, great. And then in terms of the grades at SG or in the Ying Mining District. A lot of that grade or miners saying is that grade issue was predominately at SGX? And then as well, would you like to comment on the grades at BYP? Because I noticed that they've kind of come down as well and your outlook for them for this year seems to have come down.

Rui Feng: I think it might be greater would be, we used to have a guidance for like 3 grams.

Unknown Executive: 3 grams. Right now, it's around the 2 points [ph].

Rui Feng: 2.5, 2.6, 2.6 grams. No, 2.5, 2.6 grams is [indiscernible].

Alexandra Syrnyk - BMO Capital Markets Canada: Okay. But during the quarter, they were lower there at 2.2 or something, so they've come up a bit?

Rui Feng: Yes.

Operator: [Operator Instructions] And we'll go to the line of Karen Sanderhulg [ph] with Commodity Fund.

Unknown Analyst: I have just a few questions. I was wondering why do you deduct the VAT charges from your silver sales? And I was also wondering how you get -- your reports, the realized silver price. You subtract the VAT charges from that? I was wondering why you do that? I'm not sure, I haven't seen that before.

Unknown Executive: So basically, we exclude VAT from our recorded sales already. It's -- it does not work.

Rui Feng: Okay, let me answer this question. When we do ourselves, we have signed contract. The contract price is based on Shanghai, silver exchange price, which including VAT. So for the VAT is a wash and so the government will take a VAT net like you do to the sales. You take away the VAT and deduct all of VAT credits and then by a different way, you have to pay 100% to commerce [ph].So the VAT is a wash. The reason we deduct that is because when you pull the project in Shanghai, silver expense, the price include the VAT.

Operator: We'll go to the line of Brad Humphrey with Raymond James.

Brad Humphrey - Raymond James Ltd., Research Division: Just a couple of quick questions. I know you're not going to be giving us the SGX on its own anymore. But just out of curiosity, could you tell us what the grade was at SGX in the quarter?

Rui Feng: This quarter, last quarter?

Brad Humphrey - Raymond James Ltd., Research Division: Yes, the past quarter.

Unknown Executive: For the first quarter.

Rui Feng: It was -- around 295 or 300 grams.

Brad Humphrey - Raymond James Ltd., Research Division: Okay. And so we expect it to improve over the rest of the year. Is that going to be gradual, or should we expect the same kind of grade for Ying in the second quarter as we saw in the first quarter?

Rui Feng: Yes, I think the second quarter will be probably kind of the same as the first quarter. And then the third quarter were started to come, right?

Brad Humphrey - Raymond James Ltd., Research Division: And then it'll average out to some around 250?

Rui Feng: Yes, yes. And hopefully after that, the grade will fall out of schedule, the 43-101 report, which is for the whole district, it will be around 295, 300 grams, 300 grams ahead of grade.

Brad Humphrey - Raymond James Ltd., Research Division: Perfect. And any idea about the timing on that Silvertip Small Mines permit?

Rui Feng: The timing is tough because the Canadian engineer take a long time to finish that report for submission. So we're almost finished at publication, right?

Brad Humphrey - Raymond James Ltd., Research Division: Right. But it hasn't been submitted?

Rui Feng: I think we have submitted, yes. Again, the government changed the regulation. Before that format is quite simple. And I think early this year, you needed to recycle 30 grams or 95, within the design, engineering design. And therefore, we'll have to redo a lot of new design. Because at the time, last year the market was not like that.

Operator: We have no further questions at this time.

Jonathan Hackshaw: Okay. Thank you, operator. To wrap up, I'd like to thank you again for joining us for today's conference call. We look forward to reporting to you again when we release our results for the second quarter of fiscal 2013 in November. So thank you very much and wishing you all a very enjoyable long weekend in Canada.

Operator: And ladies and gentlemen, that does conclude your conference for today. Thank you for your participation and for using AT&T Executive Teleconference Service. You may now disconnect.