China’s Mineral Resource law, established in 1997, allows foreign miners to seek exploration and mining permits through joint ventures with Chinese companies. The application process includes geological reports and title appraisals such as the Environmental Impact Studies, Geological Hazard Studies, and Labour Safety Review reports.
Being successful in China requires more than just working within the regulatory framework: a good grasp of its cultural standards and norms is necessary to communicate effectively with local authorities and communities and resolve potential problems—a Silvercorp advantage, given our seasoned management team with decades of business experience in the country.
Silvercorp is the largest domestic primary silver producer in China, the third largest silver-producing country in the world. Most other primary producers in the country are small-scale operations run by local Chinese companies and are therefore difficult for the government to regulate, providing Silvercorp the opportunity to consolidate the mines in the Ying district.
There is always a risk of repatriation when operating under a global jurisdiction. This has not, however, affected foreign mining companies in the past, and the strong relationships we’ve built with our Chinese partners since 2004 combined with China’s continued growth in overseas investments allow us to operate with confidence.
We pay a 25% income tax, a 2% resources tax, a 13% VAT on concentrate sales, and a VAT surtax amounting to approximately 1.6% of sales. China does not require a Value Added Tax (VAT) on labour or services, and the 13% VAT paid on materials purchased for mining is refunded as an incentive to mine. As a foreign company, we are exempt from other taxes such as business, city construction, and school taxes. Further information is available in our Annual Information Form as well as in our most recent Financial Statements and Management Discussion and Analysis.
Silvercorp produces clean, high-grade silver-lead and zinc concentrates at Ying and GC through standard flotation mills that are then purchased by local smelters. The payable prices for the metals depend on the spot prices on the Shanghai Metal Exchange minus smelter charges.
Each quarter, we reconcile the spot metal price and the price realized after smelter charges and VAT in our Management Discussion and Analysis.
Operations at Ying strictly adhere to Chinese health and safety regulations. The Occupational Health and Safety (OHS) department provides safety training, enforces OHS policies, and carries out daily inspections of underground workings and explosive usages. Each mine maintains a ten-person safety committee led by the Henan Found general manager and including the deputy general manager, mine manager, safety department supervisor, and mining contractor representatives. Mine management and safety officers must obtain valid mine safety training certificates issued by the Provincial Bureau of Safe Production and Inspection.
Furthermore, Silvercorp requires each mining contractor to appoint 1-2 safety officers and provides contract workers with safety training; violations of safety regulations may be fined.
Silvercorp plans to grow in several ways:
Exploration – Exploration of targets at and around our mines. By leveraging existing mining infrastructure, these “low-hanging fruit” can be fast-tracked into development / production.
Capital Investment – Construction of a new 3,000 tpd flotation mill and 19.1 million cubic metres tailings storage facility at Ying to continue growing the hub-and-spoke operation.
Tuck-in Acquisition – Regional consolidation of prospective land parcels hosting potential satellite deposits (e.g., KP project north of Ying).
Transformational M&A – Continuing the global hunt for a precious or base metal project that can be brought into production quickly by leveraging our technical expertise and financial assets (e.g., our cash-rich, debt-free balance sheet).