Silvercorp Metals (TSX: SVM) has suspended production at its Ying and GC operations in China after a sweeping safety crackdown across the country’s mining sector forced the company to bring its underground systems up to new standards.
The order traces back to a fatal coal mine accident in Shanxi Province in late May, which prompted China’s State Council and National Mine Safety Administration to extend tougher safety rules to the entire industry rather than coal alone. Provincial inspectors fanned out with unannounced night visits and underground spot checks at mines across the country.
A self-review at Silvercorp turned up areas at both mines that fell short of the updated requirements, and work was stopped while the gaps are closed.
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The company has engaged five certified vendors to complete China’s mandated “Six Major Safety Systems,” which span monitoring, personnel positioning, emergency refuge, self-rescue, water supply and communications, at the non-compliant mining levels. That work is expected to cost about US$5.5 million and take roughly 50 days. A separate round of facility and equipment upgrades, including a switch to halogen-free flame retardant cabling, adds another $6 million.
Regulators are letting production restart level by level as each one passes inspection, rather than holding the mines idle until all the work is done in an effort to reduce the impact on overall production as a result of the new rules.
Silvercorp expects output at the Ying Mining District to fall 40% to 50% during the July-to-September quarter, equal to roughly 37 to 46 of the period’s 92 days, while GC sees a reduction of about 50%, or close to 46 days. For the current quarter, the company anticipates a 10% to 15% hit, the equivalent of about 9 to 14 days.
The timing complicates guidance set in April, when Silvercorp targeted 6.8 million to 7.1 million ounces of silver in fiscal 2027. No indication was provided in terms of the overall impact to guidance for the year.
Silvercorp Metals last traded at $15.48 on the TSX.
