Silvercorp Metals: Can Production Gains Outpace Rising Costs in 2026?

Silvercorp Metals (TSX:SVM) has positioned itself as a key player in the base and precious metals sector, with ambitious production targets and expansion plans for fiscal 2026. As the company aims to boost output of gold, silver, lead, and zinc while navigating rising costs, investors must assess whether its strategic initiatives can deliver sustainable value. Let's dissect the opportunities and challenges ahead.

Production Expansion: A Multi-Metal Play

Silvercorp's fiscal 2026 guidance highlights a focus on gold and zinc, where production is expected to surge by up to 39% and 30%, respectively. This shift underscores a strategic pivot to higher-margin metals. At the Ying Mining District, gold production could jump to 10,400 ounces, leveraging the district's high-grade ore deposits. Meanwhile, the GC Mine will drive silver and lead growth, with production increases of 12–24%.

The Kuanping Project, now in its construction phase, adds another layer of potential. With permits secured and site preparation underway, this project could become a new revenue stream by the late 2020s. Additionally, Ecuador operations—though details remain sparse—are a wildcard that could expand Silvercorp's geographic diversification.

Cost Management: Balancing Growth and Expenses

While production growth is promising, costs are rising, complicating the profit picture. The All-In Sustaining Costs (AISC) for the Ying Mining District are projected to hit $157.8–160.5 per tonne, a 7% increase from fiscal 2025. This reflects a new 2.3% mineral royalty in China and higher capital spending on exploration tunnels and equipment. At the GC Mine, AISC is expected to rise by 19% to $90.9–92.6 per tonne, driven by expanded tunneling for future development.

The company's cash costs also face pressure: the GC Mine's costs are projected to jump 18% to $60.3–60.8 per tonne, while consolidated cash costs rise to $80.7–82.1 per tonne. These figures highlight a trade-off—investing in growth today may dampen short-term margins but could pay off if production targets are met.

The Investment Thesis: Growth vs. Cost Headwinds

Silvercorp's strategy hinges on two assumptions:
1. Commodity Prices Remain Stable or Rise: With zinc prices near 18-month lows and silver underperforming gold, the company's higher zinc output could be a double-edged sword.
2. Operational Execution: Meeting production targets while managing costs will require flawless execution, particularly at the GC Mine, where past declines in silver and lead production (2% and 23% in fiscal 2025) suggest room for improvement.

The Kuanping Project also carries risk. While its capital budget is modest ($3.9 million), delays or cost overruns could strain liquidity. Meanwhile, the Ecuador venture's lack of detail raises questions about its timeline and feasibility.

Investment Advice: A Cautious Optimism Play

Silvercorp's stock has underperformed peers this year, down 12% YTD as of July 2025, reflecting investor skepticism about its cost trajectory. However, if commodity prices stabilize and production ramps up as planned, the company could see a valuation rebound.

Buy Recommendation: Consider a position if SVM trades below $1.80/share, with a focus on zinc price recovery and cost-control updates.

Hold Recommendation: Investors should monitor Q3 2026 production metrics and cost trends before committing.

Final Thoughts

Silvercorp's fiscal 2026 targets are bold, but the path to profitability is fraught with execution risks. The company's ability to manage rising costs while expanding production will determine whether it becomes a long-term winner in the metals space—or a cautionary tale of overreach. For now, investors should proceed with caution, keeping a close eye on cost updates and commodity price movements.

Disclaimer: This analysis is for informational purposes only and should not be considered financial advice. Always conduct thorough research before making investment decisions.