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Why Silvercorp Metals Inc. Shares Sank

By Brian D. Pacampara, CFA – Feb 15, 2014 at 2:00PM

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Is this meaningful or just another movement?

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of silver miner Silvercorp Metals (NYSE: SVM) plunged 12% yesterday after its quarterly results disappointed Wall Street.

So what: The stock has been on a roller coaster over the past year on volatile silver prices, and today's third-quarter results -- earnings per share of $0.01 versus $0.03 in the year-ago period as sales plunged 60% to $24 million -- aren't exactly giving shareholders peace of mind. In addition to low silver prices, management cited several factors at its Ying Mining District project for the disappointing production, giving short-term-oriented investors very little reason to stick around.

Now what: Management conducted a comprehensive review in order to turn its Ying Mining District operations around. "[A] series of improvements covering all aspects of operations, including mine planning and strategy, contractor compensation methods, quality control, and a performance-based (linked to tonnage and grade) compensation package for mine management, were enacted," Silvercorp reassured investors. "In the next quarter, the Company will monitor the effects of the new improvements and expect to be in a position to provide normalized production guidance for the Ying Mining District when we release our quarterly results in May." More important, with Silvercorp continuing to sport a rock-solid balance sheet and beaten-down stock price, the downside might be limited enough to bet on that expectation. 

Brian Pacampara and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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