Silvercorp Metals has reported a significant reduction in net income for the final 2013 fiscal quarter compared to the corresponding 2012 quarter. The company cites higher production costs, lower metal prices and falling metal output for the 34% drop which will result in the annual income reducing by half to $37 million.

Silvercorp’s chief executive officer Rui Feng says pressure on profits came from several directions. “In an overview of our year-end results, base metal production fell from 17.6 million pounds lead and zinc a year ago to 11.7 million pounds lead and zinc in the latest quarter.

“Meantime, we reported lower head grades for silver, dropping to 205 grams/tonne silver in the fourth quarter this year, down from 275 grams/tonne silver a year ago and 222 grams/tonne silver in the quarter previous.”

The declining silver grade was offset, in part, by an increase in ore tonnage from the same quarter a year ago, up 11% to 172,657 tonnes. While Silvercorp tonnage increased in the fourth quarter, silver production fell nonetheless, down to 940,000 ounces from 1.1 million ounces a year ago.

The worsening production metrics took their toll on Silvercorp’s cash costs. After by-product credits for base metals, total cash costs jumped to $5.82 per ounce silver from negative $1.82 a year ago and $1.52 per ounce in the quarter previous.

Drawn out contract renegotiations also exacerbated the situation for Silvercorp, slowing a transition in mining methods to more shrinkage stoping. Cash mining costs per tonne jumped to $57.71 from $53.40 a year ago and $50.98 in the quarter previous.

Despite these results, Silvercorp has maintained its production guidance for 2014 at 6.7 million ounces silver, 20,800 ounces gold and 105 million pounds lead and zinc.

Last August the company updated the resource estimate at its BYP mine in China’s Hunan province to an indicated 10.84 million tonnes for a contained 292,000 ounces of gold, 84,821 tonnes of lead and 185,000 tonnes of zinc, and a further inferred 10 million tonnes of gold and lead-zinc averaging 1.84 grams/tonne gold, 0.85% lead and 2.75% zinc.

Production commenced in 2011 at the BYP mine, which is Silvercorp’s second Chinese project after the flagship Ying silver project.