Al's Insights – Fri 13 Jul, 2012

SilverCrest Mines significantly undervalued

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Al KorelinScott Drever

  1. On July 13, 2012 at 12:06 pm,
    Mark Alan says:

    I don’t disagree with this analysis one bit! However, the bond markets are ALWAYS right versus the conventional markets. With that in mind, too many people are still way too scared to step in. Silvercrest Mines is a prime example of a company that one may want to put on his/her shopping list. But there is STILL, A VERY GOOD CHANCE FOR LOWER PRICES OVER THE NEXT SIX TO EIGHT WEEKS. This company is one that will rocket hire because it is not only an explorer but a producer and that creates cash flow. Take a nibble if you want, I’m keeping my powder dry.

    stay frosty and thanks for the great update Big Al! Enjoy the weekend 😉

  2. On July 13, 2012 at 1:01 pm,
    Jim Richmond says:

    Known these folks for sometime. I’m a shareholder. Startup bumps seem past and cash costs low. If a junior company is producing in N. America and NOT just starting up, I am interested. MINE Startups always take longer and present challenges to maintain a schedule, especially for a new miner. Good job Scott.

  3. On July 13, 2012 at 1:27 pm,
    Robert says:

    Been a shareholder for a couple years now.
    35mil in the bank, 2.5mil cash flow per month, only 90mil shares, low cost producer etc, etc. At what point does a more senior producer say that’s to cheap to pass on?

  4. On July 13, 2012 at 1:27 pm,
    going down fast says:

    Silvercrest Mines is a very solid and well-run company. It has many of the characteristics that we all look for when investing in natural resources companies.

    They have cash flow of about $2.5 million per month, a growth profile brought about by a mill expansion, an aggressive exploration program and a management team that is mindful of the detrimental effect of share dilution (currently have 90 million shares outstanding).

    They have another property (also in Mexico) where they are growing the resource and a reasonable expectation would be for similar execution by the management team. Also, Mexico happens to be one of those jurisdictions that is still mining friendly.

  5. On July 13, 2012 at 2:48 pm,
    John W. Robertson says:

    I just ran some quick numbers. Based on $25 silver and $1,500 gold, and the 6.5 year current mine life and with current reserves, the net earnings should conservatively put the company around $2.25/sh. However, Santa Elena production is slated to double starting in 2013/2014. Then there’s the 51 million inferred ounces of silver and 333,000 oz of inferred gold in the La Joya exploration.

    Short version, you get an easy $5/share valuation based on $15/oz net revenue from mined silver (or in other words, a generous $10/oz mine cost per oz, based on $25 silver). If they actually mine La Joya, or it metals go up in price, the potential is a lot higher.

    This is definitely one of those 1-in-1,000 companies we were talking about two days ago here on the blog. Costs are reasonable, throwing off enough excess money today to fund their own exploration, and current exploration occurring in known, historic producing areas. And in mining-favorable regions of a mining-favorable country. I haven’t done enough of a “con” analysis, although the cost per mined-ounce of gold is a little high I think, but this is primarily a silver operation. However, my long term view on gold is quite a bit higher than the $1,500/oz base case I’m using (SilverCrest uses $1,600/oz as their highest case, to their credit…they can make money all the way down to $800 gold). Great company.

    SVL.V has nice shorter-term support at $1.58/share, but is still within a mid-term downtrend. It’s “on schedule” to bounce off or go through 1.58 around the second week of August, if you follow the downtrend slope. We’ll soon see.

  6. On July 13, 2012 at 7:58 pm,
    Marc says:

    John W.,
    Thanks for the analysis….great learning tool you provided. I had some good insight on this company as a junior and producer. Great “little” company. Thanks again, John W.

    • On July 13, 2012 at 10:04 pm,
      John W. Robertson says:

      Hey, no problem Marc. Always remain wary of black swans. For now, it’s hard to see what one would be for this company, other than the price of the metals themselves dropping for a prolonged period of time, and I don’t currently see how that could happen.