3 Silver Miners for the next 3-5 years
While the silver arena has very few quality companies relative to the total amoun of companies in the space, if you are able to identify them and the price is right, the potential returns are extremely lucrative. While a solid mining portfolio (Ag/Au) includes owning the likes of companies which come as close as possible ensuring solid 3-5 year returns (i.e Yamana, Silver Wheaton, Royal Gold, Goldcorp, Sandstorm and the like), an ideal portfolio also includes companies which have 5-10x+ potential returns in a 3-5 year time horizon. The following are some of the latter:
3) Alexco Resources ~ This extremely high grade Canadian Silver producer is ready to enter a long term growth spurt over the next 5 years, after being penalized for a 18m of rather stagnant output.
* Two new mines (Onek and Lucky Queen will commence commerical production in late Q4 or early Q1 2013, depending on how quickly it receives the neccessary permits. Lucky queen, per its resource estimate will have an average grade of 1,200 g/t or 300 g/t higher than Bellekeno, while Onek will add significant byproduct credits, lowering overall cash costs per ouce. The current mill feed will increase to capacity of 500 tpd, increasing production to approximately 3.2-3.5m+ Ag, depending on the mill feed contributed by each mine. Alexco will begin to generate much more significant OCF and have enough capital for exploration and development of Silver King, Elsa, Bermingham & Flama & Moth as well as the ability to increase mill capacity beyond 500 tpd. Silver King is forecast to then come online the following year, in the 1st half of 2014, which is Alexco;s highest grade deposit, grading over 1,350 g/t per its resource estimate.
By 2015, Alexco will likely be able to reach 5m Ag or higher, depending on mine and mill optimization projects. While commerical production from Flame & Moth, Elsa and Bermingham is unknown at this point in time, Elsa ,Flame and Moth and potentially Bermingham should come-online in 2015-2016, which should propel Alexco;s production profile to 8m-10m+ Oz Ag by 2016 or 2017 +/-
2) SantaCruz Silver ~ This soon to be Ag producer is rather unknown to most as it went public not to long ago. It was put toghether through the acquisiton of 3 advanced stage mines, all of which had either a resource estimate or significant exploration by past companies. This doesn;t say anything about the quality as this was done by the likes of much bigger companies such as Fresnillo, Hochschild and Buenaventura, which considered these mines too small to pursue. Currently trading under a 60m market cap, there is 5-10 bagger potential over a 3-5 year time period.
Rosario) Rosario is set to commence production in early Q1, with all permits in place and nearly fully developed. While it isn;t a high grade silver mine (Approx 190 g/t), it also has over 1 g/t Au, 3% Zn and 1.385 Pb, thus the 500 tpd mill will be able to produce 2.2m AgEq at < $7/Oz. This will ramp up rather slowly, 150-200 tpd in Yr 1, 300-350 tpd in Yr 2 and 500 tpd in Yr 3. While the slow ramp up period will likely take longer for the company to get a full revaluation, San Felipe will reach commercial production in Q3-Q4 of 2013.
San Felipe) As mentioned above, this mine will also come on-line in 2013, giving SantaCruz a much more attractive growth profile. Current mill capacity at San Felipe is 1,500 tpd but the average Ag grade is only projected to be 107 g/t, however, like Rosario, it also has significant byproduct credits with > 7% Zn and nearly 2% Pb. This should keep cash costs around $8 +/-/Oz. Assuming a 85% recoery rate, San Felipe will be able to produce an additional 1.5m Oz Ag at capacity. Its third project is Gavilanes, which is also an advanced stage development project, will enable Santa Cruz to become a 6m+ Oz Ag producer within 5 years.
Gavilanes ~ A high grade silver deposit with exceptional upside potential will make SantaCruz a very profitable company and should also make SantaCruz a market favorite as it will have an exceptional production growth profile with regards to having near-mid & long term production growth. Historical resource estimates show an average grade of 320 g/t, while surface samples have shown 1,100 g/t Ag and 4 g/t Au. Development should begin in 2-2.5 year and reach production in 3-3.5 years. Although a current mill is installed, capacity is just 120 tpd.
Production Estimates) 2013~ 700,000 Ag/ 2014~ 2m-2.2m Ag/ 2015) 3.2m-3.5m/ 2016) 4.2m-4.5m 2017)5.2m-5.5m+
1) Huldra Silver ) This is another rather unknown story and like Alexco, is another exceptionally high grade silver mine. Huldra has been around since the 80's and production halted due to low silver prices. Huldra resumed exploration in the early 2000's, however, it was not until 2010, when current CEO, Ryan Sharpe came onboard, did Huldra begin to pick up steam and resume production. The mill be be commissioned on Aug 7th, with commerical production to begin in late Q4-Q1. Huldra purchased the Merrit property to fast track production as well as receiving a small mine permit, which will prove to be very smart, avoiding what would be significant share dilution. It has an exceptional capital structure in terms of share structure, having just over 40m FD.
The Merrit property also has copper deposits, which will be explored and then spun-off either as its own company as the CEO wants Huldra to be as pure of a Ag producer as possible. These "special situations", for the most part, unlock moderate to signifcant value for shareholders. Huldra is approximately 25% finished with the 2nd of 3 stopes at Treasure Mountain. It is expected to be finished by the end of August, while the 3rd stope, which connects the two, will be complete by mid October. Huldra will be able to ramp up production, reaching capacity very quickly. My guess is Huldra will apply for a normal mine permit once management feels operations are running smoothly. There are numerous potential very high quality deposits, 4 of which have been identified. I;m also guessing by 2015-2016, a 500-600 tpd throughput will be possible, allowing Huldra to become a 5-6m Oz or at least come close.
The average grade is in excess of 1,000 g/t but numerous anamolies of 3,000 - 10,000 g/t have been seen. Cash Costs are projected to be $3.50/Oz.
Production (Estimate) ~ 2013~ 1.2m Oz Ag/ 2014) 1.8m Oz./ 2015~ 2.1m Oz/ 2016 ~ 3.5m Oz./ 2017~ 5m Oz+