Part 3 of 5 - Speedy;s Top Silver Picks 2012
Silvercrest mines - This has been an excellent story for investors of more than 1 year, yet the story is just now unfoding. Silvercrest is no one trick pony with it;s only currently operating asset in the St. Elena open pit. It has began a multi-phase phase-expansion, outling below.
· 2012 Phase 1 – Increase the current run rate of 1,650 tpd to 2,500 tpd, increasing annual AgEq production from 1.6m Oz. to 2.6m Oz Production for 2012 forecast at 2m AgEq and 2.6m in 2013.
· Phase 2-5 – Installation of a CDC processing facility, increasing mill throughput 52% [construct 3,000 - 3,500 tpd conventional mill], increasing production to 5m Ageq in 2014 and 5.75m in 2015. [Will begin feeding new mill from open pit and U/G late 2013/early 2014].
· Phase 2 – Development of an underground mine [beggining early 2013]
With approximately 30m of cash in the bank, and incremental production growth from 2012-2016, it is likely everything can be funded from OCF. Sandstorm gold does own a 20% stream on St. Elena and has the option to receive 20% of the U/G production BUT will be responsible for 20% of the capital requirements.
While not a low cash-cost producer, expect LOM cash costs are reasonable at $9.50/Oz. On a valuation basis Silvercrest is one of the cheapest out there, especially given its 100m oz resource at its La Joya mine. If metal prices cotninue to move higher, there is a very realistic chance, La Joya can be brought online in the next 3-5 years without having to turn to the market for funding. While its best to remain conservative it terms of appraisal at this point in time, my personal take is that come 2016 - Silvercrest becomes a 7-8m oz producer and 10m oz by 2017.
Trading for a mere 200m market cap while assuming, Silvercrest's valuation for Just St.Elena alone using a 10% discount rate $32.50 Ag and $1600 Au, a $6 2-3 price target is very reasonable. Investors should begin a position here and hope it can pull back below $2, though it looks unlikely given the momentum gained after >400% increase in resources.