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speedybure (< 20)

Silver Standard Resources - You Should Buy It Even If You Thought Bankruptsy Would Occur

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July 27, 2009 – Comments (5) | RELATED TICKERS: SSRI , SLV , SLW

Not that I think Silver Standard has any possibility of bankruptsy, but using this extreme example helps put the risk/reward trade-off into perspective.

Some Quicks Facts:

Enterprise Value ( Market Cap Plus Cash Less Debt) - 1.38 Billion

Total Silver Resources absent bi-products - 1.8 Billion Ounces

Total Gold Resources - 23m Ounces

They also have 2 mines that will engage in pre-feasibiity studies and another which will follow suit in 2010 or 2011.

Bankruptsy Scenario 1) - Supposing they went under at the end of 2009 , Resources will be approx 2 Billion ounces and Gold 25m Ounces. Due to over 200 million ounces of proven reserves lets assume these mines would sell for 20% per ounce of reserves ( in liquidation phase ). This would go to equity holders due to the fact they are net cash positive, so a rough estimate of the enterprise value after these assets were all sold off. This would thus equate to 360 million ounces of silver and 5m ounces of gold and for simplicity sake, assume their other mining assets had a NAV of 0. So if we assume the long term silver price is $10 ( To keep it simple ) and gold at $600, the Enterprise Value would equal 400m * 10 = 4 Billion + 5m * 600 = 300 Million = 4.3 Billion or more than a 3 bagger.

Okay, Now lets assume the previous scenario was far to aggressive and instead, each ounce of reserves was sold off at 10% ( again with 200m+ of proven reserves), The EV would still be 2.15 Billion. If you now assume these are aggresive estimates, and you thought 5% was more appropriate. In this case you would break about even, maybe slightly below.

Another way to look at this woud be that in order to break-even at the current market price, each ounce of resources would have to be bough at approx .50 cents per ounces os silver resource ( again these are not just measured and inferred but proven) and $380 per ounce of gold.

5 Comments – Post Your Own

#1) On July 27, 2009 at 9:39 PM, portefeuille (99.60) wrote:

Enterprise Value ( Market Cap Plus Cash Less Debt)

Enterprise Value ( Market Cap Minus Cash Plus Debt)

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#2) On July 27, 2009 at 9:43 PM, speedybure (< 20) wrote:

my mistake - didn't catch that

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#3) On August 01, 2009 at 5:24 PM, silverincite (48.68) wrote:

Lots of resources in good places. I've been looking on their website to find out when to expect production from their other mines. Which one do you think will come online after Pirquitas?

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#4) On August 04, 2009 at 2:57 AM, speedybure (< 20) wrote:

I don't know exactly, I got a email back from mgmt/investor relations asking them that question. I'll read it and get back to you in a half or so. I wish someone like a silver wheaton would come along and give them additional financing to progress their pipeline to production stages. I actually got an email back from SLW last week sometime and they definitely hinted an aquisition was in the works. My best guess would be with TECH'S Alaksan mine on the Silver Belt or more Ideally, with Silver Standard. Slw has 400m in available financning and if they diluted the shares to purchase streams like silverstone, that is fine by me as it more than makes up for the dilution.

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#5) On August 05, 2009 at 12:07 AM, silverincite (48.68) wrote:

I am very intrigued by SSRI's huge resources but the unknown production of said resources makes me tend more towards SLW.

Now if the 2 partnered together in a deal to bring along the Pitarrilla Project online faster that would be great!

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