Value Microcaps Junior Miners

[dr_airtime]

USA.TO - case for a double in 2018

Edge - It'a silver producer...

...so i'll trade in and out of a core position since the sector is so volatile but starts aligned for a nice 2 year hold I think. Whenever the zinc market tops that will put a ceiling on the stock for a while. They will do 7.5M oz in 2018 so they are actually inching towards silver mid-tier status. I guess they officially get this with 2 mines.

EDV.TO has a CAD 375M MC with CAD 60M in cash for 315M EV and will do 8.75M Ag-Eq Oz in 2017 for CAD 36/oz

GPR.TO has a CAD 260M MC with CAD 60M in cash for 200M EV and will do 4.1M Ag-Eq Oz in 2017 for CAD 49/oz

Endeavour is one of the cheapest on an EV/Ag-Eq Oz production basis. This is supported by slide 11 from their presentation below (looks about USD 25-30 ballpark which aligns with my calc in CAD)

http://www.edrsilver.com/_resources/presentations/EDR_presentation_Sept_2017.pdf

**Slide 11 is really important to look at in context of my analysis below**

Endeavour is the cheapest @ CAD 36/Ag-Eq oz.

USA.TO will do 7.5M Ag-Eq oz in 2018 so that equates to an EV of CAD 270M @ CAD 36/Ag-Eq oz.

USA's cash will drop into December as they commission San Rafel. They have a Glencore CAD 20M (USD 15M) prepayment facility which is basically debt so this backs into an implied market cap of CAD 250M at the lowest end of the silver mid-tier producer valuations (**See the slide !!**) With America's low AISC they should trade at a premium to Endeavour. At GPM.TO's CAD 50/Ag-Eq oz that is a CAD 375M EV and CAD 355M MC.

USA.TO's current MC is CAD 195M @ 5.05 (TSX).

The target upside to trade in line with Endeavour is +25%

The target upside to trade in line with Great Panther is +80%

Endeavour and Great Panther are both high-AISC producers. Americas will the one of the the lowest AISC producers in 2018, if not the lowest (this was CEO's claim at Denver). As a result I expect +100% or another double from CAD 5.00 SP on TSX to CAD 10.00 in 2018.

We should get a double easy if silver actually moves higher. I expect Zinc too move up of course. Zinc may top in 2018. It topped in 2006 and then collapsed as fast as it went up. This is important to follow if you invest in USA.TO or EXN.TO. Their near-term fortunes are tied to zinc somewhat.

Sprott is also a big holder here. I think if do get a continuation of the gold bull (silver follows) they could do something here and try to put together Americas with another miner (Excellon, Great Panther, etc.). I'm not sure who their other big positions are. Sprott installed the management team of Americas and merged the former U.S. Silver with Scorpio Mining (Mexican assets) to form the now Americas Silver.