Silvercrest Mines Inc (SVL)

[investor15]

Profiting from Silver Mining in the Age of Resource Nationalism: Sean Rakhimov

Source: Brian Sylvester of The Gold Report (10/26/12)

"In the smaller companies, one of the companies I like a lot is SilverCrest Mines Inc. (SVL:TSX.V; SVLC:NYSE.MKT). This is a company that I've followed for a very long time and is another company that was victimized by resource nationalism. It had a major silver project in El Salvador years back, but the government wouldn't let the company develop it.

So SilverCrest came to Mexico and got back to work. Since then it made a discovery, built a mine and that mine is now in production. SilverCrest is making about $3 million (M) a month at current metal prices.

TGR: Do you think that that's fully priced into the stock?

SR: That may be fully priced into the stock. That's hard to call mainly because the price of the metal moves and that changes the bottom line on a weekly basis, or what the bottom line would be based on that price.

TGR: Are you getting the La Joya exploration potential for free with that?

SR: Absolutely. I believe that the expansion of the Santa Elena mine to go underground and to build a mill is not priced in. Granted it is at least a year away for that expansion to come on-line, but I believe the current plan is to finance that mill out of cash flow. I don't think the expansion is priced in because that would take them toward about 5 million ounce (Moz) silver production, on par with a company like Aurcana Corporation (AUN:TSX.V; AUNFF:OTCQX) that is trading something like $400–600M in market cap. Another company in that range is Fortuna Silver Mines Inc. (FSM:NYSE; FVI:TSX; FVI:BVL; F4S:FSE), although Fortuna has a base metal segment to it.

There's certainly room for growing the valuation of SilverCrest based on that expansion and because the La Joya project is going to be very big. The company already has about a 100 Moz silver equivalent, the equivalent coming half from gold and half from copper. So 75% of value is in precious metals, between silver and gold. I believe it should come out with a new resource calculation sometime this year, which I expect to significantly increase the overall resource. I believe SilverCrest is getting no value for La Joya, which is common for producing companies. They get very little value for assets that are not in production once a company is valued on a cash-flow basis. "

http://www.theaureport.com/pub/na/14646