Scorpio Gold Corp. (SRCRF)

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CymorStockPicks: Scorpio Mining (SPM:TSX) – A Cash Cow at a Great Price

http://www.munknee.com/2013/05/cymorstockpicks-scorpio-mining-spmtsx-a-cash-cow-at-a-great-price/

Scorpio continues with good news and as production continues to improve andsilver increase, and with the price of silver beginning to stabilize with upward pressure, now is the time to add or continue to hold Scorpio in your portfolio. The company is a “cash cow” and is great value at the current price.

So writes Larry Cyna (www.Cymorfund.com) in edited excerpts from his 2 original articles as posted under the titles Cymor Stock Picks – Scorpio Mining Corporation (SPM)* and CymorStockPicks: Buy Scorpio (SPM) - Updated from Feb 8/13**. Comments or questions are welcome. Email Larry at [e-mail]
[The following article is presented by Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com and www.munKNEE.com and may have been edited ([ ]), abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. This paragraph must be included in any article re-posting to avoid copyright infringement.]

Cyna goes on to say in further edited excerpts:

*Scorpio Mining Corporation (SPM:TSX) is an exploration and mining company (primarily silver) listed on the Toronto Stock Exchange, with operations in central Mexico including a producing mine – the Nuestra Senora Mine company – and a number of excellent prospects.

At a cut-off of 60 g/t, the 2012 43-101 resource estimate showed an average value (net of equivalents – being the value of other minerals realized in the operations) of 180 g/t silver or roughly $155 of silver in each ton of rock. This is very valuable. The resource showed roughly 2,400,000 tonnes of Silver and Silver Equivalent in Measured and Indicated and an additional almost equal amount in Inferred Resources. This is a major deposit, and proper mining operations should yield a very profitable company.

Company Turnaround

The company was not managed to its potential after the resource and mine were established, with costs being too high, and silver recovery being too low. Efforts were slow to confirm an expanded resource and other nearby potential resources on lands owned or controlled by the company.

The company, recognizing that it had to correct matters, went through a number of publicized changes and, most recently, changed its CEO, reinstalling one of the founders (Peter Hawley) as “Interim” CEO. Upon his re-appointment changes were implemented and a significant effort was put into straightening out the mining operations resulting in vastly improved metal recovery and a significant decrease in the cost per ounce of silver produced. Cash flow was also utilized to explore and put into production excellent additional resources already owned by the company. One of those other resources is expected to actually go into production this year, which should result in a substantial increase in metal production.

Most Recent Financials

Looking at the most recent published financials, Scorpio Mining announced the results of its 3rd quarter operations (3 months) with both a positive cash flow and an EBITDA of approximately $2,800,000. This is a significant improvement over previous periods, and the company boldly states that operations will continue to be improved. On an annualized basis, even at this level, this is a cash cow with an expected annual cash flow exceeding $11,000,000 – but the story gets much better.

Major Potential

Scorpio Mining is a major land holder in the Cosalá district with holdings of approximately 26,819 hectares spanning an area of approximately 23 km x 19 km. The land position covers numerous exploration targets, advanced deposits and historically producing mines. This is a very significant land position, with exploration potential and previously producing mines, that should yield new resources for many years to come. Mining companies are valued on a mix of their resources and their cash flow. As Scorpio Mining’s resources expand, so will its valuation.

What is more immediately significant is the commencement of mining at the El Cajón property which should result in a substantial increase in throughput and a corresponding increase in the amount of ore that it processes as a result. This company is poised for a major improvement but the improvements and changes will not be easily recognized by the market. Once disappointed, investors are sometime slow to return. As such, the stock may not recognize these changes until results are published for a further number of quarters yet, for patient investors, the value seems to be very evident.