SilverCrest Mines Inc.
Posted: May 22, 2013 Filed under: Silver, Speculative | Tags: Canadian dollar, Gold, Mexico, NAVPS, Ounce, Santa Elena, Silver, TSX Venture Exchange Leave a comment »
English: Silver bullion bar 1000oz bottom view / view from underneath (Photo credit: Wikipedia)
SVL : TSX-V : C$1.80
SPECULATIVE BUY
Target: C$4.25
COMPANY DESCRIPTION:
Silvercrest is a junior silver producer with a 100% interest in the Santa Elena silver-gold mine in Mexico and a 100% interest in the La Joya silver-gold-copper project in Mexico. Santa Elena is ramping up to produce an estimated average of 4.6 million ounces of silver-equivalent per year by 2014E through the development of an underground operation and facility at Santa Elena.
All amounts in C$ unless otherwise noted.
Investment recommendation
We maintain our SPECULATIVE BUY recommendation on the shares of SVL with a 12-month target price of C$4.25, unchanged.
Investment highlights
SilverCrest reported Q1/13 EPS of US$0.06. After adjusting for deferred revenue of US$0.5 million and a foreign currency gain of US$0.5 million, results were in line with our forecast of US$0.04.
In Q1, SVL sold 157,088 ounces of silver and 7,370 ounces of gold, from production (pre-released) of 153,481 ounces of silver and 7,225 ounces of gold. This resulted in cash flow from operations of US$7.7 million or US$0.07 per share, in line with our forecast.
The pre-feasibility study for Santa Elena expansion is expected to be released before the end of May. This study is to include an updated
reserve and resource estimate, as well as an updated mine plan. We expect to see an increase in mine life from 6.5-years to roughly 10 years. Development of the new 3,000 tpd CCD processing facility remains on schedule and on budget for commissioning in early 2014. With grades expected to increase and strip expected to decline in H2/13, we expect SVL to meet its 2013 guidance for production of 625,000 ounces of silver and 33,000 ounces of gold.
Valuation
SVL is on track to ramp up production from 2.2 million AgEq ounces in 2013 to 4.6 million AgEq ounces in 2014 with the commissioning of the
new CCD processing facility. After adjusting our model for the Q1 results, our peak silver estimate of NAVPS (5%, US$32.50/oz Ag) decreased marginally to $5.42, from $5.43 previously. We continue to value the shares of SilverCrest based on a 0.75x multiple to our peak silver price estimate of NAVPS (5%, US$32.50/oz Ag).
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Colossus Minerals Inc.
Posted: May 21, 2013 Filed under: Speculative | Tags: Brazil, Canadian dollar, Colossus, Finance, Gold, Mining, Serra Pelada, Toronto Stock Exchange Leave a comment »
CSI: Crime Scene Investigation (Photo credit: Wikipedia)
CSI : TSX : C$1.92
SPECULATIVE BUY
Target: C$7.50
COMPANY DESCRIPTION:
Colossus Minerals is a junior exploration and development company with a focus on gold in Brazil. Colossus is under the stewardship of John Frostiak, Chairman, and Claudio Mancuso, President and CEO. The company’s primary asset is the Serra Pelada project, an extremely high grade gold-platinum-palladium project in Northern Brazil. Colossus has a 75% ownership interest in the project.
All amounts in C$ unless otherwise noted.
CONSTRUCTION 80% COMPLETE
Investment recommendation
We maintain our SPECULATIVE BUY recommendation with a 12-month target price of C$7.50, unchanged.
Investment highlights
Colossus provided a development update for its 75%-owned Serra Pelada project in Brazil. Construction is approximately 80% complete with completion expected by the end of July. Production is expected to start in late Q3/13 at a rate of 250 tpd, ramping up to 1,000 tpd by the end of Q1/14.
With the processing plant available in August, CSI now plans to process the bulk sample onsite. In addition, CSI could potentially increase the size of the sample to include a lower-grade halo zone that was discovered 30-40 metres in advance of the Central Mineralized Zone (CMZ) (assays currently pending). Results from the bulk sample will be used to calculate an initial one-year reserve estimate. Based on better than expected ground conditions and the potential addition of material from the low grade zone, CSI is exploring the use of more cost effective overhand-cut-and-fill mining.
Underground development has been improving and is currently advancing at a rate of 3.1 metres per day for a total of 1,950 metres.
To achieve a mining rate of 1,000 tpd, CSI will need to complete a further 1,750 meters, which should be complete in H1/14.
Valuation
While the development of Serra Pelada continues to advance on schedule, with only $32.1 million in cash at the end of March, the company’s balance sheet appears strained. We believe CSI is likely to need an additional working capital top up of $20-25 million to get the project into production, which we expect will be financed with a debt facility. We have adjusted our model for the Q1 financials and we have incorporated an assumed US$25 million debt financing in late Q2/13.
The net impact is a drop in our estimate of peak gold price NAVPS (10%, US$1,750/oz Au) to C$9.67, from C$9.89 previously. We continue to
value the shares of CSI based on a 0.75x multiple to our peak gold price estimate of NAVPS (10%, US$1,750/oz Au).
Related articles
- Colossus Minerals Provides Development Update (sys-con.com)
” Gold Bugs ” Remain True Believers
Posted: May 18, 2013 Filed under: Federal Reserve, Gold | Tags: April, China, Fed, Federal Reserve System, Gold, Gold as an investment, Jim Sinclair, Paper 1 Comment »
Synthetic made gold crystals by the chemical transport reaction in chlorine gas. Purity >99.99% (Photo credit: Wikipedia)
from Jim Sinclair‘s Newsletter
History will look back on this manipulation of every market on the planet and people’s reactions to it as not simply a bubble, but a frenzy.
Of others writers on these subjects I know none other than GEAB who has a full grasp of the fundamental issues that markets, no matter how concocted, will overcome. I have advised all my friends to subscribe to GEAB and to ShadowStats.com in order to know the truth of the hidden causes that will defeat the illusion by the greatest injection of liquidity into the financial system in written history.
GEAB said this morning, “When certain countries must protect their economies to survive, going looking for tax revenue in tax havens and, at the same time, paradoxically let their banks use un-orthodox methods to avoid bankruptcy, others have chosen to bet on gold. Whilst paper gold saw a scary crash in mid-April, the demand for physical gold has never been as high, which confirms the complete decoupling between paper gold and physical gold markets. What happens when everyone realizes that paper gold certificates have no physical counterpart? When the title documents to an ingot can’t be honored the paper in question has no value. We must therefore expect more volatility. This is why some brokers won’t allow any leverage on gold paper positions. The decoupling also shows that major problems are ahead because confidence in now shaken.
Physical gold itself has its best days ahead. China has clearly understood this and buys gold en masse.”
On the Fed it was said, “the poker game played by the Fed is coming to an end. The bet was that support of finance and real estate would allow a revival of the real economy before having to withdraw this support because of an untenable position going forward. This program enabled the country to gain access to cheap credit, which is already a success. But as regards to the real economy, apart from having caused new bubbles, the bet appears to be lost. As we have seen, the situation hasn’t gotten better, quite to the contrary.”
I know it hurts, but stand firm. If you have no margin then you have no debt.
Remember that producing gold companies have physical and will sell at physical price.
Remember that the future of a producing company has a great deal to do with location, location, location.
The politics of gold will have a great deal to do with how well the host country enjoys the fruits of the labor.
Remember some enlightened gold companies have made the host country equal partners already.
Remember that some gold companies are better than good citizens with a long history of significant contributions to the welfare of the people.
Hold tight to these and to your physical. While it is legal store your physical internationally as allocated with people of trust. Ignore the illusion and the Trojan Horses in the gold industry that do not seek your best interest. They have and have had an agenda for a long time. One seeks acceptance amongst the establishment more than anything. They have worked and will continue to work at your disadvantage.
Sincerely,
Jim
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B2Gold Corp.
Posted: May 17, 2013 Filed under: Intermediate Producers | Tags: Bema Gold, Canadian dollar, Colombia, Color Graphics Adapter, Costa Rica, Namibia, Nicaragua, Toronto Stock Exchange Leave a comment »
English: San Juan River border between Nicaragua and Costa Rica. Disputed area highlighted. (Photo credit: Wikipedia)
BTO : TSX : C$2.23
BUY
Target: C$5.00
COMPANY DESCRIPTION:
B2Gold is a Vancouver-based gold producer led by the former management team of Bema Gold. The company is targeting production growth from the Limon and La Libertad mines in Nicaragua and a pipeline of exploration projects in Namibia, Nicaragua, Colombia, Costa Rica and Uruguay.
All amounts in C$ unless otherwise noted.
Investment recommendation
We reiterate our BUY rating on B2Gold shares following the release of Q1/13 financial results, which were better than expected at all operations and continued to highlight the team’s excellent operational track record. Based on one of the best production growth profiles in the sector, relatively low permitting, financing and new mine development risk, and several upcoming potential catalysts that we believe should pave the way for a strong share price performance in 2013. With a strong balance sheet and relatively low capital requirements to fund growth to 540 koz by 2015E (relative to the expected cash flow profile), we see B2Gold as very well positioned to weather even an extended period of low gold prices.
Investment highlights
Q1/13 adjusted EPS of $0.07 beat of our estimate of $0.05 and consensus of $0.06. There were several one-time/non-cash adjustments
mostly related to the CGA acquisition. While production had been prereleased, cash costs were materially lower than we expected and were
also below levels budgeted by the company. In our view, B2Gold’s ability to keep costs under control in a sector struggling to handle
inflationary pressures should be viewed as a testament to the quality of the operating team.
Consolidated cash operating costs excl. royalties were $722/oz ($771/oz incl. royalties), below our estimate of $764/oz ($825/oz incl. royalties). Consolidate cash operating costs (excl. royalties) were 8% below the company’s internal budget of $785/oz.
As of March 31, 2013, the company’s balance sheet remained strong with $120.7 million in cash, and $113.6 million in working capital. Total debt was $65.8 million, including current debt of $49 million included in working capital, of which $37.5 million was consolidated with the CGA acquisition
Our 12-month target price remains unchanged at C$5.00 per share, based on 1.05x our 5%/peak NAVPS estimate of US$4.71 assuming US$/C$ parity
Related articles
- B2Gold Reports Record First Quarter 2013 Adjusted Net Earnings of $40.0 Million (virtual-strategy.com)
Pan American Silver Corp.
Posted: May 16, 2013 Filed under: Senior Producers, Silver | Tags: Argentina, Chubut Province, La Colorada, Morococha, NASDAQ, Pan American Silver, Peru, United States Leave a comment »
Pan American Silver Corporation (Photo credit: Wikipedia)
PAAS : NASDAQ : US$12.42
PAA : TSX
BUY
Target: US$19.50
COMPANY DESCRIPTION:
Pan American Silver‘s key operating mines include Huaron, Morococha and Quiruvilca in Peru, Dolores, La Colorada and Alamo Dorado in Mexico and Manantial Espejo in Argentina. The company maintains ownership of the Navidad Project located in Chubut Province, Argentina; to which we ascribe no value.
We maintain our BUY rating on Pan American Silver following Q1/13 financial results which were modestly ahead of expectations. We expect investors to be attracted to the company’s strong balance sheet ($738 million in net working capital at Q1/13), strong free cash flow from operating assets (we estimate that the company could generate an average of 9% of its current market cap in annual free cash flow over the next four years), exploration/production growth opportunities at key operating assets, management’s financial discipline, and willingness to enhance shareholder returns through dividends/share repurchases. We believe the above defensive traits should increase the stock’s attractiveness in difficult market conditions, providing for potential near term re-rating with significant optionality upside potential to an improvement in the Argentinean situation.
Investment highlights
Pan American reported Q1/13 adjusted diluted EPS of $0.26, which was modestly ahead of our estimate and consensus of $0.25, the variance to our estimate explained by lower depreciation partly offset by lower revenues (lower sales volumes) and higher corporate G&A.
Q1/13 production of 6.28 Moz Ag was largely in line with our 6.23 Moz forecast. Gold production was 32,120 (vs. our 36,112 oz estimate), zinc production was 9,694 tonnes (vs. our 9,955 tonnes estimate), lead production was 3,148 tonnes (vs. our 3,125 tonnes estimate), and copper production was 1,062 tonnes (vs. our 920 tonnes estimate).
Q1/13 total cash costs were $11.33/oz, better than our $12.24/oz estimate, with lower than expected costs at Alamo Dorado (better grades), Manantial Espejo (better grades and lower implied site costs partly due to some stripping that was capitalized) partly offset by higher costs at Dolores (lower recoveries, higher implied unit site costs likely the result of lower tonnage stacked).
2013 guidance is unchanged at 25 – 26 Moz Ag and 140 – 150 koz Au at $11.80 – $12.80/oz cash costs. Cash costs may be reviewed by the company for a decline in by product credits due to lower metal prices, potentially offset by operating expenditure reduction initiatives being undertaken by the company
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What Happens When Costs Match the Selling Price Of Gold ?
Posted: May 15, 2013 Filed under: Speculative | Tags: Business, Gold as an investment, Lake Shore, LSG, Ounce, Precious metal, Share price, Timmins Leave a comment »
Map of Timmins, Ontario (Photo credit: Wikipedia)
LAKE SHORE GOLD
(T-LSG) $0.325 n/c
From $ 4.00 two years ago
One look at the two-year chart of Lake Shore Gold shows you how bad things are in the natural resource sector, if you didn’t know already. Lake Shore Gold is not the only story trading at nearly one-tenth of where it was.
The bad part of that is much of the company’s current building and mine development was financed with issues nearly ten times today’s price.
Hard to believe the Timmins Times featured an article on January 22nd with the headline, “Glittering year ahead for Lake Shore Gold says VP Dan Gagnon.”
Well at least their production numbers appear to be going up as their Timmins West Mine is the centre of three mines expected to be in operation
having done 85,000 ounces last year. The article quotes Gagnon is expecting 120,000 to 135,000 this year and 150,000 ounces in 2014. But can they make any money at it?
The suggestion these days is that there’s many mines with costs of production way up at $1250 to $1450 and that doesn’t leave a lot left. According to the Timmins Times article, the suggestion is that their costs of production is between $800 and $875 an ounce. As one looks at the share price, one wonders wouldn’t one? Or is it just that most people have given up on the precious metals sector. Not precious at all anymore.
Lake Shore is important to the folks of Timmins and area as the company has 500 full-time employees, 200 contractors at the mine and 125 other employees working on the expansion projects. And this work tends to pay well, or at least it did.
The very low stock price makes one wonder if there are some tidbits of bad news about to happen. Higher production costs, write-downs or even losses that will be coming out tomorrow at their annual meeting. For sure, it won’t be a bunch of happy people around if anyone even bothers to
show up.
Meanwhile one service suggests that several analysts follow the stock with the average target being $1.17. Really?
When was the last time a speculator made a buck in the precious metals market listening to analysts?
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AuRico Gold Inc.
Posted: May 14, 2013 Filed under: Intermediate Producers | Tags: AuRico, AuRico Gold, Canada, Mexico, Operating cash flow, Toronto Stock Exchange, United States, Young Davidson Leave a comment »
English: Gold bars created by Agnico-Eagle (Photo credit: Wikipedia)
AUQ : NYSE : US$4.81
AUQ : TSX
BUY
Target: US$8.50
COMPANY DESCRIPTION:
AuRico is a gold/silver producer whose key assets include the Young Davidson project (Canada) and the El Chanate mine (Mexico).
Investment recommendation
We reiterate our BUY rating on AuRico Gold following the release of Q1/13 financial results. We continue to view AuRico as one of the most defensive gold stocks in the sector in light of the company’s strong balance sheet, low cost production growth profile, and relatively modest
capital requirements going forward. In our opinion, successful execution on the Young Davidson (YD) ramp-up remains key to re-rating of the
shares. As such, we expect operating results over the next few quarters to be important catalysts. Operating results to date have been very good.
Investment highlights
AuRico reported $0.04 adjusted EPS vs. our $0.06 estimate and the $0.05 consensus. The variance to our estimate was from higher
DD&A, and higher taxes, partially offset by higher revenues (more ounces sold vs. produced) and lower G&A.
Production of 38,441 oz and $635/oz total cash costs were prereleased. The company also produced 7,729 pre-commercial ounces
from the YD underground mine. All in cash costs were reported at $985/oz, below full year expected guidance of $1,100-$1,200/oz.
Adjusted operating cash flow from continuing operations was $20.1 million, or $0.08 per share, in line with our estimate.
Mine development at YD is progressing well with the YD shaft now extending 900 metres, providing vertical access to ~1.8 Moz (50% of
reserve ounces, eight years of production). Construction is proceeding on the crushing and mid-shaft loading pocket infrastructure for Q3/13 commissioning (this is key to declaration of commercial production from the underground mine).
Valuation
Given the recent pullback in the gold price and the risks associated with attaining our one-year peak gold price target, we have lowered our
target multiple to 0.95x from 1.0x. As a result, our 12-month target price has been lowered to US$8.50 (from US$9.00) based on 0.95x our
5%/peak NAVPS estimate of US$9.07 (from $9.08).
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