SilverCrest Mines Inc. SPEC BUY Target $ 5.00Posted: November 1, 2012
SilverCrest Mines Inc.
SVL TSX- V $2.00
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. With the integration of a mill and development of an underground mine, the Santa Elena is expected to ramp up to produce 4.5-5.0 million ounces of silverequivalent by 2014.
The Company has closed a $ 34/5 Million equity offer at a price of $2.55/share). Roughly $23-24 m illion of the proceeds from the financing are earmarked to close out the company’s hedge book (roughly 29,000 ounces of gold hedged at $926.50/oz). The hedge book is expected to be closed out within the next few weeks. After closing out the hedge book, we estimate that SilverCrest should have roughly US$45 million in cash in the bank.
We have upwardly revised our gold and silver price assumptions and we have adjusted our valuation of the La Joya project downwards to reflect the drop in the average market in situ value for silver projects. The net impact is a drop in our estimate of peak silver price NAVPS (5%, US$40/oz Ag) to C$6.87, down from C$7.40. With the hedge book to be closed out, we are increasing our valuation to a 0.75x multiple to our peak silver price estimate of NAVPS (5%, US$40/oz). We note that SVL is trading at 2.8x 2013E CFPS and 0.47x P/NAV (5%, spot) compared with the junior producer average of 9.0x 2013E CFPS and 0.75x P/NAV (5%, spot).
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