Stonecap Securities says SilverCrest Mines provides "immediate and growing" cash flow

Stonecap Securities initiated coverage Friday on SilverCrest Mines (CVE:SVL), with an "outperform" rating and a 12-month target price of $3.75 per share, offering significant potential upside from the current trading price of $2.32.

Precious metals producer SilverCrest is focused on production from its Santa Elena Mine in Sonora, Mexico, which started commercial production in July of last year.

The mine, Stonecap noted, is undergoing an expansion program that should see annual metal production double from current levels of around 2 million ounces of silver equivalent to 4 million ounces of silver equivalent by 2014.

The company recently announced that silver production in the first quarter from its Santa Elena Mine more than doubled while gold production almost tripled year-over-year.

For the first quarter, silver production jumped 108 percent to 134,528 ounces, from 64,712 ounces a year ago, when the mine, which is now in commercial production, was still in the commissioning phase. Silver equivalent ounces sold soared 339 percent to 641,532 ounces from 146,219 in the first quarter one year ago.

The mine is a high-grade, epithermal gold and silver producer, with an estimated life of mine cash cost of US$8 per ounce of silver equivalent.

SilverCrest anticipates that the mine should recover around 4,805,000 ounces of silver and 179,000 ounces of gold over the 6.5 year life of the open pit phase.

Meanwhile, the company's La Joya property in Durango, Mexico, has an initial NI 43-101
compliant resource of 86.4 million ounces of silver equivalent, using a 30 grams per tonne (g/t) silver equivalent cut-off grade.

Stonecap analyst Christos Doulis, CFA said the project represents "a very prospective, potential bulk mining deposit."

In late March, the precious metals producer unveiled the results of the first six, phase two drill holes from 18 completed to date at its La Joya property, extending the main mineralized trend 500 metres northwest.

Notables holes included 32.3 metres of 95.8 g/t silver equivalent in hole L J DD11-27, and 51.3 metres of 90.4 g/t silver equivalent in hole L J DD11-29, including 21.8 metres of 158.3 g/t silver equivalent.

The firm also noted SilverCrest is led by a "strong management team", which brought Santa Elena into production on time and under budget.

"SilverCrest provides investors with immediate and growing cash flow from its Santa Elena mine as well as exposure to the exciting potential bulk tonnage La Joya project," Doulis said.

"With metal production expected to double by 2014, the company will soon enter the ranks of mid-tier precious metals producers."

SilverCrest's shares rose 6.9 per cent Friday, to $2.32.