Stonecap boosts SilverCrest target price after Q1 earnings

Stonecap Securities has increased its target price to $3.90 from $3.75 on SilverCrest Mines (CVE:SVL) after the junior producer posted "strong" first-quarter earnings.

The capital markets firm retained its "Outperform" rating on SilverCrest.

Tuesday, SilverCrest said for the three months ended March 31, cash flow from operations reached $12.2 million in the first quarter of 2012, or $0.14 per share, on revenue of $19.6 million.

Net profit amounted to $6.3 million, up from a loss of $2.8 million a year earlier, or a profit of 7 cents per share from a loss of 4 cents in the first quarter of 2011.

In a research note, Stonecap Securities analyst Christos Doulis said: "The company continues to build cash, which will help fund the plan to double annual production to around 4 million ounces silver equivalent at Santa Elena by 2014."

Silver production in the first quarter was a record 135,000 ounces versus Stonecap's own forecast of 116,000 ounces and gold production was 9,405 ounces versus Stonecap's estimate of 8,900 ounces.
The company's management reiterated its full-year guidance of 435,000 ounces of silver and 33,000 ounces of gold. This prompted Stonecap to increase its estimate to 477,000 ounces silver from 464,000 ounces and maintain its forecast of 36,000 ounces gold.

SilverCrest's cash costs came in at $7 per silver equivalent ounce versus Stonecap's own estimate of $10 per ounce on 139,000 ounces silver and 9,788 ounces of gold sold in the quarter.

"SilverCrest delivered a quarter well beyond our initial expectations, and as such we have increased our 2012 CFPS estimate for the company, resulting in an increase in our target price for the company’s shares," Stonecap's Doulis wrote.

SilverCrest's flagship property is the 100 percent-owned Santa Elena Mine, which is located 150 km northeast of Hermosillo, near Banamichi in the State of Sonora, México.

Santa Elena 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 2,500 tonnes per day facility should recover approximately 4,805,000 ounces of silver and 179,000 ounces of gold over the 6.5 year life of the open pit phase of the Santa Elena Mine.