SilverCrest Mines Q2 earnings soar as revenue rises 87%

Vancouver-based SilverCrest Mines (CVE:SVL) (OTCQX:STVZF) posted a sharp increase in earnings for the second quarter as cash operating costs declined and revenues nearly doubled year-over-year.

For the quarter that ended June 30, comprehensive earnings amounted to $9.2 million, or 10 cents per share, way up from $0.8 million, or 1 cent per share, a year ago.

The increase was driven by higher silver and gold sales volumes, and a positive marked-to-market derivative impact, the company said, partially offset by lower realized precious metal prices and a higher tax expense.

The Mexican precious metals producer's flagship property is the 100 percent-owned Santa Elena Mine, which is located 150 kilometres northeast of Hermosillo, near Banamichi in the State of Sonora, México.

Cash flow from operations more than doubled in the quarter to $7.2 million, from $2.9 million a year earlier.             
               
Revenues rose 87 per cent to $16.0 million on sales of 124,739 silver ounces and 8,679 gold ounces.

Meanwhile, cash operating cost per silver equivalent ounce sold decreased 16 per cent to $6.94 - below the company's budget of $8.20 per ounce.

The decline is due to a sharp increase in production volumes, crusher throughput and gold to silver ratio, SilverCrest said.

"We had a strong second quarter of 2012," said president J. Scott Drever. 

"The Santa Elena low cost, open pit heap leach mine operations continue to perform well and generated cash flows of $7.2 million which will contribute to the financing of the Santa Elena Expansion plan and the development of our major polymetallic La Joya Project."

Of the $16.0 million in total revenue for the quarter, SilverCrest said $2.7 million was non-cash revenue due to adjustments to gold spot market prices related to hedging.     

Silver sales were 124,739 ounces, versus 70,326 in the year ago period, at an average realized price of $29, down from $39 a year earlier.

All of the company's silver production is unencumbered by hedging arrangements and sold at spot prices.

Gold sales were 8,679 ounces, up from 4,300 a year ago. Of this, the company sold 2,734 gold ounces at the market spot realized price of $1,649 per ounce, and 4,210 ounces into the hedging facility at an average price of $925 per ounce.

Second quarter production was consistent with the company's budget, it said, with 646,553 silver equivalent ounces produced, compared to 310,090 ounces in the same quarter of 2011.

"We are confident in meeting or exceeding our 2012 production guidance of 435,000 silver ounces and 33,000 gold ounces," Drever affirmed.
               
Looking ahead, SilverCrest's immediate focus is to continue its three year expansion plan to double metals production at Santa Elena, and to "rapidly advance" the delineation of its polymetallic deposit at La Joya.

For the second half of the year, the company is aiming to complete the underground decline development of the main ramp at Santa Elena, expand underground resources through drilling, complete a pre-feasibility study on the expansion plan and continue site and regional exploration.

At La Joya, SilverCrest will be completing a phase II, 80 hole drilling program, complete further metallurgical test work, and finish a revised resource estimate based on the phase II results by the fourth quarter.

The company also said it is aiming to maintain its cash operating cost at or below plan of $8.20 per ounce for the rest of the year, as well as its operating cash flow of more than $2 million per month.

In the second quarter, the silver miner's working capital rose 64 per cent to $29.6 million, and its cash position stood at $34.9 million at the end of the period.

The Santa Elena mine has an estimated life of mine cash cost of US$8 per ounce of silver equivalent and the company expects that the 2,500 tonnes per day facility should recover around 4.8 million ounces of silver and 179,000 ounces of gold over the 6.5 year life of the open pit phase.