Friday 15 March 2013

SilverCrest Mines gets vote of confidence from analysts after 2012 financial results


SilverCrest Mines (CVE:SVL) (NYSE MKT:SVLC) received some bullish coverage from analysts this morning, a day after announcing a sharp boost in fourth quarter profit on the back of lower annual income taxes, and as silver sales reached a quarterly record. 
Jennings Capital re-initiated coverage Friday on the Mexico-focused silver miner, with a buy rating and a 12-month price target of $3.50 per share, with an implied return of 41 percent. 
"SilverCrest Mines is a proven operator with strong production growth expected at its Santa Elena mine. The company is trading cheaply, at a 34% discount to our NAV [net asset value]," notes the analyst, Kwong-Mun Achong Low. 
"It also trades at less than half the valuation of other junior silver producers on an EV/oz basis, at $1.18/oz vs. the peer average $3.36/oz."
The most impressive thing, he writes, about SilverCrest, is that it delivers, citing the fact that management has built a mine on schedule and under budget, and has met or exceeded production guidance since starting commercial production in mid-2011 - "something of a rarity in the mining world". 
The company's primary asset, Santa Elena, is a "robust asset", the Jennings analyst highlights, and is expected to produce 2.4 million ounces of silver equivalent this year, at cash costs of $8.50 an ounce. The mine has a higher grade open pit that is currently being mined, and an underground resource that is being developed, remaining open with exploration upside. 
Achong Low forecasts production growth of 79 percent to 4.2 million ounces of silver equivalent over 2012, based on the mill expansion currently underway at Santa Elena, where it is looking to double production. 
The company said Thursday its plan for this year is to complete the contruction of a new 3,000 tonne per day mill facility on schedule for the first quarter of 2014.
The potential second leg of growth, the analyst adds, is the La Joya project in Mexico, where the company is rapidly advancing the delineation of a large polymetallic deposit, and which is now being derisked with an upcoming preliminary economic assessment. 
"We like SilverCrest for its growth profile and for management’s ability to execute. The company has proven itself as a worthy operator, and as it embarks on an expansion program at its producing mine, we are inclined to believe that the operating and mine building experience gained over the past few years could only enhance the chances of success."
Stonecap Securities' Christos Doulis also maintained his outperform rating and $3.90 price target on SilverCrest after the results, with the analyst highlighting better-than-expected annual cash costs, which came in at $7.39 per silver equivalent ounce for the year, compared to management's guidance for $8.20 per ounce. 
Cash flow from operations was $9.2 million in the fourth quarter, which largely funded the $10.2 million in capex that was spent during the period. 
The silver miner also reiterated its 2013 forecast for production of 625,000 ounces of silver, and 33,000 ounces of gold, at cash costs of $8.50 per silver equivalent ounce. Doulis also kept his production forecasts, but slightly increased his cash cost estimate from $8 per ounce of silver equivalent to $9 an ounce. 
"SilverCrest has delivered another solid quarter and remains on track with its plan to double annual production to ~4moz Ag eq. in 2014," Doulis notes. 
"SilverCrest continues to have a number of catalysts on the horizon with a revised Santa Elena resource, reserve and mine plan in the first half of 2013 to be followed by a PEA for the La Joya project."
The company ended the quarter with $48 million in cash and short-term investments, with the cash to be used to fund the expansion plan at Santa Elena and the continued development of La Joya. Its total capital and exploration budget for the year is around $70 million. 
Shares of SilverCrest are trading at $2.54, suggesting the analysts believe there is plenty of upside potential for the stock. Its shares are up 5 cents, or more than 2 percent Friday morning.

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