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Thursday, 4 April 2013
SilverCrest Mines "a likely consolidation target", says Canaccord analyst
Canaccord Genuity's Nicholas Campbell has taken a closer look at SilverCrest Mines (CVE:SVL) (NYSE MKT:SVLC), reiterating his buy recommendation for the company and maintaining his $4.50 price target.
Late last month, the silver miner filed an NI 43-101 compliant technical report for its La Joya resource update, which included results from preliminary metallurgical work.
Campbell's $4.50 price target represents a 91 percent premium to the $2.35 trading price the day the report was issued. The analyst boosted his price target on SilverCrest to $4.50 from $4.25 back in January, when the company first released news of doubling the ounces at its La Joya property.
In a statement in March, SilverCrest said batch cleaner floatation tests indicate that the project could be amenable to a conventional floatation process to produce a copper concentrate.
Test recovery rates ranged from 81.4 to 87.7 percent for copper, 74.9 to 84.3 percent for silver, and 18.2 to 56.6 percent for gold.
Concentrate grades ran up to 40 percent copper, 4.78 grams per tonne silver and 13.1 grams per tonne gold for the near surface Manto composite, which the company says constitutes the potential starter pit that should make for a "highly marketable concentrate".
"While preliminary, from our perspective, these results support the viability of the La Joya project," notes Campbell in his report.
"While the gold recovery looks low, gold represents less than 15% of the in-situ value of the La Joya project," he says, adding that more importantly, silver recoveries exceeded the broker's expectations, while copper recoveries were in line with estimates.
In January, the company announced that at a global case cut off grade of 15 grams per tonne of silver equivalent, inferred resources at La Joya stand at 198.6 million ounces, almost 95% higher than the 101.9 million ounces at the same cut off grade previously.
Using a base case cut off grade of 30 g/t silver equivalent, inferred resources total 159.8 million ounces, or 100.8 million ounces using a high grade cut off of 60 g/t silver equivalent.
The company says it believes that the 60 g/t silver equivalent portion of the deposit, or the high grade case, constitutes a "priority area" to be examined as a potential starter pit for initial operations, which is being looked at more closely in a preliminary economic assessment (PEA) that started in January.
"A Preliminary Economic Assessment is expected to be completed on the higher-grade starter pit for the La Joya project in the second half of 2013," says the analyst.
"We continue to view SilverCrest as a likely consolidation target for a larger cap silver producer," he adds.
La Joya is one of SilverCrest's Mexican properties, the others being the Cruz de Mayo, and its flagship Santa Elena Mine, which is located 150 kilometres northeast of Hermosillo, in the State of Sonora, Mexico.
Santa Elena 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.
The company's plan for this year is to complete the contruction of a new 3,000 tonne per day mill facility at Santa Elena for the first quarter of 2014 in its effort to double production at the mine.
InvestmentPitch.com has produced a video news alert about SilverCrest Mines based on the Canaccord Genuity research report, which can be viewed at: http://www.investmentpitch.com/video/0_4xibdayc/Canaccord-Genuity-has-upgraded-coverage-on-SilverCrest-Mines-TSXV-SVL
SilverCrest is changing hands Thursday at $2.14, for a market capitalization of $226.6 million.