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Friday, 17 May 2013
SilverCrest retains “buy” rating at Jennings as cash costs impress
SilverCrest Mines (CVE:SVL)(NYSE MKT:SVLC)(AMEX:SVLC) has retained its Buy rating from Jennings Capital with a 12 month target of $3.50 per share in an analyst’s note issued Wednesday, on the back of stand-out cash cost results reported in the miner's first quarter results.
The Vancouver-headquartered precious metals producer posted results for the three months to March 31, which were impacted by lower metal prices and less ore processed, though operating costs still came in below guidance as net profit remained steady year-on-year.
The company, which operates mines in Mexico, reported net earnings that were relatively similar at $6.0 million, or 6 cents per share, to the results reported a year ago of $6.1 million, or 7 cents per share.
Earnings came in above the investment dealer’s estimate of 4 cents.
Cash flow from operations, a key metric in the industry, came in at 8 cents per share, above the Jennings Capital’s estimate of 6 cents per share. “With the difference,” analyst Kwong-Mun Achong Low said in his note, “attributed to lower costs than we had expected.”
Cash costs posted by SilverCrest for the quarter came in at $7.69 per ounce on production of 153,000 ounces of silver and 7,200 ounces of gold (or 557, 000 ounces silver equivalent) for the quarter, better than both the company guidance of $8.50 per ounce and Jennings’ estimate of $9.97 per ounce of silver equivalent.
“This is more impressive,” Low continues in the note “given the accelerated waste removal in 1H 2013 that resulted in a higher strip ratio in Q1. We expect costs to maintain a low profile of less than $8.00 per ounce toward the second half of the year as the strip ratio decreases, with the opportunity for more impressive numbers if costs remain consistent with this quarter.”
Revenues posted in the quarterly results decreased 22 per cent to $15.3 million from $19.6 million in the same quarter a year ago, as prices declined and gold sale volumes were down. Metal sales of 157,088 ounces of silver rose 12 per cent, while sales of 7,370 ounces of gold fell 25 per cent. The average realized price for silver fell 12 per cent to $30 an ounce, while the realized gold price fell 5 per cent to $1,626 an ounce.
The analyst also noted that management had maintained the 2013 production guidance of 2.4 million ounces of silver equivalent, “which we expect could fund a significant portion of exploration and the ongoing expansion [of the company’s Santa Elena mine in Mexico, where a major expansion is underway].
"We currently assume a $30 million debt raise to complete the funding for the expansion. However, if silver prices remain at these lower levels, an additional $5 to $10 million may be added to the debt, which we do not foresee being an issue given that there is no debt on the balance sheet at the moment."