Santacruz Silver Mining Ltd
Posted: September 3, 2013 Filed under: Mexico, Silver, Speculative | Tags: Mexico, Ounce, Record producer, Rosario, San Felipe, Santacruz Silver Mining, Silver, TSX Venture Exchange Leave a comment
Olimpia – Rosario Central (Photo credit: juze1980)
SCZ : TSX-V : C$1.37 SPECULATIVE BUY
Target: C$3.00
COMPANY DESCRIPTION:
Santacruz Silver Mining Ltd. is a junior silver developer focused on the advancement of the Rosario project (100%, Mexico), the
San Felipe project (100%, Mexico) and the Gavilanes project (100%, Mexico). Through the development of the Rosario project,
we forecast production of 1.3 million ounces of silver-equivalent in 2013, growing to 4.7 million ounces of silver-equivalent in
2015 through the development of the San Felipe project,.
Investment recommendation
We maintain our SPECULATIVE BUY recommendation on the shares of Santacruz Silver Mining with a 12-month target price of C$3.00, unchanged.
Investment highlights
Santacruz reported Q2/13 financial and operational results. In Q2, SCZ produced 13,855 ounces of silver, 337 ounces of gold, 296,127 pounds of lead and 8,932 pounds of zinc, from 5,075 tonnes of ore.
The Q2 throughput fell short of our forecast of 7,000 tonnes of ore milled as a result of a slower ramp up of sulphide ore production.
At the start of the underground development at the Rosario mine, Santacruz mined through a section of oxidized material, which the company stockpiled during the quarter, but which also resulted in lower than expected ore available for the mill. Since the company replaced its mine contractor, advancement of the main decline has improved. As of mid-August, the main ramp intercepted the Rosario I vein and is expected to extend to the Rosario II vein by the last week of September 2013. While the ramp up in production at the Rosario mine has been slower than expected, the company remains
confident that it can advance the mine to a cash flow positive situation before the end of 2013. The company reiterated its
guidance of ramping up throughput to 500 tpd by the end of Q1/14.
Valuation
While Santacruz is working through some growing pains at its Rosario mine, we remain confident that the company can advance the mine into a cash flow positive situation over the next six months. We continue to believe that the growth potential associated with the San Felipe and Gavilanes projects, which should provide high margin growth with low
associated capex over the next three-to-four years, are significantly discounted in the current share price. SCZ remains one of our preferred emerging producers in the junior silver space. We continue to value the shares of Santacruz Silver based on a 0.9x multiple to our estimate of NAVPS (7.5-10%, US$23/oz Ag) of C$3.24, down from C$3.28.
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SilverCrest Mines Inc.
Posted: July 18, 2013 Filed under: Silver, Speculative | Tags: Charge-coupled device, Gold, Gold mining, Mexico, NAVPS, Ounce, Silver, TSX Venture Exchange Leave a comment
Silver-209840 (Photo credit: Wikipedia)
SVL :
TSX-V : C$1.73
SPECULATIVE BUY
Target: C$3.25
COMPANY DESCRIPTION:
SilverCrest is a junior silver producer with a 100% interest in the Santa Elena silver-gold mine in Mexico and a 100% interest in the La Joya silver-gold-copper project in Mexico. Santa Elena is ramping up to produce an estimated average of 4.6 million ounces of silver-equivalent per year by 2014E through the development of an underground operation and facility at Santa Elena.
All amounts in C$ unless otherwise noted.
Investment recommendation
We maintain our SPECULATIVE BUY recommendation on the shares of SVL with a 12-month target price of C$3.25, unchanged.
Investment highlights
SilverCrest reported Q2/13 production of 194,022 ounces of silver and 7,463 ounces of gold, beating our forecast for production of
167,000 ounces of silver and 8,780 ounces of gold. The beat was attributable to higher throughput (307,091 tonnes vs. our forecast for 273,750 tonnes) and slightly higher silver grades (65.99 g/t silver vs. an expected grade of 63.25 g/t silver).
Gold production was impacted by lower grades in the first half of Q2 (1.48 g/t gold vs. an expected grade of 1.75 g/t gold) and lower recoveries (51% vs. our forecast of 57%). Grades improved throughout the second half of Q2, and are expected to remain between 1.5 to 1.75 g/t gold throughout H2/13. Recoveries are also expected to improve in H2. SVL plans to release Q2 financial results on August 14.
Construction of the new 3,000 tpd CCD facility continues to advance on schedule and budget with approximately 65% budget committed.
The major foundations have been poured, and the CCD tank and thickener construction is near completion. All major items have been delivered. Underground, approximately 2,000 metres of development has been completed. The company has recently encountered significant water flow underground, which remains manageable and will be addressed in an upcoming hydrology study.
Valuation
This was a solid quarter for SVL. The company continues to grow production throughout 2013, while development of the new CCD facility
continues on track and budget. After updating our model for the Q2 production, our estimate of NAVPS (5%, US$23/oz Ag) decreased to
C$3.59, from C$3.60 previously. We continue to value the shares of SVL based on a 0.90x multiple to our estimate of NAVPS (5%, US$23/oz Ag).
Santacruz Silver Mining Ltd
Posted: June 17, 2013 Filed under: Mexico, Precious Metals, Silver, Speculative | Tags: Canadian dollar, Gavilanes, HochschildMining, Mexico, NAVPS, Rosario, San Felipe, TSX Venture Exchange 1 Comment
Bolsa de Comercio Rosario: The Rosario Stock Exchange (Photo credit: Wikipedia)
SCZ : TSX-V : C$1.15
SPECULATIVE BUY
Target: C$3.35
COMPANY DESCRIPTION:
Santacruz Silver Mining Ltd. is a junior silver developer focused on the advancement of the Rosario project (100%, Mexico), the San Felipe project (100%, Mexico) and the Gavilanes project (100%, Mexico). Through the development of the Rosario project, we forecast production of 1.3 million ounces of silver-equivalent in 2013, growing to 4.7 million ounces of silver-equivalent in 2015 through the development of the San Felipe
project.
Investment highlights
Santacruz reported results from the initial six holes from the Phase II 16,000-metre drill program at the Gavilanes silver project in Mexico.
Drilling intercepted 191-1741 g/t silver-equivalent over 1.0-7.3 metre true widths. SCHN-12 returned 325 g/t silver over a 7.3-metre true
width, 1687 g/t silver over a 4.6-metre true width and 1048 g/t silver over a 3.2-metre true width. The GSA vein has now been drill tested over 500 metres with the El Hundido stockwork zone drill tested over a 250-metre strike. Santacruz expects to publish a maiden NI 43-101 compliant resource estimate on the Gavilanes project in H2/13.
The company continues to focus on the ramp-up of throughput at its Rosario mine. Throughput at the mill has ramped up to more than 110 tpd. The main ramp has now been developed into the sulphide zone with throughput expected to ramp up to 200 tpd by mid-July, ramping up to capacity of 500 tpd by the end of Q1 2014.
Valuation
The results continue to demonstrate the potential to delineate a robust resource at the Gavilanes project with a high-grade zone developing at the GSA vein and a wider zone of mineralization firming up at the El Hundida stockwork zone. At current commodity prices, we estimate that the company should get into cash flow positive territory by late Q3-Q4 2013. However, with an US$18 million final payment due to Hochschild
Mining in October 2014, we forecast that the company could require some additional debt or equity financing for working capital. Therefore, we
have updated our model to reflect an equity issue of US$20 million, up from US$10 million previously. The net impact is a drop in our peak silver estimate of NAVPS (7.5-10%, US$32.50/oz Ag) to C$4.19, from C$4.49 previously. We continue to value the shares of SCZ based on a 0.80x multiple to our peak silver price estimate of NAVPS (7.5%-10%, US$32.50/oz Ag).
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SilverCrest Mines Inc.
Posted: May 31, 2013 Filed under: Silver, Speculative | Tags: Canadian dollar, Gold, Mexico, Ounce, Santa Elena, Silver, Silver as an investment, TSX Venture Exchange Leave a comment
San Mateo of Santa Elena, Yucatan (Photo credit: Wikipedia)
SVL : TSX-V : C$1.88
SPECULATIVE BUY
Target: C$4.00
COMPANY DESCRIPTION:
SilverCrest is a junior silver producer with a 100% interest in the Santa Elena silver-gold mine in Mexico and a 100% interest in the La Joya silver-gold-copper project in Mexico. Santa Elena is ramping up to produce an estimated average of 4.6 million ounces of silverequivalent per year by 2014E through the development of an underground operation and facility at Santa Elena.
All amounts in C$ unless otherwise noted.
10+ YEAR MINE LIFE POTENTIAL FOR SANTA ELENA
Investment recommendation
We maintain our SPECULATIVE BUY recommendation on the shares of SVL with a target price of C$4.00, down from C$4.25 previously.
Investment highlights
A reserve and resource estimate for the Santa Elena mine outlined an 8.2 million-tonne reserve estimate at a grade of 1.24 g/t gold and 74.9 g/t silver, containing 327,000 ounces of gold and 19.7 million ounces of silver. The reserve represents roughly a 50% increase in gold reserves and a doubling of the silver reserves for the mine.
This gives Santa Elena an 8-year reserve life with indicated and inferred resources potentially extending the mine life to 10+ years.
The new reserve grade is a blend of open pit, underground and leach pad material. This gives Santa Elena the potential to produce 4+ million ounces of silver-equivalent over a 10+ year mine life, up from roughly 6.5 years previously, with upside potential associated with the El Cholugo and El Cholugo Dos discoveries, by exploiting satellite deposits and by high-grading the underground operations to increase near-term production.
Valuation
From our perspective, this reserve/resource update for Santa Elena is an important milestone for SVL. A potential 10+ year mine life should
address concerns about the previously limited mine life for Santa Elena. While our valuation of Santa Elena has increased, we have significantly
reduced our in situ valuation ascribed to the La Joya project to account for the drop in market values for silver development projects. After
adjusting our model for reserve/resource updated at Santa Elena and our downwardly adjusted valuation of La Joya, our estimate of peak silver price NAVPS (5%, US$32.50/oz Ag) has dropped to C$5.40, from $5.42 previously. We continue to value the shares of SilverCrest based on a 0.75x multiple to our peak silver price estimate of NAVPS (5%, US$32.50/oz Ag).
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Esperanza Resources Corp.
Posted: May 30, 2013 Filed under: Silver, Speculative | Tags: Esperanza, Heap leaching, Mexico, NASDAQ, Pan American Silver, Sonora, TSX Venture Exchange, United States Leave a commentEPZ : TSX-V : C$0.74
SPECULATIVE BUY
Target: C$1.55
COMPANY DESCRIPTION:
Led by former Minefinders executives, Esperanza Resources is a development stage gold company with a portfolio of projects in the Americas. Management is focused on advancing their 100% owned fully permitted and shovel ready La Bolsa heap leach project located in Sonora, Mexico (pending PAAS trans close, est. Q2/13) and their flagship Esperanza heap leach project located in Morelos, Mexico.
All amounts in C$ unless otherwise noted.
Investment recommendation
The company reported Q1/13 results which were in line with our expectations except for a $0.6 million charge related to due diligence on the transaction with Pan American Silver Corp. (PAAS : NASDAQ | BUY We maintain our SPECULATIVE BUY recommendation and 12-month target price of C$1.55.
Investment highlights
The company ended the quarter with a cash and working capital position of US$32.4 million and US$31.5 million, respectively. After the close of the transaction, we expect the company to have a working capital position of US$65-70 million.
The company spent US$3.88 million in operating cash flow, which included US$3.28 million in exploration expenditures, with the majority allocated to the Esperanza project during the quarter ending March 31. Operating expenditures constituted the majority of the US$3.80 million drain of its cash balance.
Post the closing of the Pan American Silver Corp. transaction expected in early Q3/13, we anticipate guidance (operating/capital costs, timeline) on the development of the funded and permitted La Bolsa open pit, heap leach project in northern Mexico (Sonora). We also look forward to a feasibility study at Esperanza, another open pit gold project amenable to heap leach processing (Morelos, Mexico), expected by Q3/13.
The company changed its functional currency effective January 1, 2013 to the US dollar (USD) from the Canadian dollar (CAD), leading to a one-time charge of $6.8 million (deficit) to reflect a derivative liability related to warrants priced in CAD.
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SilverCrest Mines Inc.
Posted: May 22, 2013 Filed under: Silver, Speculative | Tags: Canadian dollar, Gold, Mexico, NAVPS, Ounce, Santa Elena, Silver, TSX Venture Exchange Leave a comment
English: Silver bullion bar 1000oz bottom view / view from underneath (Photo credit: Wikipedia)
SVL : TSX-V : C$1.80
SPECULATIVE BUY
Target: C$4.25
COMPANY DESCRIPTION:
Silvercrest is a junior silver producer with a 100% interest in the Santa Elena silver-gold mine in Mexico and a 100% interest in the La Joya silver-gold-copper project in Mexico. Santa Elena is ramping up to produce an estimated average of 4.6 million ounces of silver-equivalent per year by 2014E through the development of an underground operation and facility at Santa Elena.
All amounts in C$ unless otherwise noted.
Investment recommendation
We maintain our SPECULATIVE BUY recommendation on the shares of SVL with a 12-month target price of C$4.25, unchanged.
Investment highlights
SilverCrest reported Q1/13 EPS of US$0.06. After adjusting for deferred revenue of US$0.5 million and a foreign currency gain of US$0.5 million, results were in line with our forecast of US$0.04.
In Q1, SVL sold 157,088 ounces of silver and 7,370 ounces of gold, from production (pre-released) of 153,481 ounces of silver and 7,225 ounces of gold. This resulted in cash flow from operations of US$7.7 million or US$0.07 per share, in line with our forecast.
The pre-feasibility study for Santa Elena expansion is expected to be released before the end of May. This study is to include an updated
reserve and resource estimate, as well as an updated mine plan. We expect to see an increase in mine life from 6.5-years to roughly 10 years. Development of the new 3,000 tpd CCD processing facility remains on schedule and on budget for commissioning in early 2014. With grades expected to increase and strip expected to decline in H2/13, we expect SVL to meet its 2013 guidance for production of 625,000 ounces of silver and 33,000 ounces of gold.
Valuation
SVL is on track to ramp up production from 2.2 million AgEq ounces in 2013 to 4.6 million AgEq ounces in 2014 with the commissioning of the
new CCD processing facility. After adjusting our model for the Q1 results, our peak silver estimate of NAVPS (5%, US$32.50/oz Ag) decreased marginally to $5.42, from $5.43 previously. We continue to value the shares of SilverCrest based on a 0.75x multiple to our peak silver price estimate of NAVPS (5%, US$32.50/oz Ag).
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Goldrock Mines Corp.
Posted: May 1, 2013 Filed under: Speculative | Tags: $100 million, $3 million, Argentina, Business, Nevada, Salta, Salta Province, TSX Venture Exchange Leave a comment
Español: Viaducto La Polvorilla en la provincia de Salta, Argentina. Se trata del tren “a las nubes”, cruzando un conducto de agua. La foto está tomada desde el último vagón. (Photo credit: Wikipedia)
GRM : TSX-V : C$0.64
SPECULATIVE BUY
Target: C$0.90
COMPANY DESCRIPTION:
Goldrock Mines (formerly Mansfield Minerals) is a development stage gold company advancing their fully permitted (Oct 2011), Lindero heap leach project located Salta, Argentina. Recent management changes have brought the relevant expertise (financing and technical execution) required for the company to execute the development of the project and realize the future cash flows from it.
Investment recommendation
The company released FQ3/12 (ending February 2013) financial results with an end of period cash position of C$3.4 million. We maintain our
SPECULATIVE BUY recommendation and target price of C$0.90.
Investment highlights
The company’s previous cash position (FQ2/12) was C$5.30 million. During FQ3/12, operating expenditures were ~C$0.46 million with an additional ~C$1.70 million related to investing activities (Lindero FS) and ~C$0.23 million in positive FX adjustments resulting in a ~C$3.35 million cash position at the end of FQ3/12 versus our estimate of C$4.1 million. We estimate that GRM will close its fiscal year (May 2013) with a cash position of ~C$3 million.
Following the release (April 17) of its feasibility study (FS) on its wholly owned, fully permitted Lindero open pit/heap leach project in northwest Argentina (Salta province), we anticipate the company to redouble its efforts to crystallize financing sources to fund its development ($160 million).
We have modeled a debt facility for ~C$100 million (five year, 12%, FQ2/13), allowing for initial construction and purchasing long lead items, followed by an assumed equity raise of ~C$56 million (80 million shares at C$0.70/share, FQ2/14) and a WC facility (C$40 million, 15%) to enable commercial production by FQ1/15 (August 2015).
Additional potential catalysts include the maiden resource estimate on the Arizaro copper-gold porphyry (3-4 km from Lindero) expected by fiscal year-end (May 30, 2013). Arizaro represents upside potential to not only extend the mine life of Lindero, but to offset processing the lower grade stock pile to a later date.
Esperanza Resources Corp.
Posted: April 5, 2013 Filed under: Exploration Companies | Tags: Esperanza Resources, Heap leaching, Mexico, Pan American Silver, Pan American Silver Corporation, Sonora, TSX Venture Exchange, United States Leave a comment
Pan American Silver Corporation (Photo credit: Wikipedia)
EPZ : TSX-V : 1.00
SPECULATIVE BUY
Target: C$1.70
COMPANY DESCRIPTION:
Led by former Minefinders executives, Esperanza Resources is a development stage gold company with a portfolio of projects in the Americas. Management is focused on advancing their 100% owned fully permitted and shovel ready La Bolsa heap leach project located in Sonora, Mexico (pending PAAS trans close, est. Q2/13) and their flagship Esperanza heap leach project located in Morelos, Mexico.
Investment recommendation
We are initiating coverage on Esperanza Resources Corp. (EPZ : TSX-V) with a SPECULATIVE BUY recommendation based on a 12-month risk-adjusted target of C$1.70, a ~70% premium to current price levels. The company trades at a P/NAV (US$1,600/5%) multiple of 0.45x (0.19-0.70x, average 0.48x). We estimate its EV/oz (Au only M&I resource, post transaction) at $30/oz versus an average of US$43/oz ($8-87/oz) for its peer group of developers. For more details, please see our full report, “Top of the Heap: Introducing a Trinity of Near-Term Open Pit/Heap Leach Gold Projects in the Americas.”
Investment highlights
Pan American Silver Corp. transaction – The company entered into a transaction with Pan American Silver to create a gold project pipeline (2.8 Moz in M&I) with significant by-product silver credits (28 Moz in M&I) predominantly in Mexico. The transaction included a private placement at a premium that would bring its W/C position to $65-70 million (CG est.) leaving it fully funded to develop La Bolsa ($50 million, CG est.).
Post transaction, Pan American Silver would own ~48% of the company’s I/O shares and ~45% on a F/D basis. We note that Pan American Silver Corp. has stated that its long term goal is to vend its stake in Esperanza (~48%) once a reasonable valuation is achieved
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Midway Gold Corp.
Posted: April 5, 2013 Filed under: Exploration Companies, Speculative | Tags: Chicago Midway International Airport, Gold, Goldrock, Heap leaching, Midway Gold Corp, Nevada, New York Stock Exchange, TSX Venture Exchange Leave a comment
English: an open pit mining shovel, picture taken at the 2008 MinExpo in Las Vegas Nevada USA (Photo credit: Wikipedia)
MDW : TSX-V : 1.17
MDW : AMEX
SPECULATIVE BUY
Target: C$1.65
Midway Gold Corp.’s is a development stage gold company with a pipeline of project in Nevada. The company offers exposure to a significant growth profile as production ramps up in 2015 to 2018 from their low to moderate technical and execution risk Pan and Gold Rock open pit/heap leach projects in central Nevada.
Investment recommendation
We are initiating coverage on Midway Gold Corp. (MDW : TSX-V and MDW : NYSE) with a SPECULATIVE BUY recommendation based on a 12-month risk-adjusted target of C$1.65, a ~40% premium to current price levels. The company trades at a P/NAV (US$1,600/5%) multiple of 0.61x (0.19-0.70x, average 0.48x). We estimate its EV/oz (Au only M&I resource) at $30-35/oz versus an average of US$43/oz ($8-87/oz) for its peer group of developers. For more details, please see our full report, “Top of the heap: introducing a trinity of near-term open pit/heap leach gold projects in the Americas.”
Investment highlights
Pan gold project – An open pit (1.8:1 SR), heap leach (15.4 kt/d, 74%) project in central Nevada that is currently in permitting stage where we estimate a record of decision by Q3/13 leading to production by 2015. We forecast an upfront capex of ~US$110 million to deliver an average production profile of 60-65 koz/y at cash cost, including royalties, of US$800-810/oz over a 10-year mine life. The Pan project has the potential to provide IRRs of 20-25% and paybacks of 3.0-3.5 years.
Gold Rock gold project – Another open pit (1.5:1 SR), heap leach (15.4 kt/d, 72%) project located only 8 km SE of the Pan project where the company is seeking to grow the resource base and deliver a scoping study (H2/13). We estimate that the project will require ~US$100 million to deliver an average annual production profile of 70 koz/y at a cash cost, including royalties of US$670-680 per ounce over a 9-year mine life beginning in 2017. The Gold Rock project has the potential to provide internal rates of returns of 30-35% and paybacks of 2.0-2.5 years. The company has begun (April 2) the EIS permitting process.
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Santacruz Silver Mining Ltd
Posted: April 1, 2013 Filed under: Silver, Speculative | Tags: Canadian dollar, Mexico, Rosario, Rosario Santa Fe, San Felipe, Silver, Silver as an investment, TSX Venture Exchange Leave a commentSCZ : TSX-V : C$1.94
SPECULATIVE BUY
Target: C$3.90
COMPANY DESCRIPTION:
Santacruz Silver Mining Ltd. is a junior silver developer focused on the advancement of the Rosario project (100%, Mexico), the San Felipe project (100%, Mexico) and the Gavilanes project (100%, Mexico). Through the development of the Rosario project, we forecast production of 1.3 million ounces of silver-equivalent in 2013, growing to 4.7 million ounces of silver-equivalent in 2015 through the development of the San Felipe project.
Investment highlights
We have been waiting for the receipt of an explosives permit for the Rosario mine since January 2013. The explosives permit now appears to be near at hand. Representatives from the Mexican Ministry of Defense (which regulates the use of explosives in the country) recently completed a site inspection at the Rosario mine with the potential for a permit to be issued within the next two weeks. Once the explosives permit is received, the company estimates that it should take roughly 15 days of underground development to start ramping up throughput at the mine.
In the interim, while waiting for the blasting permit, the company secured 3,200 tonnes of ore (averaging roughly 320 g/t silverequivalent)
from a local miner at a cost of US$28/tonne, and sourced 1,000 tonnes of outcrop material from the mine site. SCZ began processing this material through its mill in mid-February.
With the recently completed C$40.4 million equity offering and in light of the challenging financing environment that we are in, SCZ is also considering a smaller scale (and less capital intensive) development of its San Felipe project in Mexico with the intention of ramping up production over time using internal cash flow.
Valuation
We have adjusted our model to reflect expectations of lower production and throughput at the Rosario project in 2013, and to reflect the potential for less dilution associated with the recently completed equity offering and the potential for a smaller scale start-up of the San Felipe project. After adjusting our model, our peak silver price estimate of NAVPS (7.5-10%, US$35/oz Ag) has decreased slightly to US$4.88, from US$4.97 previously. We continue to value the shares of Santacruz Silver based on a 0.8x multiple to our peak silver price estimate of NAVPS.
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AMP Gold and Precious Metals Portfolio 