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SilverCrest Metals: rare example of a 100% held silver producer

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SilverCrest Metals (NYSE:SILV / TSX:SIL) is a Mexican precious metals miner currently focused on the Las Chispas project, which it is in the process of commissioning. It is the first miner to successfully drill-test Las Chispas and last year it was admitted to the TSX 30. We caught up with the management team at a recent event hosted by the Swiss Mining Institute.

SilverCrest is reaching the end of a journey that will see it bring the mine into production. It has been a quicker process than many North American mines, which average a lot longer. The company has completed key infrastructure including diesel back up power, a bridge, and an assay lab in Sonora. The 2021 feasibility study put average annual total production from the mine at 12.4m oz Aq Eq. All-in sustaining costs are estimated at USD 6.68/oz Ag Eq (based on full years of production only).

Commercial production is currently estimated to start Q4 of this year. SilverCrest reckons operations are well-positioned to ramp up to commercial production by year-end. Pre-production stockpiles already provide substantial optionality during the mine commissioning phase.

The company has around 300,000 tonnes of combined historic low-grade stockpiles and also high grade pre-production stockpiles that will be available now. These stockpiles mean that SilverCrest can start to ramp up the mine at a much more measured pace. The company is expecting a mining rate of 750 tonnes per day by the end of 2022. Design rates are expected to be hit sometime in 2025.

Las Chispass Annual Throughput

“We are on time and on budget,” company president Chris Ritchie told us. “We have raised an extra $35m and we are trading at an 8% cash yield today [end Q1]. We should be getting a premium multiple.”

He emphasised the advantage enjoyed by low costs assets that enjoy a small footprint, such as Las Chispas, as they benefit from lower fixed costs and will be less sensitive to inflationary pressures.

Brokers rate SilverCrest Metals a buy

Investors should note that Raymond James raised its Q2 2022 earnings per share estimates for SilverCrest Metals to post-earnings per share of $0.02 for the quarter. Consensus estimates for SilverCrest Metals’ full year earnings are at the $1.09 mark. The broker also said Q3 EPS would be around $0.01, with Q$ at $0.33 reflecting the scale up of production operations at  Las Chispas. Q4 2023 earnings were estimated at $0.24 EPS.

Cormark Securities has also rated SilverCrest a buy recently with a C$14 target price (this on a 20 May research note). Five analysts currently have the stock as a buy. In its 10 May numbers SilverCrest C$0.08 EPS.

Las Chispas represents a top 10 global silver-primary mine, and is the only one – surprisingly to us – that is 100% held by a single-asset producer. In terms of its reserve grade it is comparable with the likes of Hecla’s Lucky Friday mine or Greens Creek.  The estimated mine life of  8.5 years also stacks up well. It has better estimated grades and mine life than Polymetal’s Dukat mine.

There are very few listed companies out there that derive more than 50% of their revenue from silver and are 100% precious metals plays. Only Aya Gold & Silver and Endeavour Silver look like higher focus silver plays. With inflation still showing no signs of coming under control, high quality silver plays like this one are worth a look.

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This article does not constitute investment advice. Do your own research or consult a professional advisor.

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