RE: SILVERCREST MINES INC Given Buy Rating at Jenn Here's the report. GLTA
SILVERCREST MINES INC. 12-Month Target: C$3.50
(TSXV-SVL C$2.35)
LA JOYA MET WORK SUGGESTS +VE ECONOMICS
? Last week, SilverCrest announced updated metallurgical results at its La Joya project, Mexico. Recoveries were better than expected for copper and silver, but
disappointing for gold versus our internal estimates.
However, gold only accounts for 15% of metal value
and so, in our view, the disappointment could be
forgiven. We would be buyers of the stock on the
sell-off from last week.
? We now value La Joya on a NAV 5% basis, switching
from our in-situ valuation method. Our assumptions are
shown in Figure 5 and derive a NAV of $134 million for
just the starter-pit.
? Recoveries at the Manto and Structure composites
within the starter pit area are highlighted below. Efforts
are underway to optimize gold recoveries via gravity.
o Au recovery: 35.0% - 56.6%
o Ag recovery: 74.9% - 80.7%
o Cu recovery: 81.4% - 87.7%
? The copper concentrate grades are good, with test
work showing 38% - 40%, compared to that usually seen
for other projects in the 25% - 30% range. This would
allow for a richer concentrate and related lower
transportation charges.
? The concentrate does contain some deleterious
elements such as arsenic, antimony and bismuth;
however, SVL has successfully tested a process to
reduce the arsenic below 1%, similar to the neighbouring
Sabinas mine owned and operated by Peñoles.
? Additional work is underway to reduce the antimony and bismuth, although these elements could penalize SVL when sending concentrates to a smelter. We have adjusted our payable percentages to accommodate this, pending further test work.
We continue to like SilverCrest for its growth profile and for management’s ability to execute.
We re-iterate our BUY recommendation with a 12-month target price of $3.50 per share based on a weighted average multiple of 0.89x (from 0.94x) our NAVPS of $3.87 per share (from $3.74 per share).