Silvercrest Mines is an emerging Mid-Tier producer. They are producing 2.5 million oz of silver equivalent (silver, gold, and copper), and are expanding production at their flagship Santa Elena mine in Mexico in 2013 and 2014. Then they have two more projects under development: Cruz de Mayo (2015) and La Joya (2016). So, they have significant growth planned for the next four years. They will reach 5 million equivalent ounces. And their costs are low. Plus, their market cap is only $265 million fully diluted.
It looks great using those numbers, but I don’t have them as a top pick. Why not? Their total M&I silver resources are only 16 million oz. They have 114 million inferred, but they are low grade. They have 1 million oz of gold, but 800,000 oz are inferred and low grade. Thus, they need to have exploration success to sustain the growth that they are planning. Also, they are using Sandstorm for financing, with 25% of gold production going to them for $350. And they are using Sandstorm for financing their two new mines. So, I expect more hedging. Also, they are counting on copper demand in the long term. They have 500 million lbs of copper and that is a significant part of their cash flow at Santa Elena.
With their growth they will probably be a 3 bagger, but more than that is speculation. And they are going to need copper to hold up. I don’t like the risk of betting on copper in the long term. The key for this stock long term (as is true for many mining stocks) will be their exploration results. They need to find more resources to extend the mine life and expand production.