RE: RE: Great News!!!??? "The future of silver ...for companies like Silvermex?"
Assuming the prices of silver and gold stay the same as 2011...
Well, first of all, I see that Duane expects 2012 production to increase to 500,000 oz AG a,d 5,000 oz AU. Pricing that out at the same $35 and $1,595 per oz respectively, I get:
Silver 500,000 x $35 ...........................$17,500,000
Gold 5,000 x $1,595 ..................... 7,975,000
Total 2012 25,475,000
That equates to a 50% increase in sales revenue over 2011, which was $16,800,000
In other words, running at full capacity for the full year instead of just a part of it, might well improve the gross by 50%. If I knew what their total fixed costs are expected to be, and if I could assume that their cash costs could be used as a rough measure of their variable cost per ton, then it would be a simple matter to predict what the 2012 net earnings might be. In any case, a 50% increase is going to add substantially to the bottom line, but it can't add more $8,600.000 to the bottom line even if the extra sales cost nothing at all to mine, refine and sell.
What happens if the price of silver shoots up to $105 per oz, i.e 3 times the present price of silver, and averages $70 per oz for the year 2012? What then?
If that were to happen, then silver sales would be $35 million vs $17.5 million. And most of that increase would go straight to the bottom line. Total sales for 2012 would then be $25,475,000 + $17,500,000 = $$43,000,000 (approx). That equates to about 15 cents per share. i.e $43m /287m shares. A helluva lot better than now, but still not earth-shaking.
What it tells me, is that there needs to be a substantial amount of profitable ore ahead of the production face, narrow veins notwithstanding, which in turn means firmed up resource ounces, plus the ability to get that substantial increased tonnage milled into a saleable product. In other words, even silver prices that double are not enough in themselves to take this company up to the next level.
The forest versus the trees!
And, the very small size of the silver market itself, plus the deternination of governments to keep these bullion prices from undermining (no pun intended) their fiat money, is a worrisome factor. I fear that the world will experience some traumatic times before the smoke finally clears and silver and gold come shining through. And think about it ... if gold and silver were to reach untold heights, might not the Mexican and other governments not want to nationalize their national treasure, along the lines of Chavez in Venezuela and La Christina.
Silver is also a material with very important military applications. I think the US government would use its power to take comand of the resource one way or another, and on their terms. I always wonder what price one of a group of castaways on a desert island could charge for fresh water if he controlled the entire supply! Or, better still, how long he would live if he didn't give it away for nothing. Being a very small market of a precious resource is not necessarily a guarantee of financial success, unless of course you have your own equivalent of a 5th Fleet of fully equipped aircraft carriers etc.
And so the war of nerves continues! If I could just make a couple of million and get the ... out before it reached that point!! In the meantime, I feel like going to one of those board meetings and saying,
"Come on guys! You've done wonders so far, but now I need you to do even greater wonders and get this company into top gear before the world falls apart around us! We've got to get up there in the "win or place" category; "also ran" is not an acceptable or viable option! Time is of the essence!!"
(Lots of exclamation marks for emphasis...)
Sunwood