SST Valuation - from MIDASAll,
Just put up on GATA's website. Notice the ridiculous valuation of SST, particularly compared to SLW.
yoyo
Junior Silver Mining Valuations
By Andy Hoffman
I did some work to update the valuations being attributed to junior silver mining companies in this hellacious market. Below is a summary of a significant-sized sample of such companies, ranging in market capitalizations from C$20 million to C$3.5 billion.
I’ve done my best to correctly calculate silver equivalent resources and reserves, giving equal weight to silver, gold, lead, zinc, and other minerals. I’ve also given equal weight to proven/probable reserves and measured/indicated/inferred resources, as well as explorers (the majority) vs. producers, and finally companies with assets in relatively safe political areas vs. ones operating in (subjectively) dangerous political spheres.
Thus, clearly this is not an apples-to-apples basis, but for the sake of this exercise it tells the story well.
A year ago, the average price/silver equivalent ounce was closer to $3.00-$4.00/oz., on average, across the board. Today, that average has dropped to roughly $1.39/oz., or just $0.98/oz. if you exclude large producers such as Silvercorp, Pan American Silver, and Silver Wheaton. Based on the current gold/silver ratio, this equates to $50-$70/oz for junior gold mining companies, and I’m sure that number would hold reasonably true if I did this analysis for that group. For base metal miners, the drop has been nearly as severe, but is harder to quantify due to the less heterogeneous nature of that group.
Silver is currently $17.40/oz. and operating costs range from roughly $4.00/oz. (royalty companies such as Silver Wheaton and Silverstone) to $10.00/oz., yielding potential net margins of $7.00-$13.00/lb.. Moreover, silver has risen 40% in the past year, while the HUI is up 28%. Thus, even in the context of rising mining costs, it is quite amazing to see the 50%-60% decline in the absolute valuation of this group, with even many producers gaining little or no ground over this period. The HUI itself has been led by a very narrow group of large-cap stocks such as GG and AEM, while most of the rest have languished.
I’m not sure what the catalyst will be to turn the Street’s perceptions toward this vastly undervalued group, which based on the current silver fundamentals could get significantly more undervalued shortly even if they remain flat. But I do know that at some point in the short- to intermediate-term this perception will eventually change, and when silver reaches $25-$30/oz. (it will), I wouldn’t be surprised to see the above valuation metric rise to $4.00-$5.00/oz..
For most of these companies, this would suggest the potential for 300%-400% stock price gains, and for others significantly more as they prove up additional resources/reserves, commence production, and/or find other ways to expand their stock multiples (such as joint ventures and/or acquisitions).
As always, we wait with the patience of Job.