Better than expected results of
.12, compared to Canaccord Genuity’s estimate of
.06, from sales of 120,199 ounces of silver and 9,702 ounces of gold.
Production was inline with expectations for 131,045 ounces of silver and 9,536 ounces of gold. Better yet, SVL managed to do
what few companies of late have succeeded at, surprise analysts with lower than expected costs. The company reported cash
costs at $5.65 per AgEq ounce, compared to estimates for $11.76. Commercial production at Santa Elena was achieved in July
2011. As of December 31, SVL had a cash position of US$26 million. Production for 2012 is estimated at 435,000 ounces of
silver and 33,000 ounces of gold at an average cost of $8.20 per ounce silver equivalent. This is in line with Canaccord
Genuity’s estimate for production of 474,665 ounces of silver and 33,568 ounces of gold at a cash cost of $14.05 per ounce
AgEq. SVL is one of Canaccord Genuity Mining Analyst Nicholas Campbell’s top picks based on his view that the production
and cash flow growth associated with the expansion of the Santa Elena mine (100%, Mexico) and the resource expansion
potential of the La Joya project (100%, Mexico) is not reflected in the current valuation of the company. SVL is producing
roughly 1.0 million ounces of silver-equivalent per year from its Santa Elena silver-gold mine. Through the expansion of this
mine, production is expected to increase to 4.6 million ounces of silver-equivalent by 2014. Further, an initial resource estimate
for the La Joya project returned a silver-equivalent resource of 86 million ounces using a 30 g/t AgEq cutoff (102 million AgEq
using a 15 g/t cutoff). Based on the exploration upside potential at the project, we see potential for La Joya to develop into a 200
million+ oz silver-equivalent resource.