RE: RE: RE: Wouldn't Surprise me I'm a long term holder of Silvercrest and began accumulating in 2008. This has been a successful holding for me and I'm very supportive of the management team. Like Natural, I too am cognizant of our low PE in the 7 range. One would think we'd trade higher given our clean balance sheet, immediate and certain growth prospects that will double earnings (Santa Elena underground), and future prospects with La Joya that are looking more certain by the day.
So, why do we only trade at 7x earnings now? Here are two things I believe are contributing to it...
1/ Management is contemplating raising cash to provide cushion for their build out of Santa Elena underground. They've disclosed that they think they have enough cash flow to self finance, but it will be tight and they want some cushion. As a large shareholder, I want to see no more dilution. If they can't raise a modest amount of debt at acceptable interest rates, I'd prefer they push back their development schedule 6 months rather than selling more equity. I believe the risk of this potential dilution is holding back the stock to some extent.
2/ Forecasted production for Santa Elena when fully built out begins to decline modestly in 2016 and more significantly by 2019. You can't put a 10 to 15+ PE on a company that has declining earnings prospects in the mid-term. This is why success in La Joya is so important because it supports longer term production/earnings sustainability, which in turn will support a higher PE.
As suggested by another poster, could a devious short player be keeping the stock price down to drive a low purchase price of the company later? Perhaps, but keep in mind that management doesn't have to say yes to a low ball offer. I'm not too concerned about this situation. I've seen management's recent presentations and it appears to me that they know what they have here and that they're still enjoying the process of building it out. It is certainly in their interest to maximize the stock value by completing the Santa Elena expansion and proving the certainty of the La Joya deposit prior to selling the company, and I believe their bias is to do just that unless the buyout offer is very compelling... say $8+.
Looking ahead 2 years from today, the Santa Elena expansion will be complete and the La Joya economics will be defined with certainty. At that time, and conservatively assuming flat metal prices, we should trade between $8-12 per share with a PE range of 10-15. This is assuming no more dilution. I'm very much hoping Drever, Fier, and Magnusson don't do an equity offering. I'm patient and I'm looking forward to things developing in the next 2 years. I'm also very bullish on the metals and believe we have a good chance of trading higher than $8-12 as a result higher metal prices. Good luck longs,