La Preciosa Approval Will Significantly Expand Silver Production By 2029

Key Takeaways

• La Preciosa project's progress and operational efficiency improvements promise increased production and revenue growth, enhancing earnings and profitability.
  
• Strong financial position and strategic resource use are set to minimize costs, boost output, and increase shareholder value and future earnings.
  
• Delays at La Preciosa and increased costs at Avino Mine could pressure margins and affect earnings, with tax and currency risks also impacting net income.

Catalysts

Engages in the acquisition, exploration, and advancement of mineral properties in Canada.

• The upcoming approval and advancement of the La Preciosa project are crucial elements of Avino's growth strategy, potentially increasing production significantly, targeting 8 to 10 million ounces of silver equivalent by 2029. This expansion is expected to drive future revenue growth.
  
• Improvements in mill availability and higher production grades, coupled with strong cash operating margins, indicate continued operational efficiency, which is anticipated to enhance net margins and earnings as the year progresses.
  
• The resolution of ore crushing challenges and better-than-expected recoveries from La Preciosa's lower-grade material suggests potential upside in production capacity, likely bolstering future revenues and profitability.
  
• Planned underground development at La Preciosa is a potential near-term catalyst, with the use of existing infrastructure expected to minimize capital costs while increasing output, thereby positively impacting earnings and cash flow.
  
• With improving balance sheet figures such as increased working capital and maintained strong cash positions, the company is well-positioned to absorb and leverage growth initiatives, potentially enhancing shareholder value and future earnings.

Avino Silver & Gold Mines Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Avino Silver & Gold Mines's revenue will grow by 19.0% annually over the next 3 years.
• Analysts assume that profit margins will increase from 6.6% today to 24.2% in 3 years time.
• Analysts expect earnings to reach $22.2 million (and earnings per share of $0.16) by about February 2028, up from $3.6 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $36.5 million in earnings, and the most bearish expecting $17.5 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 18.8x on those 2028 earnings, down from 54.5x today. This future PE is greater than the current PE for the US Metals and Mining industry at 12.2x.
• Analysts expect the number of shares outstanding to grow by 5.61% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.94%, as per the Simply Wall St company report.

Avino Silver & Gold Mines Future Earnings Per Share Growth

Risks

• The approval for underground development at La Preciosa is still pending, and any delays in obtaining necessary approvals can postpone production increases, potentially affecting projected revenues.
  
• Sustaining capital costs at the Avino Mine may increase due to required upgrades, which could pressure operating margins and impact net income.
  
• Sensitivity to the Mexican peso could lead to increased costs if the peso strengthens against the U.S. dollar, potentially diminishing earnings.
  
• The reliance on stockpiled material evaluation at La Preciosa, which has been completed, implies a need for future fresh ore processing, which can involve higher costs or operational risks impacting cash flow.
  
• Tax rates have been elevated recently, indicating potential volatility in tax obligations, which could affect net income and cash reserves if tax liabilities increase unexpectedly.

Valuation

• The analysts have a consensus price target of CA$2.95 for Avino Silver & Gold Mines based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of CA$3.4, and the most bearish reporting a price target of just CA$2.5.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $91.6 million, earnings will come to $22.2 million, and it would be trading on a PE ratio of 18.8x, assuming you use a discount rate of 6.9%.
  
• Given the current share price of CA$1.97, the analyst price target of CA$2.95 is 33.2% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.