Avino a case for USD$20 per share within 5 years (assuming $3,500 gold, $100 silver and $4 copper).

Full disclosure. I am a shareholder at the time of writing this.

Company Overview

Avino Silver & Gold Mines Ltd. is a Vancouver-based precious metals producer operating primarily in Durango, Mexico. The company focuses on silver, gold, and copper production, with its flagship Avino Mine and the recently acquired La Preciosa project. Avino is debt-free, cash-flow positive, and controls a significant mineral resource base of 371 million silver equivalent ounces. Its strategy emphasizes sustainable growth, leveraging existing infrastructure to expand production while minimizing environmental impact.

Financial Performance (2024 Highlights)

Avino reported record financial performance in 2024, driven by higher metal prices and increased production:

• Revenue: $24.4 million in Q4 2024, contributing to a strong full-year performance.
• Net Income: $8.1 million ($0.06 per share) for the full year.
• Cash Flow:
  • Cash provided by operating activities: $23.1 million, up 1,400% year-over-year (YoY).
  • Free cash flow: $14.1 million.
  • Mine operating cash flow before taxes: $27.6 million, up 150%.
• Cash Position: $27.3 million at year-end, a 916% increase YoY, representing the highest cash balance in company history.
• Costs:
  • Cash costs per silver equivalent ounce: $14.84, down 5% YoY.
  • All-in sustaining costs (AISC) per silver equivalent ounce: $20.57, down 6% YoY.
• EBITDA: $9.1 million in Q4, up 712% YoY.
• Debt: Avino remains debt-free, excluding minor equipment leases, providing financial flexibility.

These metrics reflect operational efficiency, cost control, and strong market conditions for silver and gold in 2024.

Operational Highlights

• Avino Mine: The primary source of production, delivering consistent output of silver, gold, and copper. In 2024, the mine achieved record production, with Q1 2025 reporting 678,458 silver equivalent ounces.
• La Preciosa Project: Acquired in Q1 2022, development began in January 2025 after securing permits. La Preciosa is expected to contribute to production in late 2025 or early 2026, utilizing existing processing infrastructure at the Avino Mill.
• Oxide Tailings Project: A pre-feasibility study completed in early 2024 showed positive economics, with potential to enhance long-term production.
• Exploration: Avino budgeted for 15,000 meters of drilling in 2025, focusing on high-grade zones below the Avino Vein and at La Preciosa.
• Sustainability: The company operates a dry-stack tailings facility, reducing environmental impact.

Growth Strategy

Avino’s five-year plan aims to achieve intermediate producer status by 2029, with key initiatives:

• Scaling production through La Preciosa and deeper development at the Avino Mine.
• Leveraging existing infrastructure to minimize capital expenditures.
• Maintaining a debt-free balance sheet while funding growth with cash reserves and cash flow.
• Capital expenditures for 2025 include underground mining equipment, mine development, and mill upgrades.

Market and Stock Performance

• Stock Price: As of March 2025, ASM reached a 52-week high of $1.56 USD. The current price is approximately $1.80 USD.
• Market Cap: $246.52–254.36 million as of March 2025.
• Analyst Ratings: Strong Buy, with price targets ranging from $1.90 to $2.75 (H.C. Wainwright: $2.20, Roth MKM: $2.00, Alliance Global: $2.75).
• EPS: $0.06 for 2024, with Q1 2025 EPS at $0.03 (beating estimates of $0.02).
• Risks: Metal price volatility, regulatory changes, currency fluctuations, and potential U.S. border closure impacts.

Silver and Gold Market Outlook

• Silver: Analysts predict a bullish trend, with silver potentially reaching $50/oz by 2025 due to a physical market shortage and strong industrial demand.
• Gold: Expected to remain robust, with prices around $1,943/oz in 2024, potentially rising with inflation or geopolitical instability.Avino’s unhedged production benefits directly from rising metal prices, enhancing revenue potential.

Cash Flow Projection for 2026

Assumptions

1. Production: La Preciosa begins contributing in Q1 2026, increasing silver equivalent production by 20–30% over 2024 levels (assume 3.5–4 million silver equivalent ounces annually, based on 2024 production of ~2.7 million ounces and growth plans).
2. Metal Prices:
   • Silver: $30/oz (conservative, given $50/oz forecasts).
   • Gold: $2,000/oz (slightly above 2024 levels).
   • Copper: $4/lb (stable).
3. Revenue Mix: 60% silver, 30% gold, 10% copper (based on historical production).
4. Costs:
   • Cash costs: $15/oz (slight increase due to new project integration).
   • AISC: $21/oz (stable with economies of scale).
5. Capital Expenditures: $10–12 million for La Preciosa ramp-up and Avino Mine development.
6. Operating Margin: 40–50%, reflecting 2024 margins and higher metal prices.
7. Tax Rate: 30% (standard for mining in Mexico).

Calculation

• Revenue:
  • Silver: 4M oz × 60% × $30 = $72M
  • Gold: 4M oz × 30% × ($2,000/oz ÷ 31.1035 g/oz × 0.015 AgEq) = $28.9M
  • Copper: 4M oz × 10% × ($4/lb ÷ 2,204.62 lb/ton × 0.008 AgEq) = $9.1M
  • Total Revenue: $72M + $28.9M + $9.1M = ~$110M
• Operating Costs:
  • Cash costs: 4M oz × $15 = $60M
  • Operating Income: $110M – $60M = $50M
• CapEx: $11M (midpoint)
• Free Cash Flow:
  • Operating Cash Flow: $50M × (1 – 0.3) = $35M (after tax)
  • Free Cash Flow: $35M – $11M = ~$24M

2026 Cash Flow Projection

• Free Cash Flow: $24 million
• Cash Balance (Year-End 2026): $27.3M (2024) + $14.1M (2025 FCF, per 2024 run-rate) + $24M (2026 FCF) – $5M (miscellaneous expenses) = ~$60.4M

This assumes no dividends or major acquisitions, with growth funded internally. Higher metal prices ($50/oz silver) could push FCF to $35–40M, while lower prices ($25/oz silver) could reduce it to $15–20M.

Share Price Projection for 2026

Valuation Approach

I’ll use a Price-to-Cash-Flow (P/CF) multiple and Discounted Cash Flow (DCF) model, adjusted for mining sector norms and Avino’s growth trajectory.

1. P/CF Multiple:
   • Current P/CF: Market cap ($250M) ÷ 2024 FCF ($14.1M) = ~17.7x
   • Sector P/CF: Junior silver miners typically trade at 10–20x FCF, with growth companies at the higher end.
   • Assume 2026 P/CF: 15x (reflecting growth but moderating from current levels).
   • 2026 FCF: $24M × 15 = $360M market cap.
   • Shares Outstanding: 135M (stable, assuming no major dilution).
   • Share Price: $360M ÷ 135M = ~$2.67
2. DCF Model:
   • FCF Growth: 10% annually post-2026 (La Preciosa fully operational, Oxide Tailings contribution).
   • Discount Rate: 10% (industry standard for mining).
   • Terminal Growth: 2% (long-term metal price stability).
   • 5-Year FCF (2026–2030): $24M, $26.4M, $29M, $31.9M, $35.1M
   • Terminal Value (2030): $35.1M × (1 + 0.02) ÷ (0.10 – 0.02) = $447.8M
   • Present Value (2026):
     • FCF: $24M ÷ (1.1) + $26.4M ÷ (1.1)² + … + $35.1M ÷ (1.1)⁴ = ~$103.5M
     • Terminal Value: $447.8M ÷ (1.1)⁴ = ~$305.7M
     • Total NPV: $103.5M + $305.7M = ~$409.2M
   • Share Price: $409.2M ÷ 135M = ~$3.03
3. Analyst Targets:
   • Current targets ($1.90–$2.75) reflect 2025 expectations.
   • 2026 targets likely higher with La Preciosa production; assume midpoint of $2.50, adjusted upward to $3.00 for growth.

2026 Share Price Projection

• Base Case: $2.85 (average of P/CF: $2.67, DCF: $3.03, analyst-adjusted: $3.00)
• Bull Case: $3.50 (silver at $50/oz, FCF at $35M, P/CF at 18x)
• Bear Case: $2.00 (silver at $25/oz, FCF at $15M, P/CF at 12x)

This aligns with bullish analyst sentiment and Avino’s production growth, tempered by sector risks.

Risks and Considerations

• Metal Price Volatility: A sharp decline in silver/gold prices could erode cash flow and stock value.
• Operational Risks: Delays at La Preciosa or unforeseen mining issues could impact production targets.
• Regulatory/Currency Risks: Changes in Mexican regulations or USD/MXN fluctuations could affect costs.
• Dilution: Equity issuance for unexpected capital needs could pressure share price.
• Macro Factors: Global economic slowdown or U.S. border policies could disrupt operations.

Conclusion

Avino Silver & Gold Mines is well-positioned for growth in 2026, driven by La Preciosa’s production ramp-up, a strong cash position, and favorable silver market dynamics. Projected free cash flow of $24 million and a cash balance of ~$60.4 million reflect robust financial health. The share price is expected to reach $2.85 by year-end 2026, with a bull case of $3.50 and a bear case of $2.00, depending on metal prices and operational execution.

Investors should monitor silver price trends, La Preciosa’s progress, and quarterly earnings (next report: May 6, 2025) for updates. While Avino offers significant upside, its high beta and sector risks warrant caution for conservative portfolios.

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However, on the basis of a Gold price of $3500 and a silver price of $100 per ounce:

Assumptions

1. Metal Prices:
   • Silver: $100/oz
   • Gold: $3,500/oz
   • Copper: $4/lb (unchanged, as copper is a minor contributor)
2. Production: 4 million silver equivalent ounces (AgEq) in 2026, reflecting a 20–30% increase over 2024 (2.7M oz) due to La Preciosa’s contribution starting Q1 2026.
3. Revenue Mix: 60% silver, 30% gold, 10% copper (consistent with historical production).
4. Costs (adjusted for commodity-driven inflation):
   • Cash costs: $16.50/oz (up from $16/oz due to higher energy, labor, and input costs in a high commodity price environment).
   • All-in sustaining costs (AISC): $22.50/oz (up from $22/oz).
5. Capital Expenditures: $11 million (midpoint of $10–12M for La Preciosa and Avino Mine development).
6. Operating Margin: 65% (improved from 60% due to significantly higher metal prices outpacing cost increases).
7. Tax Rate: 30% (standard for Mexican mining).
8. Shares Outstanding: 135 million (no major dilution assumed).
9. P/CF Multiple: 18x (high end of junior silver miner range, reflecting strong growth and bullish sentiment for elevated silver and gold prices).
10. Discount Rate: 10% (industry standard).
11. Terminal Growth: 2% (long-term stability).

Cash Flow Calculation

Revenue

• Silver: 4M oz × 60% × $100/oz = $240M
• Gold: 4M oz × 30% × ($3,500/oz ÷ 31.1035 g/oz × 0.015 AgEq) = $50.6M
  • Gold AgEq calculation: ($3,500 ÷ 31.1035) × 0.015 = ~1.6875 oz AgEq per oz gold
• Copper: 4M oz × 10% × ($4/lb ÷ 2,204.62 lb/ton × 0.008 AgEq) = $9.1M
• Total Revenue: $240M + $50.6M + $9.1M = $299.7M

Operating Costs

• Cash costs: 4M oz × $16.50/oz = $66M
• Operating Income: $299.7M – $66M = $233.7M

Free Cash Flow

• Operating Cash Flow (after tax): $233.7M × (1 – 0.3) = $163.6M
• CapEx: $11M
• Free Cash Flow: $163.6M – $11M = $152.6M

Share Price Projection

1. Price-to-Cash-Flow (P/CF) Multiple

• 2026 FCF: $152.6M
• P/CF Multiple: 18x (reflecting bullish sentiment)
• Market Cap: $152.6M × 18 = $2,746.8M
• Share Price: $2,746.8M ÷ 135M shares = $20.35

2. Discounted Cash Flow (DCF) Model

• FCF Growth: 10% annual growth post-2026 (La Preciosa operational, potential for further expansion).
• 5-Year FCF (2026–2030): $152.6M, $167.9M, $184.7M, $203.2M, $223.5M
• Terminal Value (2030): $223.5M × (1 + 0.02) ÷ (0.10 – 0.02) = $2,850.2M
• Present Value (2026):
  • FCF: $152.6M ÷ (1.1) + $167.9M ÷ (1.1)² + $184.7M ÷ (1.1)³ + $203.2M ÷ (1.1)⁴ + $223.5M ÷ (1.1)⁵ = ~$679.5M
  • Terminal Value: $2,850.2M ÷ (1.1)⁵ = ~$1,768.7M
  • Total NPV: $679.5M + $1,768.7M = $2,448.2M
• Share Price: $2,448.2M ÷ 135M = $18.13

3. Analyst Target Adjustment

• Current analyst targets ($1.90–$2.75) are based on silver at $30–50/oz and gold at ~$2,000/oz. With silver at $100/oz and gold at $3,500/oz, targets would scale significantly.
• Proportional increase: Silver tripling ($30 to $100) and gold increasing 75% ($2,000 to $3,500) suggest targets could rise 2.5–3.5x. Midpoint target of $2.50 × 3 = $7.50, but speculative sentiment could push targets to $18–$22.
• Assume $19.50 as an adjusted analyst target midpoint.

2026 Share Price Estimate

• Average: ($20.35 + $18.13 + $19.50) ÷ 3 = $19.33
• Range: $18.13–$20.35 (reflecting model variance)

Sensitivity and Risks

• Upside:
  • If production exceeds 4M oz (e.g., 4.5M oz) or P/CF multiples expand to 20x due to market euphoria, the share price could reach $22–$24.
  • Sustained high metal prices could attract acquisition interest, boosting the stock.
• Downside:
  • Costs could rise further (e.g., $20/oz cash costs), reducing FCF to ~$135M, lowering the share price to $16–$17.
  • Extreme metal price spikes may trigger regulatory changes in Mexico (e.g., higher royalties) or profit-taking in equities, capping multiples.
  • Operational delays at La Preciosa or supply chain issues could limit production.
• Macro Risks: A $100/oz silver and $3,500/oz gold scenario likely reflects severe inflation or geopolitical instability, increasing volatility and potentially disrupting mining operations.

Conclusion

With a silver price of $100 per ounce and a gold price of $3,500 per ounce, Avino Silver & Gold Mines’ share price in 2026 is projected to be $19.33, with a range of $18.13–$20.35. This reflects a free cash flow of $152.6 million, driven by significantly higher revenues from elevated metal prices, and a bullish P/CF multiple of 18x. The projection assumes successful La Preciosa integration and stable production growth. However, the extreme metal price scenario introduces risks such as cost inflation, regulatory scrutiny, and market volatility, which investors should carefully consider.