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$40 silver per ounce

RO
RockeTellerInvested
Community Contributor

Published

September 26 2024

Updated

September 26 2024

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Silvercrest Metals: Overview and Valuation

Project Highlights

  • Project: Las Chispas, Mexico
  • Resource Size: 130 million oz (550 gpt silver equivalent)
  • Production Rate: 10 million oz annually
  • Current FD Market Cap: $1 billion
  • Cash and Bullion: $80 million
  • Debt: None
  • AISC: Approximately $11.45/oz
  • Break-even Costs: Around $17/oz

Financials

  1. Annual Revenue Calculation (at $24/oz):Revenue=Production×Price\text{Revenue} = \text{Production} \times \text{Price}Revenue=Production×Price Revenue=10,000,000 oz×(24−11.45) USD/oz=10,000,000×12.55=125,500,000 USD\text{Revenue} = 10,000,000 \text{ oz} \times (24 - 11.45) \text{ USD/oz} = 10,000,000 \times 12.55 = 125,500,000 \text{ USD}Revenue=10,000,000 oz×(24−11.45) USD/oz=10,000,000×12.55=125,500,000 USD
  2. Free Cash Flow (FCF): With a break-even cost of $17 and an AISC of approximately $11.45, the projected FCF based on current silver prices would be significant.
  3. Valuation Potential:
    • Given that they have paid off capex, the company is now in a strong position to generate cash and potentially increase its resource base through exploration.
    • With strong grades (700 gpt AGEQ) and low costs, any increase in silver prices will significantly enhance profitability.

Stock Price Estimation

Assuming a silver price increase, let's calculate the potential stock price based on resource valuation:

If Silver Reaches $40 per oz:

  1. New Revenue Calculation:New Revenue=10,000,000 oz×(40−11.45) USD/oz=10,000,000×28.55=285,500,000 USD\text{New Revenue} = 10,000,000 \text{ oz} \times (40 - 11.45) \text{ USD/oz} = 10,000,000 \times 28.55 = 285,500,000 \text{ USD}New Revenue=10,000,000 oz×(40−11.45) USD/oz=10,000,000×28.55=285,500,000 USD
  2. Market Cap Valuation: Assuming a valuation of $100 per oz for resources:Market Cap=130,000,000 oz×100 USD/oz=13,000,000,000 USD\text{Market Cap} = 130,000,000 \text{ oz} \times 100 \text{ USD/oz} = 13,000,000,000 \text{ USD}Market Cap=130,000,000 oz×100 USD/oz=13,000,000,000 USD
  3. Stock Price Estimation: Assuming 100 million shares outstanding:Stock Price=Market CapShares Outstanding=13,000,000,000100,000,000=130 USD/share\text{Stock Price} = \frac{\text{Market Cap}}{\text{Shares Outstanding}} = \frac{13,000,000,000}{100,000,000} = 130 \text{ USD/share}Stock Price=Shares OutstandingMarket Cap​=100,000,00013,000,000,000​=130 USD/share

Summary

Silvercrest Metals is in a strong position to capitalize on rising silver prices with solid cash flow, no debt, and significant exploration potential at Las Chispas. If silver prices rise to $40 per ounce, the stock could potentially be valued around $130 per share, showcasing substantial upside potential. The company’s focus on shareholder value through buybacks and strategic management decisions further enhances its attractiveness.

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Disclaimer

The user RockeTeller has a position in TSX:SIL. Simply Wall St has no position in any of the companies mentioned. The author of this narrative is not affiliated with, nor authorised by Simply Wall St as a sub-authorised representative. This narrative is general in nature and explores scenarios and estimates created by the author. The narrative does not reflect the opinions of Simply Wall St, and the views expressed are the opinion of the author alone, acting on their own behalf. These scenarios are not indicative of the company's future performance and are exploratory in the ideas they cover. The fair value estimates are estimations only, and does not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that the author's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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Fair Value
CA$130.0
88.8% undervalued intrinsic discount
RockeTeller's Fair Value
Future estimation in
PastFuture01b2b3b4b5b201520182021202420272029Revenue US$5.2bEarnings US$2.1b
% p.a.
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Current revenue growth rate
-4.48%
Metals and Mining revenue growth rate
59.25%