Avino Silver & Gold Mines: Rapid Progress May Instigate Profit Taking

seekingalpha06-03

Avino Silver & Gold Mines Ltd. has seen its share price double in three months, but may be vulnerable to profit-taking.The company has a positive outlook and the potential for decent profits, even at ...

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That being my particular mission has led me to forage among some smaller, maybe lesser-known stocks with the view to acquiring a bargain. I am also of the opinion that silver and its associated stocks will outperform the gold sector by the time this bull market completes its journey. Avino Silver & Gold Mines Ltd. (NYSE:ASM) is one such candidate for my portfolio so today I will take a quick look at this stock and try to determine if it is a Sell, Hold or Buy. As Seeking Alpha readers know, my enthusiasm tends to run ahead of the real action and I buy too early. Given Avino's recent rapid rise in price, I have certainly missed some fireworks. If you made a purchase earlier then well done you, give yourself a big pat on the back. Brief Description Historically silver mining on the Avino property stretches back to the 1500s when the Spaniards mined it. As interesting as Avino's history is, our focus is on where they are today and where they might go in the future. The following histogram depicts their planned growth in silver Equivalent Ounces (\"AgEq\") from 2024 through to 2029. And if you allow me to dream for a moment that's 8000,000 Oz's at say today's price of around $30.00/Oz equals approximately $240 million. Of course, the price of silver could go down and there is a myriad of variable costs to be considered which represent significant risks for this operator and the same applies to most of the operators in this space. Avino Planned Production chart for Mining Gold and Silver (Avino Gold and Silver website ) One-Year Chart of Avino's progress Note the Golden crossover in early April, usually a positive indicator for a stock. The stock price has more than doubled in three months, which could be a bit too far and too fast prompting a bout of profit-taking. The RSI is over the '70' level which puts this stock firmly in the overbought zone. One Year Chart of Avino's progress (StockCharts TA by Bob Kirtley) The RSI is over the '70' level which puts this stock firmly in the overbought zone. Avino Silver YTD Comparison Chart When compared to a few of its peers on a YTD basis Avino has performed very well indeed and would appear to be one of the front-runners as depicted on the chart below. Avino Gold and Silver YTD Comparison Chart (Google Finance) One-Year Price Chart Of Silvers Progress As the chart shows, silver gained nearly $10/Oz in just three months, so a correction was due and is a good thing as it shakes out weak hands. I would also draw your attention to a small gap near the $26.00/Oz mark that was made during this rally. In my experience these gaps tend to be backfilled during a correction, not all the time, but it is something to be aware of so you are mentally prepared if it does happen. A recent example of this can be seen on the chart of the Gold Royalty Corp. (GROY) a small gap was formed at the $1.50 level in early February and the stock went on to trade at $2.15 before returning to trade at $1.50. One Year Price Chart Of Silvers Progress (StockCharts TA by Bob Kirtley) The RSI was above '70' which is a sell indicator for many investors and the MACD and the STO are also in the overbought zone suggesting a correction in the near term. However, the fundamentals take priority in my opinion and should silver continue with its trek north then the Technical Analysis will be overruled. Financials The First Quarter 2024 Results were reported on May 8 with the highlights shown on the following table: Avino Gold and Silver The First Quarter 2024 Results (Avino website) Q1 2024 Revenues of $12.4 million were up 26% on Q1 which is fairly solid progress. The working capital for Q1 2024 was $9,785k up from $5,109k in Q1 2023, registering a 92% increase, which is also pleasing to see. The above summary reads pretty well so I would now like to draw your attention to the costs of production where the all-in sustaining cash costs (\"AISC\") per silver equivalent payable ounce was $20.23/Oz, which is not too shabby given the price of silver. In terms of the future outlook the President and CEO, David Wolfin stated the following: \"We are enthusiastic with the recent advancements in the development of La Preciosa, a mineral property in its development stage boasting a substantial untapped primary silver resource in Mexico. Situated near to Avino's established operations in Durango, Mexico, the integration of La Preciosa's mineral resource inventory has notably bolstered Avino's overall NI 43-101 mineral resource portfolio to a current total of 371 million silver equivalent ounces.\" This inventory includes some gold and copper which adds a little diversity to the mix and could be useful should silver not live up to its current expectations. Inflation: The Consumer Price Index in the US states that The all-items index rose 3.4% for the 12 months ending April 2024, and it appears to be holding fairly steady. Now, since then, I have taken a peek at the freight rates for container shipping as transportation costs play a significant part when calculating the rate of inflation. Below is a chart of the Global container freight rate index from January 12, 2023, to May 30, 2024 (in U.S. dollars per 40-foot container) Global container freight rate index (Statista website) What concerns me is the price of a container as of 16 May 2024, which is around $4200, which is the highest it has been for some time. It is something to watch as transportation costs could impact the production costs of any mining operation. If we now take a quick look at the Seeking Alpha Quants section, this stock is Ranked in Sector at 106 out of 282 and Ranked in Industry at 4 out of 10 which is a tad above average, and it has been ranked as a Hold. Avino has a market capitalization of $142.18m, a 52-week trading range of $0.40 - $1.12, a P/E Ratio (\"TTM\") of 107 and an EPS (\"TTM\") of 0.01. The liquidity is reasonable with an average volume of 1,192,612 shares traded per day. At current price levels this amounts to about $1.0 million per day, so a speculator with big pockets could push this stock to higher ground rather quickly and similarly a seller could also drive the stock price down just as quickly so take care with this one and be prepared for a fair amount of volatility. Avino Silver & Gold Mines Ltd trades on the NYSE/AMERICAN symbol ASM and on the Toronto Exchange symbol ASM:CA Conclusion Avino Silver & Gold Mines Ltd has experienced a doubling of its share price in just three months and may be susceptible to a bout of profit-taking. The outlook is positive, and the opportunity exists to generate decent profits even at the current prices of the underlying commodities. If I owned this stock, I would lean towards holding it but as I don't then I will observe its progress a little while longer with the view to making an acquisition at a cheaper entry point. My followers are aware that I have been Long both physical silver and gold for many moons and that I own a portfolio of shares in the precious metals space, including: Sandstorm Gold Ltd. (SAND), Wheaton Precious Metals Corp. (WPM), Agnico Eagle Mines Limited (AEM) and SSR Mining Inc. (SSRM). Endeavour Silver Corp. (EXK) Fortuna Silver Mines Inc. (FSM) First Majestic Silver Corp. (AG) Silvercorp Metals Inc. (SVM) IMPACT Silver Corp. (IPT:CA) Pan American Silver Corp. (PAAS) Now, whether you are a Precious Metals Bug or not, please feel free to fire in your comments on this article as the readers' comments add balance to the debate and enable all of us to make better trading decisions.  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