Silvercorp Metals To Acquire Exciting New Property In Ecuador

seekingalpha06-08

Silvercorp Metals Inc. is China's primary producer of silver and other precious metals.The company recently announced a semi-annual dividend of US$0.0125 per share.Silvercorp is actively seeking ...

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I have traded this stock for many years and I am currently Long as it is one company that will benefit for the now unfolding Bull Market in the precious metals space. Like many of the operators in this tiny sector of the market it once traded at much higher price levels. As it was in 2011 when it briefly flirted with a $14.00 price tag. Fast forward to today and it can be purchased for around $3.53 registering a price drop of 75% from its peak. I am not saying that there is now “Blood in the Streets” but that its unpopularity has gone a few steps too far and that a significant price readjustment to a higher level is on the cards. Fundamentals Silvercorp Metals Inc. was established 18 years ago and has its Headquarters in Vancouver, Canada. The companies mining activities are in China at two locations that are in production and one that is in care and maintenance as the map below indicates.   Silvercorp Mines in China (Silvercorp website) In terms of geo-political risk this operator derives the bulk of its income from its mining activities in China. If you are uneasy investing there then maybe this stock is not for you. For disclosure purposes I am Long on Silvercorp and comfortable holding this stock. Financials A couple of weeks ago Silvercorp announced a Semi-Annual Dividend of US$0.0125 Per Share which is not something to write home about and it raises the question of just what do they intend to do with their current cash position. For clues as to their intentions we turn to their recently reported financial and operating results which were published on the 23 May 2024 and are summarized in the Table below with the headline news being that the ‘Adjusted Net Income came in at $39.3 Million, or $0.22 Per Share, And the Cash Flow From Operations was $91.6 Million For Fiscal Year 2024.’   Silvercorp Financial Reports (Silvercorp website) I would like to draw your attention to the column on the far-right hand side of the above table and note that Net Income increased YOY by 76% and Earnings per share by 75%. Gold ounces sold was up 65% but silver, lead and zine were all down a tad. Silvercorp’s cash and cash equivalents is shown to be $184,891.00 so there were some funds available to support their stated intention of seeking projects with high margins and long mine life through M&A activity. In keeping with this intention to expand they have announced that they are to acquire Adventus Mining Corp. (OTCQX:ADVZF) [TSXV:ADZN] in a deal worth around C$200 million. Adventus’ jewel in the crown property is an already permitted Copper-Gold Project called El Domo which is in Ecuador. In the announcement of 26 April 2024 they state the following: The Existing US$175.5 million stream with Wheaton Precious Metals International Ltd, combined with Silvercorp’s existing cash and cash equivalents of approximately US$200 million is more than sufficient to fully fund El Domo through construction Acquisitions such as this one usually take time to digest but the next two quarters should enlighten us as to the success of this move. In order to ensure that you don’t miss out on their progress reports you may want to join their mailing list , although I’m sure that you know that already. In the highlights for Q4 we can see an equity investment portfolio valued at around $112.3 million as at March 31, 2024 which could be useful for acquisition purposes but may not be readily available. The All-in sustaining cost per ounce of silver, net of by-product credits was $11.38/Oz however for Q4 it is higher at $14.36/Oz. Given that silver is now trading at north of $30.00/Oz the second half of 2024 financial reports should make very interesting reading indeed in terms of increased profitability. This also applies to the other operators in the precious metals sector that have managed to exert good control on their costs of production. I would encourage you to read these financial reports as I tend to look for the metrics that I view as important and you may spot other metrics that impact on your own decision-making process. If we now take a quick look at the Seeking Alpha Quant section, this stock is Ranked in Sector at 144 out of 281 and Ranked in Industry at 9 out of 9 which is rock bottom, and it has been ranked as a Hold. Silvercorp has a market capitalization of $659.693M, a 52-week trading range of $ 2.08 - $ 4.39, a P/E Ratio (TTM) of 16.00 and an EPS (TTM) of 0.22. For those speculators wishing to trade in and out of this stock the liquidity is fairly good. Silvercorp can be found trading on the TSX and NYSE American under the symbol SVM. A Quick Look At The Chart Of Silvercorp Metals Inc The stock price almost doubled in a few months so some profit taking was to be expected. The rally began in March on the back of the precious metals rally.   Silvercorp One Year Progress Chart (Stockcharts TA by Bob KIrtley) The technical indicators suggest that the previously overbought position has now been unwound. The following table compares Silvercorp to some of its peers A quick look at the table below which compares Silvercorp to some its peers on a YTD basis shows that it is not the best in class, however a capital gain of 39.13% is still nice to have. And depending on the time scale utilized we can come up with different results, but I prefer to stick with recent history.   Silvercorp YTD progress Compared to Similar Companies (Google Finance) A Quick Look At The Chart Of Silver Prices Having gained nearly $10/Oz in just 3 months a correction was due and indeed has arrived with a $2.00 pullback. I would also draw your attention to the gap at the $26.00 formed when silver was rallying hard. It’s just a quirk of mine but I have warned that silver may well return to backfill this space.   A One Year Chart of Silver Prices (Stockcharts TA by Bob Kirtley) The technical indicators, the RSI, MACD and the STO are now unwinding from an overbought position as the fizz dissipates. Conclusion In terms of geo-political risk this operator derives the bulk of its income from its mining activities in China. If you are uneasy investing there then maybe this stock is not for you. Silvercorp is active on the acquisition trail which suggests that the future could be sparkling as this Bull Market gathers pace. I am Long this company and will continue to hold it, you may wish to wait for this correction to complete its move before making a purchase. My readers are aware that I am Long both physical silver and gold and that I own a portfolio of stocks in the precious metals space, including but not limited to: Avino Silver & Gold Mines Ltd (ASM) Wheaton Precious Metals Corp. (WPM) Agnico Eagle Mines Limited (AEM) SSR Mining Inc. (SSRM) Endeavour Silver Corp (EXK) Fortuna Silver Mines Inc (FSM)  First Majestic Silver Corp. (AG)  IMPACT Silver Corp. (IPT:CA) Pan American Silver Corp. (PAAS) Sandstorm Gold Ltd. (SAND) Silvercorp Metals Inc. (SVM) Now, whether you are a Precious Metals Bug or not, please feel free to fire in your comments and I will attempt to reply to every one of them.  Go gently as this is going to be a White-Knuckle Ride  Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.24.2","shortVersion":"4.24.2","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2441073352"}