To The Moon

U.S. stocks rose Friday as big tech stocks rallied and Treasury yields retreated following the release of key labor market data. The best-performing concepts is Precious Metals & Minerals.

Considering the different perceptions of the stock, this time TigerPicks chose $SilverCrest Metals Inc(SILV)$ to have a fundamental highlight to help users understand it better.

$SilverCrest Metals Inc(SILV)$

SilverCrest Metals Inc. engages in the acquiring, exploration, and development of precious metal properties in Mexico. The company primarily explores for silver and gold properties.

Its focuses on principal property the Las Chispas Mine that consists of 28 concessions totaling of approximately 1,401 hectares located in Sonora, Mexico, as well as operates a portfolio of El Picacho, Cruz de Mayo, and Angel de Plata properties in Sonora Mexico.

$SilverCrest Metals Inc(SILV)$ is a Canadian silver & gold mining company that is listed in both the U.S. and Canada. The reporting currency is U.S. Dollars. The company owns the low-cost Mexican silver and gold mine Las Chispas, which has been in commercial production for about 18 months. I have downgraded the stock from a "buy" to a "hold" following the recent strong stock price performance.

The main reason I became more interested in SilverCrest a little over a year ago, was that the ramp up of La Chispas had gone well, but the market was at the time giving the company very little credit for that fact. Since then, SilverCrest released an updated technical report in July of last year, which indicated higher costs and minimal reserve growth, even if the increase in operating cost was expected due to the inflation we have seen for mining companies. The release of the technical report caused a substantial sell-off in the stock.

The company has continued to deliver very strong operational results and the stock price has over the last 9 months done very well, outperforming gold, silver, and most peers by a large margin. So, the market is now giving the company much more credit for the work at Las Chispas, even if the buybacks and strong metals prices have been nice tailwinds for SilverCrest as well.

SilverCrest is in 2024 guiding for an annual production volume of 10Moz silver equivalent ("AgEq"). The cash cost is estimated to $9.50-10.00/oz and the corporate all-in sustaining cost ("AISC") is expected to be in the $15.00-15.90/oz range. The total capital budget is set to $52-58M, where most of that is sustaining capital.

Silver At $30?

Silver prices have recently rallied. Gold has rallied substantially too, in spite of the risk that interest rates may stay higher for longer. But silver has demonstrated even better performance thanks to its greater volatility.

The grey metal even exceeded $32 per ounce at the end of May, the highest level since 2013. Even during the 2020-2021 rally, silver traded lower than that. As I am writing this, the grey metal is trading for slightly less than $30 per ounce. But more growth is yet to come, it seems.

I remain bullish on silver due to the fact that its price remains high in spite of strong macroeconomic conditions and high interest rates. Moreover, silver has many industrial uses, including green energy and artificial intelligence. Silver is not as strong as it could be due to many ways to invest in grey metal without buying physical silver itself. There are risks of higher rates for longer and also that the precious metal's strong fundamentals will be ignored by investors.

Conclusion

The Las Chispas mine has had excellent operating performance since commercial production was declared 18 months ago, and I have no reason to think this will change going forward.

SilverCrest has over the last couple of years relied quite a lot on the stockpiled material, but the underground mining rate was up to 942 t/d in Q1, a 10% increase compared to the prior quarter. The company aims to exit 2024 with an underground mining rate above 1,050 t/d.

Based on current metal prices, 2024 guidance, and following the strong stock price performance of SilverCrest, the stock is trading with a mid-single digit free cash flow yield now that the company is paying cash taxes as well. That is not an expensive valuation in my view. However, based on current gold and silver prices, it is probably in-line with many of its peers, which haven't re-rated as much as SilverCrest recently.

It is worth remembering that the mine life of Las Chispas is only 6-7 years at this point and even if I do think the company will be able to extend that the operating life over time, that looks to be priced in at this point. So, the risk reward feels less compelling than in the recent past. So, I don't expect SilverCrest to outperform going forward, and I am now more neutral on the stock.

Stock Price Forecast:

Here are the target price forecasts for the next 12 months from analysts.

Based on 6 Wall Street analysts offering 12 month price targets for SilverCrest Metals in the last 3 months. The average price target is $8.66 with a high forecast of $9.71 and a low forecast of $8.00. The average price target represents a -2.91% change from the last price of $8.92.

Resource:

https://seekingalpha.com/article/4693377-silvercrest-metals-another-strong-quarter-but-the-stock-is-more-fairly-valued-now

https://seekingalpha.com/article/4701086-silver-at-30-it-deserves-to-trade-much-higher-than-that

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