Consider it a blessing they did not get Orko, which they could have bought for probably 50-70% cheaper following this PM bankster smack down. Now they can offer for Aurcana which was 1.20-1.30 and now 38 cents. For less than what they would have spent on Orko, they can get 2 producing mines and 6-8M oz Ag-eq with exploration upside. It's super accretive, La Negra is long life and low cost. AG market cap is 5x AUN market cap, yet AUN can bring almost half the silver AG brings to the table. AUN shareholders would tender to AG, since it is the most loved silver miner. CDE already shot their wad. Maybe PAAS would interfere. Or maybe PAAS would let AG get Aurcana with an eye on later buying the combined company and becoming a 50M oz silver producer even without Navidad.
In hindsight, I'd now say the Silvermex deal was accretive. They only diluted the stock about 10% and they are already getting over 10% from La Guitarra. More importantly, LG is a good long term platform with growth. As throughput increases to 1000 tpd over the next year, cost per oz will drop in line with the rest of the portfolio. AG also picked up some decent exploration assets in the deal as a side bonus.
I don't know what AG's next move is. Maybe announce a 4-5 cent quarterly. That would be a good start. Aurcana is cheap and has a lot of silver. I think AG slightly overpaid for Silvermex in hindsight, and they definitely would have overpaid for Orko, but now the slate is clean. It was a blessing in disguise. There are really decent projects in this space trading for basement sale prices. I bet Keith will figure out a way to buy a good silver mine for well under $1 an oz and that can become a multimillion oz producer with low operating costs, low capex, and exploration upside.
Many of the seniors have already blown their wads, especially on the gold side, but I think the solid steady midtier types with growth can use a strong stock to buy assets that will produce. Looking for ones with high IRR% and quick payback, and ability to weather lower gold price. Ain't gonna happen even though the herd thinks it will. The herd is eventually always wrong.
When a commodity price goes below cost of new production, that is bullish. It can happen, such was the case with natural gas recently, but that was because of gigantic new supply coming onstream rapidly. That's something that will NEVER happen in gold or silver, unless they go to $5000 and $100+!
Aurcana popped to almost 50 cents now, still trading well under its 2010-2012 base. I don't know if it has bottomed or if it will retest the 35 cent level, but for $200M, 6-8M oz of silver production seems awfully cheap and accretive. I don't know how good Shafter cash costs will be, but La Negra is producing at $6.50 cash cost, so even on an "all-in" basis that mine is profitable at lower silver prices.
I don't think the HUI and XAU are gonna blast off this year, but I do think the PM miner space is going to present good entry points in the sector for the selective and patient, and avoid price chasing (waiting for 20% bounce to confirm you were right and then you buy, like most retail.)