If you assume the cost per ounce to mine at this firm is $1,080 and the operating margins average 23% to value the silver you come up with a fair value of about $5.54 a share. By my calculations this firm is priced at a 14% discount to intrinsic value. The problem with this stock is gold is off 25% over the past year and this is off 79%; quite a disconnect. Looks like they took on some debt in Q2 2012 so maybe that has something to do with it. On the plus side they are a low cost producer, at about $1,080 per ounce over the last year.
The Fed will never be insolvent as long as inflation stays low and GDP expands. Fed revenues buoy the balance sheet and expenditures pump the fiscal side until receipts offset the deficit. The down side in a closed system is interest rates rise because they have to borrow, but if they can print paper and buy bonds instead, rates stay low. The question is how much FOMC bond buys can the economy support? If the market is a gauge, seems like Ben called it right. Time to taper?
I used the Q3 2013 F/S and the recent news release on Q4 for last years production. I am factoring in overhead, cash cost is understated, the average cost per ounce, over the two year period ending Q3 2013 is $1,080.
That is the worst analysis I've ever seen. Go back to school and learn how to do an after-tax DCF analysis. Then add the value of their reserves, which are by themselves worth at least twice the current enterprise value. And then there is the additional resource tonnage and exploration potential. At that point you'll have a fair acquisition value of at least $20 - and that's being very conservative based on recent transactions.
Sentiment: Strong Buy
Take the annual production of gold and silver. Determine the reserves proven. How many years until depleted assuming spot prices and current 10 year treasury interest rates (NPV). Add net cash and subtract debt, using the Q3 2013 F/S you get my FV price, slightly more if you use full year production figures just released. The only thing I noticed is the silver production seems low compared to other firms with similar reserves and production figures. Kapich?