Hello anybody home ? Here is a clipping of an analyst's research:
The key point IMO is that once Pirquitas is up and running, SSC will be generating pre-tax cash flow equal to its current market cap, using current metal prices. This translates into a fairly low risk 10 bagger once the Silver markets turn up for real. For this kind of return I am prepared to wait as long as it takes...6 months, 1 yr or 3 years:
THE INTERNATIONAL MINING REVIEW
15 St. Helen's Pl., London EC3A 6DE, England.
Monthly, 1 year, $395.
Sunshine Mining: Argentina shining through
David Williamson: "The famed Sunshine Mine (NYSE SSC $0.47) in Kellogg, Idaho has produced over
350Moz of silver over the last century and plans to expand annual output from 5.5 to 7.5Moz to reduce unit costs to
less than US$4.00/oz. The bankable feasibility study for its Pirquitas project in Argentina shows annual production
of over 9Moz of silver with net operating costs of less than US$1.50/oz silver equivalent. The market, so far,
appears reluctant to recognize the strong potential of these factors.
Expansion Program In Idaho Will Lower Costs
Sunshine Mining currently produces silver at a rate of some 5.5Moz pa with cash costs of US$4.39/oz (total costs
US$4.71/oz) from its underground mining operations in Idaho, where reserves stand at over 40Moz. A US$6m
capital program should enable capacity to be raised to over 7Moz pa and reduce net cash costs to under US$4/oz
silver.
Pirquitas Feasibility Shows A High Margin Robust Project
The Pirquitas project in Jujuy province of northern Argentina has reserves containing 116Moz silver, 156Mlb tin
and 272Mlb zinc. The final feasibility study forecasts an unleveraged rate of return of 20% for the project and with a
US$124m capital cost at a milling rate of 6,600 tons per day, initially yielding 11Moz silver pa, and averaging per
annum 9.2Moz silver together with approximately, 10Mlb tin and 11Mlb zinc at a unit net cash cost equivalent to
less than US$1.50/oz silver.
The Silver Market Appears To Have Downside Support And Upside Potential
The silver price appears to have strong support at the US$4.80/oz level, in spite of adverse influences from the
weak gold market. The recent price rally over US$5.00/oz is seen as an encouraging move. The major market
factors are continuing primary supply deficits (c.300Moz pa), offset by scrap recycling and deliveries from an
unquantified stock overhang, plus the impact of Indian trading and fabricating activity. The medium-term outlook for
the silver market appears reasonably positive.
Strong Earnings Growth Potential
We estimate that Sunshine could generate annual revenues of US$130m and cash flow of US$80m at current
product prices. At US$7.00/oz silver cash flow could increase by over 40%. Pirquitas is a robust project which
should find appropriate debt and equity funding and, together with the Idaho operations, will give the company
rapidly expanding production combined with falling unit costs."
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