If Europe can sidestep disaster - and the market is betting that it will - and/or US growth continues to pick up, demand for silver will remain strong. One way to gain exposure to the metal is via Endeavour Silver (EXK), a well-run silver and gold miner with operations centered in Mexico.
The company runs two mines, has several other exploration efforts underway and sports a market cap of less than $1 billion.
The company recently announced that it has surpassed its 2011 silver production guidance by 14 percent and its gold output by 23 percent, to more than 3.7 million ounces and 21,810 ounces, respectively.
But with prices depressed in the second half of the year, management chose to withhold "a significant portion" of its production from the market, preferring instead to keep the metals in inventory until it could realize better sales prices.
This year Endeavour expects to produce 4.3 million ounces of silver along with about 26,000 ounces of gold. It anticipates extracting those metals at a cash cost of between $5.50 and $6.00 an ounce of silver (net of by-products).
The company is operating in the black and is expected to generate per-share earnings of about 60 cents this year, assuming market prices remain near current levels.
And the results of its 2011 drilling efforts were encouraging. Management is focused primarily on its two operating high-grade underground mines, Guanacevi and Guanajuato, where several new high-grade silver/gold veins were discovered.
Several new, moderate grade silver/gold mineralized veins were also discovered at its San Sebastian property, one of four "district scale" exploration properties the company owns that could add substantially to its asset base over time.
The conservatively run company has a prist! ine bala nce sheet with no debt and $155 million in working capital with which to fund its expansion.
While the stock trades at a premium to other junior silver producers, we're willing to pay up for the shares considering that it has turned in eight consecutive years of reserve growth.
In addition, the company has the potential to substantially add further to those reserves, and extract the metal at a relatively low cost. Buy Endeavour Silver below $11.50 a share.
Related articles:
- Kinross Gold: Ready to shine?
- Royal Gold: A 'royalty' play
- Silvercorp Metals: Fighting off shorts
No comments:
Post a Comment