Wednesday, September 29, 2010

Only 3 "pure" Silver plays on the ASX

CCU, SVL, AYN ... I get the feeling these three codes will come up very frequently on stock discussion boards over the next several months. Silver (priced in USD) has recently broken out to fresh 30 year highs as the precious metal bull market kicks things up a notch, Gold has surpassed $1300 to reach new highs, the HUI is approaching the high of 519 set in March 2008, all signs are pointing towards an explosive end of year for the metals & related stocks. 
During periods of high interest in precious metals Silver tends to outperform Gold as do the mining stocks, so you can just imagine the interest we could see in Silver mining companies, especially if Silver climbs in a parabolic fashion as I suggested it might in another recent post: "Where to for the price of Silver?".

The Gold:Silver ratio is still around 60:1. Before the 2008 collapse in precious metals prices this ratio was sitting around 50:1. A 50:1 ratio today based on the current Gold price would give us a Silver price over US$26.

Australia's large Silver producers do not do so as their main focus ... so finding exposure on the ASX to Silver's price upside can be difficult. To my knowledge there are currently only 4 "pure" Silver companies on the ASX (by pure, I mean Silver production or exploration is their main focus). One of those companies (CXC, Coeur D'Alene Mines Corp) is delisting from the ASX in December this year. That will leave us with 3, which brings us back to the codes listed at the start of the blog ... CCU, SVL, AYN, these are the 3 ASX codes for the following companies:


Cobar Consolidated Resources Limited (CCU)
Silver Mines Limited (SVL)
Alcyone Resources Limited (AYN)

Below is a short introduction I have written for each, I will hopefully find time to cover each of them in more depth in the near future.

In my opinion the real speculative money has not really caught onto Silver's rise, as Silver rises further I expect these 3 companies will benefit handsomely through a significant rise in their share prices.


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Silver Mines (SVL)
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Share price: 18.5c
Number of shares: 94m
Number of options: 30m (12c, May 2011)
Market cap (not inclusive of options): $17.4m
Cash: $1.8m + $472k = $2.27m (placement/end of June Qtr)
Silver resource: 4.6m oz @ 200g/t
Market Cap / Resource = $3.78 p/oz

Silver Mines listed on the ASX in January 2007 with the purpose of exploring several tenements in the New England region of north-eastern New South Wales. The tenements are all considered prospective for silver and to a lesser extent gold and base metals. Their tenements consist of over 1,300 km2 of prospective ground in an under explored province. Webb’s Silver has a history of mine production over 1885-1901 and 1962-1965, the mine produced about 40,000t @ 700g/t Ag.

Recent high grade results from a drilling program at their Webb’s Silver project include:

RC076 – 25m @ 1,175 g/t silver from 146m (incl. 1m @ 6,150g/t Ag)
RC082 – 8m @ 183 g/t silver from 167m (incl. 3m @ 337g/t Ag)
RC097 – 4m @ 823 g/t silver from 90m (incl. 1m @ 2095 g/t Ag)
RC098 – 24m @ 316 g/t silver from 84m (incl. 1m @ 1600 g/t Ag)
RC100 – 11m @ 635 g/t silver from 74m (inlc. 1m @ 3008g/t Ag)

13,000m worth of drilling to date has been completed at the Webb’s project with another 4000m planned by years end.

An upgrade to SVL’s resource is expected very soon which will incorporate many of the recent drilling results; the resource was last updated in 2008.


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Cobar Consolidated Resources (CCU)
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Share price: 27c
Number of shares: 131m
Number of options: 5m
Market cap (not inclusive of options): $35.3m
Silver resource: 50.6m oz @ 71.8g/t (Res. 14.3m oz, 97g/t) + 2.7m oz @ 47g/t
Cash: 3.7m (end of June Qtr)
Market Cap / Resource = $0.66c p/oz

Cobar Consolidated listed on the ASX in July 2006. In December 2007 CCU entered into a joint venture agreement with CBH Resources Limited over its Wonawinta tenement EL6155 (initially with potential to earn up to 70% interest), which was located near it’s existing Gundaroo Prospect. A maiden resource was announced in mid 2008 with several upgrades as drilling continued over the next 18 months. CBH Resource’s interest in the Wonawinta Project has now been reduced to a 2% royalty.

An optimised mine schedule has been performed, capital expenditures for plant construction estimated and debt adviser appointed to assist them with financing the project. There is potential for production by the end of 2011 with cash costs expected to be in the vicinity of $6.50p/oz (after lead credits).

In a recent announcement showing target minerlisation it was suggested that there may be another 40m+ oz to be discovered over and above their existing resource.


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Alycoyne Resources (AYN)
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Share price: 3.7c
Number of shares: 770m
Number of options: 140m
Market cap (not inclusive of options): $28.4m
Silver resource: 15.1m oz @ 79g/t
Cash: $3.7m (end of June Qtr)
Market Cap / Resource = $1.88 p/oz

Alycoyne Resources is essentially a recapitalisd Macmin Resources (MMN) which went into administration in 2008 after being unable to raise required capital in the middle of the GFC.

In March this year AYN announced a 15.1m oz resource and indicated resumption of production would resume later this year. $20m was spent on the infrastructure that currently resides at their Twin Hills mine.

In a recent capital raising of $3.7m a non-executive Chairman injected $1m of personal funds.

An update to their resource is expected soon.


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BB.

Disclosure: Position held in SVL & CCU. Not investment advice. Do your own research.

5 comments:

  1. New South Wales, Argent’s closest peers include Malachite Resources, Silver Mines and
    Cobar Consolidated, which are working at the Conrad, Webbs and Wonawinto projects
    respectively. Both Silver Mines and Cobar Consolidated have run their cash down to about
    $1 million and while ore reserves of Silver Mines and Malachite have a similar insitu value
    per tonne to those of Argent, Silver Mines’ has a very small deposit and Cobar has a larger
    total insitu value, with a much lower insitu value per tonne. Malachite holds about $3 million
    of cash and its Conrad project has substantial size, with an insitu value per tonne which is in
    line with the values achieved at Argent’s projects.
    Overall, when comparing Argent’s market capitalisation per dollar of resource value, with
    those of its direct peers involved in silver developments in NSW, the company appears to be
    significantly undervalued by comparison. Argent attracts a market cap of about 0.8% of the
    insitu value of its resources, while the close peer cohort companies are valued with a market
    capitalisation of between 1% and 3% of the insitu value of their resources. On the basis of
    this comparison, it appears that Argent has considerable potential to triple its value, so as to
    bring it into line with these peer companies.
    Argent also appears to be inexpensive when compared with a broader selection of peer
    companies. Its market capitalisation as a percentage of the insitu value of its 70% interest
    in both deposits trades at the low end of those companies surveyed

    ReplyDelete
  2. ARD is an interesting company, their focus seemed to be on their Gold rather than Silver prospects recently though. I wouldn't buy in personally with the takeover offer in place. It's not a very good price that's been offered in my opinion.

    BB.

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  3. AYN - this week had a 'please explain' from the ASX about their rise in share price.

    7/12/2010 9:58:00 AM 3 Response to ASX Query (PDF)

    In their reply AYN says the only reason it knows for the sudden rise is the price of silver going to Aust$30.10

    I say it was also this post, and your link to here on the SilverStackers forum. That page is #3 in Google for a search for AYN silver.

    Way to go BullionBaron!

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  4. Forgot to mention that the other 2 are up nicely as well.

    AND, AYN is in a trading halt today and I can't buy the sucker :(

    Next time, I'll have to get in on your tips quicker!

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  5. Thanks for the comments anon! I must admit I've been surprised by how well the blog does in Google searches already. That said I don't think there's many yet talking about Australian Silver stocks...

    I'm sure you would have read by now that AYNs trading halt was to raise capital. I was not impressed with the way they did it, it's a lot of dilution and at a low share price. Where the existing shareholders have been given the opportunity to buy 1 for every 5 they hold to raise $5m, the instos have been given $10m. I would not be happy with this if I was a shareholder.

    I think CCU and SVL are the better plays of the 3 at the moment, though do think it's likely that AYN will end up rising regardless (in the medium term) given there are so few choices of Silver stocks on the ASX.

    Cheers

    BB.

    ReplyDelete