The next generation of mid-tier silver producers are here and selling at extremely attractive valuations. The following is a list and brief overview of mid-tier producers which should be bought while they are trading at fire sale prices. Not only do these companies represent excellent value but they all have upcoming catalysts, which should really cause them to move.
Alexco Resources (NYSEMKT:AXU) - This high grade Canadian silver company is on the precipice of becoming a solid mid-tier silver producer over the next several years. I recently did an in-depth analysis and appraisal on SA here.
Alexco is awaiting two final water permits in order to commence production at its high grade Lucky Queen mine (avg resource grade > 1,200 g/t) as well as its zinc rich (13.7%) Onek mine, which has significant silver byproduct > 190 g/t. This will boost production to approximately 2.8 - 3.0m oz. Ag at cash costs (net of byproducts) of $9.75 - $10/oz. In 2014, Alexco will enjoy an entire year of production from three of its deposits, which will increase production to 3.0m - 3.3m oz. Ag at $9.25-$9.50 cash costs. Production will be augmented in the second half of 2014 by Elsa Tailings, adding approximately 100-200k oz. in 2014, for a total of 3.1m oz. - 3.5m oz. Come 2015, Alexco's production growth will really start to pick up steam as Flame & Moth and one of either Silver King, Bermingham and Husky (OTCPK:HUSKF) will commence production in the second half of the year. This will propel production to roughly 4m oz. in 2015 and 5m+ oz. in 2016.
Alexco has competitive advantages rarely seen, such as its very good relationship with the government and surrounding community (First Nations), which basically ensures they will be granted all the permits they apply for. Alexco also has a very prolific and storied land package in the Keno Hill District, which is rich with mining history. Lastly, it has an environmental arm, which makes money while also appeasing all those environmentalist nuts out there.
Huldra Silver (OTCPK:HUSIF) - Huldra Silver is another, relatively unknown Canadian silver company, which is developing the Treasure Mountain mine. In fact, it is expected to declare commercial production before the end of the month. Production is expected to be between 1.2 - 1.4m oz. in 2013 at cash costs of $7-$8/oz. In 2014, its first full year of operation, it is expected to produce 1.8m - 2.0m oz. at $5/oz. This, however, will be accomplished through a 200-tpd pilot plant. Huldra's objective was to get Treasure Mountain into production as fast as possible and this was the way to pursue it. The Mill has room to increase capacity to 600 tpd at minimal capital costs, which it will do going forward. Assuming it runs below optimal capacity or 500 tpd, it still can expand production to 4.4m - 4.8m oz. Additionally, Huldra is on the prowl for a company or single asset to acquire once it is cash flow positive. Trading right around a mere $50, Huldra is extremely attractive on a forward cash flow basis among other metrics.
Aurcana Silver (OTCPK:AUNFF) - Aurcana will enter the ranks of mid-tier silver producers this year, producing roughly 4.4-4.8m oz Ag in 2013 and 5.6 - 5.8m oz. in 2014, when Shafter is running at initial design capacity of 1,500 tpd. Once it is running continuously at 1,500 tpd, Shafter mill throughput will be expanded to 2,500, which should be complete sometime during 2015. 2015 production should increase to between 6.5m - 7m oz. and 2016 production should jump to 8.5m - 8.7m Ag oz., as it will be the first full year La Negra and Shafter are running at new design capacities.
One downside Aurcana has is its sloppy share structure (which contrary to popular belief can't be solved by a stock engaging in a reverse split but only through a significant share buyback). Current shares outstanding are 466m but 567m shares on a fully diluted basis.
Endeavour Silver (NYSE:EXK) - While Endeavour is already a mid-tier silver producer, it is still worth highlighting as it enters into the Top-tier come 2014. Endeavour had a transformational year in 2012, acquiring a 3rd flagship asset and production center in El Cubo as well as some longer term (albeit marginal growth in Guadalupe Y Calvo). In 2012, Endeavour produced approximately 6.4m silver equivalent oz. (Ag & Au), which will increase to between 7m - 7.2m silver equivalent oz. in 2013. Production growth will come primarily through optimization at El Cubo, new production from San Sebastian and Gyc.
Disclosure: I am long EXK, OTCPK:AUNFF, OTCPK:HUSIF. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.