Avino Silver & Gold Mines (NYSEMKT:ASM) is in the process of bringing its flagship Avino Mine back into production after it was shut down around the turn of the century due to low metal prices. As the company moves forward it needs capital, and given the very strong performance in the company's shares--which are up 84% for the year, it makes sense to do a secondary offering.
The offering isn't for a definitive amount. Rather, the company may sell up to or exactly $25 million worth of stock onto the open market at market prices. It may have already sold some stock over the past couple of days. With the company's market capitalization at $75 million this will be significantly dilutive, and it will have an impact on the near-term share price. However I believe that this near-term weakness can be taken advantage of.
Even though the stock has risen from about $1.45/share to $2.15/share since I recommended it last September I think the company remains undervalued considering its very tight share structure and the fact that it plans on producing perhaps 3-4 million ounces of silver per year. Other companies with similar production figures trade at several multiples of Avino shares, and as production commences at the Avino Mine--which is now more certain given that the mine has been dewatered and given that the company is raising capital to commence the final preproduction construction and development. Wait for the near-term share supply to be absorbed by the market, but then buy this one aggressively.
Disclosure: The author is long ASM. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.
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