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Summary

  • Avino may sell up to $25 million worth of common stock onto the open market.
  • This confirms my opinion that the company will be moving forward with its expansion plans at its Avino Mine.
  • While I anticipated something to this effect it turns out to be promising considering that the stock has risen about 50% from my initial recommendation.

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.

Editor's Note: This article covers a stock trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.

Source: Update: Avino Silver & Gold Mines Secondary Offering