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Summary

  • Silver Standard Resources showed strong Q2 production results due to higher grade ore being mined.
  • While this is great news for the company it doesn't impact the investment thesis, which is much longer term.
  • Investors who are bullish on silver should continue to accumulate shares on weakness.

On Wednesday afternoon Silver Standard Resources (NASDAQ:SSRI) released production results for its two producing mines--Pirquitas and Marigold. Pirquitas showed an increase in production of 6.5% for silver and 5.4% for zinc, thanks to higher grade ore being mined. Marigold, which Silver Standard finished acquiring in the second quarter, produced 22,000 ounces of gold, or 10% more than expected.

Investors should be pleased with this strong performance after the company's high Q1 production costs at Pirquitas and the fact that management put the company's flagship Pitarrilla mine on hold due to a low silver price and its inability to obtain sufficient water rights. This shows that as precious metals prices show strength going forward that the company will be able to take advantage and generate cash-flow. Furthermore, it shows that the company's Marigold acquisition, which I wrote about favorably here, is working out.

But as I pointed out last summer, the real impetus behind an investment, is the company's Pitarrilla mine, which as I said has been put on hold, and this update has little bearing on the larger investment thesis. At a higher silver price I suspect that the company will have a better chance of getting the water rights it needs, considering the tax and royalty revenue that the Mexican government will be able to collect. If not then the company will have to re-work the mine plan, although given the enormity of the resource this will be worthwhile.

Source: Update: Silver Standard Resources Reports Solid Q2 Production Results