Update: SilverCrest Mines Earnings - Excellent Beneath The Surface

| About: SilverCrest Mines, (SVLC)


SilverCrest Mines reported Q2 earnings of $1.3 million, cash-flow of $3.1 million on revenues of $7.7 million.

This represents a substantial decline as the company's Santa Elena Mine transitions from open pit to underground operations.

The transition was smoother than expected reflecting management's ability to execute as I've pointed out in the past.

The shares are slightly overvalued but they are worth accumulating on pullbacks.

SilverCrest Mines (NYSEMKT:SVLC) just reported its second quarter earnings results. As expected the company's results showed declining production as the company spent 3 months--May through July--transitioning its operations from open pit mining to underground mining. This means that for two months out of the three in the second quarter the company was operating at considerably below its full capacity. As a result Revenues fell 41% to $7.7 million. Earnings and cash-flow fell as well to $1.3 million and $3.1 million, respectively. The company reported silver sales of 163,000 ounces--down 10%--and gold sales of 4,700 ounces--down 36%.

In all I think these are excellent numbers. I was especially impressed that the company was able to turn a profit despite the fact that its focus has been less on immediate production results and more on transitioning its Santa Elena operation to its underground phase, which should last at least 8 years. As I argued back in April management is setting realistic goals for itself and meeting them in an efficient manner. As I reported recently the company just announced the end of its transition period as its new mill is operating at nearly full capacity, and the company reported strong than expected production figures during the transition period. These earnings figures reflect that fact.

SilverCrest shares trade nearly 25% higher than they did back when I recommended the stock in April, and since we haven't seen a similar move in metal prices I would be hesitant to add shares at $2.10/share. However when I said back in April that $1.70/share was a "fair" price I hadn't anticipated such a strong second quarter performance. With this in mind I would be willing to pay a higher price for the shares--maybe $1.80-$1.90--assuming metal prices remain the same.

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