Update: Avino Silver & Gold Mines' Earnings

Aug.21.14 | About: Avino Silver (ASM)

Summary

Avino's operating earnings were flat year over year despite lower metal prices thanks to higher production and lower costs.

The company is generating a tremendous amount of cash-flow for its valuation as I predicted last September.

I continue to remain bullish given the company's strong cash-flow potential at low metal prices along with its extensive project pipeline.

Avino Silver & Gold Mines (NYSEMKT:ASM) just reported its second quarter earnings results. The company reported flat earnings with operating earnings at $2.3 million. Revenues rose slightly to $5.3 million. Overall, the company broke even as it uses capital in order to develop the Avino Mine at its Avino Mining camp (it currently produces at its San Gonzalo Mine, which is adjacent). These strong numbers were in spite of lower metal prices versus the second quarter last year. The company increased total silver equivalent ounces sold by a substantial 32% to 296,000 ounces. It also brought all in sustaining costs down from $12.80/oz. to $12.02/oz.

As I expected the company is performing incredibly well, as the San Gonzalo Mine is one of the most efficient silver projects that I know of, as small as it may be. Considering that it can produce at this rate of production for many years to come, and considering Avino's substantial project pipeline, the shares remain undervalued at $2.20 each despite the fact that they are up 50% from when I recommended them.

Speaking of this pipeline, management recently announced that it has completed several steps towards bringing its flagship Avino Mine back into production after a 13+ year hiatus. The mine has been dewatered and the main haulage ramp has been rehabilitated. Meanwhile, the processing plant is undergoing an expansion. Investors should expect production to commence in the first part of next year, and this should send shares substantially higher presuming gold and silver prices hold up. Near term Avino's management may issue stock directly onto the market, and this can put pressure on the shares. I'm an aggressive buyer on weakness and I'm not selling my current holdings.

Disclosure: The author is long ASM.

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