Is Silvercorp Metals in Takeover Talks?

Jun.29.11 | About: Silvercorp Metals (SVM)

On June 27th and 28th, Silvercorp Metals (NYSE:SVM) filed technical reports on its:

  • HPG Mine in Henan Province, China

  • SGX Mine in Henan Province, China

  • TPL and LM Mine in Henan Province, China

  • BYP Property in Hunan Province, China

  • Silvertips Property in British Columbia, Canada

The above technical reports are available at (search Silvercorp Metals).

The only other property with a defined resource held by Silvercorp is the GC/SMT properties in Guandong Province, China.

On June 24, 2011, the company announced, "Silvercorp Announces TSX Approval Of Share Repurchase Program" a program under which the company can buy back up to 10,000,000 shares (5.7% of the issued shared) over the next year.

The Q1, 2011 financial statements (also available at shows that the company has

  • US$147.2M in cash and cash equivalents

  • US$57M in short term investments

versus current liabilities of US$36.5M.

A coordinated update of resource and reserve estimates, the fact that Silvercorp is cash rich, and the fact that Silvercorp is selling at significantly reduced price levels (52 week high was US$16.32 versus a close on June 27, 2011 of US$8.75), makes me wonder if Silvercorp might be in takeover talks.

Silvercorp holds high grade silver deposits. My last estimate of the average ore value per tonne for Silvercorp across its properties was US$460, with approximately 80% of the in situ resource in China. This suggests the interested party may be someone in China. A takeover of Silvercorp at current prices would be buying in situ silver for less than $5.00 per ounce on a market capitalization per ounce of silver equivalent and less than $4.00 per ounce on an enterprise value per ounce of silver equivalent.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.