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Hyperinflation
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Analyst & Contributor @ The Morgan Report ( Silver-investor.com) ,
My company:
Stone Investment Group
  • Bear Creek: A mining Juggernaut in the Making 8 comments
    Sep 27, 2010 1:46 PM
     Despite the 20% increase in the price of silver and a corresponding run up in silver mining companies, bargains can still be found in the smaller juniors and advanced stage exploration companies. The current valuation attached to Bear Creek Mining(BCM.TO) proves this point. Bear creek’s future keeps getting brighter as they increase total resources and more importantly 2p reserves at a furious pace with plenty of drilling still on the horizon.

     

    About Bear Creek: Mining operations are focused on the most silver rich nation, Peru, and host to the world class Corani Project in addition to their Santa Ana operation, both having vast upside potential. Bear Creek will have their first mine on-line (Santa Ana in 2012). There are many things that separates bear creek from their peers, most notably the speed at which BCM will go from exploration to a 20-22m ounce producer and the low capital requirements needed to bring Santa Ana to commercial production.

    The Santa Ana Project – Feasibility study is currently nearing completion but due to the low initial capital requirements, Santa Ana will be in production in 2012. Though not nearly as lucrative as their flagship Corani, Santa Ana is a great first step in building taking bear creek from an exploration company to a silver mining juggernaut.

    ·         Internal rate return in excess of 75% due to extraordinarily low capital requirements – $51m to construct the mine and cash costs of $7.50. Currently expected to have a 12-14 year mine life with an annual production of 4.5-5.0m ounces.

    The Corani Project – In addition to being one of the largest undeveloped silver mine, the Corani mine, like Santa Ana also requires minimal capital investment relative to the size and annual production (15-17m oz/year).

    ·         Proven Reserves – 258m oz Silver(and an additional 100m in Silver resource), 2.9B of lead and 1.4B oz of Zinc. Total silver equivalent ounces, however, up 2P reserves to nearly 500m oz. This trumps numerous top tier silver miners i.e Hecla Mining among others.

    ·         Sports a Incredibly Internal rate of Return (Click here to view the calculations), in excess of 50% (54%) as initial capital outlays will be less than 350m. net of Bi-products, cash costs will be approximately $1.15/oz.

    ·         The Initial mine life was 27 years but Bear Creek will maximize the mill throughput to reduce the life of mine to 20 years. This will increase annual production by several million ounces such that average annual production will be between 15-18m ounces.

    Valuation:

    ·         Each share has 7.6 ounces of silver resource and nearly 3.5 ounces of proven reserves.

    ·         An EV/NAV ratio of .21 (at $21/oz) – fully valued is 1.

    ·         Cash Flow Valuation of $19/Share using a price deck of $21/ounce and a costs of capital of 13.5%.

    Though Bear Creek can finance all their capital requirements and exploration budget, Bear Creek looks like a likely takeover target. To top all this off, Bear Creek latest resource update saw total resources at Santa Ana climb 39% with more drill results on the way. Drill results and Resources/Reserve updates will act as catalysts for the next year or so as the Santa Ana mine is being constructed. Keep in mind many drilling results will be coming out over the next two years at Corani, which I believe will add a substantial amount of 2p reserves and possibly guide annual production even higher. Feel free to message me for the valuation spreadsheet and internal rate of return calculations.

    Short Term Price Target (6-18 months) - $10.50

     

    Long term Price Target (2-3 years)- $25

    My Top Takeover Canidates:

    1)      Exeter

    2)      Bear Creek

    3)      Avion Gold 



    Disclosure: long bcm.to,xra

    Disclosure: long bcm
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Comments (8)
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  • revlis
    , contributor
    Comments (44) | Send Message
     
    hyper - whats your take on the peru conflics and bear creek..thanks in advance.
    15 Dec 2011, 12:20 PM Reply Like
  • Hyperinflation
    , contributor
    Comments (815) | Send Message
     
    Author’s reply » I think they are overblown and think Bear Creek will get Santa Ana back and definitely find funding for Corani. My guess or proposal would be: sell a 10-15% silver stream to silver wheaton, Sell 10-15% of by-products to Sandstorm Metals and energy and if that won;t suffice look towards sprott lending for the remaining financing. It exchange for a low interest rate give them some warrants. I think that would be the way to approach the financing side.
    15 Dec 2011, 04:51 PM Reply Like
  • Youngone91
    , contributor
    Comments (198) | Send Message
     
    come back and write more articles please! Do you like sndxf.pk at these levels? 1.10-1.20, or do you think we can get an even better bargain
    16 Dec 2011, 03:17 PM Reply Like
  • Hyperinflation
    , contributor
    Comments (815) | Send Message
     
    Author’s reply » I can;t but you can find my work by subscribing to the Morgan Report - which is a very affordable monthly newsletter edited by the "Silver Guru" David Morgan. I like Sndxf.pk here but I;m not a market timer and anything is possible, so it could go lower but DCA. Buy Say 20,30,40% here of your total planned purchase and should it say drop to $1, buy another 20% and so on.
    17 Dec 2011, 06:47 PM Reply Like
  • Youngone91
    , contributor
    Comments (198) | Send Message
     
    ah ok thanks for the response! I guess your articles were to good to keep getting them for free haha
    18 Dec 2011, 12:31 PM Reply Like
  • Hyperinflation
    , contributor
    Comments (815) | Send Message
     
    Author’s reply » I do write occasionally for Financial Sense, although they are market and economic oriented, not company specific. If Interested go to FinancialSense.com and in the search bar type : Christopher Marchese and you can find all the articles I've written for them (20-30 or so).

     

    I'm not trying promote you to subscribe to the Morgan Report for financial gain as I'm not paid as a function of total subscribers. Anyway, I believe the Newsletter is one of the best out there and very affordable because David Morgan is interested in helping investors make money, but he has to eat so obviously this kind of in depth reporting, analysis and recommendations. The fee is $79.99/year for 12 issues + 4-5 additional reports throughout the year. To give you a sense of what you get, we just finished the January Issue, which before it goes to person doing the layout is in excess of 40 pages. The website also has at least 1 CEO interview update per company each year on those we recommend. For more info visit Http://http://bit.ly/rNYZkb or send me an email @ Chris.Marchese@VishniC...
    18 Dec 2011, 04:40 PM Reply Like
  • revlis
    , contributor
    Comments (44) | Send Message
     
    can you comment on the planned merger w/ uxg and minera? have followed these two for years - some have said the purposed .45/1 share swap is to low of a bid - thanks revlis
    21 Dec 2011, 10:20 AM Reply Like
  • Hyperinflation
    , contributor
    Comments (815) | Send Message
     
    Author’s reply » I think its a very good merger but one has to consider why this was done. Rob Mcewenn (sorry I misspelled his name), is one of the best in the business. Having started both companies, he thinks there are tremendous synergies to be unlocked, which I agree with. I'm familiar enough to have a qualified model on the fair value of UXG thus I can't say if its a good swap. But count on Rob to create tremendous value for shareholders over the year. Simply look him up on say wikipedia and take a look at his accomplishments, which I consider to be unrivaled throughout the entire industry.
    21 Dec 2011, 05:00 PM Reply Like
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