Not too long ago we wrote about Avino Silver (NYSEMKT:ASM) who is in the process of putting the historic Avino mine in Mexico back into production. This company has been in existence since 1968 and has in fact mined the Avino vein until 2001 when silver prices dropped and the operation was no longer economical. In 2006 silver prices had improved enough for the company to make a decision to raise money and prepare for resumption of mining.
The company has a functional mill and several potential sources of ore:
- The original Avino mine which is presently being de-watered,
- The newly discovered and developed San Gonzalo vein,
- Stockpiles from previous operations,
- Oxide and sulphide tailings,
- And several exploration targets on the property.
A 250 tpd circuit was installed and initially stockpiles started to be processed by July 2012. Once ore from the San Gonzalo vein became available it was used as feed for this first circuit. A couple of months ago the company announced the plan to install a second 250 tpd circuit in order to continue processing the remaining stockpiles in addition to the San Gonzalo ore. This second circuit is now functional and production results for its second month in operation have just been released. Our diagram below illustrates production history since the start-up in July 2013.
In absence of a feasibility study Avino has not provided a production guidance for 2013. However, judging from the production profile so far 700,000 to 800,000 of silver equivalent ounces seem possible, especially if gold recovery in the second circuit can be improved.
The company plans to have the original Avino mine de-watered and back in production by mid-2014 adding another 1000 tpd of production.
A feasibility study for the re-processing of the oxide tailings has shown very favourable economics and the company plans to start re-processing them early in 2015. A separate study will be looking at the sulphide portion of the tailings in due time.
The timeline below (taken from the company presentation) illustrates the intended time line to full production.
Avino Silver is listed on the TSX and also on the NYSE. The share registry is tight with only 27M shares outstanding. The largest share holder is Sprott Asset Management and institutional holdings are reported to total 6% of outstanding shares.
At present the company is a micro-cap proposition with a market capitalisation of only $32M, which is apparently less than the replacement cost of the mill. Investments in micro-cap companies have specific risks that should be considered before committing funds. Caveat emptor! A possible investment in Avino Silver is still highly speculative. We suggest that potential investors only consider investing money that they can afford to lose.
In this particular case, however, these risks are moderated by the fact that Avino is listed on the NYSE and has to comply with all the associated requirements which distinguished the company from similarly sized stocks that trade on the pink-sheets. We would also like to note that management and the Avino team have shown very solid performance so far and the possible rewards seem considerable should the silver price improve and the plans be executed as scheduled.
Disclosure: I am long ASM. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.