Head-To-Head Analysis Of 11 Junior Silver Producers In Mexico

by: Tickerscores

(Editors' Note: This article covers a micro-cap stock. Please be aware of the risks associated with these stocks.)

Earlier this week, we published a head-to-head comparison of the six junior and mid-tier gold producers in Mexico. However, today's look at primary silver producers is perhaps even more interesting.

Silver's added volatility means that silver miners have felt the pinch even more than their gold producer brethren. In 2013 alone, the price of silver has had an amazing range between $18 and $32. This means production costs, economics, discipline, and flexibility are key.

We have conducted a thorough analysis of the junior and mid-tier producers in Mexico. Using our scoring system, we've identified a handful as being opportunities that could outperform the market.

Analysis Methodology

Our algorithm that we use for Tickerscores breaks down each junior producer based on four major areas, which are weighted according to the current economic climate. Each area has multiple sub-variables that are also weighted. The four major areas are: financials, management, efficiency and growth, and performance and valuation.

The "Financials" section studies liquidity, debt ratios, cash flow, and cash relative to other producers in the jurisdiction. "Management" examines insider ownership, institutional ownership, YTD insider transactions, previous merger and acquisition experience, and experience with a major producer. "Efficiency and Growth" looks at revenue growth, ounces produced, net income, cost control within the business, and the growth prospects for the mine. "Performance and Valuation" is measured by performance vs. a basket of other junior producers, their enterprise value per ounce, book value per share, and return on equity.

From these 20+ variables, a score out of 100 is calculated for each company. The scoring system is extremely stringent and a score of 60+ is considered a very well-rounded. Companies that score well have excellent growth prospects, financial stability, and could provide market-beating returns.

Endeavour Silver (NYSE:EXK) Market Cap: ~500m

  • Financial score: 48/100
  • Management score: 68/100
  • Efficiency & Growth score: 67/100
  • Performance & Valuation score: 44/100
  • Visual Capitalist Tickerscore: 59

Comments: Endeavour is a growing silver producer. Management has done a fantastic job growing reserves and production every year since 2004. Price to cash flow and price to earnings ratios are low compared to their peers.

Great Panther Silver (NYSEMKT:GPL) Market Cap: ~150m

  • Financial score: 80/100
  • Management score: 44/100
  • Efficiency & Growth score: 32/100
  • Performance & Valuation score: 63/100
  • Visual Capitalist Tickerscore: 49

Comments: The drop in silver prices has hurt Great Panther with a $5.2 million loss in Q2 and they will need to continue to work hard to become profitable at current silver prices. $23 million in cash gives management some flexibility to ride out current silver prices.

Golden Minerals (NYSEMKT:AUMN) Market Cap: ~56m

  • Financial score: 85/100
  • Management score: 64/100
  • Efficiency & Growth score: 18/100
  • Performance & Valuation score: 64/100
  • Visual Capitalist Tickerscore: 49

Comments: The management team at Golden Minerals made a prudent decision to suspend production at the Velardena mine. The company has a low float of 49 million shares outstanding and approximately $30 million in cash. The stock price has been crushed, moving this year alone from $4.40 to $1.15, which does provide a big discount to past prices. It is probably best to wait until silver appears to be on the upswing before diving in again.

Excellon Resources (OTCPK:EXLLF) Market Cap: ~102m

  • Financial score: 25/100
  • Management score: 75/100
  • Efficiency & Growth score: 29/100
  • Performance & Valuation score: 33/100
  • Visual Capitalist Tickerscore: 39

Comments: Excellon owns the La Platosa mine, which is the highest grade silver producer in Mexico. The focus is to build cash flow and increasing the current mine life by finding new resources. All in cash costs are approximately $14/ounce. They rolled back shares 5:1 on May 8th 2013 and the company has been buying shares back in the open market.

Scorpio Mining (SMNPF.PK) Market Cap: ~67m

  • Financial score: 82/100
  • Management score: 66/100
  • Efficiency & Growth score: 15/100
  • Performance & Valuation score: 68/100
  • Visual Capitalist Tickerscore: 49

Comments: Scorpio is well set for future growth with $23 million in cash, and has the top cash to market cap ratio of all Mexico Silver producers (27%). Scorpio owns 5,590,000 shares of Scorpio Gold that provides additional leverage to an increase in metal prices. Scorpio is looking for organic growth to take them to the next level.

Silvercrest (NYSEMKT:SVLC) Market Cap: ~230m

  • Financial score: 78/100
  • Management score: 68/100
  • Efficiency & Growth score: 53/100
  • Performance & Valuation score: 58/100
  • Visual Capitalist Tickerscore: 62

Comments: Silvercrest management has some serious skin in the game; the president, chief financial officer, and chief operating officer each own over 2 million shares. The Santa Elena expansion boasts an impressive IRR of 88%, adding 8 years to the current mine life. The IRR is calculated using $28 silver. Using $19.50 the IRR is still impressive at 49%. Silvercrest is expecting a big jump in production from 2.4 million AqEq to 3.5-4 million AgEq in 2014. Sprott owns 8 million shares, Libra Advisors LLC owns 6.4 million.

Impact Silver (OTCPK:ISVLF) Market Cap: 56m

  • Financial score: 69/100
  • Management score: 57/100
  • Efficiency & Growth score: 39/100
  • Performance & Valuation score: 58/100
  • Visual Capitalist Tickerscore: 52

Comments: Impact is a small silver producer producing between 150,000 and 175,000 ounces a quarter. Cash costs are calculated by Visual Capitalist to be approximately $17 an ounce. Impact is doing an excellent job of ramping production; ounces mined increased by 25% Q2 2013 vs. Q2 2012.

Avino Silver & Gold (NYSEMKT:ASM) Market Cap: ~43m

  • Financial score: 56/100
  • Management score: 64/100
  • Efficiency & Growth score: 36/100
  • Performance & Valuation score: 63/100
  • Visual Capitalist Tickerscore: 51

Comments: Avino has a very low float for a producer with only 27 million shares outstanding. Avino follows an interesting business model trying to re-open a former producing mine. The PEA has a 54% IRR using silver price of $20.54.

Stantacruz Mining (OTCPK:SZSMF) Market Cap: ~110m

  • Financial score: 75/100
  • Management score: 73/100
  • Efficiency & Growth score: 3/100
  • Performance & Valuation score: 27/100
  • Visual Capitalist Tickerscore: 36

Comments: Santacruz is the newest silver producer in Mexico achieving commercial production April 2013. Management has set some very aggressive growth plans targeting 5 million ounces of production in 2016. Santacruz is an interesting value play as $40 million was raised earlier this year at $2 per share and the current share price is $1.35.

First Majestic (NYSE:AG) Market Cap: 1.7b

  • Financial score: 72/100
  • Management score: 78/100
  • Efficiency & Growth score: 62/100
  • Performance & Valuation score: 41/100
  • Visual Capitalist Tickerscore: 63

Comments: First Majestic is a pure silver producer with strong growth going from 11.3 - 11.7 million ounces in 2013 to 16 million ounces by end of 2014. First Majestic has five mines in production with a sixth in the developmental stage. Silver reserves are strong with 556 million AgEq ounces which gives each investor approximately 4.75 ounces per share.

Aurcana (OTCQB:AUNFF) Market Cap: ~147m

  • Financial score: 26/100
  • Management score: 70/100
  • Efficiency & Growth score: 58/100
  • Performance & Valuation score: 63/100
  • Visual Capitalist Tickerscore: 56

Comments: Aurcana is trying to setup a $50 million credit facility with Red Kite Mine Financing to ease short-term liquidity issues. This was supposed to be completed in July and but it has been pushed back several times, now with a new target date of September 2013. At some point Aurcana will become a good value play with Shafter adding significantly to the mineral reserves. The question is: when?

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. Visual Capitalist is an investment research company with several team members. This article was written by Rob Fuhrman, our Lead Analyst. We did not receive compensation for this article and we have no business relationship with any company whose stock is mentioned in this article.