This Silver Bull: Secret Silver Bullet

| About: Silver Bull (SVBL)

Summary

Silver Bull Resources has a large deposite with 90 million ounces but lower grades.

Even though its not cash flowing, its price to book ratio is 1.98.

Silver Bull has plenty of working capital with a current ratio of 3.01 and with no bank debt on its balance sheet.

The next company a follower requested me to write about was Silver Bull Resources (NYSEMKT:SVBL). I will say my first initial thought was that they have the right name, couldn't have thought of a better name for a silver miner then that.

In terms of its resources that can be seen in the picture below.

Source for the chart above can be found on Silver Bull Resources website.

Based on this resource estimate, I can already tell this will be more of an optionality type play on silver with a total measured and indicated resource of 90.9 million ounces of silver. The grades are low as well, as I would like to see grades of at least 100 grams of silver per tonne. This estimate was done using a silver price of $18 dollars an ounce.

In terms of the companies share structure, I think it's okay, not great but definitely not a deal breaker. Currently, it has 177,894,967 shares outstanding, and on a fully diluted basis it has 193,953,225 shares. I would like to see a little less dilution, but this isn't bad. I don't expect too much dilution because management and directors hold 3.9 percent of the shares.

In terms of valuation, many metrics can't be used because this company isn't in production and therefore isn't cash flowing. In terms of its price to book ratio, its ratio is 1.98.

In terms of its financials the company has plenty of working capital with a current ratio of 3.01. Its total assets to total liabilities ratio of 24.23, and no bank debt on its balance sheet. Since this is a non-producing entity I could care less about the company's income statement, in terms of its cash burn rate, this company has a burn rate of $1.48 million dollars per year.

In conclusion, I like the company's price to book ratio, it has a large asset, in a safe geopolitical environment as Mexico is considered one of the safer environments in the world. Its share structure is okay, not great, but I don't like the grades, as this is a low-grade deposit, thus not meeting my metrics of solid grades. This is, as stated above, an optionality play that will outperform during upswings, but during corrections will decline drastically in price. I do expect them to get bought out in the future, maybe when silver hits $30 dollars an ounce, that would more than likely pique the interest of mid-tier or major mining companies. Lastly, this company should be okay financially thanks to its strong balance sheet, so I don't expect more shareholder dilution in the near future.

Disclosure: I/we 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 (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.

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Tagged: , , , Industrial Metals & Minerals, Canada
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