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Americas Gold & Silver (Gold/Silver Mid-Tier Producer). An Opportunity Or Too Much Risk?

Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.


  • Currently unloved with very poor investor sentiment.
  • Very high risk due to metallurgical issues at their Relief Canyon mine.
  • A potential turnaround story, although not a slam dunk.
Rows of golden and silver bars

Ravitaliy/iStock via Getty Images


We have been in a 14-month correction for the gold/silver bull market. During this period, many investors have lost interest in gold/silver miners, which has allowed several out-of-favor stocks to become oversold.

Many of them are so disliked that investors get angry just thinking about them. I plan to write articles about several of these stocks because investors are wondering if they could be turnaround stories, or if the risk is too high.

The intense pour sentiment could be creating a buying opportunity. Many will possibly laugh at some of my choices (I’m sure the comments below will not all be friendly for many of these stocks). Why? Because some of these stocks are unloved by many investors.

I’m a fan of mid-tier producers, and I think many that have crashed will be turnaround stories. However, not all of them will. You will need to be risk-averse with the goal of finding high alpha to bet on these potential turnaround stories.

As the saying goes, price fixes everything. That's not completely true. Some issues cannot be fixed with price. For instance, companies cannot buy permits, they cannot solve some metallurgical issues, and they cannot make an unsafe location safe.

Mid-tier producers have the potential to generate high FCF (free cash flow). For this reason, they are ideal turnaround candidates. Of course, certain events have to occur to create their turnaround. The first event is higher gold/silver prices. Often the second event is to alleviate a condition that caused them to crash.

For Americas Gold & Silver, their main issue is metallurgy at their flagship Relief Canyon mine. The secondary issue is higher silver prices to generate free cash flow at their two silver mines.

Americas Gold & Silver

Stock Name

Symbol (US)



Share Price (US)

FD Shares

FD Mkt Cap (11/27/2021)

Americas Gold & Silver



Emerging Mid-Tier Producer




Americas Gold & Silver has been having problems at their flagship Relief Canyon mine in Nevada. They have been trying to ramp up gold production, with the expectation of producing 80,000 oz., with targeted all-in costs around $1,300 per oz (break-even). Unfortunately, they ran into metallurgical issues and could not make a profit at $1,800 gold! Ouch.

They are currently calling operations suspended, although there is no guidance for a restart date. Their costs exploded last quarter, and they lost about $20 million. They are almost out of cash and have about $38 million in current liabilities and only about $20 million in current assets.

I spoke to them, and they are testing a fix to their metallurgical problems. The bad news is that it is going to take some time, and this fix requires a method that is not currently being used in Nevada. Testing will not be completed until sometime in H1 of 2022, and then they have to get it approved by the state of Nevada, which is not a given. Thus, they might be back in production at Relief Canyon in H2 or might not. We will have to cross our fingers and wait.

They recently restarted production in Mexico, which was suspended for more than a year due to a road blockage. They think this issue has been resolved and won't return. But that is another risk. With this restart, they will now have about $7 to $10 million in free cash flow each quarter going forward.

They have large silver resources in Idaho and Mexico. They will produce about 4.5 million oz. (AGEQ) in 2022, with healthy free cash flow. Their all-in costs (break-even) should be around $16. If silver prices average above $25 in 2022, they should be in pretty good shape.

The key to their success will be getting free cash flow from Relief Canyon. Plus, they need to expand the mine life at Relief Canyon, which is currently only 6-8 years. Although, another key will be higher silver prices.

In the near term, if they can return Relief Canyon to production in 2022, then this is a very cheap stock. Of course, the risk level is also high. However, even without Relief Canyon, the long-term upside looks very good just from their silver mines and large silver resources.

I should mention that their silver mines have a lot of base metals. For this reason, it is difficult to project the FCF multiple these mines are worth as silver prices rise. In theory, they should be worth more than $1 billion at $50 silver, but that is just a guess. We need to recognize there is some risk from the extensive base metals exposure.

Another factor impacting the share price is past performance. They have diluted shares significantly in the past and had a 12 to 1 reverse split. Investors have long memories, and many are not fans of management’s past execution. This could impact investor sentiment and the FCF multiple they will receive as a market cap valuation.

Company Info

Cash: $20 million (cash and inventory).

Debt: $20 million.

Current Silver Resources: 130 million oz. (135 gpt).

Current Gold Resources: 700,000 oz. (.7 gpt).

Estimated Future Resources: 100 million oz. (135 gpt) (AGEQ).

Current Silver Production: 4.5 million oz.

Estimated Future Silver Production: 10 million oz. (AGEQ).

Current All-in Costs (break-even): $16 per oz. (estimate).

Current FCF Multiple: 5

Scorecard (1 to 10)

Properties/Projects: 6.5

Costs/Grade/Economics: 6

People/Management: 6

Cash/Debt: 3

Location Risk: 7

Risk-Reward: 6.5

Upside Potential: 7.5

Production Growth Potential/Exploration: 6.5

Overall Rating: 6.5


1) Significant upside potential: The current FD market cap is a bit over $100 million. Their potential free cash flow at $75 silver is over 2x that value. A quality company is usually worth at least 5x FCF (free cash flow).

2) Good locations: Nevada and Idaho are very good locations. Mexico is not ideal but is not considered a high-risk location yet.

3) Optionality play: They have large resources, with 1.5 million oz. of gold and more than 100 million oz. of silver. Those resources are currently not being valued fully. If gold/silver prices rise, those resources will be worth much more.

4) Large silver resources: Their large resources underpin their valuation. This reduces their overall risk.

Risks/Red Flags

1) Metallurgical issues at Relief Canyon: They must come up with a method of mining their gold economically. They are going to try to use kerosene, which has never been used before in Nevada. It will probably work, but it might not get permitted.

2) Poor balance sheet: They have zero net cash. They expect to generate free cash flow in Q1 and may not need to do a financing. However, I think we can expect one. This expectation from investors will put downward pressure on the share price.

3) Management needs to prove that it can execute better: Investors are skeptical of management's execution ability. This will put downward pressure on the share price until they produce better results.

4) Base metals exposure: Both of their silver mines have significant revenue from base metals. If demand for base metals wanes, then their costs could rise.

Balance Sheet / Free Cash Flow

They currently have about $20 million in cash and $20 million in debt. That's not a terrible balance sheet, although you want to see higher net cash to alleviate the chance of share dilution. They are estimating low breakeven costs (around $16 per oz.) for their silver mines in 2022, with FCF around $7 to $10 million per quarter at $23 silver. That is very good as long as they hit their targets. Overall, their FCF should be strong enough for them to make a profit in 2022 if silver prices do not drop.

Valuation #1 ($75 silver prices)

Production estimate for the long term: 7 million oz. (AGEQ)

Cash Costs (conservative): $14 per oz.

All-In Costs (break-even): $6 per oz.

7 million oz. x ($75 - $20) = $350 million annual FCF (free cash flow).

$350 million x 8 (multiplier) = $2.8 billion

Current FD market cap: $134 million

Upside potential: 1,900%

Valuation #2 ($75 silver prices)

Production estimate for the long term: 5 million oz. (AGEQ)

Cash Costs (conservative): $14 per oz.

All-In Costs (break-even): $6 per oz.

5 million oz. x ($75 - $20) = 275 million annual FCF (free cash flow).

$275 million x 8 (multiplier) = $2.2 billion

Current FD market cap: $134 million

Upside potential: 1,500%

Note: Valuation #1 is with Relief Canyon, and Valuation #2 is with only their silver mines.

Investment Thesis

The risk level is very high because of the problems at Relief Canyon. But if silver prices take off, they become a somewhat interesting silver optionality play. Their large silver resources and moderate to low-cost silver mines create an interesting risk-reward play. But the roadblock problems in Mexico add significant risk if they return. Also, the decision would be much easier if management had a better record.

So, is this an opportunity or too much risk? That is for you to decide. Some with high-risk aversion may find it compelling to chase the high alpha. Others will find the risk too high.

Analyst's Disclosure: I/we have a beneficial long position in the shares of USAS either through stock ownership, options, or other derivatives.

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.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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