Horseshoes, Hand Grenades, and Silver Bull
Lazarus Investment Partners, a shareholder of Silver Bull, has issued this opinion of SVB(A).
“Relative to the amount of silver in the ground and relative to the NPV of the company's project, this stock is dirt cheap. On top of the company's silver resource, there are also over 2 billion pounds of zinc, which we think the market has largely failed to notice.
“The project is estimated to have 164 million ounces of silver and 2.2 billion pounds of zinc. The last Preliminary Economic Assessment indicated an after tax net present value of $464 million with an after tax IRR of 23.1%. The market cap today is around $40 million. The company has no debt and cash to last into 2017, if needed. Management has no intention of mining the asset themselves. They are setting the table so a larger company can walk up to a turnkey operation.
“Of course all this begs the question of why Silver Bull is down when news from the company and on silver and zinc pricing is positive. We heard that a large investor in Silver Bull had to liquidate their position to fund redemptions this year. Beyond that, we don't have a great answer, other than to say therein lies the opportunity. Microcaps are often priced inefficiently and we think Silver Bull is one such example.
“We are not the only one who sees this optionality. At least thirteen companies have signed confidentiality agreements with Silver Bull so they can review the resource, as a step towards an acquisition. Coeur Mining is the company's largest shareholder and invested at share prices of $0.50 and $0.68 -- more than twice today's price.
“In 2006 and 2007 Silver Bull traded at over $4 a share. That's sixteen times the current stock price. The Sierra Mojada project is forecasted to have an average annual cashflow of $92 million. That's more than twice the company's market cap today - and that's one year of cashflow. The project's net cash cost per ounce of silver is $6.58. Pick the discount rate you want, pick the silver price you want, you still make money. On top of the silver, the company has zinc worth about $2.4 billion today. Management wants to sell the company, so there's no need to worry about how to finance it all.”
Lazarus Investment Partners, a shareholder of Silver Bull, has issued this opinion of SVB(A).
“Relative to the amount of silver in the ground and relative to the NPV of the company's project, this stock is dirt cheap. On top of the company's silver resource, there are also over 2 billion pounds of zinc, which we think the market has largely failed to notice.
“The project is estimated to have 164 million ounces of silver and 2.2 billion pounds of zinc. The last Preliminary Economic Assessment indicated an after tax net present value of $464 million with an after tax IRR of 23.1%. The market cap today is around $40 million. The company has no debt and cash to last into 2017, if needed. Management has no intention of mining the asset themselves. They are setting the table so a larger company can walk up to a turnkey operation.
“Of course all this begs the question of why Silver Bull is down when news from the company and on silver and zinc pricing is positive. We heard that a large investor in Silver Bull had to liquidate their position to fund redemptions this year. Beyond that, we don't have a great answer, other than to say therein lies the opportunity. Microcaps are often priced inefficiently and we think Silver Bull is one such example.
“We are not the only one who sees this optionality. At least thirteen companies have signed confidentiality agreements with Silver Bull so they can review the resource, as a step towards an acquisition. Coeur Mining is the company's largest shareholder and invested at share prices of $0.50 and $0.68 -- more than twice today's price.
“In 2006 and 2007 Silver Bull traded at over $4 a share. That's sixteen times the current stock price. The Sierra Mojada project is forecasted to have an average annual cashflow of $92 million. That's more than twice the company's market cap today - and that's one year of cashflow. The project's net cash cost per ounce of silver is $6.58. Pick the discount rate you want, pick the silver price you want, you still make money. On top of the silver, the company has zinc worth about $2.4 billion today. Management wants to sell the company, so there's no need to worry about how to finance it all.”
