In this post we provide financial data/metrics for the set of silver producers we follow. Notable omissions from this list include Silver Wheaton (we don't consider them a silver producer... they have an entirely different business model), and Fresnillo and Hochshild Mining (both listed on the LSE, reporting in GBP, making financial comparisons a little more difficult... and based on their size, Fresnillo is in a completely different league than the rest of the companies).
Note: if there are other companies you think should be added to his list, leave us a comment identifying the company and we'll consider adding them the next time we compile this data.
We provide the following financial metrics, all extracted or calculated from the quarterly and annual reports filed on SEDAR and EDGAR:
- Market Capitalization
- Price/Earnings (P/E)
- Price/Operational Cash Flow (P/OCF)
- Price/Free Cash Flow (P/FCF)
For earnings, we use the "Net earnings for the period" figure as reported in the financial report for the period. For operational cash flow, we use the "Cash generated by operating activities" figure as reported in the financial report for the period (we do not adjust for one-time items). For free cash flow, we calculate this as "Cash generated by operating activities" - "Cash used in investing activities" (again we do not adjust for one-time items).
One of the purposes of gathering this data is to aid in future projections we make for the companies in this space that we cover (right now, just Aurcana). Specifically, projections can be made based on P/E, P/OCF, P/FCF. So far, our projections have been based on P/E, however, we may use a blend considering using P/OCF in the future (or a blend of P/E and P/OCF). In fact, the recent research report released by RBC on Aurcana [
1] (which we highly recommend anyone considering or holding an investment in Aurcana read) uses P/OCF to come up with a price target for Aurcana. And the multiple they selected was 10x. Based on the data for Aurcana's peers, this appears low, since the average P/OCF of their peers is 16x and the median P/OCF of their peers is 13x.
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| Market Capitalization |
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| Trailing Price/Earnings (P/E) |
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| Trailing Price/Operating Cash Flow (P/OCF) |
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| Trailing Price/Free Cash Flow (P/FCF) |
References
[1]
https://www.rbcinsight.com/Insight2/share/document?documentKey=1031-241350-7KKSKR19RILCVBFSK4PAPH948U
Silvercrest seems to be cheap in all the metrics. But they are in the middle of building a mine. So a lot of risk still there I guess..
ReplyDeleteYes, SilverCrest does appear cheap in comparison to the others. However, they are the one company I am not certain actually belongs in this list. The reason I say that is this list contains producing mining companies whose primary product is silver. In the case of SilverCrest, this is not true. In fact, in the first 3 quarters of 2012 SilverCrest reported the following production:
DeleteSilver: 426Koz
Gold: 25Koz
Silver Equivalent: 1.78Moz
That means that only ~24% of production is silver while ~76% of production is gold. So, right now, this company is really a gold producer with a silver by-product. And I think you'll find that silver producers generally tend to command higher multiples than gold producers. Going forward Silvercrest does plan to produce more silver, but it is not until 2017 that their production forecast switches a larger percentage of silver than gold. So from my perspective, SilverCrest is really a gold producer (not a silver producer as one might guess based on their name).