Common Stock: SilverCrest Metals (TSX:SIL)
Current Market Price: $11.93 CAD
Market Capitalization: $1.1 billion CAD
**Note: All values in this article are expressed in Canadian Dollars (CAD) unless otherwise noted.
SilverCrest Metals Stock – Summary of the Company
Silvercrest Metals is a precious metals exploration company focused on the acquisition, exploration, and development of precious metals properties, primarily in Mexico. The company currently has 4 exploration stage properties in Mexico. Silvercrest was founded in 2015 and is headquartered in Vancouver, Canada.
Revenue and Cost Analysis
Silvercrest does not have any properties which are currently producing and therefore does not have any revenue. The company consistently runs a net loss and is likely to continue to do so for the foreseeable future.
In 2019 Silvercrest had a net loss of $59.2 million. This represents a significant increase from 2018’s net loss of $19.8 million. This increase is due mostly to an increase in exploration and evaluation expenditures, which increased from $14.4 million in 2018 to $50.3 million in 2019.
SilverCrest Metals – Royalty and Streaming Agreements
One of the concessions at the Las Chipas property has a 2% net smelter royalty for production above a certain threshold.
Balance Sheet Analysis
Silvercrest has a solid balance sheet with a very strong liquidity position and very low liability levels. They should not have a problem funding their operations in the short to medium term.
SilverCrest Metals – Debt Analysis
As of year-end 2019, the company does not have any debt outstanding.
SilverCrest Metals Stock – Share Dynamics and Capital Structure
As of March 2020, the company had 110.1 million common shares outstanding. They also have 7.9 million options outstanding. Fully diluted shares outstanding is 118 million shares.
SilverCrest Metals Stock – Dividends
The company does not currently pay a dividend and is unlikely to do so for the foreseeable future.
Management – Skin in the game
Insiders at Silvercrest have sold a significant amount of the company’s stock in 2020. This is generally viewed as a bearish signal for the stock.
SilverCrest Metals Stock – 3 Metrics to Consider
Debt to Equity Ratio
Total Liabilities/Total Share Holder Equity
$5.5 million/$122.5 million = .04
A debt to equity ratio of .04 indicates that Silvercrest uses almost no debt in its capital structure and relies almost entirely on equity financing to fund itself.
Price to Book Ratio
Current Share Price/Book Value per Share.
$11.93/$1.04 = 11.5
Based on fully diluted shares outstanding, Silvercrest has a book value per share of $1.04. At the current market price this implies a price to book ratio of 11.5, meaning the company’s stock currently trades at a significant premium to the book value of the company.
Working Capital Ratio
Current Assets/Current Liabilities
$113.1 million/$5.1 million = 22
A working capital ratio of 22 indicates a very strong liquidity position. Silvercrest should not have a problem meeting its near-term obligations.
Gold Market – Economic Factors and Competitive Landscape
Gold mining is a highly competitive, capital intensive business. The company will need to compete fiercely for both new projects and capital. However, given the current economic environment of global money printing and zero or negative interest rates, it would appear gold companies are poised to benefit from a strong economic tailwind.
SilverCrest Metals Stock – Summary and Conclusions
The Las Chipas property in Mexico appears to be a significant discovery, with the potential for additional discoveries. The projects PEA, appears attractive at low silver and gold prices, providing investors significant leverage to rising precious metals prices. Silvercrest has been exploring the property aggressively, and should make a construction decision by the end of 2020.
The company is in a sound financial position and the capital structure is acceptable for common stock holders.
Silvercrest stock certainty has further upside potential should additional discoveries be made and/or should the gold and silver price rise further. However, the company’s stock is currently trading at a best-case scenario valuation. Although Silvercrest stock is investable, I would prefer to wait for a lower price or a construction decision before investing.
Disclaimer
This is not investment advice. Nothing in this analysis should be construed as a recommendation to buy, sell, or otherwise take action related to the security discussed. If I own a position in the security discussed, I will clearly state it.
This is not intended to be a comprehensive analysis and you should not make an investment decision based solely on the information in this analysis. I hope this serves as a useful starting point for a more comprehensive analysis, and hopefully draws attention to aspects of the company that were overlooked or merit further investigation. This is by no means intended to be a complete analysis. Again, this is not investment advice, do your own research.
