How This Silver Miner Beat Expectations In Its Recent Earnings Report – And What It Has Planned Next
Detroit, Michigan
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August 29, 2024 08:45 AM Eastern Daylight Time
By Meg Flippin, Benzinga
Silver is shining bright this year, with prices up 21% in 2024. It recently hit an 11-year high, and experts are calling for more price increases. That hasn’t been lost on Silvercorp Metals Inc. (AMEX: SVM), the mining company headquartered in Vancouver, British Columbia. The company posted strong first-quarter fiscal 2025 results that it says beat Wall Street expectations, and positioned it for more growth.
Silver investors like the metal because it offers diversification beyond stocks and bonds. It tends to increase in price during periods of low interest rates, and with analysts projecting Fed rate cuts, an uptick in silver prices is expected.
Just like gold, silver is seen as a store of value. If the U.S. dollar ever devalued, silver could even potentially be used as a form of currency. There’s also a scarcity of it, which means the price has room to appreciate. Much of the silver mined has been used and isn’t recoverable. The global deficit of silver reached an all-time high in 2022 at 237.7 million ounces as the demand for silver rose 18%.
Revenue Growing, Costs Declining
Silver is Silvercorp’s bread and butter, accounting for 63% of its first-quarter revenue. The company also mines gold, lead, and zinc. For the fiscal first quarter, Silvercorp reported revenue of $72.2 million, up 20% year-over-year, driven by rising silver prices.
“The results of this quarter reinforce why investors should own our shares, namely demonstrating that we provide leverage to higher silver prices through the response in our financial results,” said Silvercorp president Lon Shaver during the company’s quarterly results conference call.
Silvercorp surpassed Wall Street’s expectations, reporting a net income of $21.9 million, or adjusted earnings of $0.12 per share, up from $9.2 million or $0.05 per share, in the same quarter last year. Analysts had expected the company to weigh in with earnings of $0.09-$0.11 per share. Raymond James also highlighted this strong performance, noting that Silvercorp’s EBITDA of $41 million significantly outperformed their estimate of $26 million, as well as the consensus estimate of $34 million.
Cash flow provided by operating activities was $40 million, up 28% year-over-year. Silvercorp ended the quarter with $216 million in cash and short-term investments, another $108 million in equity investments, and zero debt. The company says its results are a testament to its ability to capitalize on market conditions and optimize operations for maximum profitability.
Silvercorp’s ability to beat analyst targets on the earnings and cost fronts prompted analysts to reiterate their buy ratings on the stock, with bulls pointing to the strong showing in the quarter, disciplined cost management, healthy cash generations and near-term catalysts as reasons to like the stock. “We largely view the quarter as positive, as the results beat our estimates on the bottom line supported by higher-than-expected realized silver prices, gains on investments and favorable exchange rate movements during the quarter,” wrote Eight Capital in a recent research report. The firm has a buy rating on shares of Silvercorp.
Expansion Mode In Full Swing
Beyond beating fiscal first-quarter estimates, Silvercorp closed a key acquisition that may serve as a catalyst for the company. In late July, Silvercorp completed its acquisition of Adventus Mining Corporation, creating a geographically diversified mining company. With the acquisition, Silvercorp added the advanced El Domo Project and the exploration stage Condor Project, both located in Ecuador, to its portfolio. Analysts view the move as positive; “For El Domo, we believe it is likely SVM will outline development plans as well as potential improvements to the project which could provide an additional source of positive catalysts in the coming months,” stated Roth Capital in a recent research report.
Another potential catalyst is the Mill No. 2 capacity expansion, on track and on budget to be completed by November, which will significantly boost production capacity, Silvercorp reports. The company forecasts the project will increase its total production capacity to around 5,000 tons per day. Silvercorp has accumulated a stockpile of ore ready for processing, and this expansion is expected to increase the company’s output, further driving revenue growth.
With silver prices projected to continue rising, and Silvercorp expanding its operational capacity and geographic reach through a strategic acquisition, it could be well-positioned and may offer investors substantial exposure to silver’s likely continued growth.
For more information on Silvercorp, please visit silvercorpmetals.com/welcome.
Featured photo by Zlaťáky.cz on Unsplash.
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