While the price of gold (GLD) has been pummeled over the past month, it’s the silver price (SLV) that has taken the real beating.
This is evidenced by the industrial metal finding itself more than 18% off its recent highs, more than double the ~7% correction of gold in the same period.
The violent decline has pushed the price of silver back near $20.00/oz, which is only marginally above the average all-in cost to produce silver for primary producers, with this cost being all-in-sustaining costs plus growth capital and corporate G&A.
This is not ideal for the silver miners group, and especially not high-cost miners with $25.00/oz plus all-in costs that are now seeing negative margins for every ounce pulled out of the ground and processed on site.
The silver lining, though, is that if the silver price has declined to a point where growth is no longer incentivized, suggesting a steady decline in silver production if prices remain at or near these levels.
This obviously isn’t great for high-cost producers, but it is positive for those producers that will survive the short-term margin compression and are being thrown out with the bathwater.
In this update, we’ll look at two names that are trading at deep discounts to their historical multiples, and dig into their respective low-risk buy zones.
Avino Silver & Gold Mines (ASM)
Avino Silver & Gold Mines (ASM) is a ~$90 million silver producer that operates the Avino Mine in Durango, Mexico, which has more than a dozen named veins on the property and sits on the edge of a caldera.
The mine is unique given that it has silver, gold, and copper instead of just silver and gold like many primary silver mines, and it’s also unique in the sense that it is profitable despite a very small footprint, operating at a rate of barely 700,000 tonnes per annum, translating to production of 3.0 million ounces of silver per year dependent on grades. Continue reading "Silver Lining For These Two Stocks"