When it comes to efficiency, there is no better example than a mining company. Move the stone and dirt efficiently, get the product out of the ground, smelt and then sell for a nice tidy profit. Outside of finding the metals a company desires, this is mining. Providing commodity prices cooperate, a mining company that can do this well is a company that will turn a profit.
Silvercorp Metals Inc., a silver, gold and lead mining company, works to acquire, develop and exploit mining opportunities primarily in the Peoples Republic of China. The company is a Vancouver, Canada based organization.
As has been mentioned in past posts, cost controls and basic commodity prices are the key ingredients to a successful mining operation. Silvercorp Metals, in this sense, is a very successful operator. Extraction levels of silver and lead increased in the first quarter by respective 6% and 11% levels while extraction costs fell to levels recognized as the lowest in the industry. In this regard, 1.2 million ounces of silver and 16 million pounds of lead were extracted. On the silver front, cash cost for extraction was $5.09 per/oz. leading to a $0.02 per share dividend and $7.5 million net earnings.
Given the company’s efficiency and current market for silver, it does appear to be in a fairly strong position. Plans for expansion within China are moving forward with exceptional speed given the nature of the political economy and suspect environmental permitting process. The company’s current permitted area shows solid prospects with plenty of opportunity for exploration within its currently permitted region (new regions are currently being permitted for near-term exploration). As one might suspect, the environmental permitting process within China is favourable toward the company for extended exploration opportunity.
Although there are personal opinions about owning a mining stock vs. owning the commodity itself, Silvercorp Mining does seem to be in a solid position of control in both respects. It has sizable holdings in the commodities it mines and solid sales for its mined commodities. In a certain sense, it is playing both sides of the commodities market and doing well at both. Sales of silver in the first quarter were up while its holdings have provided a stable company position for future mining activities and financing.
Depending upon whom an investor chooses to listen to within the silver investing community, the company’s position should only improve as anticipated silver commodity deleveraging takes place (which is the point of contention within the silver market… has there been manipulation in the COMEX silver market or not?) Whatever the answer may be, Silvercorp Metals Inc. has put itself in a very favourable position for a nice run. Silver price is undervalued in relation to gold and represents an opportunity for an investor looking for longer-term profit potential. Silvercorp may be a way to take advantage.