BERAL, INC.
Andrew Racz
Director of Research
300 East 54 Street, Suite 26C
New York, NY 10022
Phone: (212) 319-6949
Fax: (212) 753-1944
E-mail: mlikar@aol.com

Silvercrest Mines, Inc.

October 26, 2010
 

SVL - TXS.V
STVZF - PINK SHEET

Price: $1.31 TSX
$1.26 Pink Sheet
Long-term debt:
 
Issued and outstanding: 60,836,429
Warrants and options: 15,979,713
Fully diluted shares: 76,815,429
Operating Income
2011 E: 60¢
2012 E:
60¢ - 75¢

SilverCrest Mines Inc. is a Mexican precious metals producer with headquarters based in Vancouver, BC. SilverCrest's flagship property is the 100% owned Santa Elena Mine, which is located 150km northeast of Hermosillo, near Banamichi in the State of Sonora, Mexico. The mine is a high grade, epithermal gold and silver producer, with an estimated life of mine cash cost of less than US $375 per ounce of gold equivalent. SilverCrest anticipates that the 2,500 tons per day facility will produce approximately 35,000 ounces of gold and 600,000 ounces of silver per year from the open pit heap leach operation.

SilverCrest is a Vancouver-based gold and silver producer which has been financed by a combination of a $12 million pre-payment from Sandstorm Resources, a $12,500,000 bank loan facility from Macquarie Bank and $6,300,000 equity financing.

The company entered into a letter of intent with Sandstorm pursuant to which Sandstorm has agreed to purchase 20% of the gold produced over the life of the mine of the Santa Elena Project for an up front payment of U.S. $12 million plus a further payment upon delivery of the gold equal to the lesser of (a) U.S. $350 and (b) the then prevailing market price per ounce of gold. The payments will increase at 1% per annum commencing on the third anniversary of the date that the Santa Elena Project begins commercial production. The company estimates that approximately 50,000 ounces of gold will be provided to Sandstorm over the life of the current open pit plan or approximately 6,250 ounces per year. The terms of the letter of intent do not affect the estimated 4.88 million ounces of silver recoverable over the life of the initial open pit heap leach operation.

Santa Elena Financing

Equity CAD $6.3 million

- Unit consisting of one common share @ $.50 plus 1/2 warrant @ $0.65.

Macquarie Bank Loan Facility U.S. $12.5 million

- U.S. $6.8 million drawn down
- 55,000 oz. Au hedged at U.S. $926 over 3 years

Sandstorm Resources Gold Purchase Agreement U.S. $12 million

- Upfront U.S. $12 million payment received plus:
- U.S. $350 per oz. for 20% of future production on open-pit oz. Au
- pro-rata capital contribution and $400 per oz. for underground production

In many respects the company is the forerunner of future conversion of exploration companies, the producing companies, by loans or investments by large finance companies. Originally, Sandstorm invested $12 million in the development of the gold production of Silvercrest and Macqueri Bank added a $6.3 million to the project.

The $20 million project financing, Silvercrest announced that the first shipments of gold occurred in October, 2010. The inaugural shipment included 383 kilograms of combined metals comprised of 368 ounces of gold and 10,035 ounces of silver, with an estimated value of $700,000.

The rate of production which is to be reached in the first quarter of 2011, will be at the rate of 35,000 ounces of gold and 600,000 ounces of silver per year. The mines, which are all in Mexico, produce from the 100%-owned Santa Elena mine and is estimated with a lifetime cash cost of less than $375 per ounce of gold. The company can process 2,500 tons of ore per day and it is capable of 35,000 ounces of gold and 600,000 ounces of silver production per year. Based on the agreement with two finance companies, the division of production is as follows:

  1. The first 20% of gold goes to Sandstorm at a price of $350.
  2. The second lot of 17,000 ounces goes to Macquarie at a price of $926.
  3. The remaining 11,000 would be 100% accrued to Silvercrest.
35,000 total gold products
Receipts
20%
7,000 ounces to Sandstorm for
$350
$2,450,000
  17,000 for $926

15,742,000

  12,000 market price $1,360

14,960,000

  600,000 silver $24

14,400,000

TOTAL

47,552,000

Fully diluted shares

77M
61.75¢ - Gross Revenue/Sh

Based on current plans and the ability of the company to finance expansion internally, in three years the gold production could reach 100,000 ounces, which is almost three times the current figure.

The valuation of Silvercrest depends on the price of gold and silver. It is a type of company which really can flourish in a booming precious metals atmosphere. 2010 is history's highest market for gold and silver. The various forms of silver and gold products which are available with ETF's and coins, have contributed to the increased price of the metals. For instance, since January 8, 2008, the price of silver has increased from $8 to $24, and the current estimate is that the price of silver even in the year 2010 may be above $30.

As silver becomes more of an investment vehicle, there are what's called derivatives that trade on the New York Stock Exchange and therefore worldwide. Silver Wheaton which is full of silver products from companies which receive financing from Silver Wheaton's management and purchase the silver at $4, has a more complex price structure, different from any silver mine. Silvercrest is in many respects a modification of Silver Wheaton, and therefore our analysis of the future price is of vital importance.

The leverage factor -- increases in gold and silver prices -- are impressive.

Price Increase  
EPS Increase
 
$100 gold   
1.1M
 
$2 silver $600,000M
1.2M
 
   
2.3M
 
  77M shares
0.04
$500 gold  
 
 
$10 silver  
 
 

We conclude that Silvercrest has a tremendous future. Furthermore, it is almost inevitable that both gold and silver-related companies that are financed by outside sources and created to remain independent, may in the future relate to silver and gold-indexed bonds.

In other words, Silvercrest is an intermediate vehicle of the past mining entities and the newly backed finance vehicles that will dominate the precious metals market in the future.

Conclusion

Silvercrest, at the current price structure of $1,350 per ounce of gold and $24 per ounce of silver, has an operating gross income of 60¢.

With 20% price increase it is 75¢.

At gold being $2,000/ounce and silver at $30/ounce, the per share earnings could top 75?

Silvercrest is not understood -- this is why:

The stock is undervalued.

Disclaimer

Information contained herein is based on data obtained from recognized statistical services, issuers reports or communications or other sources believed to be reliable. However, such information has not been verified by us and we do not make any representation to its accuracy or completeness. Any statement non-factual in nature constitutes only current opinions which are subject to change. BERAL INC. or their officers, directors, analysts or employees may have positions in the securities or commodities referred to herein, and may as principal or agent buy and sell such securities or commodities. An employee, analyst, officer or a director of BERAL INC. may serve as a director for companies mentioned in this report. Neither the information nor any comment expressed shall constitute an offer to sell or a solicitation of an offer to buy any securities or commodities mentioned herein. There may be instances when fundamental, technical and competitive opinions may not be in concert. This firm may from time to time perform investment banking or other services for or which investment banking or other businesses from any company mentioned in this report.

 

Archive

Bunker Hunt Article
Posted October 27, 2014

Lamb Realty.
Posted October 15, 2014

Chiquita Brands International
Posted August 20, 2014

Emerson Radio
Posted August 24, 2014

Evercore Partners Inc.
Posted August 5, 2014

Moelis & Co.
Posted July 22, 2014

Torchlight Energy Resources, Inc.
Posted May 21, 2014

Andrew Racz
Posted May 19, 2014

Royal Nickel Corporation
Posted May 02, 2014

Recorded Interview Robert Schermer, CEO
Posted March 15, 2014

Cowen Group, Inc.
Posted March 5, 2014

Pacific Booker Minerals Inc.
Posted February 4, 2014

Sandstorm Gold Ltd
Posted January 24, 2014

Global X Gold Explorer ETF
Posted January 16, 2014

Bring Back Mr. Giuliani
Posted December 24, 2013

Gold Reserve Inc.
Posted October 15, 2013

Premier Diagnostics Health Services Inc.
Posted September 25, 2013

Almaden Minerals
Posted September 3, 2013

Electric Cars In New York City
Posted August 27, 2013

The World Without Gold
Posted July 2, 2013

Remembering Mr. Churchill
Posted June 10, 2013

Financial Transactions in the Digital Age
Posted May 15, 2013

Senator Chester Crandell ( R ) Arizona
Posted May 7, 2013

Explor Resources Exs V
Posted April 14, 2013

The Gathering Storm
Posted April 9, 2013

Vietnam - West of Hong Kong
Posted March 11, 2013

Vietnam – In Peace!
Posted February 26, 2013

Wisdomtree Investments Inc
Posted January 28, 2013

Explor Resources Inc.
Posted November 28, 2012

Oremex Silver Inc.
Posted September 18, 2012

Alphamin Resources Corp.
Posted July 26, 2012

Harvest Natural Resources
Posted July 20, 2012

The Man Who Was Created by Gold
Posted July 06, 2012

Recorded Interview With Zach Erdem, President
Posted June 20, 2012

Nortec Minerals Corp.
Posted May 01, 2012

The Fundamentals of Chesapeake Gold Corporation
Posted April 16, 2012

Jourdan Resources Inc. (JOR.V)
Posted March 20, 2012

THE IMF
Posted February 27, 2012

Gold Index Bonds - To Avoid the Money Traps
Posted February 2, 2012

Monarch Casino & Resort, Inc.
Posted February 01, 2012

QMC Quantum Minerals
Posted january 19, 2012

African Metals Corp.
Posted December 21, 2011

The Crisis That Almost Wasn’t
Posted December 7, 2011

DNI METALS, INC
Posted November 18, 2011

The Crisis That Almost Wasn't
Posted November 15, 2011

Ocean Power Technologies, Inc
Posted October 19, 2011

The Mongolian Economic Miracle
Posted October 12, 2011

H. Hunt
The Son of Bunker Hunt
 
Posted August 24,2011

Sandstorm Gold
(SNDXF - NASDAQ)
Posted August 15, 2011

"Silver At $200
Posted July 29, 2011

"First Majestic Silver Corp
 Posted July 26, 2011

"Interview with Brian Kirwin,
President
American Bonanza Gold Corp"

Posted July 21, 2011

"Interview with Ian Foreman
President
Yale Resources Ltd."

Posted June 16,2011

"Interview with Brandon Mckee
Callinan Mines
By Andrew Racz "

Posted June 1, 2011

"Andrew Thompson Interview Soltoro Ltd."
Posted May 15, 2011

"Great Panther Silver Limited"
Posted March 29, 2011

"The 21st Century's Marshall Plan"
Posted March 17, 2011

"Interview With
Houston Hunt"

Posted February 23, 2011

"Esperanza Resources Corp."
Posted February 23, 2011 

"Douglas Lake Minerals"
Posted January 11, 2011 

"Do not bet against Casablanca"
Posted December 10, 2010 

"Palladium"
Posted December 8, 2010 

"Full Circle"
Posted November 19, 2010 

"REMX - NYSE ARCA - MV.RARE EARTH/STRATEGIC METALS"
Posted November 8, 2010 

SilverCrest Mines, Inc.
Posted October 26, 2010

Cache Exploration, Inc.
Posted October 22, 2010 

Silvore Fox Minerals Corp.
Posted September 29, 2010 

Almaden Minerals, Ltd.
Posted August 16, 2010 

"The Path Of A Hungarian Immigrant"
Posted August 12, 2010 

"Interview With
Mark Hazout -
Silver Dragon Resources
"

Posted June 24, 2010

"Who Owns Whom At The Final Tally"
Posted June 15, 2010 

"The World Needs
Bunker Hunt.
"

Posted May 24, 2010 

"Arafura Resources "
Posted April 15, 2010 

"MF Holdings LTD"
Posted April 7, 2010 

"Quest Uranium Corporation"
Posted April 5, 2010 

"Lynas Corporation, LTD"
Posted March 19, 2010 

"Rare Element Resources LTD"
Posted February 9, 2010 

"Mexco Energy Corporation"
Posted January 4, 2010 

"Claude Resources"
Posted December 16, 2009

"The Silver Spirit"
Posted November 25, 2009 

"... from Casablanca to Monte Carlo."
Posted November 20, 2009 

"Sutter Gold Mining, Inc."
Posted November 16, 2009 

"Whose Friends Are They Anyway?"
Posted November 4, 2009

"U.S. Energy Corporation"
Posted October 28, 2009 

"Harris & Harris"
Posted October 13, 2009


"They Made A Difference"
Posted September 30, 2009 

"Bridge Bancorp, Inc"
Posted September 22, 2009 

"Entree Gold - September 2009"
Posted September 3, 2009 

"Who Lost Mongolia"
Posted August 16, 2009 

"Mongolian Prime Minister Sanj Bayar -
A politician of the 21st century"

Posted July 16, 2009 

"Romios Gold"
Posted July 7, 2009 

"The Grand Alliance"
Posted July 6, 2009 

"Sandstorm Resources, Inc."
Posted June 22, 2009 

"Ireland, Inc."
Posted June 16, 2009 

"The Brave New World! - Gold at $1000"
Posted June 5, 2009 

"Claude Resources, Inc."
Posted May 28, 2009 

"Bullion Management Group"
Posted May 11, 2009

"Golden Hope Mines, Inc. - Retraction"
Posted May 4, 2009 

"Silvercrest Mines, Inc."
Posted April 1, 2009 

"Silver Dragon Resources"
Posted February 27, 2009

"In Gold We Trust"
Posted February 26, 2009

"Entree Gold: An Unusual Asset Accumulation"
Posted February 20, 2009 

"The Ultimate Colorful Fate of Edmond Safra, Bernie Madoff, and Governor Bill Richardson"
Posted January 12, 2009

"Silvermex Resources, LTD"
Posted December 13, 2008 

"Prime Minister of Mongolia"
Posted December 11, 2008 

"US Gold Corporation"
Posted December 1, 2008 

"Rubicon Minerals"
Posted November 5, 2008 

"Gold Coins & The Money Game"
Posted October 29, 2008 

"Gold and the Chinese Millennium"
Posted October 20, 2008

"JNR Resources, Inc."
Posted September 30, 2008

"Three Immigrants In Front Of The Court"
Posted September 24, 2008 

"Governor
Walter J. Hickel Interview"

Posted September 11, 2008

"The Alaskan Queen"
Posted September 9, 2008 

"Evercore Partners, Inc."
Posted September 3, 2008 

"Stalin In The
White House"

Posted September 2, 2008 

"Cal-Maine Foods Inc."
Posted August 4, 2008 

"The Mongolian Revolution"
Posted July 10, 2008 

"Mongolian Newsletter, First Edition"
Posted July 2, 2008 

"Goldsource Mines, Inc."
Posted July 1, 2008

"The Douglas Lake Story In The Age Of Fear"
Posted June 25, 2008 

"Mongolia: The 10th Richest Country in the World"
Posted June 10, 2008 

"North American Gem, Inc."
Posted June 5, 2008 

"The Emergence of Tanzania"
Posted June 4, 2008

"Tanzania - An Up & Coming Mineral & Agricultural Producer In Africa"
Posted June 2, 2008

"Western Potash Corp.
(WPX-VSE) "

Posted May 12, 2008 

"Judy Garland &
The Subprime Crisis"

Posted April 29, 2008 

"Altek Power Corp."
Posted April 27, 2008 

"Letter to Prime Minister of Mongolia"
Posted April 24, 2008 

"The Mongolian Manifesto"
Posted April 4, 2008 

"Prime Minister Sanj Bayar of Mongolia Receives The Nobel Peace Prize"
Posted March 17, 2008 

"Olympus Pacific Minerals, Inc."
Posted February 28, 2008 

"Tanzania Gold - Douglas Lake Minerals - Harp Sangha"
Posted February 21, 2008

"Warren Buffett Receives A Call From Franklin Roosevelt"
Posted February 19, 2008

"Gold At 2000!!"
Posted February 14, 2008

"Entrée Gold, Inc"
Posted February 11, 2008

"The Unexpected
Mongolian Dilemma"

Posted February 2, 2008 

"Mongolian Gold"
Posted January 8, 2008

"Sir, Do Not Abdicate"
Posted December 27, 2007

"No More Munich -
The Mongolian Version of 1938"

Posted December 11, 2007

"Watergate Saved Nixon's Life"
Posted November 28, 2007

"The Mongolian Wakeup Call"
Posted November 16, 2007 

"Sanj Bayar -
The Prime Minister of Mongolia"

Posted November 15, 2007 

"Stalin & Chavez"
Posted November 9, 2007 

"Tagish Lake Gold Corp."
Posted November 1, 2007 

"Gold Indexed Bonds"
Posted October 11, 2007

"Jasper Mining Corporation"
Posted September 27, 2007

"Ghengis Kahn Returns"
Posted September 27, 2007

"Interview with Professor William Pfaffenberger - Torch River Resources"
Posted September 22, 2007 

"Interview with
Jim Davis - President of Leeward Capital Corporation"

Posted September 4, 2007 

"Interview with
David Hjerpe - Newmac Resources, Inc."

Posted August 27, 2007 

"The Age of Special "Corporate" Relationships"
Posted August 23, 2007

"Entrée Gold Inc."
Follow Up Report #1

Posted July 24, 2007

"Aldershot Resources Ltd."
Posted July 16, 2007 

"Portal Resources"
Posted June 12, 2007 

"Ghengis Kahn Was Hungarian"
Posted May 31, 2007

"Bayswater Uranium Corp."
Posted May 30, 2007 

"Brilliant Mining Corp."
Posted May 22, 2007

"Golden Valley Mines, Ltd"
Posted April 21, 2007

"Warren Buffett - Franklin Roosevelt"
Posted March 15, 2007

"Rubicon Minerals Corp."
Posted March 1, 2007

"Robert Friedland -
The Man of The Year"

Posted February 21, 2007

"Lexam Exploration, Inc."
Posted February 11, 2007

"My Father Died In Auschwitz"
Posted January 19, 2007

"WisdomTree Investments, Inc."
Posted December 26, 2006

"Entrée Gold Inc."
Posted December 13, 2006

"Aero Mechanical Services, Ltd"
Posted November 17, 2006

"This Year I"m Voting For Dick Nixon"
Posted November 7, 2006

"Global Options
Group, Inc."

Posted November 1, 2006

"The Arrival of the
Nickel Billionaires"

Posted October 18, 2006

"The Kennedy-Nixon debate revisited"
Posted October 4, 2006

"Brilliant Mining Corp."
Posted September 17, 2006

"A Matter of Reasonable Doubt"
Ken Lay - Enron

Posted August 30, 2006

"Silver Wheaton - SLW"
Posted August 28, 2006 

"Silver In The
Twenty-First Century"

Posted August 16, 2006

"The Age of Mediocrity"
Posted July 19, 2006

"Let There Be Sunshine"
Kirk Kerkorian

Posted July 12, 2006

"Oil & Gas
Energy Crisis Solution"

Posted July 3, 2006

"I Am An Immigrant!"
Posted June 7, 2006

"Northern Star
Mining Corp."

Posted May 19, 2006 

"Gateway Gold:
It"s A Gold Story"

Posted May 15, 2006

"Ken Lay's Legacy"
Posted May 8, 2006

"The Principal Guest Was Missing"
Posted April 25, 2006

"J.P. Morgan Offers Advice To Ken Lay"
Posted April 11, 2006

"Pocketful Of
Miracles"

Posted April 8, 2006 

"Midway Gold
Corporation
"
Posted March 23, 2006 

"Harvest Gold"
Posted March 2, 2006 
 
"Sparton Resources"
Posted March 1, 2006 

"Interview with
Robert McEwen-
U.S. Gold Corporation
"
Posted February 22, 2006 

 
"A Tribute to
Rudy Giuliani
"
Posted February 15, 2006
 
"Your Money Is Not Yours"
-Enron & Martin Siegel, Esq.

Posted February 9, 2006

"Other People"s Money -Enron & Martin Siegel, Esq."
Posted January 28, 2006

"Northern Star Mining"
Posted January 16, 2006 
 
"Sonesta International Hotels Corporation"
Posted December 29, 2005 

"The Currency of Mass Destruction"
Posted December 5, 2005
 
"Bunker Hunt-Silver-China"
Posted November 28, 2005

"50 Relatives Worse Than Yours"
Posted November 14, 2005

"Then And Now"
Posted November 9, 2005 

"The Business of Hungary is Business!"
Posted October 31, 2005

"Mr. Prime Minister"
Posted October 13, 2005
 
"U.S. Gold Corp."
Posted September 29, 2005

"Orezone"
Posted September 23, 2005

"Mr Clarke -
Call In The Boys"

Posted September 12, 2005
 
"A Letter To
President Bush"

Posted September 8, 2005

"Mr. Smith Goes To Hungary"
Posted September 1, 2005
 
"Orko Gold"
Posted August 18, 2005

 "Near Hit"
Posted August 16, 2005

"An African Queen"
Posted August 11, 2005

"1848 and Beyond"
Posted August 4, 2005

 

 

Andrew Racz. 300 East 54 Street, Suite 26C, New York, NY 10022
Phone: (212) 319-6949 Fax: (212) 753-1944. E-mail: mlikar@aol.com

Copyright © 2011 Andrew Racz. All Rights Reserved.

Disclaimer