Silver Standard Resources Inc. (NASDAQ:SSRI) engages in the acquisition, sale, exploration, development and production of silver and silver mines principally in the Americas. At present, the company has one fully operational mine, three mines under development and eight mines in exploration stage. Silver Standard Resources Inc. (NASDAQ:SSRI) has a market capitalization of $548 million and an average daily volume of 1.5 million shares. According to the fiscal third quarter figures, Silver Standard has a book-value-per-share of $10.53 with cash and short-term investments worth $6.70 per share.
Silver Standard Resources’ current situation
Unfortunately, Silver Standard Resources Inc. (NASDAQ:SSRI) only producing mine is located within Argentina. Named the Pirquitas mine, at present this is Silver Standards’ only source of income. However, according to the company’s own corporate presentation, it would appear that this mine is still in its early stages of production and the company is guiding for a cash cost per ounce of silver produced from the Pirquitas mine for full-year 2013 of $14 to $15.
Charlie Munger: Invert And Use “Disconfirming Evidence”
Charlie Munger is considered to be one of the best investors and thinkers alive today. His thoughts and statements on investment research, investment psychology, and general rational behavior are often incredibly insightful. Anyone can learn something from this billionaire investor and philosopher. Q2 2020 hedge fund letters, conferences and more If you’re looking for value Read More
As all in sustaining cash costs are at least 50% to 100% higher than cash costs, these figures imply that Silver Standard Resources Inc. (NASDAQ:SSRI) will be losing money for full-year 2013.
That being said, taking a closer look at Silver Standard Resources Inc. (NASDAQ:SSRI)’s results reveal that the cash cost of production from the Pirquitas mine has declined from $17.6 during the third quarter of 2012, to $13.32 reported for the third quarter of this year. Nevertheless, the company also reports that its total cost per ounce of silver produced was $21.24 for the third quarter of this year, only $0.14 lower than the companies realized silver price of $21.38 for the period.
Value is there for those who can stomach risk
Still, it is hard to pass up the value here. In particular, Silver Standard Resources Inc. (NASDAQ:SSRI) currently trades at $6.78 based on its US NASDAQ listing. With 80 million shares in issue, this gives a market capitalization of $548 million. Strip out the company’s $401 million in cash, (excluding cash from the asset sales yet to be marked on the balance sheet; see below) add in debt and marketable securities and we arrive at an enterprise value of $293 million. Silver Standard Resources Inc. (NASDAQ:SSRI) has 566 million ounces of proven and probable resources and 622 million ounces of measured and indicated resources, which gives us a total reserve base of 1,188 million ounces. All in all, this works out as an enterprise/resources value of $0.25 per ounce of silver reserves. For value investors who are prepared to take the risk this could be a highly lucrative opportunity.
Furthermore, as mentioned above, Silver Standard Resources Inc. (NASDAQ:SSRI) recently inked two deals to sell its exploration stage Challacollo and San Agustin projects, two deals that should further boost Silver Standard’s cash balance and future prospects.
For the Challacollo project, Silver Standard Resources Inc. (NASDAQ:SSRI) will receive $7.5 million in cash, the cash equivalent of 240,000 ounces of silver in eight quarterly installments and 17 million common shares of Mandalay Resources Corp. (TSE:MND) (the buyer), equivalent to $23 million. Silver Standard will also receive royalties up to $5 million from the project.
The San Agustin project is being sold to U.S based Argonaut Gold Inc (TSE:AR) for a aggregate consideration of $75 million in cash and $30 million of Argonaut shares. The Challacollo project is located within Argentinian and the San Agustin project is located in Mexico.
This is only a quick and somewhat rushed overview of Silver Standard Resources Inc. (NASDAQ:SSRI). However, it is easy to see the value on offer here. I plan on taking a more in-depth analysis of Silver Standard Resources Inc. (NASDAQ:SSRI) soon to try and assess the risks and upcoming catalysts facing the company.