Wednesday, April 24, 2013

Silver Bull Resources (SVBL) and Silver in Mexico

Silver Bull Resources (SVBL) is digging for metals in Mexico and Gabon.  It was known as Metalline Mining until May 2, 2011, yet I am puzzled that the old MMG ticker still exists.  What the name change has to do with operating a mine is anybody's guess.  Hard data and results are more relevant.

The CEO is a geologist.  I tend to favor operating geologists over consulting geologists but a breadth of consulting experience in different geologies and metals helps.  The rest of the team also has deep experience in the mining sector.

Their project in Sierra Mojada, Mexico is coming along.  Their 43-101 data indicated fairly sizable Ag deposits with attractive grades, albeit still in MII categories.  The photograph of the site in their corporate presentation shows several large flat areas adjacent to the projected mine that can accommodate milling facilities and tailings piles.  The site also has a railroad connection, grid power, and water wells.  That is truly the logistics trifecta.

It is significant that Couer D'Alene Mines Corp. owns a big piece of Silver Bull Resources.  It is also significant that Silver Bull's Sierra Mojada project is in the general vicinity of Orko Silver's project.  Coeur D'Alene completed its acquisition of Orko Silver this month.  That puts one of the largest silver projects in Mexico into a producer's control.  I do not believe Coeur D'Alene Mines is ready for another acquisition because they have to shell out CAD$100M to former Orko shareholders and had about US$125M on their balance sheet at the end of 2012.  Silver Bull's current market cap is about US$54M, a bit of a stretch right now for Coeur D'Alene Mines unless they're willing to go into debt or commit the next several quarters of FCF exclusively to another acquisition (unlikely IMHO).  

Their most recent quarterly report dated January 31, 2013 shows cash on hand of US$1.66M and a burn rate of about US$700K/month.  Holy canole, they were running on fumes at the end of that quarter.  These people needed to raise some cash pronto to have a chance at taking Sierra Mojada into production.  Fortunately they did collect about $9.2M from a private placement in February.  That's enough to last another year.

I'm going to wait for Silver Bull's PEA to see how much they think full development will cost.  I also want to see another 43-101 report with 2P data.  Acquisitions in the neighborhood are certainly encouraging because producers need to replace reserves reduced by production.  Let's see if the stock moves once they announce a PEA.

Full disclosure:  No position in SVBL (or other companies mentioned) at this time.