Ben Kramer-Miller, chief analyst at miningWEALTH, notes that Santacruz Silver Mining has been a top pick since March, and while shares have risen ~70%, he still believes there is substantial upside ahead.
Santacruz Silver Mining Ltd. (SCZ:TSX.V; SZSMF:OTCQX; 1SZ:FSE) is focused right now on two projects. The first is Rosario in San Luis Potosi, Mexico. The company has been operating this underground mine for a couple years now, and it is currently mining at a rate of ~1 million silver-equivalent ounces per year (mostly silver with zinc and lead as coproducts). Rosario contains a mill with capacity that exceeds the mining rate, and as a result management has acquired the right to mine on another property 40 km away—Cinco Estrellas—where it mines mostly gold with some silver.
The second is Veta Grande, which is less than 200 kilometers away from Rosario in Zacatecas. The company doesn’t own the project, but has an exclusive right to explore and mine it from owner Minera Contracuña. Santacruz receives 60% of the profits for its trouble (55% should the silver price rise above $22/oz). The company has not declared commercial production here yet, though the mine and mill are fully operational. Long term, the company is very ambitious with respect to its production targets at Veta Grande.
Management has shifted its focus to these two projects, though it still controls two interesting late-stage exploration projects—Gavilanes and San Felipe. These are “back burner” projects that provide in-ground optionality to metal prices (silver and zinc, mostly).
The company is inexpensive relative to its in-ground silver and its productive capacity, and there are likely a few reasons for this:
In Q1/15 there was a tailings dam rupture at Rosario, which caused a stop in production. The problem is fully resolved now.
In 2014 the company sold …read more