GETTING DOWN TO THE DIRTY ON SILVER MINER PROFITS

By SD Contributor SRSrocco:

A few days ago, I presented a table on the top silver miners COST OF SALES ratio.
I have put together another one showing the OPERATING EARNINGS.

According to my data, the top 2 in both tables, First Majestic & SilverCorp have the best low cost structure of the bunch.  They also showed the highest net income percentage compared to the others.
Here is the breakdown:

 

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I have put together another one showing the OPERATING EARNINGS (figures are in millions):

This chart was listed by highest to lowest in OPERATING EARNINGS.  Here we can see a change in the structure when we add this further aspect.  For clarity, cost of sales are costs, and operating earnings are actual gains.  The cost of sales only includes the actual mining costs at the mine.  To get to the operating earnings, we have to take out depreciation, depletion, amortization, general & admin, exploration, share based costs and etc.

Operating Earnings do not include either gains or losses on derivatives, any mine sales, or taxes.   That is the problem with Net Income… it may include gains on the company selling a mine or etc.  This may be nice on their balance sheet, but it skews their performance in mining silver that quarter or year.

However, we see how some of the miners fell down the list as we include OPERATING EARNINGS.  The four miners on the bottom all stated net income losses in Q3 2012, except Alexco… it had a mine sale of $6.3 million which boosted its net income to positive from negative.

According to my data, the top 2 in both tables, First Majestic & SilverCorp have the best low cost structure of the bunch.  They also showed the highest net income percentage compared to the others.  Here is the breakdown:

Q3 2012 Net Income (for last three months only)

First Majestic = $24.8 million  (2.1 million oz silver produced)

Pan American Silver = $22.6 million (6.3 million oz silver produced)

SilverCorp = $13.5 million (1.3 million oz silver produced)

The interesting thing to note is that First Majestic made more net income than Pan American and produced three times less silver.

Comments

  1. Appearances of robust profits can be deceiving. PAAS last quarter net dropped a great deal. If the third quarter $22 million was taken out over 9 months it would be only about $67 million instead of its $182 million as reported. These big changes can spell problems for one mining firm or the industry.  I am a little surprised as the profits noted. If many of them sell to Silver Wheaton, the profits should be lower.  Without going through the annual reports I expect that there are further adjustments to the NOI reported.  The returns must be exceptional to counter depletion of ore grades, regulations, environmental expropriations and nationalizations.  CAPEX costs are very high and could take down real cash flow after these expenditures.  Suffice it to say, these miners appear to have a picture of health.  The top officers of manypublic mining firms are being replaced.

  2. I believe someone is stacking the books like we all try to do. Lol

  3. Soon, the cost to produce an ounce of silver will rise thanks to the growing demands for physical silver, the low spot price of silver, the inflation rate that will soon turn into the hyperinflation rate thanks to QE infinity and the diminishing grades of ores.

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