Silver Standard (SSRI, Financial) has seen a significant correction in the past year, but we cannot jump to any conclusion for the moment, as there are mixed factors affecting the miner. During the quarter, its revenue rose a whopping 150% from a year ago period to $122.8 million, while the company reported an adjusted loss of 8 cents per share compared to a profit of 19 cents last year. Although the numbers do not look pretty on the earnings side, the company is making every effort to improve its bottom line. Silver Standards’ initiatives are focused on smart application of operational excellence that will eventually drive down cost.
What next?
But all its mines are not progressing well as some are still struggling to perform up to its expectations. The company is still in talks with the regulators around water supply restrictions at its Pitarrilla mine in Mexico. In its recent press release the management did not give a vivid description on its further developments, indicating that the issue could linger around for quite some time. Similarly, at the San Luis project it is re-engaging in discussion with the newly elected leadership for both the Ecash and Cochabamba communities. Both these mines are yet to see a turnaround, which will be very crucial for its long term growth.
Although we discussed a lot of positives but all these prospects would only benefit over a period of time. Further, these initiatives should be backed by macroeconomic cues as well, without which the turn will not be possible. Currently, the company does not have any trailing P/E because of its losses but the company predicts a forward P/E 80.41, which is not very impressive.
Since the availability of machines increased on account of its above initiative, the company implemented a new procedure that resulted in a significant rise in the utilization of key equipment in the mine, which further led to record gold production of over 67,000 ounces during the fourth quarter. The management cites that it was the best quarter in the history of the mine. These are encouraging developments, considering Marigold’s sale as a high cost asset by its predecessor. Silver Standard is counting on this mine to deliver even better results in the days to come.
Valuation and conclusion
From a valuation point of view its current price looks attractive as the company has a P/S and P/B ratio of 1.47 and 0.76 respectively, which is better than the industry average. Therefore both positive and negative factors are present, which could affect the stock price. Considering its valuations the stock may see some upside move, but the real turnaround will have to be backed by the improvements at all its mines coupled with favorable commodity pricing environment.
