Silver and Sterling Mining: What's Wrong With This Picture?
6 Month Chart of Silver ETF (SLV)
6 Month Chart of Sterling Mining Company (SRLM)
There is something wrong with this picture. See if you can find what it is.
While the price of silver is pushing to new highs, the common shares of Sterling Mining Company (SRLM) are sinking in a reverse relationship to the price of the metal it is in the business of prospecting and producing.
I find this odd for a couple of reasons. While silver prices are rocketing higher, SRLM is not showing any positive price action. This smells fishy to me as Sterling appears to be on the verge of being one of the premier silver mining companies in the world in the near future.
Sterling Mining Company has strengthened its status as one of the world's few primary silver producers by restoring the Sunshine Mine in North Idaho's "Silver Valley" to production. The Company acquired the rights to the mine and related assets in mid-2003, and officially commenced initial production in December of 2007.
Sterling Mining Company Geographically Diverse Project Portfolio
In the meantime, this may be a great opportunity for those who wish to load up on some shares of SRLM at bargain prices.
Disclaimer: I own shares of Sterling Mining Company (SRLM) and stand to make profits on a rise in the common shares of this company. Do your own due dilligence before you make any investing decision including this one.
6 Month Chart of Sterling Mining Company (SRLM)
There is something wrong with this picture. See if you can find what it is.
While the price of silver is pushing to new highs, the common shares of Sterling Mining Company (SRLM) are sinking in a reverse relationship to the price of the metal it is in the business of prospecting and producing.
I find this odd for a couple of reasons. While silver prices are rocketing higher, SRLM is not showing any positive price action. This smells fishy to me as Sterling appears to be on the verge of being one of the premier silver mining companies in the world in the near future.
Sterling Mining Company has strengthened its status as one of the world's few primary silver producers by restoring the Sunshine Mine in North Idaho's "Silver Valley" to production. The Company acquired the rights to the mine and related assets in mid-2003, and officially commenced initial production in December of 2007.
Along with the Sunshine Mine and exploration properties encompassing over 25,000 acres in North Idaho's "Silver Valley" and neighboring Montana, the Company is exploring and developing properties totaling over 62,500 acres in the historic Zacatecas Silver District of Mexico.
Some recent Sterling Mining Highlights include:Sterling Mining Company Geographically Diverse Project Portfolio
- The Company's core projects are situated in two of the world's most geologically prospective silver-mining districts, Idaho's renowned Coeur d'Alene (Silver Valley) district and Mexico's historic Zacatecas silver-mining district.
- The Company's advanced projects and newly expanded portfolio of silver properties are situated in politically stable regions with a strong mining heritage. The United States and Mexico are signatories to free-trade agreements and have laws and legislation governing investment in their mineral sectors.
- Sterling Mining has assembled a strong technical and management team to achieve its growth plans in the United States and Mexico, including many Sunshine Mine veterans who contributed their expertise to restoring the Sunshine Mine to production.
- Commenced initial production at the Sunshine Mine in late 2007.
- Assembled a team of more than 120 employees at the Sunshine Mine by year-end 2007, including many Sunshine Mine veterans.
- Secured a listing with the Toronto Stock Exchange under the trading symbol "SMQ," reflecting a strategy to raise Sterling's global profile and shareholder base. The company's shares began trading on this resource-based exchange on October 2, 2007.
- Began processing Sunshine vein ore from the Mine's Upper Country development in the newly refurbished mill in September of 2007.
- Sterling common shares began trading on the OTC Bulletin Board under the symbol "SRLM" on August 14, 2006. The company is also listed on the Frankfurt Stock Exchange (FSE:SMX).
- Completed a successful financing of US$24.7 million in August of 2007.
- Retained the independent engineering firm to complete a NI 43-10 technical report which identifies a reserve of 23.48M oz and a resource of 231M oz.
- Completed the 5,700-foot Sterling Tunnel Project, and also renovated the Silver Summit Hoist and rehabilitated the Silver Summit shaft to the 3,000-foot Level to complete the Sunshine Mine's secondary escapeway system.
- Expanded landholdings in the United States and Mexico, while continuing to explore priority projects independently or through industry joint ventures.
In the meantime, this may be a great opportunity for those who wish to load up on some shares of SRLM at bargain prices.
Disclaimer: I own shares of Sterling Mining Company (SRLM) and stand to make profits on a rise in the common shares of this company. Do your own due dilligence before you make any investing decision including this one.
Labels: Silver, Silver ETF Fund, Silver Valley, SLV, SRLM, Sterling Mining
posted by a at 1:00 PM
3 Comments:
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Look at their 10-K, how little information is in the financial statements, the auditors comments, and the picture seems reasonable.
I suggest you do more homework on this stock. They just released their 10Q for Q1 2008 operations (released on May 12, 2008). According to the 10Q, Sterling's operations are running at a net loss and the company has $0.5M in cash and $1.5M in marketable securities. Sterling notes that it's burning through $2.5M a month -- that cannot be good. The company is clearly short of cash. On May 5, they raised about $1.7M in a private placement involving 9 investors, as per the 10Q. The company also acknowledges that its current cash position (including this latest financing) will only be sufficient until June 2008. There is no doubt that they would like more cash and probably tried to raise more than that. The fact that they raised such a small amount should also raise red flags as to their ability to maintain current operations. In Q1, Sterling generated $1.3M in company revenues (Mexico and US combined) and incurred about $900,000 in cost of revenues. That may look upbeat, but, again, the $2.5M a month cash burn is a huge problem. The company does not specify the reason for that high monthly cash requirement. I believe that their June 2007 Idaho Technical Report may reveal some clues. That document states that Sterling's measured resource (6M ounces of silver) is the only part of their resource sitting above water in the US. The other 24M ounces of indicated resources and 231M ounces of inferred resource are submerged. Getting these resources upgraded to an economic status will require substantial drilling (years of drilling, in fact) in addition to a massive dewatering effort. All this is clearly weighing on the company, as their marginally cash flow positive operations are severely burdened by development efforts. In sum, I believe the risk of operations coming to a standstill is substantial. An M&A solution for Sterling is also unlikely given the time-consuming and cost-intensive drilling and dewatering programs that a future operator would be required to undertake in Idaho. Based on the paltry sum Sterling raised in their latest financing, it seems the market is in agreement. I would be interested to receive any feedback. For full disclosure purposes, I have no long/short position in this stock.
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