ccu is best silver play on asx

on 15 october i posted a comparison of CCU and SVL on the SVL forum in response to their on-going "SVL best pure silver play" thread (see cut & paste below). my comparison presented the case for CCU representing better value than SVL given the companies' respective share prices, resources, reserves (SVL had no reserve at all) and relative stages of mine development at that time.

there were numerous emotional responses from parochial svl holders suggesting my comments were either wrong or unwanted (or both!).

the interesting thing is that since the 15 october the ccu share price is up 8% (from 37c to 40c) while the svl price is down 9% (26.5c to 24c), a relative outperformance of 17% over the 6 weeks.

i still think that ccu is the best pure silver play on the asx at this time! good luck to all ccu holders ...

k


note: the cut & paste below is from 15/10 so some figures are outdated ...

"as a long-term holder of cobar consolidated resources, i'm afraid i beg to differ!

i believe these comments are directly relevant to this thread (as titled "svl best pure silver play") so i believe this post should NOT be moderated as a cross-stock promotion (although i do present a direct comparison between SVL and CCU).

i actually think that cobar consolidated (asx: CCU) stacks up more strongly as a pure-play asx silver stock as detailed below:?

Current CCU sp = $0.325

CCU shares + options = 137M

Market cap (fully diluted) = $44M (actually MC is $44M less the (unknown to me?) cost of options' conversion. but just say $44M for these calcs.)

=> EV = $41M (Cash = $3M; Debt = Nil)


CCU JORC Ag Equiv (Ag + Pb) "Indicated & Inferred" RESOURCE = 50.6Moz (71.8g/t Ag; 0.97% Pb).?

CCU EV / Ag Equiv RESOURCE Oz = $41M/50.6M Oz = $0.81/oz


CCU JORC Ag Equiv (Ag + Pb) "Probable" RESERVE = 14.3M oz (97g/t Ag; 1.4% Pb).

CCU EV / Ag Equiv. RESERVE Oz = $41M/14.3M Oz = $2.87/oz


COMPARISON BETWEEN CCU & SVL

CCU EV/RESOURCE oz = $0.81/oz

SVL EV/RESOURCE oz = $4.67/oz from nathan21 post this thread (albeit SVL resource may be at higher grades than CCU?) in fact, the ccu ev/RESERVE value is also substantially less than the svl ev/RESOURE value!!

CCU are currently at "feasibility study" stage with a plan to commence mining in q4 2011. a recent consultant?s optimisation study indicated low opex (A$6.50/oz with Pb credits or A$10.20/oz ignoring Pb credits) for a 0.8Mtpa initial operation producing approx. 2.5Moz Ag per annum. at current silver price of $23/oz this implies net cashflow of between $32M and $41M per annum (which is almost the current market cap of just $44M!).

yes, SVL has exceptionally high Ag grades (higher than the CCU average grades) which looks very promising but i believe my figures presented do show the following points:

(1) the SVL market cap (and hence its sp) is high relative to the CCU market cap (and sp) when comparing the EV/resource values for each (not to mention the relative difference in their stages of exploration/production). unless someone believes there is a mistake in my figures then this is a mathematical fact based on the current resources and the sp of each;

(2) if you accept point (1) above then i believe the only way the value of SVL stacks up against CCU is if SVL find a lot more high-grade silver. this is of course possible (or even probable depending on your subjective view of the quality of their turf). regardless i believe this speculation is clearly built into the SVL SP. the question is to what extent?

pls note i am NOT saying that SVL is overpriced. SVL may well still be attractively priced but, if SVL is currently good value, then would not CCU appear to be a bargain as there is minimal speculation built into its current SP?

food for thought?

k

disclosure: i do hold a substantial stake in CCU."