Take physic, pomp

Fortuna Silver (FVI.v) results

Here linked is the press release from Fortuna Silver (FVI.v) that hit the wires a few minutes ago. And below, by way of a small self-promo and a large fundy pointer, is the part of The IKN Weekly published last Sunday that took a look at Fortuna Silver and its 1q09 results published last Friday.

You could have snapped up FVI.v at 89c or 90c this morning, folks, but don’t worry because this thing is going higher. This is what subscribers read on Sunday afternoon on half of one of the 13 pages of The IKN Weekly;

DYODD, dude.


Fortuna Silver (FVI.v): Fortuna reported its quarter on Friday 15th May. The numbers were much as expected, with operating profit at Caylloma of U$4.23m and a final net loss of $1.06m once normal-looking land asset writedowns, machinery upgrades and exploration costs were taken into consideration. Two notable changes:

Firstly FVI.v is now reporting in US dollars to directly reflect its means of sales. This makes sense, but it did make me do a nasty double-take when I saw its current assets position at $37.9m, as I was expecting to see a Canadian dollar total there. After about 20 seconds of “oh my gawd where’s the money gone?” I noted the change. Moral; read the small print J

Secondly, FVI.v is now reporting its cash costs per ounce of silver after by-product credits (Pb and Zn). 1q09 came in at a cash cost of U$0.10/oz silver (10 cents per ounce). This will likely be used as a marketing promotional angle. It’s certainly eyecatching even for experienced FVI.v watchers like myself. The market likes positive soundbites.

Now for the practical stuff, as we can now refine our price target for FVI.v. Using the following parameters:

  • Friday’s closing share price of C$0.93 (U$0.79)

  • Reported NAV of U$112.9m

  • Current forex of U$1 = C$1.178 (reversed C$1 = 0.8489)

  • S/O total of 92.147m (the Continuum merger is now complete)

Fortuna is running a market cap of U$72.8m. This gives us a NAV multiple of 0.645X, a very low multiple for what is in essence a self-sustaining mining company with significant growth potential baked in via its Mexico project. There is every reason to expect that NAV multiple to return to a very sustainable 0.8X which would imply a share price of C$1.15 (note, Canadian dollar share price target) and an upside to Friday’s close of 23.7%. This is now our target price for this cycle of the stock and where we will take profits. So let’s be clear here; FVI.v is now a strong buy for short-term trading purposes. Final note: FVI.v will publish its news release about the quarterly report on Tuesday morning.

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