Thursday, December 10, 2015

IMPACT Silver - In My Opinion, 3Q 2015 Results Were Really Good

Due to remarkable interest in my article on IMPACT Silver, below I am providing my comment on the company’s 3Q 2015 results.

Shortly speaking, these results were really good. Please, look at the table below:

Source: Simple Digressions and the company’s reports

Year to date the company was able to increase its sales. Surely, a favorable exchange rate between the Canadian dollar and the US dollar had a positive impact on the company’s sales but keep in mind that, in terms of sales prices per ton of ore milled, a favorable exchange rate was responsible for only an 8.4% increase in sales; the rest, 14.3%, was attributable to the sales growth (expressed in C$ per ton of ore milled).

What is more, year to date Silver IMPACT succeeded in cutting its costs from C$108.6 per ton of ore milled to C$94.4 per ton of ore milled. Due to that fact, the company reported lower loss than a year ago. Well, it was still a loss but what I may demand from a silver miner producing and selling its metal at today’s low prices?

Next thing, IMPACT is quickly approaching a “magical” point of equilibrium between sales and costs – please, look at the chart below:

Source: Simple Digression and the company’s reports

After years of incurring high costs, at least higher than sales, the company is very close to start delivering operating profits. I am very curious whether we are going to see the first profits in 4Q 2015 or later…

The main reason standing behind this positive development are higher feed grades reported at the company’s Guadalupe mill. Year to date IMPACT was milling its ore at the feed grade of 195 gram per ton, while last year it was only 152 gram per ton (in 3Q 2015 the feed grade was even higher: 214 gram per ton).

Note: due to the lack of current reserves/resources estimates, I am leaving a question, whether the company is high-grading, as open. Generally, epithermal vein systems are high grade deposits (grades of 150 – 1,000 gram per ton of ore) so, I believe that the risk of high-grading is relatively low – please, look at the graph below:

Source: the company’s presentation, slide 16

Next thing, the company is very close to meeting its annual production target of 1 million ounces of silver. Year to date IMPACT produced 716,319 ounces of silver. To meet its guidance, in the fourth quarter of 2015 the company has to produce around 284 thousand ounces of silver (a little bit above the 3Q 2015 production of 277 thousand ounces).

However, the most important thing is the fact that year to date IMPACT was able to generate positive cash flow from operations (C$110 thousand, working capital issues excluded). Cash is incredibly vital issue for the company – at the end of September 2015 it held cash of C$803 thousand, which is quite a low figure. Fortunately, not incredibly low. Year to date the company generated C$1,415 thousand in cash from operations (working capital issues included) and spent C$1,691 (investment spending). So IMPACT was cash deficient of C$276 thousand. If the company is able to keep tight cost/spending regime it should survive with only C$803 thousand on bank accounts. At least for some time.


I was positively surprised to see Silver IMPACT’s quite decent 3Q 2015 results. With silver prices around US$14 - 15 per ounce, the company, with a little help of the weaker Canadian dollar, was able to post only a small loss. What is more, IMPACT is very close to meet its 2015 production guidance. Summarizing, Mr. Shakespeare was wrong writing:

“Something is rotten in the state of Denmark”

Hamlet, Marcellus to Horatio

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