BML (ASX) Silver + lead

Originally posted by PhillW: ↑

I'm not sure where you arrived at the conclusion that I insinuated that IVR is more profitable than BML because I cannot find any such statement and the spreadsheet I provided says otherwise.

I did however state that silver companies with a higher amount of silver as a percentage of its silver equivalent resource would have the highest increase in revenue on a rising silver price. I possibly provided too much information on the spreadsheet, so I have reduced the information. The simplest way to show what I was trying to point out is to look at the last line (in green) of each spreadsheet. The first spreadsheet shows this mornings closing metal prices at the close of US markets.

You have selected IVR as a comparison. Looking at the first spreadsheet you should be able to recognise that BML with a metal value per MRE ton at 5.9 silver equivalent ounces clearly would be more profitable than IVR with 3.7oz unless there was major grade/metallurgical issues with its project.

Now if we look at the second spreadsheet using the future pricing I alluded to, you can also determine that IVR as a result of silver outperforming all other metals has closed the gap between the two companies from value per MRE ton from 2.2oz down to 1.3oz. The difference between the first two spreadsheets is what was in the table I posted in my original post and I have reposted that table at the bottom of this post.

It is a crude measure, but the original post clearly stated an increase in revenue. I am totally aware of predominately silver resource projects ending in tears. Been there and done that! The companies that own these projects would be a trade only with tight stops. Two widow makers out there are Texas and Cobar. Any company owning those projects I tend to steer well away from.

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Ok.. so to expand on the discussion - here are some other key points you might want to consider. Your choice ofc. Each person has to form their own view on probabilities

1) revenue optionality has to factor opex - operating costs. Ie whatever portion of sales has to go to meet mining costs is your zero bound - effectively 0% earnings upside - so it doesnt matter what pays those costs. If half your silver output goes toward opex then your optionality from Ag upside is only 50%. ( you may use fewer ounces to meet opex as per oz price rises but generally not a linear tradeoff for pure silver's because of their need to forward sell to protect vs negative earnings)

Thats why i would use lead to pay those costs so the project gets maxiumum leverage. Thats one reason why your spreadsheet is potentially so misleading.
Bml (and adt?) could be the only one of all those companies to get 100% earnings leverage per unit increase in silver price

2) your lead price assumption is v conservative if you are projecting a 10+yr us50oz Ag price. While i dont know the ag/lead price correlation the charts suggest its a reasonable force and imply more than 10% upside on a 10yr basis

3) output assumptions. We know what bml and svl plan to output with a fair degree of confidence. We dont know that for any other project. Without that we can't really form any solid conclusions about earnings leverage.

Ivr put out some scope numbers but they were a long way from reliable imo.

4)economies of scale. This is a biggy imo. It used to be you could get up a dore operation fairly cheaply. It's what allowed small gold mines No more. And because of that i expect the capital intensity gap between say ivr and bml to be much less than in former times

and if throughput is also higher getting you cheaper per ounce output you burn less ounces on opex

ivr knows this which is why they are slow walking the project development work. V clever regarding mkt psychology is ivr

so again - this is a big impact on actual $earnings leverage per ounce of silver

=because of these factors, this is why market usually just goes on ev/oz, grade, resource size, nearness to surface and exploration upside for pre cashflows

at least until prices are so high project creations seems likely - or they are adt style tier ones that are so richly endowed they proceed despite market lulls etc

And why i wouldnt agree with most of your leverage conclusions...at least on what is visible at this stage