drill baby drill, from here we’re heading towards the euro to start with.
Silver/euro closing at all-time highs on a monthly basis. Sotkamo Silver is certainly being offered strong tailwinds from external factors. The financiers were also merciful and gave the company more time to pay off the debt. Now it’s up to the company’s own actions to make things work.
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At these silver price levels, one would think the CEO would even go to the mine themselves to ensure the contractor is extracting the ore.
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Alright, the $40 mark is broken🤭 The folks in Sotkamo are probably starting to get a good laugh🤓
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Here is a fresh company report from Aapeli after the refinancing arrangements have been clarified. 
We updated our forecast for Sotkamo Silver to reflect the completed refinancing of financial instruments originally due next year. Overall, we see the refinancing as having lowered the company’s risk level, along with the additional one million euros in financing, and providing it with some breathing room to sustainably resolve production challenges. Despite this, the stock’s risk level remains high until the challenges are overcome and revenue financing strengthens, considering the limited cash buffers. Reflecting this, we still see the stock’s risk-adjusted return expectation as insufficient and reiterate our ‘reduce’ recommendation. However, reflecting the lowered risk level and increased earnings forecasts due to the rise in silver prices, we raise our target price to SEK 1.0 (previously SEK 0.9).
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My own thought is to buy, target price 0.20. The next Q3/Q4 will show the direction, and by next spring 6/26, 0.35 cents. Machines are running there in three shifts, and more people are going underground all the time🤭
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Perhaps this is just a stock that is bought and sold with small margins. The reputation has been lost due to incompetent company management and without respecting investors ever since. Finns just can’t do business.
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SoSi’s problem has been production challenges and varying silver grades, which have negatively surprised investors. Especially the last two quarters have been brutal to follow. This can also be seen in the share price, which has not reacted to silver movements in any way.
As long as the company cannot prove that production has returned to its normal trajectory, positive share price development will be awaited. On the other hand, if evidence is obtained in the coming quarters, you will not be able to get in at the same price the company is currently trading at. However, the company’s management has spoken about restoring production levels, and even the lower end of the given guidance (1M ounces) requires that silver production in H2 almost doubles. This means an extrapolated rolling annual production of 1.3M ounces if the pace remains at e26.
I’ll throw in a little scenario of my own here, what option SoSi’s stock currently offers investors.
Let’s assume SoSi could get back to an annual production rate of 1.5M ounces. What would this require? The mining volume would have to be pulled back to 130 thousand tons per quarter level. From the volumes of the last two (production-challenged) quarters of ~100 thousand tons, this would require a 30% increase.
The silver grade would return to the upper end of the company’s targeted range of 90-110g, i.e., 110g/ton. This would be a 64% increase from the average of the previous two quarters. With these, an annual production of 1.5M ounces would be achieved.
The average price of silver per ounce was $32.8 in the last H2, now it’s $43, a 31% increase (of course, currency exchange rate changes have weakened it from the other side). But let’s believe in rising prices and throw in a 30% price-driven growth into the calculator for the coming quarters.
Quarterly revenue for 25H1 averaged 74M. Let’s add 30% growth from the price of silver and 110% from the improvement in production quality and quantity, which would lead to ~180M, or about 16.5M euros in quarterly revenue, i.e., a rolling annual revenue rate of 66M€. Operating costs have averaged about 28.6M€ over the last two years, so EBITDA would be 37.4M€ per year, with which debts would rapidly shorten to zero in just over a year. With a moderate EV/EBITDA 5 valuation, Sosi would be about 7x the current stock price. (Of course, dilution would probably come significantly from JV loans in this scenario, which would accelerate the melting of the debt burden)
I am keenly awaiting the drilling results and further quarry plans at the end of the year; they will tell a lot. They also offer some certainty regarding the future development and assessment of grades. The surprise can be positive/negative. An excellent opportunity to refuel cheaply. Do not buy if you do not believe in the management at all and its ability to restore mining volumes to the average of the last three years; production challenges can really quickly sink such single-mine orchestras, even if prices and the market otherwise provide support.
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Good thoughts, when you add Jalasto’s selected comments to this, the expectation for the autumn battles is again in place, will the tide finally turn?
“We have every reason to expect a clearly stronger financial performance in the latter half of the year.”
“We have good reasons to be optimistic about the development in the latter half of the year and in the coming years.”
“The medium-term targets extending to the end of 2027 will be updated in the latter half of 2025.”
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I wonder if this is finally going to take off? Silver is in such a strong uptrend…
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45$ smashed through the silver level. What does Aapeli think about this? Is Jalasto hitting the panic button yet?
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How does Sotkamo Silver sell to customers, according to spot prices or with longer-term contracts / agreed fixed prices? How quickly is a higher silver price reflected in the results?
When delivered, payment is based on the average price of the previous month, but the final price is determined two months from the delivery month. So it seems to show up in the figures with a one-month delay.
In that webinar for stock savers, the CEO describes the impact of price changes on the company, as well as how the selling price of the concentrate is determined.
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I simply cannot find a greater risk factor on the Helsinki Stock Exchange than what SoS currently has. If Q3 production somehow hits the mark and the price of silver holds or rises, the figures will be tremendous. It’s hard to imagine the company not announcing updates before the earnings report on October 23rd.
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Aapeli has prepared a new company report due to, among other things, changed market conditions.
We raise our recommendation for Sotkamo Silver to Add (previously Reduce) and our target price to SEK 1.5 (previously SEK 1.0), supported by significantly increased forecasts. Behind the increase in forecasts is the recent very strong silver price development. With the market tailwind, the company should be able to achieve very good results and cash flow even with moderate production, which would simultaneously strengthen the company’s financial flexibility and lower the stock’s high risk level.
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Good analysis! Silver is also rallying +2% this morning.
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I am keenly awaiting the ore and mineral reserve estimate update later this year. Now, reserve estimates can be made with completely different metal price estimates.
The previous update was likely done in 2023, and at that time, the calculations used a silver price of 25.6 USD/oz and a gold price of 1950 USD/oz. There might be some upward pressure on reserves through this as well, given that current market prices are practically double. Without knowing the mineralization of that mining area, the increase in metal prices itself is already likely to extend the mine’s lifespan.
I would also gladly see a plan from the company to increase extraction volumes now that the metal market is hot, provided this could be done with reasonable investments. As I understand it, the current environmental permit would also allow for this.
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I think some American company will snap this up, as establishing a new silver mine takes 15 years, and SoSi has now struggled through that time.
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This could certainly suit Boliden well, as it would bring vertical integration to downstream processing and additional efficiency to the entire supply chain.
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