It’s a strategy with a long track record for success.
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1) Buy a silver project in Mexico, a country with a long history of production of the grey metal.
2) Apply modern mining techniques to the seemingly endless veins that have generated silver going back to the Spanish Empire.
3) Provide the market with that rare bird among juniors: the primary silver producer.
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Why are such opportunities so desirable?
Experienced metals investors know that gold can provide huge gains when the macro picture turns in its favor, as it has today.
But they also know that silver — gold’s cheaper cousin — offers tremendous leverage to the gold move in such a situation, typically outperforming the yellow metal by a large margin.
But there’s also a way to pile leverage upon leverage, turbo-charging even those gains provided by silver. And that’s where junior silver stocks, particularly those that are already producing the white metal are benefiting from its price gains.
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And this is where Avino Silver & Gold (ASM.NYSE-A; ASM.TO) comes in.
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With a 52-year operating history, this company is the granddaddy of the junior silver plays.
The Avino Mine at the heart of the company’s silver production has been in operation for more than 35 years, first from 1974 to 2001 and then from 2011 to the present.
In that time, Avino has delivered significant leverage during multiple silver rallies.
Fast forward to today, and the stars are lining up for this storied silver producer to shine once again in the next phase of the silver bull market that is now beginning.
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The Avino mine area controlled by Avino Silver & Gold lies within Mexico’s Durango State, in an area that has produced silver since at least the mid-16th century.
In the ensuing years, small scale operators and artisanal miners have methodically worked along the rich silver veins that seem to go on forever.
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| The Avino Mine sits among a multitude of past-producing and currently producing mines. |
Even once modern mining techniques started to be employed, companies would often dispense with the bother of proving up a significant resource, as just a modest amount of drilling was sufficient to demonstrate ongoing viability.
The longevity of these resources explains why Avino Silver & Gold Mines has been in operation for more than half a century.
And yet the Avino property still contains more than 70 million ounces of silver-equivalent resources in all categories.
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Set Up For A Big Rebound In The Weeks Ahead
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In truth, 2020 was a pretty good year for silver plays, particularly this past summer, when roaring precious metals markets sent many silver names parabolic.
Unfortunately, Avino’s performance was tempered by Covid-19 restrictions and an untimely strike by local miners.
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But those misfortunes are now creating an opportunity for investors, as these impediments kept Avino from reaching its full potential in 2020.
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You see, management has established Covid protocols that will allow it to operate effectively in the current environment.
More importantly, it reached an agreement to end the strike in October and is now evaluating all of its equipment before restarting production at the Avino mine.
As you can see from the chart below, after a down 2020, the company plans to bring the mine’s silver-equivalent production roaring back to life in 2021.
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| Avino is forecasting a big production turnaround from 2020, which promises to deliver a profitable 2021 for the company and its shareholders. |
Once it ramps production up again at the Avino mine, management projects it can produce between 2.2 million and 2.8 million silver-equivalent ounces in 2021 at all-in sustaining costs of only about $16/ounce.
So with silver prices having recently surged to $27 (near their recent highs this past summer), the mine should kick out tremendous cash flow in 2021.
The good news for investors:This big turnaround has yet to be factored into Avino’s share price.
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More Than 70 Targets To Chase
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But Avino’s leverage potential isn’t just limited to production during a time of high and rising silver prices.
There’s a significant exploration story here as well.
As the map below indicates, there are over 20 named veins (and 50 additional veins) on the property that have seen little in the way of modern mining exploration.
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| The Avino property contains more than 70 vein targets worthy of exploration. |
With a cash balance of more than US$12 million, Avino is well-positioned to test the most promising of these veins with the drill bit over the weeks and months just ahead.
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Of particular interest is the Santiago vein, an east-west trending vein that intersects with the north-south trending San Gonzalo vein, just above the recently productive San Gonzalo mine.
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Avino believes further drilling on Santiago this year could duplicate the rich silver-grades encountered and mined at San Gonzalo.
So, in addition to a return to production, the company could well start feeding the market high-grade assays from exploration later this year.
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Plenty Of Leverage Still To Come
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Where does that leave today’s potential investors in Avino Silver & Gold?
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Right at the cusp of a big breakout for this once and future silver lever.
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As silver continues to follow gold higher on the back of a tsunami of stimulus…as a return to historic production levels allows the company to profit from higher prices…and as drills explore the extraordinary number of targets on its property…
…Avino is now set up to once again deliver powerful leverage on the silver trade.
With more dollar-destroying debt and currency creation on the way, the future is bright, both for silver and for Avino.
Buying in at or near current levels could make for a very lucrative investment in 2021.
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