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Hi Ho Silver For Alcyone
FNArena News - June 28 2012


- Alcyone Resources an emerging silver producer
- Highly leveraged to spot silver prices
- Exploration upside also an attraction
- DJ Carmichael initiates coverage with a Spec Buy


By Chris Shaw


Emerging silver producer Alcyone Resources ((AYN)) is the reincarnation of Macmin Silver, which was placed into administration during the Global Financial Crisis. Alcyone is well advanced in the ramp-up stage of silver production at the Texas project in Queensland. The project contains both the Twin Hills heap leach operation and the less developed Mt Gunyan deposit.


DJ Carmichael has initiated coverage on Alcyone with a Speculative Buy rating, attracted to both the company's leverage to the silver spot price and the potential for exploration to boost reserves and production in the future.


In terms of leverage to spot silver prices, DJ Carmichael notes unit operating costs at the Texas project should be around $15 per ounce once the company is in full production. This should be around the end of this year, at a rate of around 1.5 million ounces per annum for a 10 plus year operation.


This implies good margins, while DJ Carmichael estimates for every 10% change in silver prices there is a 17% impact on valuation for Alcyone. As well, a 10% change in the Australian dollar is forecast to translate to a 9% valuation impact.


The other point with respect to leverage is that from the beginning of 2013 Alcyone should be fully unhedged, as at present the company only has forward silver sales and pre-paid commitments of around 300,000 ounces.


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