Research Paper- SMI H1 2020 Results

SMI : A SUCCESSFUL INVESTMENT BET

Silver, an attractive investment theme in 2020 :
Silver's bullish acceleration since mid-March 2020 by 90% triggered a lot of interest among international fund managers. In fact, this metal’s current price levels would be supported by solid fundamentals. This is the catch-up potential in the price of Silver in comparison to Gold, the downward trend in the mining supply and finally, the activation of the banknote printing by the major central banks implying a depreciation in the value of the currency.

SMI, a strong ability to outperform Silver :
As one of the world's TOP 10 Silver mines, SMI is among the few single-product miners with a competitive cash cost between 8.0 and 9.0 $/Oz. The sustainability of current Silver price levels, combined with the stability of SMI’s production, would allow the mining operator to benefit from a considerable margin effect.

With a normative production of 180 T, we note that for each additional dollar at the level of Silver price, the operator’s profitability would increase by MAD +30 Mn over a full year, i.e. 30.0% in comparison to FY 2019 profit. This high sensitivity is supported by SMI’s deleveraged profile.

A “cautious” revision of our 2020-2021 growth forecasts :
Taking into account the high volatility of Silver and pending confirmation of its bullish cycle, we made a "cautious" revision regarding our growth forecasts for the period 2020-2021 : 

• A revenue growth in 2020 of 12.8% based on an average selling price of 19.4 $/Oz. In 2021, the increase in revenue would reach 16.5% taking into account an average selling price of 22.0 $/Oz in comparison to a spot price around 27.0 $/Oz currently ;
• A net income growth in 2020 of 56.0% to MAD 142 Mn against MAD 159 Mn initially due to the expected drop in production in a Covid-19 crisis. In 2021, the net income would stand at MAD 204 Mn, up 43.6% compared to 2020 driven by a positive Silver price effect.

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