Fortuna Silver (FVI.to) and Great Panther Silver (GPR.to); an excerpt from the weekly

Here's a slice of IKN47 that went out yesterday. After a discussion on the latest developments over at Fortuna (FVI.to) we did a quick comparative of FVI and Great Panther (GPR.to), in one aspect at least.

FVI and GPR: A quick comparative. You’ll note that in the above discussion of FVI we haven’t gone into much detail about the quarterly results just announced. The reason for that is now there are several larger houses covering FVI and they all came out with update reports on the numbers and the conference call last week (the FVI IR dep’t sent them all to their mailing list, so if you’d like a copy ask them to put you on the list, or if you like ask me and I’ll forward). So now that FVI is getting love from the big boys there’s not that much point for this little boy to just cover the same ground, but one thing I’d like to address here is a comparative of GPR.to (a company that got its financials criticized in IKN46 last week) and FVI (that has just had glowing words thrown at it by the same author).

I’ve been one corner of a mail exchange this week between...let’s just say “some people in mining”... and one line used by one of the participants in the exchange was that some of the key numbers in the 4q09 operation results at GPR and at FVI were rather similar. Here’s a little table that shows those results:

GPR & FVI: selected 4q09 financials
($m)	GPR	FVI
revenues	9.85	16.36
MOI	4.2	10.38
Net Income	1	1

The person who pointed to these numbers was trying to make a case for GPR, defending the company (and also wondering why GPR has dropped around 10% since its earnings report, while FVI has moved up over 12%). After all, what we have are two companies with similar amounts of shares outstanding (revolving around 110m), but the different share prices mean that FVI has a market cap three times the size of GPR. Once that is taken into account, the relatively smaller production and mining income (like for like, with amorts and deprec included in both sets of numbers) makes GPR look like quite the bargain, doesn’t it?

Well, doesn’t it?

No, it doesn’t. Firstly, there’s the whole cash cost subterfuge that we looked into last week (I don’t like the wool being pulled over my eyes by a 500tpd miner....sorry, I’m like that). Next, Great Panther has been a producer with two operating mines for a number of years. This means that it should (in fact, in my view ‘must’) be able to pass Rule One*, something it failed to do over the course of 2009. Meanwhile, Fortuna is a company that’s half producer/half explorer and in the 2009 period has had cash to pay out for its San José project while making money at Caylloma.

Finally and more importantly, if we look a little more closely at the two sets of company numbers the perspective changes. The statement of cash flows is where to go to find out the relevant information, and here’s a second little table that shows the real difference between the two companies at this stage of their lives:

GPR& FVI: 2009 cash flow information ($m)
	GPR	FVI
net cash provided by ops	1.299	13.686
net cash used in investment	1.757	16.979

This is, of course, also tied up in the abovementioned investment activities happening at FVI San José, but it does show just how much more money FVI is committing to its future growth, with most of it coming from the cash generated by Caylloma. In 2009, GPR operations brought in a touch under $1.3m. By way of investment (drilling at its sites, etc) it spent a touch over $1.75m. Meanwhile, Caylloma provided $13.7m to the FVI cash bucket and the company spent $17m on investment activity. That’s an enormous, basically-factor-of-ten difference, ladies and gentlemen, and the investment getting ploughed into FVI included a full $11m that went on progressing San José to its current stage, a whisker before its PFS publication and virtual certain decision to build this very profitable looking mining operation (on paper, at least).

The real difference between the $100m market cap company and the $300m market cap company is written in that small box above. FVI is simply a different animal; bigger, more dynamic, more profitable and growing faster.

*Make a profit