GETTING DOWN TO THE DIRTY ON PROFITS

A few days ago, I presented this table on the top silver miners COST OF SALES ratio (figures are in millions...also the table represents the first nine months of 2012):

I have put together another one showing the OPERATING EARNINGS (figures are in millions):

This chart was listed by highest to lowest in OPERATING EARNINGS.  Here we can see a change in the structure when we add this further aspect.  For clarity, cost of sales are costs, and operating earnings are actual gains.  The cost of sales only includes the actual mining costs at the mine.  To get to the operating earnings, we have to take out depreciation, depletion, amortization, general & admin, exploration, share based costs and etc.

Operating Earnings do not include either gains or losses on derivatives, any mine sales, or taxes.   That is the problem with Net Income... it may include gains on the company selling a mine or etc.  This may be nice on their balance sheet, but it skews their performance in mining silver that quarter or year.

However, we see how some of the miners fell down the list as we include OPERATING EARNINGS.  The four miners on the bottom all stated net income losses in Q3 2012, except Alexco... it had a mine sale of $6.3 million which boosted its net income to positive from negative.

According to my data, the top 2 in both tables, First Majestic & SilverCorp have the best low cost structure of the bunch.  They also showed the highest net income percentage compared to the others.  Here is the breakdown:

Q3 2012 Net Income (for last three months only)

First Majestic = $24.8 million  (2.1 million oz silver produced)

Pan American Silver = $22.6 million (6.3 million oz silver produced)

SilverCorp = $13.5 million (1.3 million oz silver produced)

The interesting thing to note is that First Majestic made more net income than Pan American and produced three times less silver.

Anyhow, I am putting this all this data together on spreadsheets that will be put on my future website.  My wife tells me I need to charge a fee for the detailed data or else she will kill me for spending so much time on the damn computer.