Adding to the Sotkamo Silver position based on momentum indicators getting pretty low after a solid selloff
(Please drop me a message if any numbers in the spreadsheet are wrong! 🙂 )
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Sotkamo Silver AB is a young mining company located in Finland that just reported on their 5th full quarter of full production.
Investors in Sotkamo have had to endure quite some volatility in the stock in recent weeks with the #SilverSqueeze and #WallStreetSilver focus playing heavily into the share price of the company.
On February 17th the company reported on Q4 numbers, and the share price fell as much as 30% intraday top-bottom from the day before! Year end report download
On first looks, numbers from Q4 did not look good, with sales down to 78 million swedish crowns (SEK) compared to 130 million in Q3, and silver production of 349 thousand ounces, down from 433 thousand in Q3. Q3 report download
However, when looking into the report, the company does give an explanation on the subject, and refers investors to zoom out and focus on longer timed averages.
“We have been preparing the mine production in the deeper levels of the mine by drifting horizontal tunnels to follow the ore zones. This had an impact to mill head grades which were lower than in average in October and November but recovered in December to average level.
Silver production of the reporting period was ca. 350 kilo-ounces. This sets to the low end of the range of 350-430 kilo-ounces which has been the variation during the last six quarters, i.e., ca. 390 kilo-ounces +/- 10% per quarter. Volatility of the head grades is high in a short period but evens well in quarterly or yearly period. Silver production of 1.58 million ounces is well within the production guidance for the full year which was 1.4 to 1.7 million ounces.
Lower metal production compared to the previous quarter and Q4/2019 and final price determination mechanism had an impact to our revenue which was 78 MSEK for the reporting period and totalled to 366 MSEK for the full year. Volatility of the production and especially the final pricing mechanism have strong impact to the revenue and financials of a single quarter while annual figures illustrate much better the performance of the company. “
“Preparations for the mine production in the deeper levels of the mine by drifting horizontal tunnels to follow the ore zones had an impact to mill head grades which were lower than in average in October and November but recovered in December to average level. In addition, the ore has natural variance in the grades “
From 2020 report
Q1 2021 numbers will be presented in only two months. I am not skilled in mining investments at all, but for my portfolio I will be holding the Sotkamo Silver stock and see if numbers does indeed even out in this quarter.
The quoted spot price for silver in the market seems very low compared to what is possible to find at silver retailers at the moment. Typically you will be paying a heavy premium on any silver product you can get your hand on.
Note a small increase in number of shares registered, from 179,977,732 to 184,518,783 due to a convertible.
(Please drop me a message if any numbers in the spreadsheet are wrong! 🙂 )
Daily chart 2018 – 2021 with Silver Price comparison added.
Note that Sotkamo share price is lagging quite heavily compared to silver price.
A nice and sustained uptrend has been established for Sotkamo since march 2020, with some crazy price movements recently.
15 minute chart of recent weeks
Normally 15 minutes charts are only usable for daytraders, but it is worthwhile having a look at investor behaviour and at which levels we have seen crazy gap movemements to the upside and to the downside, as they may come into play later during february and march.
The Bacon Portfolio 