This story has similarities with Aurcana in that they purchased an existing mine back in 2006, refurbished it and are now a profitable primary silver producer. The assets of U.S. Silver are the operating Galena Mine and the adjoining, but currently non-operating, Coeur Mine and Caladay Project encompassing 14,000 acres located in the northern Idaho´s Silver Valley. The company has kept a positive cash flow for approximately 2 years. The Galena mine is the operating property, adjacent the other two advanced-stage properties, with guidance 2.4 - 2.6 million ounces of silver for 2011. The company also expects to produce 5.8 million pounds of lead and 1.0 million pounds of copper during the year. Approximately 85% of revenue is from silver, which puts US Silver among the few "pure" silver plays available on the market.

Production - Galena MineThe Galena mine consists of two ore types, silver-copper and silver-lead ore. The silver-copper ore has higher grades of silver while the silver-lead ore contains very high grades of lead (7-10%). The recovery rates are excellent, 96% for silver-copper ore and 92% for silver-lead ore. Silver-copper concentrates are sent to Quebec by rail and silver-lead concentrates are trucked to British Columbia. Both the Galena mill and the Coeur mill are operating today and are running at 65% capacity. The Coeur and Galena Mines are connected underground by rail tunnel at the 3,700 foot level and the Caladay property is connected to the Galena mine by a tunnel at the 4900 foot level. Both tunnels are used to exhaust ventilation air. The Coeur tunnel is also used for the movement of lead-silver ore to the Coeur mill. Drilling is ongoing at the Coeur mine to be able to put a mining plan in place, once it is in place production could start shortly, no permitting or acquisition costs are required. With great cash flow from production and a strong balance sheet with almost C$30 million in treasury and over C$40 in working capital an aggressive exploration budget is possible and this will help the company make the reserve replacement exceed production and delineate a mine plan for the Coeur mine.

The company is on track to attain an annual production of 3.0 million ounces of silver, the company will do so mainly by improving the ore grades but one should remember there is an extra 35% capacity available at the mill, currently about 900 tons are put through per day and up to 1400 tpd could be processed.
Although the ores are rich of by-products, cash cost are in the higher range of the industrial average in the world, somewhere between US$15-17/oz silver. If one believes the silver price will rise and be US$50 or more, US Silver will be an attractive investment. Being a high cost producer with a higher lever to the silver price, the risk increases. This goes both ways which is why we choose to have a smaller position in US Silver than Aurcana.

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PaperOne of the reasons we have chosen to take a position in U.S. Silver is that they are not only profitable and debt free, they are now also hedge free. Like most juniors a few years ago, U.S. Silver also struggled in the period around 2008, resulting in a large share structure. With ~342 million shares fully diluted, the company decided to do a reverse split 5:1, taking the fully diluted shares down to aprox 68.4 million shares. They did this in order to apply for a NYSE listing later in the spring of 2012. The Mcap is now C$160 million (@C$2.40). The balance sheet is strong and growing stronger by the day, which enables the company to finally put higher focus on exploration and prolonging mine life. The treasury is close to C$30 million.
As a higher cost producer, we believe that the stock might be even more volatile, which makes the upside quite appealing for those of us who see much higher Ag prices in the coming years. This also warrants us to take a smaller position than we might otherwise have done.

A little over seven minute long YouTube video about U.S. Silver, including comments by people in leading positions of the company.