APM · Andean Precious Metals (TSXV: APM)

Andean Precious Metals is one of the two positions (with Valeura Energy) behind the roughly 2,000x personal return that made McCracken's name. It appears in this episode not as a current holding but as a benchmark.

The number he quotes is the point: he bought it when it traded at "1.5 times enterprise value over cash flow." Enterprise value is the market value of the equity plus debt minus cash — what it would cost to buy the whole business outright. At 1.5x cash flow, the entire company was priced at about eighteen months of the cash it generated. That is a level at which you are being paid to take the risk rather than paying for the story.

His observation now is that this setup has largely gone: "the market is starting to behave a bit and price things more correctly, at least in miners." That is why the mining sleeve of his book is under-sized despite a bullish commodity view — not because he dislikes the metals, but because he has an anchor for what a genuinely cheap miner looks like and is refusing to lower it. The one place he still sees it is gold miners after a pullback, which he is waiting for.

Andean is a two-asset silver-gold producer — Golden Queen in the US and San Bartolomé in Bolivia — and it's one of this week's adds. The company got TSX approval to buy back up to 4m shares (about 2.65% of its float), and management pointedly asked for barely half of what the exchange would allow, stating the market price doesn't reflect the underlying value. Mart reads a buyback funded from a company that knows its own numbers as a positive signal, especially since it's done this profitably before.

He then rebuilds the earnings from scratch at today's $4,000 gold / $60 silver to show why: consolidated cash margin of ~$215m, adjusted EBITDA near ~C$237m, against a ~C$830m market cap — about 2.7x EV/EBITDA. For a producer with a track record he argues 4–5x is defensible even with Bolivian country risk, which implies roughly C$8–10 a share versus a much lower current price. In plain terms: the market is pricing catastrophe into a company generating real cash, and the buyback is management saying the same thing with the balance sheet.

Andean Precious Metals is a two-asset silver-gold producer — Golden Queen in the US and San Bartolomé in Bolivia — that generates real cash flow today, unusual for a company its size. The knock on it is the Bolivia exposure (country risk, a purchased-ore plant, a legacy Silver Elephant lawsuit), which the market prices as a heavy discount to the underlying earnings.

Mart's read is that the discount has become too steep: Bolivia is "still a risk, but improving," and after the drawdown the shares trade at a very low multiple of the cash the business actually throws off. He is adding here, treating the compressed valuation as the margin of safety while the two-asset production keeps paying him to wait.

Andean PM holds a silver royalty over the Apogee project in Argentina, plus a direct ownership stake. The royalty generates actual cash flow right now — unusual for a junior silver name that most investors would expect to be pre-revenue. The result is a company trading at roughly 2× EBITDA with a free cash flow yield above 20%, which by any traditional value metric is extremely cheap.

The Silver Elephant / Apogee lawsuit is a legal complication Mart is monitoring, but his take is straightforward: the valuation is so compressed relative to cash flow that you are being paid to wait regardless of the legal outcome. At a >20% FCF yield the market is pricing in catastrophic risk; Mart thinks the discount is too steep and holds at C$0.64, 75% allocated. If the lawsuit resolves favorably, the re-rating could be sharp; if it doesn't, the cash flow still supports the current price.