Solaris Resources Inc T.SLS

Scotia Update and New Target $19.50

[savyinvestor333]

Solaris Resources Inc.

• SLS-T: C$14.65
• Target: C$19.50
  Old: C$18.00
• Rating: Sector Outperform

Warintza Resource Debrief: Outlining a Long-Life, Compelling Copper Asset

OUR TAKE: Positive. Following the resource update at Warintza, we have updated our estimates with this note to include a larger total resource along with our other assumed parameters. Total reported resource is 579 million tonnes of Indicated resources at a grade of 0.59% copper equivalent along with Inferred resources of 887 Mt at 0.47% CuEq. The new resource also includes a high-grade ‘starter pit’, with nearly ~300Mt grading 0.73%-0.82% Cueq (Inferred and Indicated). For additional details, see our First Look note here. We now include a mineable reserve of ~1Bt (+40%), which may prove to be conservative given that the deposit remains open in multiple directions and follow up drilling is ongoing. We expect a subsequent resource update in the future that will incorporate the additional drilling completed since the November 2021 resource cut-off date. Following model updates, our price target increases to C$19.50 (from C$18), while our SO rating is maintained.

KEY POINTS

Sensitivities – Notably, our model is sensitive to the higher-grade, near-surface portion of the deposit that is to be mined at the outset. We assume higher grades of 0.6% Cu mined in years 1-6, before reducing to 0.5% in years 7-12 and 0.4% in year 13 onwards. Were we to add another year of mining at 0.6% copper, our NAVPS would increase by ~2%, all else equal. Our new life-of-mine parameters are shown in Exhibit 1.

Valuation – At Scotiabank GBM’s long-term copper price assumption of $3.50/lb, SLS shares are currently trading at 0.75x our P/NAV10% estimate, broadly in line with base metal developer peers at 0.77x; however, we believe Solaris shares should trade at a premium given Warintza's relatively high grade nature and continuous tenor of mineralization, good access to infrastructure, exploration upside, and backing by a well-known management team at Augusta Group with a proven track record.