Post by
savyinvestor333 on Apr 05, 2022 8:14am
TD Update Target $22.00
Buying Opportunity on Recent Weakness; Resource in April
Event We are publishing this brief note to highlight what we view as an opportunity to buy shares of SLS during a period of underperformance brought about by, in our view, pre-selling in advance of the upcoming resource estimate (which is expected to be released this month).
Impact: NEUTRAL
Solaris has underperformed its peers since the company's all-time high on December 31, 2021, with SLS down ~22% since then and the base metals developers in TD's coverage universe up ~10%. We believe that the underperformance is due to investors selling before the upcoming Warintza Central resource estimate.
As a reminder, the initial resource growth drilling program (~50 km) for Warintza Central has been completed, which will inform the updated resource estimate in April (62 holes have been completed at Central to-date, with assays reported for 54 of these).
We are anticipating total resources of ~1 Bt at 0.53% CuEq (0.36% Cu). We note that the company is also planning to concurrently release details of a high-grade starter pit.
Our model for Warintza is based only on Warintza Central and does not incorporate the recent discoveries (East, West, South) or other company targets.
Our view that the company provides strong exploration upside exposure continues to increase, given recent results. For example, yesterday's drill results expand on two key growth areas with near-surface, high-grade mineralization on the edge of resource drilling that remains open (which suggests that additional drilling could lead to an eventual bigger resource).
Following the company's resource announcement, we believe Solaris could become a take-out target as we do not believe that an acquirer will need to wait for an economic study (a large company will use its own throughput/development assumptions). Solaris last reported a cash balance of ~$34mm (December 31).
TD Investment Conclusion World-class discoveries are rare and unique, and we believe that Solaris is in the early stages of making multiple world-class discoveries among its cluster of porphyries on the Warintza property. We expect the stock to continue to re-rate higher as the company demonstrates the growth potential of the project.