Brownfield Asset in One of the World's Top Silver Mining Reg
When assessing junior exploration and development companies, we place a high level of importance on asset location, which, in the case of SLVR, receives an A+ grade. The El Tigre project is located in Sonora, Mexico, a state with significant history of silver mining, and lies on the Sierra Madre silver and gold belt that hosts multiple projects, including Santa Elena owned by First Majestic (FR-T, Not Rated) and Las Chispas owned by SilverCrest Metals (SIL-T, Not Rated). As the world’s leading silver mining jurisdiction with over 1,100 Moz produced from 2015 to 2020 based on data from S&P Capital IQ, Mexico has more primary silver mines than any other country with over 140 active projects, accounts for the largest share of the global silver exploration budget, and has the highest silver reserves and resources globally.
SLVR is targeting 100,000m of diamond drilling as part of its 2022 exploration program with six drill rigs, following the Sooy, Seitz Kelly, El Tigre, and northern Benjamin veins along strike in addition to pursuing new high-grade vein discoveries. Since drill hole 202 intersected 667.9 g/t AgEq over 11.75m in the footwall of the Sooy vein in early 2021, SLVR has been testing the black shale horizon, a 30m thick sub-unit section of the flat formation with a slight dip to the east. The black shale horizon was previously considered to be barren but is now showing evidence of wide intercepts of high-grade silver mineralization. Currently, the black shale horizon has been encountered along strike of the Sooy, Benjamin, and Seitz Kelly veins. Towards the end of 2021, drilling commenced on the El Tigre vein utilizing the fifth and sixth rig. With the El Tigre vein located between the Seitz Kelly and Sooy veins, we believe it is only a matter of time before active drilling confirms the black shale horizon along strike of the El Tigre vein. SLVR has initiated the refurbishment of the underground main entrance on level 7 of the 14 levels from historical mining operations at El Tigre. Level 7 runs through the black shale horizon, and refurbishing the access to it, will pave the way for underground channel sampling along with a possible mobilization of underground drill rigs to better test the black shale horizon. If the black shale horizon is delineated across a significant area of the property, it will likely contribute to resource expansion since it represents an additional source of mineralization besides existing veins and potential new vein discoveries.
The latest discovery of a potential new high grade silver vein between the El Tigre and Seitz Kelly veins in the black shale horizon is the fourth vein discovery within the span of a year, further strengthening the initial observations and emphasizing the importance of the black shale formation. We anticipate the Sooy, Benjamin, Seitz Kelly, and El Tigre veins will be the main contributors of ounces in the upcoming resource estimate update. We also see potential for SLVR to incorporate the black shale, a stratigraphically bed hosted mineralization, into the upcoming resource update should the company successfully define the zone across a larger area of the property.
SLVR’s management team is experienced and has an exceptional track record of wealth creation in Mexico through project discovery, advancement, and monetization. The team is led by Glenn Jessome, President & CEO, a lawyer in the resources sector with over 25 years of experience. The management team and the Board own ~7% of shares outstanding. In addition to mining operations expertise, the team has developed strong relationships with the Mexican government authorities and demonstrated the financial acumen to advance exploration properties into profitable producing mines.
On EV/oz metrics, SLVR trades at a discount of 8% to peers with silver-equivalent resources of 84 Moz AgEq, or 55% if 86 Moz AgEq of potential regional resource upside are included as well. SLVR has a steady pipeline of drill results from the ongoing exploration campaign, including potential new vein discoveries through to the end of 2022 that we believe will create strong upward momentum for the share price over the next 12 months.
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