Solaris Resources Inc T.SLS

Scotia Update Target $18.00

[savyinvestor333]

OUR TAKE: Positive. Solaris Resources released results from drilling at the flagship Warintza project. Highlights include SLS-54 with 356m of 0.73% Cueq from 50m depth (within a broader interval of 1,093m of 0.56% CuEq), SLS-52 with 482m of 0.62% CuEq from 96m depth (within a broader interval of 977m of 0.45% CuEq), SLS-53 with 176m of 0.78% CuEq from 16m depth (within a broader interval of 957m of 0.46% CuEq), and SLS-51 with 918m of 0.50% CuEq from 130m depth (within a broader interval of 1,012m of 0.47% CuEq). The updated Warintza Central resource estimate is expected to be issued in April 2022.

Importantly, the latest drilling has expanded the growing northeast extension area, which remains open with follow-up and step-out drilling underway. Drilling has also expanded the growing southeast extension area, which remains open in near-surface, high-grade mineralization. A 260m NE step-out platform was recently completed, and a second platform stepping out further to the NE is under construction. Overall, we view the latest drill results positively as they continue to return long intervals of high-grade mineralizationm including near-surface, high-grade extensions. We rate SLS shares SO with a C$18 PT.

KEY POINTS

Detail – SLS-54 was collared at the northeastern limit of the grid and drilled into an open volume near surface. SLS-52 was collared on the eastern side of the grid and drilled southeast into an open volume near surface. SLS-53 was collared from a southeastern platform and drilled south into an open volume near surface. SLS-51 was collared from the south-central portion of the grid and drilled east into an open volume at surface. 62 holes have been completed at Warintza with results released for 54 of these. Location of the latest drilling is shown in Exhibit 1.

Valuation – At Scotiabank GBM’s long-term copper price assumption of $3.50/lb, SLS shares are currently trading at 0.71x our P/NAV10% estimate vs. base metal developer peers at 0.77x; however, we believe Solaris shares can re-rate higher and 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.