RE:RE:AGM at July7th it gives some answers:
"May 29, 2020
We are issuing this letter to provide some details on the Company’s current status and outlook during an unprecedented global crisis. While the Company learns to adapt to these historic and unique times please allow me an opportunity to share and reflect on how Silver Elephant Mining Corp. (“ELEF”) will continue to add value through these otherwise uncertain times.
Activities and Share Price 2020
Back on track, pegging rising silver price
ELEF has seen big share price swings as silver prices went from $19/oz to $12/oz before rallying back to around $17/oz between February to May, due to the COVID pandemic.
In early 2020, ELEF completed its first drill program at Pulacayo.
The Pulacayo West step-out drilling program was selected due to two criteria:
· No historic drilling was ever conducted just to the west of the Pulacayo resource.
· Several historic artisanal workings exist to the west of the resource providing strong justification to explore these areas.
While drill results were below expectation, and release timing coincided with a market freefall in March, the Company did successfully extend the resource by approximately 100m westward (PUD 267 intercepted 35.5 meter mineralization grading 54 g/t Ag, 4.3%Zn, and 0.9%Pb starting 31.5 meters downhole).
In March, I sold some ELEF shares. This was not due to lack of confidence or conviction in and toward the Pulacayo project, but rather as matter of prudence with the world seemingly crashing down at the time. The shares I sold were purchased at much higher prices, I still retain 7.3 million shares and have zero intention of further sales.
Meanwhile, the share price is recovering with very healthy liquidity. The Company activated Pulacayo in July 2019, and in 9 short months, ELEF has established high positive correlation to silver price, trading approximately 1M shares daily volume. We believe this reflects our marketing efforts and technical merits of the Pulacayo project. Pulacayo’s resource quantity and quality can easily be compared to other top-performing silver juniors (e.g. NUAG, AXU, BCM, SVE, KTN) and well-researched investors recognize ELEF is very undervalued considering Pulacayo’s exploration upside.
Pulacayo Mandate and Program next 6 months
Infill results, new Resource Calculation, and Drilling
During the lockdown, the ELEF team conducted internal review of benefits of whether to expand our exploration to the district level, or advancing the existing Pulacayo resource to a production decision. After careful deliberation, exploration prevailed!
Our exploration goal is to discover more silver on the property with program that delivers lower cost per quality ounce discovered. Engineering can start commence we know the size and scope of Pulacayo district.
The Pulacayo project is not only comprised of the two resources that exceed 50 million ounces in total but covers a larger district of over 30 square km in size. The geologic events that resulted in creating the two bookend deposits of Pulacayo and Paca also feature themselves as multiple surface expressions with similar geological hallmarks that indicate potential and even confirmed mineralization at surface. This is a puzzle that our geological team needs to unravel with sound, fundamental, modern, exploration tools and strategies. This means geophysics (IP), geochemistry, mapping, prioritizing actionable targets to be explored by drilling. District exploration already commenced in February and will resume in June once COVID lockdown ends.
We asked ELEF Directors, renowned geology experts in epithermal systems and local geologists who are familiar with Pulacayo to visit our project in January and February and they provided invaluable feedback. All came to same conclusion: There exists at Pulacayo significant exploration potential of new major silver discoveries.
We have used lockdown time as an opportunity to pour through the volumes of historic data produced by previous operators who had spent over $20 million on the property in order to gain a better understanding of the district.
Our goal is to delineate prime targets this fall for drilling. We may drill sooner based on what we found; but we will leave it to our exploration team, which consists of 4 expert geologists (2 Western, and 2 local), to provide recommendations to this effect.
Meanwhile, it should be noted that towards the end of the most recent Pulacayo drill program in early 2020, we managed to drill 2 infill validation holes to test Pulacayo high grade area, and we expect assay, once the assay lab re-opens and clear their back log.
During this time of rising silver prices, we have engaged Mercator Geological Services to update Pulacayo-Paca resources using a lower cut-off, and examining the possibility to upgrade a portion of Paca resource to a Measure and Indicated category. Mercator previously used cutoff grades of 200 g/t AgEq (surface) for Paca and 400 g/t AgEq (UG) for Pulacayo, optimized for lower silver prices. Many silver junior companies are now using cutoff grades of 50g/t Ag for a pit constrained resource and 200g/t Ag for underground resource. This update will enable the market to have a fair comparison of our project to our industry peers.
One example of this is our neighbour, New Pacific Metals, currently with an $820 million market capitalization, who is supported by a maiden resource dated May 2020 of 35.4 million tonnes of measured and indicated at 137 g/t Ag, and 9.8 million tonnes of inferred at 112 g/t Ag with a cut off of 45g/t Ag. We expect marked increase in tonnage and contained silver resources from current 2.5 million tonnes at 342g/t AgEq for Paca and 2.4 million tonnes at 594 g/t AgEq for Pulacayo upon completion of the updated mineral resource, expected in early August.
Non-Silver Assets
Spin off Nevada Vanadium, Seek cash neutral/strategic for Mongolia
ELEF’s subsidiary company, Nevada Vanadium, expects to reach a Record of Decision (“ROD”) on an Environmental Impact Statement (“EIS”) and conclude permitting the Gibellini vanadium project in Q1 2021. This work is being led by Mike Doolin and Ron Espell, who are doing a great amount of this work in-house in order to lower costs on EIS consultants on fixed price contracts.
Vanadium price has rebounded from $4/lb to $6lb in 2020, still long way down from $33/lb in Q1 2019. The Gibellini vanadium mine will require $116M in CAPEX and has a breakeven price of $7.76/lb with a $4.77/lb cash cost. Towards the fall, the company will talk and meet potential off-takers as well as mining companies that may be interested in financing Gibellini construction and taking Nevada Vanadium public.
ELEF traded at $70 million market capitalization in early 2019 on the strength of Gibellini alone, and there are still several devoted ELEF shareholders who are waiting for a Gibellini update. Gibellini is on track to be 1s primary vanadium mine in the US and We are sure they will be pleased to hear our progress.
In Mongolia, we have 1-billion-tonnes of coal resources within a 40 meters seam that are shallow, open pittable, and have access to rail. This is a big resource which we intend to leverage and conduct a strategic survey with large regional coal mining companies for JV interests. Our current coal mine is leased for $2/t production royalty, and in 2019 our lessee produced and sold approximately 100,000 tonnes of coal. There is great demand with a strong order-book for this coming winter from Mongolia and China. We are working closely with our lessee to bring in additional equipment from other operators to attempt to double our coal production to fulfill winter orders. Our goal is cashflow break-even at our Mongolia subsidiary, currently is running at $500,000 in annual G&A and various licensing fees.
Share Price Going Forward, Marketing and Shareholder relations
More frequent engagement with key shareholders. Utilize social media to reach wider audience and create stronger rapport.
To date, in 2020 the Company share turnover has been over 91 million shares according to Stockwatch out of 138 million shares (or 122 million shares outstanding before the May equity private placement).
We have done a good job in acquiring new shareholders according to this volume, and now we need to work better in order to keep them. We strive to:
1. Be pro-active in reaching out to key shareholders; this is the only way to understand their concerns and get their feedback.
2. Invest more time on digital social media, with broader reach and direct rapport with shareholders, and not rely solely on transitory traders or newsletter writers.
3. Continue to push for research analyst coverage; we have met several analysts who cover NUAG and silver juniors and will continue to do so.
Our social media programs are achieving good results (e.g. Twitter, Linkedin) with increased followers and $ELEF.to search exposure.
Financing and Budgeting
Successful PP in May, and proposing warrant reprice to fully fund 2020 operation
In May we raised C$1.97 Million by issuing 15.2 M units. The minimum order size was $65,000 and existing shareholders represented 70% of the financing. Demand was healthy and we enlisted a new US institutional shareholder focused in silver mining. There are no swing traders in this most recent round of financing.
To meet our 2020 budget, there is still a short fall. We believe it’s prudent to shore up additional capital and have petitioned your approval for repricing of warrants in the coming annual general shareholder meeting in July. By repricing strike price of the existing 24 million warrants to 26 cents (with strike prices from 40 to 70 cents, most of which expire by end of 2021), the Company could raise an additional $6.24 million assuming full exercise. This sum would fully fund the Company’s 2020 operation which includes regional Pulacayo exploration and a resulting drill program. An additional $2.4M will be raised if the May 2020 placement warrants were exercised (15.2M at $0.16).
The alternative to the proposed warrant repricing is another private placement that will invariably also lead to dilution, and possibly more so (vs warrant reprice) when you consider potential ancillary warrant attachments, commissions, and hefty price discounts should market conditions turn sour). While a private placement can possibly be done at higher prices in 2 to 3 months from now, financing risk is heightened by market volatilities, an economy strained by continued lockdowns, and massive unemployment rates. Saving pennies may be pound foolish.
We understand that dilution is undesirable; insiders own 8% of the Company. In light of what I mention above, our interests align and we appreciate your understanding and support.
Name Change to Silver Elephant, and Our Macro View
Silver is our DNA
After 10 years under the Prophecy banner, we have changed our name to demonstrate our conviction to Pulacayo and to silver which is entering a major bull market that happens once in a decade or longer. Looking at 30% budget deficit to GDP, 30% unemployment, and the Fed's unlimited QE’s with $7 trillion already on the book at the rate of $3 trillion more a quarter, we like silver’s prospect and will be focused on continuing to derisk and add resources to Pulacayo district throughout 2020 and 2021, while keeping an flexible and open exit strategy.
Bolivia is a strength
ELEF thrives in Bolivia, shareholder interests will gather as project steadily advances
Bolivia has been stable in recent years with uninterrupted operations from Sumitomo and Pan American Silver, to name a few. Investors are warming up to the country as seen by the market capitalization of New Pacific Metals. The country is forming a stronger alliance with US, Brazil and Peru, as it distances itself from Venezuela and Cuba. Due to years of a lack of foreign investment, revenue from metals and gas are down, reserves are at being depleted, and foreign investments are now being sought. We enjoy strong support from Federal government as well as local people of the town of Pulacayo, whom have been working with members of our team since 2005.
With Bolivia opening up to investment and ELEF possessing local know-how of the country’s regulatory idiosyncrasies, we have a major-mover advantage in the country and are currently evaluating several synergistic, and accretive silver opportunities. This means looking at silver assets with size potential, decent grade, and logistical access, that will meaningfully bulk up ELEF quality resource base while carefully considering the dilution trade-offs.
We appreciate your support. We look forward sharing our Company’s developments as they come to light.
John Lee
Mike Doolin