The newly announced resource update and what it means in terms of project economics is captured in a ROTH Capital Partners report.
In a March 18 research note, analyst Jake Sekelsky reported that ROTH Capital Partners raised its target price on Buy-rated SilverCrest Metals Inc. (SIL:TSX.V) to CA$5.50 per share from CA$5 because its "positive resource update sets the stage for a robust preliminary economic assessment (PEA)."
Sekelsky reviewed the updated Las Chispas resource estimate and how it compares to the previous one.
The new estimate encompasses Indicated resources of 1 million tons (1 Mt) at average grades of 6.98 grams per ton (6.98 g/t) gold and 710.6 g/t silver, or 1,234 g/t silver equivalent (Ag eq), for a total of 39.8 million ounces (39.7 Moz) Ag eq.
Inferred resources now total 3.6 Mt at average grades of 3.32 g/t gold and 332.5 g/t silver, or 68.1 Moz Ag eq.
The entire Las Chispas resource grew 24% to 108 Moz Ag eq, in line with ROTH's estimate of 110 Moz. Sekelsky purported that SilverCrest could potentially add another 25 Moz to the resource by 2020, taking the total to 135 Moz Ag eq, in light of its "aggressive exploration plans and past hit rate."
The increase in ounces along with a boost in grades since the previous resource estimate are reflected in the update, highlighted Sekelsky. That should make for a robust maiden PEA, expected in Q2/1, which depicts a "high-grade, low-capex project generating significant free cash flow."
Sekelsky concluded, "Las Chispas is a rare asset that has the potential to generate positive cash flow at even lower metals prices, an attribute we believe majors would gravitate toward in a lower price environment." As such, the project is a prime takeout candidate, particularly as SilverCrest continues derisking it and growing its resource.
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Disclosures from ROTH Capital Partners, SilverCrest Metals, Company Note, March 18, 2019
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