Baker Steel Resources Trust Ltd. (LSE: BSRT) is now one of the biggest shareholders in Silver X Mining Corp. (AGX:TSX.V) after it converted its $4 million debenture, plus interest and a fee, to 17.6 million shares valued at $0.30 apiece. Baker Steel now owns 19.5 million shares in Silver X, or 13.89% of the company’s outstanding shares.
Baker Steel must hold the 17.6 million shares specifically related to the debt conversion for at least four months, but the larger company has incentives to continue to hold at least 10% of Silver X beyond the 4-month deadline.
Baker Steel can nominate someone for election to the Silver X board, and it can maintain its ownership percentage by participating in future financings—but only if Baker maintains its 10% stake. Those handy caveats are designed to keep Baker Steel from flooding the market with Silver X paper.
Before the deal, Silver X had issued 122.8 million shares. There are now about 140.4 million shares outstanding, and the company still has roughly CA$6 million in debt.
Timothy Lee, an analyst with Toronto-based Red Cloud Securities, maintains his “buy” rating for Silver X but reduced the company’s target price to CA$0.85 from CA$1.00 to compensate for the added dilution.
“We view Silver X as an emerging producer with the potential for rapid production growth and significant exploration upside. We look for ongoing drilling results and production ramp-up to be the main share price drivers in the coming months,” Lee wrote in an April 21 note.
Silver X Has Some Noteworthy Upcoming Catalysts
Silver X continues to publish promising drill results from its flagship Nueva Recuperada silver-lead-zinc mine in Huancavelica, Peru, where the company recently increased mill production to 720 tonnes per day up, a 20% increase from the previous 600 tonnes.
So far this year, Silver X has completed about 2,350 meters of exploration drilling over 25 holes at its Tangana mining unit.
At the end of last month, the company published results from 14 holes drilled at Tangana; the program was designed to focus on the Tangana 1 vein. Each of the 14 holes hit the mineralized structure.
Hole 18, an infill hole, intersected a vein that returned 1.8 meters grading 390.62 grams per tonne silver-equivalent (390.62 g/t AgEq), while hole 7 hit another vein grading 192.71 g/t AgEq over 1.72 meters.
Hole 15, drilled below the current mine workings, hit a series of braided veins that returned 148.89 g/t AgEq over 11.5 meters, including 371.99 g/t AgEq over 1.5 meters and 244.19 g/t AgEq over 2.76 meters.
Results from the six remaining holes will be published soon.
The current Nueva Recuperada resource is 7.324 million tonnes at 130.38 g/t Ag, 2.04% Zn, and 3.17% Pb for a total of 68.3 million AgEq oz. The resource from Tangana alone accounts for almost 40 Moz AgEq.
The rest of the planned 15,500-meter drill program will focus on drilling the underground workings—mainly the Cauca vein—to expand the resource at Nueva Recuperada.
Silver X plans to publish a new resource estimate by the end of June, followed by a preliminary economic assessment before the end of 2022.
The upgrades at the Nueva Recuperada mill include new crushing and grinding circuits as well as flotation cells. The mill produces a zinc-lead “bulk” concentrate with precious metals and copper credits. The company is looking at adding a copper recovery circuit to take greater advantage of near all-time highs in copper prices. Silver X President and Director Jose Garcia says a separate copper concentrate would be quite lucrative.
In March, throughput at the mill was about 4,700 tonnes at an average head grade of 9.41 oz AgEq, with higher than usual gold grades—as high as 72 g/t Au in concentrates. The added gold is expected to fetch higher concentrate prices.
Silver X Continues to Implement High Goals
Despite the recent upgrade in throughput capacity, the company’s goal is to take the processing plant up to 2,400 tonnes per day. Silver X has already filed the environmental permitting paperwork to have approval in hand by the time the company further expands production.
“We're preparing that permitting umbrella. In 2023, we will likely get that capacity approved,” Garcia said. “That means that the permitting is prepared for the company to grow. We don't really anticipate going to about 1,500 tonnes a day until 2024—and potentially more—but that depends on the resources we keep on finding the ground.”
Silver X started trading in late June 2021 after Oro X merged with Latitude Silver earlier in the year.
Silver X subsequently raised CA$14M and launched a 25,000-meter drill program to improve the resource and further de-risk the project. In different roles at other companies, the board has sold almost everything that wasn’t nailed down.
Silver X Lead Advisor Paul Matysek, who has a penchant for X-branded companies, has been involved in the sale of five junior mining companies. The combined value of those deals is around CA$2 billion.
Meanwhile, Director Darryl Cardey co-founded Underworld Resources and Northern Empire Resources Corp. (NM:TSX.V; PSPGF:OTC.MKT ). Kinross Gold Corp. (K:TSX; KGC:NYSE) bought Underworld in 2010 for $139M, while Coeur Mining Inc. (CDE:NYSE) acquired Northern Empire in 2018 in an all-share deal valued at $117M.
Silver X says its management has created CA$3.2 billion in value over the previous 15 years.
Garcia says there could be more regional M&A on the way.
“We're looking at potential, actually very tangible, M&A opportunities. It might be that we grow with M&A. It's not something that is the core business, but we certainly like that idea,” Garcia told Streetwise Reports.
Management owns about 29% of Silver X; U.S. Global Investors owns 4.15%, while the same amount is held by Frankfurt, Germany-based Universal-Investment-Gesellschaft.
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