The worry for Outcrop Silver & Gold Corp. (OCG:TSX.V; OCGSF:OTCQX; MRG1:DB) when Colombia’s leftist President Gustavo Petro took over last summer was that the politician who ran on an anti-mining platform would follow through on his promises to upend the industry.
However, Petro soon made it clear that while he wanted to move away from fossil fuels like oil and gas, he did want Colombia to search for minerals important to building the new green economy, like copper and silver.
“In multiple speeches, he has clarified that he is not against all mining; he is against new coal and oil and gas operations,” Gwen Preston of The Maven Letter wrote. “Investors don’t trust promises like these quickly. In other words, investors are still more wary of Colombia than they were before Petro. But that is changing.”
Why Silver?
As Outcrop prepares its maiden resource estimate, the Silver Institute has predicted that global silver demand will reach a new high of 1.21 billion ounces this year, up 16% from last year. Industrial demand is on course to grow to 539 million ounces (Moz).
“Developments such as ongoing vehicle electrification (despite sluggish vehicle sales), growing adoption of 5G technologies, and government commitments to green infrastructure will have industrial demand overcome macro-economic headwinds and weaker consumer electronics demand,” the report said.
The global silver market is forecasted to record a second consecutive deficit between supply and demand this year, the Institute said. At 194 Moz, it will be a multi-decade high and four times 2021’s level.
In August, Research Capital Corp.’s Stuart McDougall reiterated his Speculative Buy rating with a target of CA$0.75 per share on the strength of drilling results and the 50 Moz Ag eq estimated resource.
For those reasons, the Colombian government supports the exploration of these important elements.
“They just want it to be socially and environmentally responsible,” Outcrop Chief Executive Officer Joseph Hebert said during a recent investor presentation. “We’re aligned with what the government wants to achieve.”
“Surmounting the climate crisis means leaving behind the consumption of oil and coal,” Petro told United Nations leaders in September. “This means a profound transformation of economies, a devaluing of powerful interests in these economies, a change in the global economy that the political leadership of humanity cannot get ahead of.”
The country’s mining agency plans to hold talks with those in the industry until February and then present a new mining code to congress. The agency also has announced that it is preparing to launch its own mining company.
The Catalysts: Frias Mine, Resource Estimate
Outcrop has drilled more than 50,000 meters in more than 300 holes at Santa Ana, looking to complete a maiden resource estimate for the project in the coming months.
Last week, the company announced it had found multiple high-grade results through underground mapping and sampling of the historic Frias Mine on the site, including a sample of 10,216 grams per tonne silver (g/t Ag), 12.49% lead and 19.15% zinc.
One channel sample, RX6225, returned more than 4,576 g/t Ag, 9.62% lead, and 3.29% zinc over 0.9 meters.
Santa Ana, mined back to at least 1585, was once the largest colonial silver mine in Colombia. It now covers 36,000 hectares. Spanish Royal Archives reports said the area had 14 mines producing an average of 4,000 g/t Ag over an average of 1.4 meters, with some mines finding as much as 17,000 g/t Ag.
The Frias Mine produced 7.8 Moz Ag at 1.3 kilograms Ag per tonne recovered grade.
The results from Frias are important because the makeup of the Frias formation is a good analog for the Santa Ana project as a whole, Hebert said.
Outcrop has continually outdone itself this year with Santa Ana results. This summer, it released its thickest and highest-grade intercept from Las Maras to date: 1,651 g/t Ag eq over 8.97 meters at hole DH274, including 15,941 g/t Ag eq over 0.66 meters.
The project has gotten the attention of analysts. In August, Research Capital Corp.’s Stuart McDougall reiterated his Speculative Buy rating with a target of CA$0.75 per share on the strength of drilling results and the 50 Moz Ag eq estimated resource.
Newsletter writer Preston said she continued to be bullish on silver in the “medium term,” both for its compelling fundamentals and for its green bona fides.
“As silver strengthens (in 2023?), the market will seek exposure,” Preston wrote. “I think the resource that Outcrop is preparing to publish will stand out to those investors.”
Ownership, Coverage, and Share Structure
Mining financier Eric Sprott owns about 14% of Outcrop, management and directors own about 12%, and the rest is held by high-net-worth investors and retail, the company said.
The company is followed by Research Capital Corp.’s Stuart McDougall wrote and Gwen Preston of The Maven Letter. Click "See More Live Data" in the data box above to read more.
Outcrop has a market cap of CA$69.53 million with 194 million shares outstanding and 118 million of them free-floating. It trades in a 52-week range of CA$0.43 and CA$0.10.
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1) Steve Sobek wrote this article for Streetwise Reports LLC. He or members of his household own securities of the following companies mentioned in the article: None. He or members of his household are paid by the following companies mentioned in this article: None.
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