Silver X Mining Corp. (AGX:TSX.V) released a preliminary economic assessment (PEA) showing "robust economics" with expansion of the Tangana mining unit at its flagship Nueva Recuperada silver-gold-lead-zinc project in Peru, after which Red Cloud Securities increased its target price on the company, reported analyst Timothy Lee in a Feb. 15 research note.
"[The PEA] solidifies the company's expansion plan for Nueva Recuperada, paving the way for a feasibility study and construction start within the next two years," Lee commented.
Red Cloud's new target price on Silver X is CA$1.10 per share, up from CA$0.95, noted Lee. The increase reflects updated capital and operating costs of the Tangana expansion. In comparison, Silver X's current share price is about CA$0.32, multiples lower than the target price. Thus, the potential return for investors is significant. Silver X is Buy rated.
"Ramp-up to full production along with positive results from exploration activities could lead to a rerating of the stock," Lee wrote.
Attractive Project Economics
According to the PEA, the Tangana expansion is projected to yield an after-tax net present value discounted at 10% of US$175 million (US$175M) and an after-tax internal rate of return of 39%, Lee reported. The after-tax payback period would be four years.
Tangana is expected to produce an average of 4,200,000 ounces (4.2 Moz) of silver equivalent per year over a 12-year mine life. Total operating costs are forecasted to be US$78 per ton.
The cash cost is estimated to average US$8.80 and the all-in sustaining cost, US$16.20, both per ounce of silver equivalent.
New Mill Planned
Lee pointed out the PEA includes building a mill with a 1,500-ton per day (1.5 Ktpd) capacity near the Tangana mine portal. The cost for this is included in the initial capex estimated at US$61M.
Currently, Silver X is trucking ore to and processing it at the existing 720-ton-per-day mill. The added mill will eliminate the need to transport the ore and thereby reduce the operating cost, wrote Lee. The company will keep using the smaller mill but to process ore from the Plata mine. Between the two mills, the capacity will total 2.2 Ktpd.
"While building a new mill requires a larger initial capex, the resulting lower operating costs result in a net increase to our valuation for Silver X," Lee added.
Resource Estimate Updated
The Tangana expansion PEA is based on a newly updated resource estimate for Nueva Recuperada, noted Lee.
The update, from 2022, shows a 300%-plus boost to the Measured and Indicated (M&I) resource to 3,600,000 tons (3.6 Mt) from 0.84 Mt. M&I plus Inferred tonnage, however, decreased slightly to 132.1 Moz from 166.6 Moz.
The new resource reflects a 20% increase in the gold grade but a decrease in the silver, lead, and zinc grades. The net effect is a 21% decrease in contained Ag eq ounces.
Next Steps for Expansion
Silver X's timeline for Tangana includes updating the environmental impact statement this year, completing a feasibility study in 2024, and starting construction late next year or in early 2025. Once the new mill is up and running, in 2026 at the latest, the company will expand mill capacity to about 2 Ktpd.
In the near term, however, investors can expect to see more exploration results from Nueva Recuperada on an ongoing basis and Silver X's Q4/22 results sometime this quarter.
| Want to be the first to know about interesting Gold, Base Metals and Silver investment ideas? Sign up to receive the FREE Streetwise Reports' newsletter. | Subscribe |
Disclosures:
1) Doresa Banning wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees. As of the date of this article, an affiliate of Streetwise Reports has a consulting relationship with Silver X Mining Corp. Please click here for more information.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the decision to publish an article until three business days after the publication of the article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases.
As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Silver X Mining Corp., a company mentioned in this article.
Important Disclaimers for Red Cloud Securities, Silver X Mining Corp., February 15, 2023
Red Cloud Securities Inc. is registered as an Investment Dealer and is a member of the Investment Industry Organization of Canada (IIROC). Part of Red Cloud Securities Inc.'s business is to connect mining companies with suitable investors. Red Cloud Securities Inc., its affiliates and their respective officers, directors, representatives, researchers and members of their families may hold positions in the companies mentioned in this document and may buy and/or sell their securities.
Additionally, Red Cloud Securities Inc. may have provided in the past, and may provide in the future, certain advisory or corporate finance services and receive financial and other incentives from issuers as consideration for the provision of such services. Red Cloud Securities Inc. has prepared this document for general information purposes only.
This document should not be considered a solicitation to purchase or sell securities or a recommendation to buy or sell securities. The information provided has been derived from sources believed to be accurate but cannot be guaranteed. This document does not take into account the particular investment objectives, financial situations, or needs of individual recipients and other issues (e.g. prohibitions to investments due to law, jurisdiction issues, etc.) which may exist for certain persons. Recipients should rely on their own investigations and take their own professional advice before investment. Red Cloud Securities Inc. will not treat recipients of this document as clients by virtue of having viewed this document.
Red Cloud Securities Inc. takes no responsibility for any errors or omissions contained herein, and accepts no legal responsibility for any errors or omissions contained herein, and accepts no legal responsibility from any losses resulting from investment decisions based on the content of this report.
The analyst has visited the head/principal office of the issuer or has viewed its material operations. The issuer paid for or reimbursed the analyst for a portion, or all of the travel expense associated with a visit. In the last 12 months preceding the date of issuance of the research report or recommendation, Red Cloud Securities Inc. has performed investment banking services for the issuer.
Analysts are compensated through a combined base salary and bonus payout system. The bonus payout is determined by revenues generated from various departments including Investment Banking, based on a system that includes the following criteria: reports generated, timeliness, performance of recommendations, knowledge of industry, quality of research and client feedback. Analysts are not directly compensated for specific Investment Banking transactions.
Analyst Certification: Any Red Cloud Securities Inc. research analyst named on this report hereby certifies that the recommendations and/or opinions expressed herein accurately reflect such research analyst’s personal views about the companies and securities that are the subject of this report. In addition, no part of any research analyst’s compensation is, or will be, directly or indirectly, related to the specific recommendations or views expressed by such research analyst in this report.
