Silver X Mining Corp. (AGX:TSX.V) is acquiring the near production-ready Revenue-Virginius mine in Ouray, Colo., for US$4.5 million (US$4.5M), reported Echelon Capital Markets analyst Gabriel Gonzalez in an April 18 research note.
"Assuming production were to restart after Silver X completes a 12- to 18-month exploration and study program, we believe the Revenue-Virginius mine would beneficially accrete value operationally and valuation-wise by diversifying out of higher-risk Peru and Latin America," Gonzalez wrote.
Significant Potential Return
Echelon has a Speculative Buy rating and a CA$0.80 per share price target on Silver X, the current share price of which is about CA$0.30. The difference between these prices implies a compelling 105% return for investors.
The price target, Gonzalez explained, is "based on a fully diluted/financed [Nueva Recuperada] expansion preliminary economic assessment (PEA), which is estimated to take production to over 6,000,000 ounces of silver equivalent (6 Moz Ag eq) by 2026, without considering potential copper production which we believe could eventually be included in production and slightly increase our net asset value."
Convering the Cost
The US$4.5M cost to buy the Revenue-Virginius mine out of receivership equates to US$0.11 per ounce (US$0.11/oz) of Ag eq resources, noted Gonzalez. If Silver X pays in full on or before May 31, 2023, the total consideration would be US$3.5M, or US$0.08/oz Ag eq.
Gonzalez pointed out that for Silver X to be able to cover US$3.5M, let alone US$4.5M, it likely will need to raise part of the capital and/or sell or option one or more of its secondary assets, the Coriorrco, Las Antas, and Julian projects. This is because, the analyst noted, the silver producer's current capital is tied up with Nueva Recuperada, the flagship project, in Peru.
As for its financial status, Silver X had only US$1M in cash and cash equivalents and (US$10.6M) in working capital at the end of Q4/22. Because debt and lease obligations amounted to only US$2.3M, Gonzalez wrote, refinancing near-term liabilities is one way the company could raise capital.
"We estimate that Silver X can still pull ahead with positive cash flow and growing its cash balance provided that the timing of its trade payables and accrued liabilities can be appropriately matched and/or refinanced," added Gonzalez. "However, Q1/23 and Q2/23 operations will likely have to show directional improvements to secure such lending."
About the Asset
Revenue-Virginius is a past-producing polymetallic project with a total current resource, Measured & Indicated plus Inferred, of 40.6 Moz Ag eq at a grade, per Echelon's estimate, of about 1,044 grams per ton. Mineralization is hosted in narrow, 0.5–1 meter wide on average, veins.
A feasibility study of Revenue-Virginius prepared in 2021 shows the project to be attractive economically. The study outlines an operation producing 2.78 Moz of Ag eq per year over a 6.25-year mine life.
A restart of the project would require US$20M in capex, the study indicated. Once up and running, the all-in sustaining cost would be an estimated US$12.25/oz Ag eq, based on installed 260-ton-per-day mining/mill rates.
Also, the feasibility study assigns the Revenue-Virginius project a US$108.8M net present value discounted at 5% and a 175% internal rate of return. These figures were derived using a price of US$20.89/oz of payable silver.
Q4/22 Financial Results
In the fourth quarter of 2022, Silver X posted US$3.9M in revenue, which fell short of Echelon's forecasted US$5.3M. Adjusted EBITDA came in at (US$3.6M), also below Echelon's US$1.1M estimate. Adjusted earnings per share (EPS) was (US$0.02) compared to Echelon's US$0.
Cash costs and the all-in-sustaining cost (AISC) in Q4/22 were higher than Echelon expected. Cash costs were US$14.6/oz Ag eq versus Echelon's US$12.94/oz projection. The AISC was US$21.5/oz compared to Echelon's US$18.32/oz estimate.
Estimates Revisited
Given the Q4/22 results and the pending acquisition, Echelon updated its model on Silver X to reflect both, noted Gonzalez. In its estimates, Echelon maintained its 2023 production projection, 1.7 Moz of Ag eq, but increased associated forecasted cash costs to US$12.50/oz from US$10.80. AISC stayed the same, at US$17.07/oz.
Also, Echelon incorporated the results of the Nueva Recuperada expansion PEA into its long-term estimates.
"We remain of the view that Silver X's Nueva Recuperada project is a potential company builder asset that provides Silver X with a strong foundation for company growth," commented Gonzalez.
| Want to be the first to know about interesting 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.
Disclosures for Echelon Capital Markets, Silver X Mining Corp., April 18, 2023
Echelon Wealth Partners Inc. is a member of IIROC and CIPF. The documents on this website have been prepared for the viewer only as an example of strategy consistent with our recommendations; it is not an offer to buy or sell or a solicitation of an offer to buy or sell any security or instrument or to participate in any particular investing strategy. Any opinions or recommendations expressed herein do not necessarily reflect those of Echelon Wealth Partners Inc. Echelon Wealth Partners Inc. cannot accept any trading instructions via e-mail as the timely receipt of e-mail messages, or their integrity over the Internet, cannot be guaranteed. Dividend yields change as stock prices change, and companies may change or cancel dividend payments in the future. All securities involve varying amounts of risk, and their values will fluctuate, and the fluctuation of foreign currency exchange rates will also impact your investment returns if measured in Canadian Dollars. Past performance does not guarantee future returns, investments may increase or decrease in value and you may lose money. Data from various sources were used in the preparation of these documents; the information is believed but in no way warranted to be reliable, accurate and appropriate. Echelon Wealth Partners Inc. employees may buy and sell shares of the companies that are recommended for their own accounts and for the accounts of other clients. Echelon Wealth Partners compensates its Research Analysts from a variety of sources. The Research Department is a cost centre and is funded by the business activities of Echelon Wealth Partners including, Institutional Equity Sales and Trading, Retail Sales and Corporate and Investment Banking.
Research Dissemination Policy: All final research reports are disseminated to existing and potential clients of Echelon Wealth Partners Inc. simultaneously in electronic form. Hard copies will be disseminated to any client that has requested to be on the distribution list of Echelon Wealth Partners Inc. Clients may also receive Echelon Wealth Partners Inc. research via third party vendors. To receive Echelon Wealth Partners Inc. research reports, please contact your Registered Representative. Reproduction of any research report in whole or in part without permission is prohibited.
Canadian Disclosures: To make further inquiry related to this report, Canadian residents should contact their Echelon Wealth Partners professional representative. To effect any transaction, Canadian residents should contact their Echelon Wealth Partners Investment advisor.
U.S. Disclosures: This research report was prepared by Echelon Wealth Partners Inc., a member of the Investment Industry Regulatory Organization of Canada and the Canadian Investor Protection Fund. This report does not constitute an offer to sell or the solicitation of an offer to buy any of the securities discussed herein. Echelon Wealth Partners Inc. is not registered as a broker-dealer in the United States and is not be subject to U.S. rules regarding the preparation of research reports and the independence of research analysts. Any resulting transactions should be effected through a U.S. broker-dealer.
ANALYST CERTIFICATION
Company: Silver X Mining Corp. | AGX-TSXV
I, Gabriel Gonzalez, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that I have not, am not, and will not receive, directly or indirectly, compensation in exchange for expressing the specific recommendations or views in this report.
