Outcrop Silver & Gold Corp. (OCG:TSX.V; OCGSF:OTCQX; MRG1:DB) has released its maiden mineral resource estimate (MRE) for its 100%-owned flagship Santa Ana project in Colombia.
Initial indicated resources are estimated at 1.2 million tonnes grading 614 grams per tonne silver equivalent (g/t Ag eq), containing 24.1 million ounces (Moz) Ag eq. Initial inferred resources are estimated at 966,000 tonnes grading 435 g/t Ag eq, containing 13.5 Moz Ag eq.
Analyst Stuart McDougall of Research Capital Corp. noted in a table in an updated research note on April 27 that the resource's overall grade of 530 g/t Ag eq compared favorably to peers, such as Blackrock Silver Corp. (BRC:TSX.V; BKRRF:OTCQX) with 389 g/t Ag eq, Dolly Varden Silver Corp. (DV:TSX.V; DOLLF:OTCQX) with 294 g/t Ag eq, and Vizsla Silver Corp. (VZLA:NYSE American) with 427 g/t Ag eq.
"On a comparable basis, we think the maiden estimates stacks up well against similar projects," McDougall wrote, reiterating his Speculative Buy rating on the stock with a CA$0.75 target price per share.
A total of 64% of the resource was classified as indicated, compared to 54% for Dolly Varden's estimate and 45% for Vizsla, according to McDougall's data. The Outcrop MRE also has an M&I EV/ounce Ag of $2.23 compared to $5.35 median for its peers, including Blackrock, Dolly Varden, Vizsla, and Kuya Silver Corp. (KUYA:CSE: KUYAF:OTCQB)
According to the data provided by McDougall, OCG's resource has the third largest number of ounces among its explorer peers with 37.6 million silver equivalent ounces (SEO) after Vizsla with 201.8 million SEO and Dolly Varden with 90.9 million SEO. Blackrock has 37.1 million SEO.
Analyst Stuart McDougall of Research Capital Corp. noted that the resource's overall grade of 530 g/t Ag eq compared favorably to peers, such as Blackrock Silver Corp.
Resources were calculated using a 158 g/t Ag eq cut-off grade and minimum vein width of 1.0 meter, Outcrop said. Only 17% of the mapped veins at the project have been drilled.
The MRE's results create "the measurable potential for a sizable project," said Vice President of Exploration Guillermo Hernandez. "As we advance, we will continue significantly enhancing our resource endowment. We are confident in the strong resource growth potential with multiple targets in the next phase of our exploration drilling."
Outcrop said dozens of additional veins have been identified on the project and form a high-grade silver-enriched trend that extends for 30 kilometers. The veins are drill-permitted and will be drilled in 2023, and the results will be added to the established resource.
Resources from the project have highly commercial flotation concentrate grades of 12,133 g/t Ag and 172 g/t gold (Au), with recoveries of 93.4% Ag and 96.7% Au, the company said.
The Catalyst: 'Excellent Exploration Upside Potential'
"Santa Ana has excellent exploration upside potential," Outcrop noted in its release.
McDougall noted that each of the veins included in the MRE remains open along strike and at depth.
"We see strong potential for growth and are keeping our valuation goalpost at 50 Moz Ag," McDougall wrote.
"We see strong potential for growth and are keeping our valuation goalpost at 50 Moz Ag," he wrote. "Furthermore, OCG has identified dozens more veins with similar characteristics as those in the resource area, either by scout drilling, geological mapping, or underground sampling."
Santa Ana covers 27,000 hectares, a significant part of the Mariquita District, where mining records date to at least 1585. The district was once the highest-grade primary silver district in Colombia, the company said.
Spanish Royal Archives reports said the area historically 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.
Silver Vital in the Green Economy
Asset manager and author of the What is Chen Buying? What is Chen Selling? newsletter Chen Lin is bullish on silver this year, saying the precious metal will be vital in the green economy transition. He said he was watching Outcrop closely.
The global silver market will see a compound annual growth rate (CAGR) of 9.83% through 2030, according to Market Research Future.
Silver is great at coating electrical contacts. Almost all computers, phones, cars, and appliances contain the metal. It's also in high demand for use in solar panels. Because of this, the Silver Institute predicted global demand for silver would reach a new high of 1.21 billion ounces in 2022, up 16% from the preceding year.
The global silver market will see a compound annual growth rate (CAGR) of 9.83% through 2030, according to Market Research Future.
"Physical investment (in silver) in 2022 (was) on track to jump by 18% to 329 Moz, which would also be a new record," the report said.
Industrial demand for the metal, including for vehicle electrification and other green technologies, is on course to grow to 539 Moz, it said.
Streetwise Ownership Overview*
Outcrop Silver & Gold Corp. (OCG:TSX.V; OCGSF:OTCQX; MRG1:DB)
"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's authors wrote.
Ownership 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.
Major inside shareholders include Executive Chairman of the Board Ian Slater, with about 10.1% or 20 million shares, and Chief Executive Officer Joseph Hebert, with 0.95% or 1.88 million shares, according to Reuters.
Outcrop has a market cap of CA$70.11 million with 197.6 million shares outstanding and 148.5 million free-floating. It trades in a 52-week range of CA$0.43 and CA$0.10.
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