Silver X Mining Corp. (AGX:TSX.V; AGXPF:OTC) reported Q3/24 production from its Nueva Recuperada mine in Peru, and on the news, Red Cloud Securities lowered its target price on the company to CA$0.80 per share from CA$0.85, reported mining analyst Timothy Lee in an Oct. 25 research note.
This new target implies 122% upside given the Canadian silver miner is currently trading at about CA$0.36 per share, noted Lee.
Silver X remains a Buy.
Review of production figures
Lee discussed the quarterly production results from Nueva Recuperada, where Silver X extracts silver, gold, lead and zinc. The takeaway, the analyst wrote, is the figures show the tonnage mined was consistent but metal production was lower, quarter over quarter (QOQ), and this was due to a lower head grade and a lower gold recovery.
"In our opinion, these are neutral to slightly negative results," Lee commented.
Specifically, in Q3/24, the company mined 42,849 tons, a quantity consistent with tonnage mined in Q2/24 and in line with Red Cloud's estimates. It processed 46,624 tons, including stockpiled material, through the mill. Silver X produced 257,635 ounces of silver equivalent (Ag eq), 9.3% lower than production in the previous quarter and 20% below Red Cloud's forecast.
Lower grades and gold recovery
One reason for lower QOQ metal production was lower grades. The head grade in Q3/24 averaged 220 grams per ton (220 g/t) Ag Eq versus 253 g/t Ag eq in Q2/24.
Decreased gold recovery was another contributor. At 49% in Q3/24, it was down from 67% in Q2/24 and 78% in Q3/23. The cause, Lee explained, was Silver X encountering a section of ore with relatively low gold grades, in which much of the mineralization was associated with refractory sulphide minerals, such as pyrite.
"Silver X typically gets better recoveries from higher gold grades (greater than 1 g/t gold), when more free gold is found," Lee explained. "While gold grades and recoveries are expected to be variable, the 2023 preliminary economic assessment predicted a long-term recovery of 76% gold."
What would be of benefit
Though metal production was down in Q3/24, both it and tonnage mined were higher year over year in the first nine months of 2024, by 30% and 52%, respectively.
Lee noted that a second ore source and higher production would boost production results.
"We are looking for further production ramp-up from the company's ongoing development work in the Tangana Mining Unit as well as potential development at Plata, which could provide a second ore source," Lee commented. "Silver X could benefit significantly from further production ramp-up in this strong precious metals price environment."
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