'One of the Most Important Silver Projects' Advancing: Expert
Research Report

AbraSilver Resource Corp. (ABRA:TSX.V; ABBRF:OTCQX) is rapidly advancing Diablillos in northern Argentina, now positioned "as one of the most important silver projects coming down the pike at a global level" due to several converging events, reported Hallgarten & Co. Mining Strategist Christopher Ecclestone in a lengthy Dec. 16 coverage update.

"The rise of silver (and gold) to new record trading ranges combining with the onset of the Milei Administration (bringing Argentina in from the cold), the burgeoning of infrastructure on the altiplano (prompted by the lithium brine boom) and the publishing of two preliminary feasibility studies (PFSes) in 2024 (each better than the prior one) have collectively given AbraSilver the impetus to move into development mode," Ecclestone explained.

100% Target Upside

AbraSilver is trading now at about CA$2.45 per share, noted Ecclestone. Hallgarten & Co. assigned a target price on the Canadian mineral developer of CA$4.90 per share.

The difference in these prices reflects a potential return for investors of 100%.

AbraSilver remains rated Long.

Project Takeout Potential

According to the analyst, Diablillos, the largest precious metals project available in Argentina, is a prime candidate for miners needing to supplement their project pipeline. Spanning 7,919 hectares, Diablillos consists of 15 contiguous and overlapping mineral leases.

Its estimated Proven and Probable mineral reserves contain 210,000,000 ounces of silver equivalent (210 Moz of Ag eq), or 42,300,000 tons of 91 grams per ton silver (91 g/t Ag) and 0.81 g/t gold (Au).

"Frankly, our target price is predicated upon an offer being received in the next 12 months," Ecclestone wrote. "In any case the management are not waiting for predators to appear and are looking to develop the project under their own steam."

Catalysts to Watch For

The next step for Diablillos is a feasibility study (FS). It will include phase four results from the in-progress, 20,000-meter resource expansion and stepout drill program started in early H2/24, wrote Ecclestone.

From results already available from this campaign, AbraSilver identified multiple new prospective mineralized zones. One is near the JAC zone, identified through stepout hole DDH 24-018, which intersected 31.5m of 277 g/t Ag, including 13.7m of 455 g/t Ag. This intercept confirmed a new significant high-grade mineralized structure at an angle to the main JAC zone, now a top-priority exploration target.

AbraSilver could further enhance Diablillos' economics in the FS in two other ways, Ecclestone noted. It could include the low-cost processing of waste, mineralized material below the cutoff grade, via, say, heap leaching. It could incorporate the sulphide mineralization encountered below the oxide material.

Investors can expect additional drill results in the near term, completion of the FS in H1/26 and possibly an expanded resource in the interim.

Exploration targets close to the planned Oculto-JAC open-pit that warrant additional drilling include Oculto, JAC, Fantasma, Laderas, JAC North, Alpaca. Plus many other targets exist elsewhere within the concession block.

Two Studies Compared

Ecclestone highlighted that the second Diablillos PFS, done in November 2024, shows improved economics, due mostly to higher precious metals prices and the impact of Argentina's new Promotional Regime for Large Investment, or RIGI. According to AbraSilver's management, the latest PFS increases confidence in the project's significant upside potential. The second PFS reflects an optimized mine plan, updated capital and operating costs.

Specifically, the second PFS shows "a massive uplift" in the after-tax net present value discounted at 5% (NPV5%) at US$747 million (US$747M), an internal rate of return (IRR) of 27.6% and a payback period of 2 years, using the updated base case pricing, US$25.50 per ounce (US$25.50/oz) Ag and US$2,050/oz Au.

This compares to the first PFS, indicating a US$494M NPV5%, a 25.6% IRR and a 2.4-year payback period, using the prices, $23.50/oz Ag and US$1,850/oz Au.

Ecclestone pointed out that at today's spot prices, the after-tax NPV5% would be US$1,291M, the IRR, 39.3% and the payback period, 1.5 years.

Costs in the second PFS are US$544M of initial preproduction capex plus another US$77M in sustaining capital over the life of mine (LOM) versus in the first PFS, US$373M and US$65M, respectively.

The average all-in sustaining cost (AISC) in the second PFS is US$12.67/oz Ag eq over the LOM and US$11.23/oz Ag eq over the first five years of full mine production. This compares to average AISC in the first PFS of US$12.40/oz Ag eq over the LOM.

The second PFS outlines an open-pit mine producing n average annual production of 16.4 Moz Ag eq over the first five years of full mine production versus 11.07 Moz in the first PFS. The processing plant has been designed for a nameplate capacity of 9,000 tons per day and targeting high-grade silver and gold mineralization in the mine plan's early years.

Tangible Effects of RIGI

When the financial benefits of Argentina's new RIGI program are applied to Diablillos, the effect is "dramatic for AbraSilver, in a way that few outside investors seem to have grasped," Ecclestone purported.

RIGI benefits, the analyst reiterated, include a reduction of corporate taxes to 25% from 35%, elimination of export duties, removal of all foreign exchange restrictions and provision of value-added tax reimbursement on capital expenditures and tax stability throughout the LOM. Accordingly, in the second PFS, the updated taxes, royalties and export duties amount to US$536M versus US$965M in the previous PFS.

EIA Already Done

Following the first PFS, AbraSilver completed and submitted an environmental impact assessment of Diablillos in early fall. Along with project details from the initial PFS, it included complete environmental baseline studies, air quality, hydrological modelling, flora and fauna characterization and impact evaluation. It also encompassed an analysis of mitigation, controls and benefits "that will be present over the LOM of the project, from construction to final closure."

Hot Mining Location

Diablillos is in Argentina's Salta province, a booming mining region, and sits on the border with the Catamarca province, Ecclestone reported. Also in Salta is First Quantum Minerals Ltd.'s (FM:TSX; FQM:LSE) Taca copper-molybdenum-gold project, which helps expose the potential for precious and base metals projects in the area.

This location, in the Puna region, is the southern extension of the altiplano, or high plateau, of southern Peru, Bolivia and northern Chile, which separates the Cordillera Oriental to the east and the Andean Cordillera (Cordillera Occidental) to the west.

The Diablillos concessions cover highly prospective porphyry occurrences. Also, they abut and cover two lithium salt pans, the Salar de Hombre Muerto and the Salar de Diablillos.

"The proliferation of lithium projects in the zone has brought a wealth of infrastructure which mitigates some of the capex that AbraSilver would otherwise have to install," Ecclestone wrote.

Two Strategic Investors

Earlier this year, AbraSilver gained two strategic investors, Kinross Gold Corp. (K:TSX; KGC:NYSE) and an affiliate of Central Puerto SA (CEPU:NYSE), a local privatized power generator, when each invested CA$10M. As a result, each of these two companies has a 4% interest in AbraSilver.

Subsequently, AbraSilver and Kinross formed a regional partnership to jointly explore for and acquire new silver, gold and copper-focused projects in Argentina.

"This could have relevance back to the porphyry element of the Diablillos concession area," added Ecclestone.

Other Company Data

As of Sept. 30, 2024, reported Ecclestone, AbraSilver had CA$14M in cash. Added to this is the CA$3.7M of warrant proceeds it generated since.

On the date of the analyst's report, the company had 128.3 million shares outstanding and a CA$314.34M market cap. Its 52-week share price range was CA$1.30–3.58.