Silver X Mining Corp. (AGX:TSX.V; AGXPF:OTC) had analyst coverage on it resumed recently by Fundamental Research Corp. (FRC) Head of Research Sid Rajeev, with a Buy rating and CA$0.98 per share fair market value, he reported in a Feb. 28 research note.
"We believe Silver X offers a compelling value proposition, driven by its substantial resource growth, ability to ramp up production quickly and significant discount to peer valuations," Rajeev wrote.
838% Implied Return
With a current share price of about CA$0.16, noted Rajeev, Silver X is trading at just CA$0.30 per ounce (CA$0.30/oz), at a discount to the average of junior silver producers, at CA$1.50/oz.
FRC's CA$0.98 per share fair value estimate on the silver producer reflects a potential return for investors of 838%.
Silver X is a Buy.
What to Know
Rajeev presented the highlights of the Silver X investment story. Along with a project so large that it's divided into subprojects, the company is endowed with an existing mineral resource estimate, an active silver-polymetallic mine and the determination to increase production materially.
The British Columbia-based company owns the fully permitted Nueva Recuperada project, spanning 20,472 hectares in Peru, the world's third largest silver producer. The project comprises a producing mine, the Tangana Mining Unit; one development-stage asset, the Plata Mining Unit; and four exploration projects.
At this property, reported Rajeev, featuring low to intermediate sulfidation epithermal vein deposits, previous exploration identified about 200 targets and 500 outcrop veins that could host medium- to high-grade silver-rich polymetallic mineralization.
Resource, Expansion Upside
Silver X just updated the Nueva Recuperada resource estimate. The new global resource is 208,000,000 ounces of silver equivalent (208 Moz Ag eq), 40% greater than the previous, 2022, estimate. Tangana accounts for 70% of the updated resource, Plata the remaining 30%.
Also, Rajeev pointed out, the resource mineralization remains open at depth, and the company has identified more high-grade targets.
"We believe there is significant resource expansion potential, with the property's three main units (Tangana, Plata and Red Silver) hosting multiple veins not factored into the current resource," he added.
A preliminary economic assessment (PEA) was done on the Tangana Mining Unit in 2023 that showed "promising economics," according to the analyst. He noted, though, the study was conservative because it only took into account less than 40% of Nueva Recuperada's resources. In the PEA, the after-tax net present value discounted at 10% was US$175 million (US$175M) and the after-tax internal rate of return was high at 39%. These economics were based on a silver price of US$23/oz; today's silver price is about US$31/oz.
Past, Future Production
Today, Silver X is mining the Tangana Main vein area that represents only 5% of the Tangana Mining Unit resource. In the first three quarters of 2024, the operation produced 800,000 ounces of Ag eq, a 34% year-over-year increase. Commercial production started there in January 2023.
"Management aims to reach annual production of 6 Moz by 2028 (CA$186M in revenue based on the current spot price)," Rajeev reported. This is about a 500% increase to current production.
"We forecast a significant boost in revenue and earnings per share for 2025, driven by Silver X's ability to ramp up production."
The company is looking to quadruple current processing capacity, which would involve doubling capacity of the existing facility to 1,500 tons per day (1.5 Ktpd) and building a second 1.5 Ktpd facility.
Now EBITDA Positive
Regarding its financial position, last year was pivotal for Silver X as it turned EBITDA positive, the analyst noted. In the first nine months of 2024, the company's revenue was 41% higher and its net loss was 16% lower, YOY. Working capital, however, at the end of Q3/24 was negative, mostly because of CA$20M in payables. The miner now is pursuing a CA$3M equity financing
"Although Silver X's negative working capital is a concern, we believe it should be able to extend payables and/or secure debt financing this year given its strong production growth plan," commented Rajeev.
What to Watch For
Rajeev provided the events that could catalyze Silver X's stock price. An updated PEA, including both the Tangana and Plata mining units, is expected by Q2/25. The start of production at Plata is targeted for 2026.
Events related to increasing processing capacity include a feasibility study of an expansion, updating the Environmental and Social Impact Assessment to reflect the greater capacity and securing permits to build another plant.
Share Structure
Silver X has 202 million shares outstanding. Its market cap is CA$32M. Its 52-week range is CA$0.15−0.38 per share.
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