Guanajuato Silver Co. (GSVR:TSX.V; GSVRF:OTCQX), on its way to becoming a leading producer in Mexico's eponymous mining district, caught the attention of Echelon Capital Markets, which launched research coverage on it, analyst Gabriel Gonzalez reported in an April 20 initiation note.

"From just one mine and plant producing 2,100,000 ounces of silver equivalent (2.1 Moz Ag eq) at a US$20.89 per ounce ($20.89/oz) all in sustaining cost (AISC) in 2022, we look for production of close to 6 Moz Ag eq per year with sub-US$18/oz AISC by 2024 from four mines and three plants, with management also focused on additional growth opportunities through further district consolidations and mergers and acquisitions opportunities," Echelon's Gonzalez wrote.

Echelon initiated on Guanajuato Silver with a Speculative Buy rating and a CA$0.85 per share target price. The target implies a potential 41.7% return, given the Canadian silver explorer is currently trading at about CA$0.60 per share.

What the Company Does

Guanajuato Silver acquires and breathes life back into mining projects, overbuilt or overlooked by past operators, in Mexico's Guanajuato silver district.

Once a new project is part of its portfolio, the company optimizes the operation, rapidly improves productivity, and seeks to extend the mine life through exploration and new mineralization sources.

Advancement of Acquired Projects

Most recently, in mid-2022, Guanajuato Silver acquired shuttered Valenciana and San Ignacio mines, the Cata plant, as well as the Topia mine and Durango processing plant. Within six months, the company had restarted production at Valenciana and San Ignacio. It plans to expand production at Topia over 18 months to 12,000 tons per month from 7,500 tons and, for Valenciana and San Ignacio, implement underground hydraulic backfill storage. Recent drilling returned encouraging high-grade results: 1,219 grams per ton (1,219 g/t Ag eq) over 6.45 meters (6.45m) at San Ignacio and 1,375 g/t Ag eq over 3.2m at Topia.

In late 2020, Guanajuato Silver acquired the El Cubo mine and processing plant. It restarted production there in late 2021, on time and budget, and began exploration work, which has been successful. The company is getting permits to add a dry stack tailings processing and storage facility. Production at El Cubo has grown from 0.2 Moz Ag eq in 2021 to 2.1 Moz Ag eq in 2022, and the company guided to 4.6–4.8 Moz Ag eq for this year.

"Based only on currently defined, pre-acquisition Measured and Indicated and Inferred resources, we estimate that the company has approximately five years' worth of production visibility at El Cubo, seven years at Valenciana, six years at San Ignacio and approximately six years at Topia," Gonzalez wrote.

Finances, Share Ownership

As for capital, Guanajuato Silver recently raised CA$8.5 million (CA$8.5M) and refinanced CA$5M. Thus, it is well-funded to deliver the production ramp-up at Valenciana and San Ignacio. If successful, it should provide enough cash flow for the miner to start reducing its debt.

In terms of owners, insiders (management, directors, and advisers) own 3.9% of Guanajuato Silver. Other notable owners are Endeavour Silver, with an 8.8% stake, Great Panther Mining having 8.1%, and Eric Sprott holding 2.1%. The top institutional investor, Myrmikan Capital, at 7.5%, is an insider, too, given its CEO, Daniel Oliver, is a Guanajuato Silver director.

Experienced Leadership

The mining company's Vancouver-based executive suite and its management team in Mexico have a solid track record of execution and experience, including, for some, involvement in developing First Majestic Silver.

James Anderson is Guanajuato Silver's chairman and chief executive officer. Through 19 years of working with several Canadian investment firms, he gained significant experience as a retail broker, investment banker, and manager.

President and Director Ramón Dávila, based in Mexico, was First Majestic's chief operating officer and board member from 2004 to 2014.

Chief Financial Officer Lisa Dea has 20 years of experience in the finance, securities, and accounting fields.

Hernán Dorado Smith, the chief operating officer, is a fifth-generation mining engineer with 15 years of underground and open-pit mining experience, including extensive knowledge of the El Pinguico mine in Guanajuato. He has worked on many major mining projects.

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Disclosures for Echelon Capital Markets, Guanajuato Silver Company Ltd., April 20, 2023

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ANALYST CERTIFICATION
Company: Guanajuato Silver Company Ltd. | GSVR: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. 

Important Disclosures: 

During the last 12 months, Echelon Wealth Partners Inc. provided financial advice to and/or, either on its own or as a syndicate member, participated in a public offering, or private placement of securities of this issuer. During the last 12 months, Echelon Wealth Partners Inc. received compensation for having provided investment banking or related services to this Issuer. The Analyst had an onsite visit with the Issuer within the last 12 months. (Guanajuato District Operations; Oct. 10-12, 2022).