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 was trading at the time of the report 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 sulfide 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 the 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 an 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 targets 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 modeling, 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 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.
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Important Disclosures:
- AbraSilver Resource Corp. is a billboard sponsor of Streetwise Reports and pays SWR a monthly sponsorship fee between US$4,000 and US$5,000.
- Doresa Banning wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor/employee.
- This article does not constitute investment advice and is not a solicitation for any investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Each reader is encouraged to consult with his or her personal financial adviser and perform their own comprehensive investment research. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company.
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Disclosures for Hallgarten & Co., AbraSilver Resource Corp., December 16, 2024
I, Christopher Ecclestone, hereby certify that the views expressed in this research report accurately reflect my personal views about the subject securities and issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or view expressed in this research report. Hallgarten’s Equity Research rating system consists of LONG, SHORT and NEUTRAL recommendations. LONG suggests capital appreciation to our target price during the next twelve months, while SHORT suggests capital depreciation to our target price during the next twelve months. NEUTRAL denotes a stock that is not likely to provide outstanding performance in either direction during the next twelve months, or it is a stock that we do not wish to place a rating on at the present time. Information contained herein is based on sources that we believe to be reliable, but we do not guarantee their accuracy. Prices and opinions concerning the composition of market sectors included in this report reflect the judgments of this date and are subject to change without notice. This report is for information purposes only and is not intended as an offer to sell or as a solicitation to buy securities. Hallgarten & Company or persons associated do not own securities of the securities described herein and may not make purchases or sales within one month, before or after, the publication of this report. Hallgarten policy does not permit any analyst to own shares in any company that he/she covers. Additional information is available upon request. Hallgarten & Company acts as a strategic consultant to AbraSilver and as such is/was compensated for those services but does not hold any stock in the company nor does it have the right to hold any stock in the future. © 2024 Hallgarten & Company Ltd. All rights reserved. Reprints of Hallgarten reports are prohibited without permission. Web access at: Research: www.hallgartenco.com 60 Madison Ave, 6th Floor, New York, NY, 10010
