Disclosure: Southern Silver Exploration Corp. has paid FRC a fee for research coverage and distribution of reports. See last page for other important disclosures, rating, and risk definitions.
Price Performance (1-year)
*See important disclosures at the bottom of this report rating and risk definitions. All figures in C$ unless otherwise specified.
Compared to the 2022 PEA, the updated PEA incorporated several improvements, with the most notable being an updated 2023 resource estimate, and higher throughput rate, leading to increased annual production and CAPEX.
Located in a well-established mining district near several majors. CLM hosts a classic silver-lead-zinc CRD/skarn system similar to major polymetallic deposits in Mexico
NPV and IRR increased primarily due to resource expansion, and higher annual production, partially offset by the impact of higher CAPEX
The study returned an AT-NPV5% of US$501M, and an AT-NPV10% of US$258M, using US$23/oz silver vs the spot price of US$31/oz
Source: Company
The AT-NPV5% increases to $931M using spot prices. Anticipated life-of-mine sales of 194 Moz AgEq over 17 years (11.4 Moz/year), at an AISC (all-in-sustaining costs) of US$13.23/oz.
The project's higher production in its early years is a key advantage. CLM hosts a large polymetallic deposit with relatively high-grade silver resources, and low-grade zinc, gold, copper, and lead
It is anticipated that silver will account for 43% of the project’s revenue, followed by zinc (35%), lead (13%), copper (7%), and gold (2%)
Resources are spread across seven zones (Blind, El Sol, Las Victorias, North Felsite, Bocona, Skarn Front, and South Skarn.
We believe there is resource expansion potential as the deposits remain open laterally, and at depth. SSV is planning a 25,000 m drill program this year aimed at potentially expanding resources by 10%-20%
Healthy balance sheet. SSV is currently pursuing a $3.5M equity financing
In-the-money options and warrants can bring in up to $4.56M
SSV is trading at $0.38 per AgEq oz (previously $0.30) vs the sector average of $0.87/oz (previously $0.72/oz
Applying $0.87/oz, we arrived at a revised fair value estimate of $0.66/share (previously $0.62/share)
After incorporating updated inputs from the PEA, our DCF valuation increased from $0.46 to $0.54/share
We are reiterating our BUY rating, and raising our fair value estimate from $0.54 per share to $0.60/share (the average of our DCF and comparables valuations). Upcoming catalysts include financing, and our positive outlook on gold/silver juniors.
We believe the company is exposed to the following key risks (not exhaustive):
