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Project Overview
The Nueva Recuperada project includes the producing Tangana mine unit (TMU) with a 720 tpd processing plant, the advanced-stage Plata mining unit (PMU), and four exploration projects. Extensive vein fields with 200+ targets, and 500+ outcrop veins
2023 PEA vs 2025 PEA
Earlier this month, the company announced results from an updated PEA, which we view as highly positive. While the previous 2023 PEA focused solely on the TMU, the recent update added the PMU to the plan. The new study confirms the company’s plan to operate two mines, and potentially increase production to 6 Moz per year from the current ~1 Moz. The objective is to have two milling facilities, a new 1,500 tpd mill at Tangana, and the existing Recuperada mill (15 km south of Tangana), which will be expanded from the current 720 tpd to 1,500 tpd. Recuperada will be dedicated to processing ore from PMU.
AT-NPV10% rose 73% to $303M, while AT-IRR improved 30 pp to 69%, driven primarily by expanded operations, and higher metal prices. The study used $33/oz silver, and $12/oz cash costs, vs the current spot price of $44/oz
The average annual production estimate increased 48% to 6.2 Moz AgEq. The PEA accounted for just 64% of resources, indicating further upside for NPV and IRR
Q2 Production and Key Operating Metrics
After peaking in Q3 2024, production has declined QoQ over the past three quarters due to lower throughput, as the company has focused on mining higher-grade areas
Q2 production declined 13% QoQ to 209 Koz AgEq, 15% below our estimate due to lower throughput, partially offset by higher grades. Cash costs rose 5% QoQ due to lower production
Immediate plans include:
Q2 Financials
Revenue grew 2% QoQ on higher metal prices despite lower production, missing our estimate by 7%. Gross margins rose 0.7 pp, 1.7 pp above our forecast, driven by higher metal prices
EBITDA, EPS, and margins improved QoQ, beating our expectations. EPS came in 21% above our estimate
While the company has limited debt, working capital remained negative, primarily due to $23M in accounts payables
Can raise up to C$11M from in-the-money options/warrants
We believe AGX’s balance sheet will be materially strengthened by the ongoing C$21.5M financing, potential proceeds from in the money options and warrants, and projected positive cash flows in 2026.
Comparables Valuation
Junior silver producers are trading at $2.73/oz (previously $1.82/oz), while AGX is trading at just $1.24/oz (previously $0.36/oz), a 55% discount
The forward EV/Revenue of AGX is 2.79x (previously 1.90x) vs the sector average of 3.95x (previously 2.72x), a 29% discount
DCF Valuation
Given higher metal prices, partially offset by lower production, we are raising our EPS estimates
As a result, our DCF valuation increased from C$0.66 to C$0.86/share. Our valuation is highly sensitive to metal prices
We are reiterating our BUY rating, and adjusting our fair value estimate from C$0.76 to C$0.95/share (the average of our DCF and comparables valuations).
Record commodity prices have driven heightened M&A activity, a trend we expect to continue as larger miners pursue strategic acquisitions. AGX’s updated PEA, and ongoing resource expansion drilling, highlight meaningful operational progress, with production potential increasing to 6 Moz/year. Valuation metrics suggest AGX is trading attractively relative to junior silver peers.
Risks
We believe the company is exposed to the following key risks:
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