- Earnings inflection: Q1 revenue +39% QoQ, 8% above our estimate, driven by higher metal prices. EPS improved QoQ to $0.016 from ($0.017) vs our forecast of $0.0035.
- New acquisitions: Acquired two early-stage regional projects, one silver-rich polymetallic project, and one gold project. Both are being evaluated as potential standalone operations, with dedicated processing facilities.
- Long-term growth optionality: 40,000 m drill program, the largest in company history, targeting resource growth and advancement of multiple regional targets to production.
- Favorable silver market: Despite the recent pullback in silver prices, we believe stable interest rates, elevated inflation, and continued safe-haven demand should support prices through 2026. We believe the new Fed Chair may be inclined to keep rates unchanged, balancing inflationary pressures with the administration's preference for lower rates. Furthermore, the Silver Institute expects the silver market to remain in a deficit for a sixth consecutive year in 2026.
- Compelling valuation: AGX trades at an average 54% discount to junior silver miners on forward EV/Revenue and EV/EBITDA, suggesting its growth profile is not fully reflected in the share price.
Price and Volume (1-year)
| |
YTD |
12M |
| AGX |
-40% |
152% |
| TSXV |
-4% |
33% |
| SILJ |
1% |
87% |
| Silver |
-14% |
79% |
* QP: A. David Heyl, C.P.G., Consultant for Silver X Mining. Silver X Mining has paid FRC a fee for research coverage and distribution of reports. See last page for other important disclosures, rating, and risk definitions. All figures in US$ unless, except for share price, fair value estimates, and MCAP data, which are in C$.
Portfolio includes the producing TMU, advanced-stage PMU, Red Silver and Blenda Rubia targets, and 200+ exploration targets, all within the Huancavelica region of Peru
Portfolio Overview
District-scale consolidation provides infrastructure synergies, lower CAPEX/OPEX, and an accelerated path from exploration to production
Source: FRC
AGX plans to operate two 1,500 tpd milling facilities: a new mill at Tangana and the expanded Recuperada mill, which is scheduled to increase from 720 tpd to 1,000 tpd in Q3-2026 (permitted) and ultimately to 1,500 tpd upon receipt of permits
The 2025 PEA highlights the potential to increase annual production from ~1 Moz to 6+ Moz
AT-NPV10% of $303M, using $33/oz silver (spot: $66/oz), and $12/oz in cash costs
Source: Company
The PEA accounted for just 64% of resources, indicating further upside for NPV and IRR
Production and Key Operating Metrics
Source: Company
Q1 production was in line with our estimate
Silver production +9% QoQ to 106 koz
AgEq production fell 9% QoQ to 180 koz
Silver production rose on higher grades, but AgEq output fell as higher silver prices lowered by-product metal conversions
We expect grades across all metals to improve going forward as Q1 grades were materially below resource model assumptions
Source: FRC/Company
Cash costs rose 25% QoQ, driven by higher royalties resulting from stronger metal prices, in line with our estimate
Source: FRC
Targeting annual production of 6 Moz AgEq by 2029, potentially sourcing ore from TMU, PMU, Red Silver, and Blenda Rubia
Evaluating newly acquired projects as potential standalone operations with dedicated processing facilities
Financials
Revenue +39% QoQ on higher production, and stronger metal prices exceeding our estimate by 8%
EBITDA +146% QoQ; 14% above our forecast
Source: FRC
EPS turned positive for the first time: ($0.017) → $0.016 vs. our forecast of $0.0035
Margins significantly above sector averages
Operating cash flow increased sharply; FCF declined due to higher exploration spending, property & equipment investments, and acquisitions
Cash balance increased significantly, driven by $50M convertible debt refinancing completed in Q1
Source: FRC / Company
Can raise another $17M from in-the-money options/warrants
FRC Projections
Given the recent pullback in metal prices, we are lowering our 2026 revenue and EPS forecasts
Source: FRC
We are also trimming our production forecasts slightly as our previous ramp-up timeline was a bit aggressive
Comparables Valuation
AGX’s forward EV/Revenue is 1.45x (previously 1.57x) vs the sector average of 3.72x (previously 3.64x), a 61% discount
Source: FRC / S&P Capital IQ / Various
AGX’s forward EV/EBITDA is 3.13x (previous 3.40x) vs the sector average of 6.00x (previously 6.04x), a 48% discount
Applying the sector averages, we arrived at a comparable valuation of $1.81/share (previously $1.88/share), driven by our lower revenue and EBITDA forecasts
DCF Valuation
Source: FRC
Our DCF valuation declined from $1.20 to $1.18/share, driven by lower revenue forecasts and partly offset by a weaker US$
We are reiterating our BUY rating, and adjusting our fair value estimate from $1.54 to $1.49/share (the average of our DCF and comparables valuations). While we have slightly lowered our production forecasts, AGX continues to execute well, with production, earnings, and liquidity all trending positively. We believe its growth potential and attractive valuation are not fully reflected in the current share price.
Risks
We believe the company is exposed to the following key risks:
- Metal prices
- Exploration and development
- FOREX
- Production ramp-up may be slower than expected
- OPEX and recovery rates may underperform assumptions in our models
Maintaining our risk rating of 4 (Speculative)
APPENDIX
