Mining Stock Opportunity - Silver Developer/Explorer
This is one of my largest holdings and it continues to get more and more undervalued I see a nice opportunity ahead.
Southern Silver has been a position I have been in since the silver squeeze mania of early 2021. I have continued to add to the position recently as it has gotten cheaper than I could have imagined, this is the case for most small silver explorers/developers. At the current share price of .14 cents and a 40 million Canadian Market cap, the risk/reward is heavily skewed in your favour.
Okay so let’s get into why I like the stock. The companies main project Cerro Las Mintas is located in Mexico in the Durango Province. Mexico is the number one silver producing country right now in the world. There is many other projects and mines in the area, including some of the mid-tier producers.
The project is very large at over 340 square kilometres so far they has identified six high-grade silver-polymetallic deposits, and there is many more high priority targets that will be explored. There has been alot of nice exploration done already over the last few years. They did a resource estimate in 2021 and the numbers didn’t disappoint at over 137 million oz Indicated and 198 million oz inferred.
There isn’t many silver developers with these kind of numbers, this is going to be a huge mine that runs for 15+ years and I believe it will be built these decade. I like companies with proven ounces in the ground and exploration upside and in my opinion this resource gives you huge leverage to the silver price in a coming bull market, the company released a PEA a couple months ago and it gives you a good idea of what the economics and possibilities could be.
At $22 silver the project is worth over $450 million Canadian after tax, at $25 that number becomes $730 million Canadian. This is what I am talking about when I say the project has huge leverage to the silver price. The current valuation of this company is $40 million Canadian, to me this is a no brainer as long as you believe silver is going back into the twenties.
The CapEx costs are very reasonable on the project, there is more exploration upside here as well, I believe the company will still be able to add lots of ounces, making the economics even more intriguing. There is some other base metals that will be mined as well with Zinc being the largest and some copper + lead. I believe we are headed into a commodity super cycle, the other metal inputs have the potential to give the project even more leverage.
The project is close to the city of Durango and is easily accessible with infrastructure in place already. This is very important, as it will reduce alot of costs down the line. There is mining projects in British Colombia for example, where roads need to be built and projects can only be accessed certain times of the year by helicopter. It creates alot more risks and adds to CapEx and operating costs. This is another bonus for this project.
The image below gives you an idea of how accessible the project is and how close it is to infrastructure. Looks pretty mineable to me.
The company also owns 2 properties in New Mexico, both are early exploration projects. They are currently drilling 4000 metres at the Oro Project in search of copper/gold. This is another bonus and only adds to the upside.
Okay now let’s have a look at the weekly chart going back to 2016.
The company got as high as .70 cents when silver was trading around that $28 level last year. It is currently back to levels not seen since the covid panic of 2020. There isn’t much downside left here, maybe it gets a couple cents cheaper, but at 40 million market cap this is one hell of a bargain. I continue to add and expect this to be a multi-bagger for me when silver starts moving back into the twenties.
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