Silver X Mining Corp. (AGX:TSX.V) is now part of Echelon Capital Markets' coverage universe given the producer is on the cusp of commercial production, and has growth plans and exploration potential, reported analyst Gabriel Gonzalez in a Dec. 9 research note.
The investment bank just initiated coverage on Silver X with a Speculative Buy rating and a CA$1 per share price target. The latter represents about a 222% projected return from the miner's current share price of about CA$0.31.
Gonzalez presented Echelon's investment thesis on Silver X, which he described as "an emerging junior silver producer focused on near-term positive cash flow and production growth at its Nueva Recuperada project in Peru."
Now in commercial preproduction, Silver X plans to ramp up production at its flagship silver-zinc-lead project in Peru at least through the next three to four years, noted Gonzalez. The first goal is completion of an in-progress expansion to 720 tons per day (tpd) of output from 600 tpd, which should move the company into positive cash flow territory in early Q1/22.
Then in about mid-H1/22, the company aims to commence commercial production, Gonzalez relayed and during next year will produce 1,800,000 ounces (1.8 Moz) of silver equivalent (Ag eq), Echelon forecasts. With an estimated all-in sustaining cost of $17–18 per ounce of Ag eq, this would generate about $8.1 million in EBITDA.
Subsequently, management intends to further boost production to 2,500 tpd by 2024-2025, yielding about 6–7 Moz of Ag eq per year, according to Echelon's estimates.
Gonzalez highlighted that Silver X has significant potential to grow the district and its current mineral resource. After many acquisitions and agreements, the miner now has a consolidated land package of about 15,000 hectares and an Inferred resource of 7,300,000 tons of 131 grams per ton of silver equivalent. The company is currently conducting a 25,000 meter drill program, aiming to expand and upgrade resources and make new discoveries.
"Aside from Nueva Recuperada and the company's current exploration/development pipeline, management continues looking for additional opportunities to further grow the company," Gonzalez wrote.
Finally, the analyst pointed out that Silver X stock is "still flying under investors' radar" and trading at a discount, about 0.2 times Echelon's net asset value (NAV) for it versus where sector peers are trading, at 0.8 times NAV. However, Echelon expects Silver X to rerate once it starts generating positive cash flow and the story gets more attention.
"With the ramp-up of production, delivery of positive cash flow, increased resource confidence with an updated resource and preliminary economic assessment in H1/22, we see the current valuation as a potentially rewarding risk-return proposition," Gonzalez wrote.
1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
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Important Disclaimers for Echelon Wealth Partners Inc., Silver X Mining Corp., Dec. 9, 2021
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U.S. Disclosures: This research report was prepared by Echelon Wealth Partners Inc., a member of the Investment Industry Regulatory Organization of Canada and the Canadian Investor Protection Fund. This report does not constitute an offer to sell or the solicitation of an offer to buy any of the securities discussed herein. Echelon Wealth Partners Inc. is not registered as a broker-dealer in the United States and is not be subject to U.S. rules regarding the preparation of research reports and the independence of research analysts. Any resulting transactions should be effected through a U.S. broker-dealer.
U.K. Disclosures: This research report was prepared by Echelon Wealth Partners Inc., a member of the Investment Industry Regulatory Organization of Canada and the Canadian Investor Protection Fund. ECHELON WEALTH PARTNERS INC. IS NOT SUBJECT TO U.K. RULES WITH REGARD TO THE PREPARATION OF RESEARCH REPORTS AND THE INDEPENDENCE OF ANALYSTS. The contents hereof are intended solely for the use of, and may only be issued or passed onto persons described in part VI of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001. This report does not constitute an offer to sell or the solicitation of an offer to buy any of the securities discussed herein.
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ANALYST CERTIFICATION: I, Gabriel Gonzalez, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that I have not, am not, and will not receive, directly or indirectly, compensation in exchange for expressing the specific recommendations or views in this report.
Does the Analyst or any member of the Analyst’s household have a financial interest in the securities of the subject issuer? No.
The name of any partner, director, officer, employee or agent of the Dealer Member who is an officer, director or employee of the issuer, or who serves in any advisory capacity to the issuer. None.
Does Echelon Wealth Partners Inc. or the Analyst have any actual material conflicts of interest with the issuer? No.
Does Echelon Wealth Partners Inc. and/or one or more entities affiliated with Echelon Wealth Partners Inc. beneficially own common shares (or any other class of common equity securities) of this issuer which constitutes more than 1% of the presently issued and outstanding shares of the issuer? No.
During the last 12 months, has Echelon Wealth Partners Inc. provided financial advice to and/or, either on its own or as a syndicate member, participated in a public offering, or private placement of securities of this issuer? Yes.
During the last 12 months, has Echelon Wealth Partners Inc. received compensation for having provided investment banking or related services to this Issuer? Yes.
Has the Analyst had an onsite visit with the Issuer within the last 12 months? Nueva Recuperada Project. Peru. October 28-30, 2021. Yes.
Has the Analyst or any Partner, Director or Officer been compensated for travel expenses incurred as a result of an onsite visit with the Issuer within the last 12 months? No.
Has the Analyst received any compensation from the subject company in the past 12 months? No.
Is Echelon Wealth Partners Inc. a market maker in the issuer’s securities at the date of this report? No.