Secular precious metals bull markets don't come around often, so when they do, you want to wring out every last drop of profits.
That means you need to employ leverage to maximize your gains.
It's a step-by-step process, beginning with the fundamental, macro story.
To wit: Are governments going to continue to shower their economies with newly created currency, more and more debt, and seemingly unrestrained spending?
You bet.
Will the growing mountains of debt require continued ultra-low interest rates going forward? Even negative rates after adjusting for inflation?
Absolutely.
And does this mean the price of gold will rise considerably over the coming years?
It seems assuredly so—and even more likely given gold's recent rebound from its correction lows.
Given all that, how do you leverage this historic, multiyear gold bull market for maximum gains?
The easy answer is the metal that has always leveraged gold in markets like this: silver.
But it doesn't end there. . .because you can leverage the move once again, with silver juniors.
These companies can multiply the moves in silver, which in turn leverages the moves in gold.
You get the picture. Now your job is to find the best silver junior companies.
And in this regard, one name is standing out right now: Aftermath Silver Ltd. (AAG:TSX.V) and its three underappreciated silver projects.
A Rare Bird In The Silver Space
It's not hard to understand why silver naturally outperforms gold in a secular bull market.
For one thing, it trades at a fraction of gold's price, which means the percentage gains for silver are much greater when silver prices begin to run.
Even though silver's uses are primarily industrial, it retains its historic status in investors' minds as a monetary metal.
Thus, when gold prices begin to run, silver typically begins to run in sympathy.
And when investors start scanning the space for equities that can leverage a run in silver, they will find only a small group of candidates.
That's because most silver is produced as a byproduct of base metal deposits, meaning projects with silver-forward mineralization are rare.
Within that already tiny universe of companies, Aftermath Silver and its millions of ounces of silver resources stand out.
New Acquisition Fits Strategy to a Tee
Company President and CEO Ralph Rushton sums up the Aftermath Silver story nicely: "This is not a grassroots situation. We have built an early-stage, pure-silver play with three projects and a growth curve ahead of it."
Those three projects began with two primary silver projects in Chile: Challocollo and Cachinal.
To those Aftermath has just added what looks to be a flagship project in Peru called Berenguela.
Aftermath's recently acquired Berenguela project in southern Peru is situated close to key infrastructure including a port.
Aftermath is purchasing a 100% interest in the Peruvian company that owns Berenguela from SSR Mining Inc. (SSRM:NASDAQ) for US$12.7 million in cash and CA$3.4 million in shares. SSR will also retain small royalties, which Aftermath can buy on a sliding pricing scale.
Because SSR's previous optioner was an Australian company, the most recent resource estimate for Berenguela was JORC-compliant, but not compliant according to Canada's NI 43-101 standards.
Still, that Australian-compliant resource, compiled in 2018, demonstrates the potential. The study posits a Measured and Indicated resource of 98.7 million ounces of silver and 624.5 million pounds of copper (35.9 million tonnes of 85 g/t silver and 0.79% copper). It also contains an Inferred resource of 28.2 million ounces of silver and 147.2 million pounds of copper (10.0 million tonnes of 88 g/t silver and 0.67% copper).
The company cautions that an independent Qualified Person (QP), as defined in National Instrument 43-101 (NI 43-101), has not yet completed sufficient work on behalf of Aftermath Silver to classify the Berenguela historic estimate as a current Measured, Indicated or Inferred mineral resource, and Aftermath Silver is not treating the historical estimate as a current mineral resource. Aftermath Silver will need to validate previous work to produce a mineral resource that is current for CIM purposes.
1. For full details see Valor Resources news release dated 30 January 2018 to the Australian Stock Exchange (ASX), which summarizes the results presented in report titled "Technical Report and Updated Resource Estimate on the Berenguela Project, Department of Puno—Peru, JORC—2012 Compliance" to Valor Resources by Mr. Marcelo Batelochi, independent consultant, MAusIMM Competent Person.
2. JORC 2012 definitions were followed for the Historic Mineral Resources.
3. Grades are estimated by the Ordinary Kriging interpolation method using capped composite samples.
4. Bulk density has been estimated by Nearest Neighbor method and the average value is 2.82g/cm3.
5. The Historic Mineral Resources uses a copper equivalent cutoff of 0.5%, copper equivalents (CuEq) were based on the formula CuEq (%) = Cu (%) + ([Ag (g/t) / 10000] in ounces x Ag price x silver recovery) / (Cu price x Cu recovery) + (Zn% x Zn price x Zn recovery) / (Cu price x Cu recovery). Assuming: Ag (silver) price $16.795/oz and Zn $3,150/t and recoveries of Ag 50%, Cu 85% and Zn 80%. Mn grades are not considered for CuEq calculations.
6. Numbers may not add/multiply due to rounding.
The historic resource gives Aftermath a big head start as it begins the work to complete an NI 43-101 prefeasibility study on Berenguela, which will go a long way to establishing the economics associated with the project.
The Smart Money Is Betting on Aftermath
True kingmakers are rare in the mining sector, but Eric Sprott is certainly one of them.
In this latest run for the precious metals, Sprott has been making strategic bets on a variety of companies. . .and hordes of generalist investors have tended to follow his lead.
Bear that in mind when you consider that he participated heavily in the non-brokered private placement Aftermath Silver announced in August and closed in September.
Between the announcement and the closing of the deal, the placement was upsized from CA$12.5 million to CA$17.1 million. Sprott increased his participation in the transaction so that he remains the company's lead shareholder, with a 19.6% interest.
Clearly, Sprott sees what other farsighted investors see in Aftermath: a unique silver play with not one, but two potentially large silver development projects, led by a management team with a strong track record of delivering value for shareholders.
Potentially Massive Leverage to Silver
Leverage to silver (and gold) is one key thing to look for in a junior silver play, and given its resource, Aftermath offers that in spades.
But you also want to see upcoming catalysts to grab the market's attention and unlock that potential.
Aftermath shines here as well, with big news on the way.
First off, with the money from its recent raise in hand, Aftermath plans to start the aforementioned prefeasibility study at Berenguela.
To do so, it will conduct infill, geotechnical and metallurgical drilling. Not only will Aftermath complete the report, they will also test several highly prospective exploration targets that could provide investors with more reasons to own Aftermath.
And even before that, at Challacollo, the company's other major project, an NI-43-101-compliant resource is due shortly. It will be followed by a PEA (preliminary economic assessment) to assess an open-pit mining scenario.
Indeed, both projects may be open-pittable. The mineralization at Berenguela is exposed at surface.
That makes them potential takeout targets as Aftermath moves them through the de-risking process.
Simply put, companies with silver projects this interesting are few and far between, a fact that makes Aftermath a compelling takeout target in the long term.
But even in the short term, this company's silver projects make it a highly levered optionality play on rising silver prices.
If you like silver's potential leveragability on gold, you'll want to own a piece of Aftermath Silver before the next leg of the precious metals bull market kicks into gear.
Click here to learn more about Aftermath Silver.
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