Even as it readies its maiden resource estimate for its Santa Ana flagship project in Colombia, Outcrop Silver & Gold Corp. (OCG:TSX.V; OCGSF:OTCQX; MRG1:DB) is still identifying new drill targets and releasing results from exploration over the last year.
The estimate was expected at the end of 2022 but has been delayed until Q1 2023 as additional high-level qualification tests are completed, and Outcrop continues to explore some of the site’s high-grade shoots and expand the resource.
One expert said the company’s prediction of between 45 and 55 million ounces silver equivalent (Moz Ag eq) from the site would already represent a good grade and scale as the silver world braces for a demand squeeze for silver from the coming green economy.
"Potential is one thing,” Gwen Preston wrote in The Maven Letter. "Potential in the hands of a team that has demonstrated the ability to turn that into quality (ounces) is another. Outcrop certainly represents the latter . . . I think Outcrop has demonstrated a solid grasp of how mineralization is developed at Santa Ana. I think that understanding bodes well for further discovery to add what will be a strong initial resource.”
"Potential is one thing,” Gwen Preston wrote in The Maven Letter. "Potential in the hands of a team that has demonstrated the ability to turn that into quality (ounces) is another. Outcrop certainly represents the latter."
Outcrop is still drilling at the site and just added a third rig, Chief Executive Officer Joseph Hebert told Streetwise Reports.
The company has added nine priority drilling targets and is advancing several more areas. "We've barely scratched the surface," he said.
The company released assay results last week from two more holes in the Las Maras shoot. Hole DH308 intercepted 0.9 meters true thickness of 767 grams per tonne (g/t) Ag eq. Holes DH308 and DH306 extend Las Maras’ high-grade mineralization at depth and to the south, Outcrop said.
Twenty-seven drill holes have been drilled in Las Maras to date, the company said. Seventeen have returned high-grade assays, including 2.1 meters of 2,034 g/t Ag eq and 5.9 meters of 1,697 g/t Ag eq. Recent drilling targeted step-down intercepts from hole DH290. Las Maras remains open at depth.
The Catalysts: Silver and Solar
As the world steps closer to green energy, silver will become a much sought-after commodity as solar energy technology requires large amounts of it.
The Silver Institute predicted that global silver demand would reach a new high of 1.21 billion ounces in 2022, up 16% from 2021. Industrial demand is on course to grow to 539 Moz.
"Developments such as ongoing vehicle electrification (despite sluggish vehicle sales), growing adoption of 5G technologies, and government commitments to green infrastructure will have industrial demand overcome macro-economic headwinds and weaker consumer electronics demand,” the report said.
Chen Lin, an asset manager and author of the What is Chen Buying? What is Chen Selling? Newsletter, said demand will "create a silver tsunami.”
The global silver market is forecasted to record a second consecutive deficit between supply and demand this year, the Institute said. At 194 Moz, it will be a multi-decade high and four times 2021’s level.
Chen Lin, an asset manager and author of the What is Chen Buying? What is Chen Selling? Newsletter said demand will "create a silver tsunami.”
"Solar panel production will see explosive growth for decades to come,” Chen wrote in a recent essay to his readers on silver. "We are only at the beginning of the major sea change of future energy. This is very similar to electric vehicles, for example. Once the technology matures, explosive growth follows.”
Stock Has Room to Grow, Expert Says
Outcrop has drilled more than 50,000 meters in more than 300 holes at Santa Ana. The company last year announced it had found multiple high-grade results through underground mapping and sampling of the historic Frias Mine on the site, including a sample of 10,216 grams per tonne silver (g/t Ag), 12.49% lead, and 19.15% zinc.
One channel sample, RX6225, returned more than 4,576 g/t Ag, 9.62% lead, and 3.29% zinc over 0.9 meters.
Santa Ana, mined back to at least 1585, was once the largest colonial silver mine in Colombia. It now covers 36,000 hectares. Spanish Royal Archives reports said the area had 14 mines producing an average of 4,000 g/t Ag over an average of 1.4 meters, with some mines finding as much as 17,000 g/t Ag.
Research Capital Corp.'s Stuart McDougall reiterated his Speculative Buy rating with a target of CA$0.75.
The Frias Mine produced 7.8 Moz Ag at 1.3 kilograms Ag per tonne recovered grade. The results from Frias are important because the makeup of the Frias formation is a good analog for the Santa Ana project as a whole, Hebert said.
This week, Research Capital Corp.'s Stuart McDougall reiterated his Speculative Buy rating with a target of CA$0.75 per share on the strength of drilling results, new high-grade targets, and the 50 Moz Ag eq estimated resource.
Newsletter writer Preston said she thinks the upcoming resource estimate will stand out to investors. And while the company has taken its share of hits due to turbulent currents in the markets and the recent election of Colombia’s first leftist government, the stock has room to grow from here.
"I think the double whammy of silver (prices) and Colombia has already left Outcrop more beat up than most, which I think lessens the downside risk from here,” Preston wrote.
Ownership and Share Structure
Streetwise Ownership Overview*
Mining financier Eric Sprott owns about 14% of Outcrop, management and directors own about 12%, and the rest is held by high-net-worth investors and retail, the company said.
The company is followed by Research Capital Corp.’s Stuart McDougall wrote and Gwen Preston of The Maven Letter. Click "See More Live Data" in the data box above to read more.
Outcrop has a market cap of CA$69.1 million with 194.7 million shares outstanding and 144.6 million of them free-floating. It trades in a 52-week range of CA$0.43 and CA$0.10.
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1) Steve Sobek wrote this article for Streetwise Reports LLC. He or members of his household own securities of the following companies mentioned in the article: None. He or members of his household are paid by the following companies mentioned in this article: None.
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