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Analyst: Co.'s Purchase of High-Grade Mine Positive
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The Canadian silver producer acquires a high-grade, past-producing, polymetallic mine in Colorado boasting an existing resource and reserves, a recent feasibility study and upside, noted a Red Cloud Securities report.

Silver X Mining Corp. (AGX:TSX.V) agreed to acquire the Revenue-Virginius polymetallic mine in Colorado out of receivership for US$4.5 million (US$4.5M) or, if the transaction is done before May 31, 2023, US$3.5M, reported Red Cloud Securities mining analyst Timothy Lee in an April 19 research note. The transaction is expected to close in Q2/23.

"This is a positive acquisition for Silver X," Lee commented.

Significant Potential Gains

The Canadian silver producer is currently trading at CA$0.42 per share. The stock could move up if exploration results from any of Silver X's projects are positive and when production fully ramps up at its flagship asset Nueva Recuperada, noted Lee.

Now, though, given Red Cloud's CA$1.05 per share target price on Silver X, potential return is attractive, at about 153%.

Deal a Strong Move

Lee presented the reasons why the Revenue-Virginius acquisition is positive for Silver X.

1) Revenue-Virginius is a past-producing mine. Its operations date back to the 1890s and, more recently, to March 2022. The mine could easily be brought back online.

2) The project has more than 43,000,000 ounce silver equivalent (43 Moz Ag eq) resources plus reserves, and they are high grade. According to a December 2021 resource estimate update, the Measured and Indicated resource is 2.9 Moz Ag eq, the Inferred resource is 13.2 Moz Ag eq, and reserves are 21.2 Moz. All are graded 36.9 ounces per ton of Ag eq.

3) A feasibility study was done in the recent past and outlines an operation with compelling economics. It shows the mine producing 17.7 Moz of payable Ag eq over a 6.25-year life, including average annual production of 3.1 M z Ag eq for the first five years, at an all-in-sustaining cost of US$11.01 per ounce of Ag eq. The calculated after-tax net present value discounted at 5% (NPV5%) for the project is US$75M and the internal rate of return is 71%.

4) The purchase price of Revenue-Virginius is well below this NPV5% of US$75M.

5) Additional upside exists with Revenue-Virginius, by way of Inferred resources excluded from the feasibility study and by way of future exploration. Silver X intends to carry out a 12- to 18-month exploration program to "confirm resources and improve geological understanding," Lee wrote.

6) Synergies exist between Revenue-Virginius and Nueva Recuperada on which the company can capitalize. For instance, Silver X's experienced team that brought the latter into production can do the same with the former.

Upcoming Likely Stock Movers

Silver X has several catalysts pertaining to this new asset lined up for this year.

This quarter, along with the closing of the Revenue-Virginius acquisition, the company is expected to submit an Environmental Social Impact Assessment. Plus, there will be exploration results on an ongoing basis.

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1) Doresa Banning wrote 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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Disclosures for Red Cloud, Silver X Mining Corp., April 19, 2023

Red Cloud Securities Inc. is registered as an Investment Dealer and is a member of the Investment Industry Organization of Canada (IIROC). Part of Red Cloud Securities Inc.'s business is to connect mining companies with suitable investors. Red Cloud Securities Inc., its affiliates and their respective officers, directors, representatives, researchers and members of their families may hold positions in the companies mentioned in this document and may buy and/or sell their securities. Additionally, Red Cloud Securities Inc. may have provided in the past, and may provide in the future, certain advisory or corporate finance services and receive financial and other incentives from issuers as consideration for the provision of such services.

Red Cloud Securities Inc. has prepared this document for general information purposes only. This document should not be considered a solicitation to purchase or sell securities or a recommendation to buy or sell securities. The information provided has been derived from sources believed to be accurate but cannot be guaranteed. This document does not take into account the particular investment objectives, financial situations, or needs of individual recipients and other issues (e.g. prohibitions to investments due to law, jurisdiction issues, etc.) which may exist for certain persons. Recipients should rely on their own investigations and take their own professional advice before investment. Red Cloud Securities Inc. will not treat recipients of this document as clients by virtue of having viewed this document. Red Cloud Securities Inc. takes no responsibility for any errors or omissions contained herein, and accepts no legal responsibility for any errors or omissions contained herein, and accepts no legal responsibility from any losses resulting from investment decisions based on the content of this report.

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3. In the last 12 months preceding the date of issuance of the research report or recommendation, Red Cloud Securities Inc. has performed investment banking services for the issuer.

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