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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