Silver X Mining Corp. (AGX:TSX.V) missed Q3/23 estimates for production after halting it temporarily but since the restart, has been ramping operations back up aggressively, reported Red Cloud Securities analyst Timothy Lee in a Nov. 15 research note.
"We view the recovery of operational performance towards the [quarter's] end positively as important metrics such as grade and throughput are approaching levels seen in Q3/22 and Q4/22 before operational issues affected H1/23 earnings," Lee wrote. "This bodes well for future performance."
240% gain implied
As such, Red Cloud maintained its CA$0.85 per share target price on the Canadian silver miner, its current price about CA$0.25 per share, noted Lee.
The gap between these two prices reflects a significant yield for investors, of 240%.
Silver X remains a Buy.
Q2 production down
Silver X stopped production at its Nueva Recuperada operation in Peru for most of Q3/23 for a "strategic operational reset to deal with issues such as grade variability," explained Lee.
Due to that downtime, production during the quarter came in below Red Cloud's forecast and below previous that of previous quarters.
Specifically, total Q3/23 production was 95,373 ounces of silver equivalent (95,373 oz of Ag eq) versus Red Cloud's estimate of 143,240 oz of Ag eq. Also, Q3/23 production was 62% lower quarter over quarter (QOQ) and 74% lower year over year (YOY).
During Q3/23, Silver X processed 15,700 tons (15.7 Kt) of ore, lower than Red Cloud's projection of 20 Kt and down QOQ and YOY, 56% and 49%, respectively.
Turning it around
Lee highlighted that Silver X restarted Nueva Recuperada operations on Sept. 19 and since, has made a concerted effort to ramp production back up to previous levels. It is making progress.
"With the reported recovery in throughput, production figures for Q4/23 and beyond should improve," Lee purported.
In the 45 days since the restart (between Sept. 19 and Nov. 3), the company processed 230,444 oz of Ag eq, much more than the 121,000 oz (121 Koz) it processed in Q3/23.
Also, since Sept. 19, the average head grade was 304.25 grams per ton (304.25 g/t) Ag eq, Lee noted, nearing the 369 g/t Ag eq achieved in Q4/22. This is positive but may not be accurate, Lee pointed out, because Silver X used stockpiled material when it resumed milling operations.
"The full effects of the new mine scheduling protocol at Nueva Recuperada on head grades remain to be confirmed," the analyst wrote.
Looking forward
Now for Q4/23, Red Cloud estimates Silver X will produce 179 Koz of Ag eq and process 25 Kt, at Nueva Recuperada, Lee relayed.
Further, the investment firm forecasts that by Q4/24, one year later, production and processing will have more than doubled, reaching 430 Koz and 60 Kt of Ag eq, respectively.
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