Gold, Silver Producer Brings Second Mine Onstream
Research Report

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Disclosures for VSA Capital, Sierra Madre Gold and Silver Ltd., April 30, 2025

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Sierra Madre Gold and Silver Ltd. (SM:TSX.V; SMDRF:OTCQX) restarted mining at the Coloso mine, 4 kilometers northwest of La Guitarra mill, in Mexico, reported VSA Capital Analyst Oliver O'Donnell in an April 30 research note.

Since restarting La Guitarra, the company enhanced its operational management team and updated its mine plan, noted the analyst. The latter included the decision to restart production at Coloso and have a metallurgist optimize the ratio of ore produced from both mines.

"This development highlights the nimble, low cost and focused approach that management has taken to restarting La Guitarra, with the benefit of their past experience combined with new insight," O'Donnell wrote.

124% Uplift Implied

VSA Capital reiterated its CA$1.30 per share target price on Sierra Madre, trading at the time of the report at about CA$0.58 per share. The target reflects a potential return on investment of 124%.

The miner remains a Buy. Its market cap is CA$89.31 million (CA$89.31M).

Optimizing Mined Grades

Compared to La Guitarra mine, Coloso, developed by prior operator First Majestic Silver Corp. (AG:TSX; AG:NYSE; FMV:FSE), between 2014 and 2018, is more modern and has wider drives. Also, Coloso's grades are materially higher, but metal recovery, for First Majestic, was relatively lower.

Optimizing the ratio of ore produced at both of these mines could minimize the grade difference, according to management, "so that the benefit of higher grades is felt in terms of margins and output," O'Donnell relayed. If it works, the company could generate greater profit from its existing resources than originally expected.

Coloso alone could support the mill for at least seven years at the current 500 tons per day rate, O'Donnell pointed out. The Jessica and Joya veins likely would extend that duration given they remain open for expansion. Further, they both dip at depth and could intersect, a possibility that has not been investigated. As such, the veins represent a prospective exploration target.  

On the Road to Profitability

In other news, O'Donnell reported, Sierra Madre announced its full-year results. What stood out among them was the US$6.5M in revenue the company generated in only the first six months of operation, during the test mining ramp-up phase.

"We continue to believe that Sierra Madre is on track to deliver strong profitability in 2025, while the strong silver grade means that the stock is well-positioned to benefit from the catch-up in the silver price following gold's strong rally," wrote the analyst.