Santacruz Silver Mining Ltd. (SCZ:TSX.V; SCZMF:OTC; 1SZ:FSE) announced the start of development work and the initiation of full production permitting at its fully owned Soracaya Project in Bolivia’s Potosí Department, marking a significant step toward a construction decision, Atrium Research analysts Ben Pirie and Nicholas Cortellucci wrote in an updated research note on October 7.
The company emphasized Soracaya as a key growth asset, supported by a high-grade, silver-rich resource and strong synergies with its existing operations in Bolivia. This follows the completion of a US$40 million accelerated option with Glencore in early September, which gave Santacruz full ownership of its Bolivian portfolio, allowing the company to advance Soracaya with a 100% interest, the analysts wrote.
"We are maintaining our BUY rating and increasing our target price to CA$3.10/share (previously CA$2.50/share) on SCZ," the analysts wrote.
At the Soracaya Project, mineralization is found along reactivated faults with replacement and brecciated sulfides, characteristic of some of the world’s most productive silver deposits, Pirie and Cortellucci wrote.
Since 1999, over 29 kilometers of drilling across more than 90 holes have provided a robust geological foundation for resource modeling and mine planning. In October 2024, SCZ published a Technical Report detailing an Inferred Resource of 4.14 million tonnes grading 31.6% zinc equivalent (ZnEq), 1.23% zinc (Zn), 7.23% lead (Pb), and 260 grams per tonne silver (g/t Ag). Santacruz plans to provide further details on the full construction decision at a later stage.
Analysts: Significant Multiple Expansions
SCZ has been one of the top performers in the sector, with an 834% increase year-to-date, driven by rising silver prices, stable production, decreasing costs, and an improved balance sheet, the analysts wrote.
This has led to significant multiple expansions for SCZ, rising from 1.9x 2025E CF when Atrium initiated coverage to 8.3x at the time of writing. However, it still trades at a discount compared to its peers despite the strong progress SCZ has made in proving the quality of its assets.
"We have decided to increase our target multiple to 10.0x 2025E CF (8.0x previously), resulting in our target price increasing to CA$3.10/share," Pirie and Cortellucci said. "We will note that we are still modelling silver at US$35/oz as lately there has been significant volatility in the precious metal (currently silver is over US$48/oz). Furthermore, our model does not include any contribution from Soracaya yet."
Company Upside, Catalysts
When it comes to why the analysts favor the company, they listed several reasons, including its diversified asset portfolio, operational optimization, improved financial health, the stock's sensitivity to silver prices, and the fact that it trades at a substantial discount compared to its peers.
Upcoming catalysts for the company include quarterly production and financial results and accelerated debt reduction.
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