released a maiden resource estimate for its flagship Santa Ana silver-gold project in Colombia, which "stacks up well against similar projects" in terms of grade and "highlights project upside," reported Research Capital Corp. analyst Stuart McDougall in an April 27 research note.
Possible 173% Return From Here
Currently, this Canadian resource explorer offers investors a significant potential return.
The difference between Outcrop's share price today, CA$0.28, and Research Capital's target price on the company, CA$0.75 per share, reflects a possible gain of 173%. Outcrop is rated Speculative Buy.
Resource at a Glance
Santa Ana has a total resource of 27,000,000 ounces of silver (27 Moz Ag) and 140,000 ounces gold (Au), or about 37 Moz silver equivalent (Ag eq) at 530 grams per ton (530 g/t), according to the estimate prepared by AMC Consultants, noted McDougall. The resource includes seven veins.
Indicated resources amount to 1,230,000 tons (1.23 Mt) of 446 g/t Ag and 2.25 g/t Au. Inferred resources stand at 1 Mt at 312 g/t Ag and 1.64 g/t Au. Both resource categories add up to 2.2 Mt.
All figures assume long-term metals prices of US$25.50 per ounce for silver and US$1,850 per ounce for gold. Also figured into the resource are a 158 g/t Ag eq cutoff grade, a 1-meter minimum vein width, a US$114 per ton mining cost, and 93% Ag and 96% Au recoveries.
McDougall pointed out that the estimate for the core vein area at Santa Ana is below prior guidance.
However, he wrote, "We see strong potential for growth and are keeping our valuation goalpost at 50 Moz Ag, valued at US$3 per ounce, adjusted for options, warrants and assumed future equity," McDougall wrote.
The analyst highlighted two key points about the maiden resource estimate.
Outcrop is Undervalued
The first takeaway is that the 530 g/t high grade of Santa Ana's resource compares well to that of similar silver projects, such as those belonging to Silvercrest, Dolly Varden Silver, and Guanajuato Silver, among others, wrote McDougall. Comps average 329 g/t Ag eq for nonproducing projects and 438 g/t Ag eq when three producing projects are included.
Yet despite Santa Ana's equivalent grade, Outcrop is trading at a 40% discount to a select group of peers.
"We would expect that gap to narrow as the potential for expansion is demonstrated in [Santa Ana's] core area and beyond," McDougall added.
Potential To Grow Resource Exists
The second major point about the Santa Ana resource estimate is that it highlights significant potential for expansion, McDougall wrote. Specifically, each of the seven veins included in the estimate remains open at depth and along strike. Also, there are "dozens more veins" at the project, which have been identified but are untested and bear similar geological characteristics to the veins included in the estimate.
Outcrop plans to drill test some of these new targets this year, including Frias, Alaska, Espiritu Santo, Aguilar, Jimenez, and El Guadual.
Therefore, noted McDougall, throughout 2023, investors can expect Outcrop news and possible stock catalysts in the form of exploration updates.
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Disclosures for Research Capital Corp., Outcrop Silver & Gold Corp., April 27, 2023
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