Last month we caught up with Silver X Mining Corp, which has two projects located in Peru, Nueva Recuperada and the Coriorcco Gold Project. It just successfully completed the second phase of a private placement in which management participated.
One of the things I like about this miner is that it has in fact already got producing assets at its Tangana mining unit, part of Nueva Recuperada in Huancavelica.
Silver X Mining TSXV:AGX has effectively achieved commercial production and published its first PEA for Nueva Recuperada. Resources have been upgraded and exploratory drilling is taking place at Ccasahuasi this year. The company is also working to validate its Plata mining unit with a view to getting Plata to commercial production before the end of 2024.
Silver mining in Peru snapshot
- Peru is believed to contain the world’s largest reserves of silver
- The country currently produces 14% of world silver
- Historical silver production averages 5,000 M0z Ag
- The vast bulk of the silver produced comes from carbonate-hosted deposits or the rocks of the Miocenic Volcanic Belt
Nueva Recuperada is a silver district which Silver X has managed to build up through the acquisition of concessions from a number of different parties. The plan has been to establish two separate mining operations with their own processing plants. Currently the company is producing 2Moz AgEq/year out of its Tangana mining unit, with 720 tpd going through its central processing plant.
Try a free trial of Data+ for a deeper look.</a></strong></li></ul>"}" data-sheets-userformat="{"2":33554945,"3":{"1":0},"12":0,"28":1}"> A future scenario, which management projects for 2026, is a 1500 tpd plant at Tangana, with 4 Moz AgEq/year, plus another 720 tpd going through Plata, with 2 Moz AgEq/year. Commercial production came online in January and the company has already achieved revenues of $13.9m in 2022. Gold content is now driving increased sales values as well.
Silver X is very much focused on expanding a hybrid model of production and exploration, which we have found works will with some of our other mining investments. Although Silver X has come back to the market for further financing recently, the road map for the company holds out the prospect of being able to do this less as precious metals production gets ramped up into 2024.
The plans include moving away from a one mine status, with silver as a first preference for further acquisitions. We note however that a lot of the new project work currently includes gold (this was a bigger contributor to revenues than silver in Q1). The company is estimating that one year production can exceed 2 Moz by end 2023 and that Plata can be cash flow positive at some time in 2024.
The last set of results filed by the company (Q1 2023) included an 18% increase in revenues, amounting to an operating loss of $0.4m, some of this was attributable to social disruption in Peru, of which more below. Q1 there was a net loss before tax of $1.1m compared with a net loss of $3.1m in Q1 2022.
Risks and valuation
The company reported operational disruption due to social unrest in December, but management say operations have returned to normal. We did quiz them on the political situation in Peru, especially in light of the news of the semi-nationalisation plans being aired in Chile, but CEO Jose-Maria Garcia was very confident there would be no political interference in the mining sector, from the government at least.
It should be noted that Silver X is still trading at only 0.2x P/NAV, which is one of the highest discounts among silver peers. It is trading well off the valuations commanded by the likes of Endeavour Silver TSX:EDR or indeed Fortuna Silver TSX:FVI.
