Silver has been on the ropes which is creating incredible buying opportunities in companies that are producing excellent results despite the silver price environment. Besides contrarian buying, the other silver investment case is that with a shortage of quality silver assets growing with drilling, companies with significant resources will become acquisition targets. One company that is proving it fits both these investment cases is, SilverCrest Metals (TSX-V: SIL) (OTCQX: SVCMF).
It is a simple story only because of the quality of the company and its management; it has experienced management, a consolidated land package, an initial high grade resource to be announced in Q1 18, impressive metallurgy and potential for becoming a district scale operation. The current silver price is the only thing working against this company, despite this the company’s objective is to do it again; to move its key asset towards production.
Silvercrest Metals was originally spun out of the $154 million CDN deal that saw First Majestic (TSX: FR) acquire the predecessor company for the Santa Elena silver mine. Prior to the sale, SilverCrest demonstrated the ability to bring on low-cost O/P production followed by an expansion into a profitable underground mine. Santa Elena is currently First Majestic’s key producer
Prior to the sale of the original SilverCrest, the SIL team consolidated a past-producing district (Las Chispas) in Sonora, Mexico, and is the first company to pursue modern exploration. SilverCrest is the first company to drill-test the Las Chispas district and has completed ~28,500 metres of a 35,000 metres drilling program over two phases.
Silver Crest’s Phase II exploration program is anticipated to be approximately 29,000 metres, of which 25,000 metres has been drilled to-date. Combined with the company’s Phase I Exploration Program of 6,500 metres in 2016, the Company has drilled a total estimated 35,000 metres in 141 holes covering a cumulative vein strike length of approximately 3.5 kilometres out of 12 kilometres defined to date from various veins.
The current phase is exploring nine of the 19 known epithermal veins on the property with efforts focused on four of these veins to be incorporated into SilverCrest's maiden resource estimate anticipated in Q1 2018 based on the 35,000 metres of drilling. The Company anticipates completing its expanded Phase II Exploration Program by mid-January which will include drilling a further 4,000 to 6,000 metres in the district, primarily on the Babicanora extension.
Recent drilling demonstrates that the Las Chispas project has potential for bonanza Ag/Au grades including the intercepts of 1.9 m grading 8,800 g/t AgEq. The recent drilling has now extended the strike length to 1,000m on the Babicanora vein, with more assays still pending. This phase of drilling will work towards the company's upcoming maiden resource that is expected in the new year of 2018.
If one were to do some rough calculations, the maiden resource could look like 40-50 mill AgEq oz with an average grade of 400-500 gpt AgEq (uncut and undiluted). The lion share of the resource will come from the Babicanora vein. Before the company’s most recent drilling results, Babicanora alone had these oz: 600m long x 175m high x 3.6m wide x 2.6 density with an avg. grade of 483 gpt AgEq. that is roughly 15 mill oz. However, with the recent drilling, the resource could increase this rough estimate.
The Las Chispas district has already produced 100 MMoz Ag (at 1,700 g/t) and 200 Koz Au (15 g/t) from a series of historic narrow vein operations. The past production demonstrates they are mineable and there is plenty of geological data and 11.5 km of underground infrastructure for ongoing exploration and development. To date, SIL has re-opened and gained access to about 10km of the 11.5 km underground workings.
The team at SilverCrest brought a low-capex mine into production (Santa Elena) in the same district hosting Las Chispas. The initial ramp-up in 2011 came in under budget (<$20 MM) and grades aligned to the mine plan. Santa Elena has been a key producer for First Majestic.
A company with this impressive track record and resource, purchasing shares of SilverCrest is a steal with share prices at year lows. In addition to the discount the price of silver is providing, SilverCrest has a maiden resource that will come out in the near term which provides another compelling event that will create growth in the company.
When silver prices rise and larger mining companies are looking to grow production, junior miners like SilverCrest are primed and ready to meet that demand. Now is the time to start picking up positions in near term production silver companies because they are on sale. SilverCrest is one company that stands out.
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