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Sun Silver: Valuation at $100/oz Silver
Key Project: Maverick Springs (Nevada)
- Resource:
- Silver: 175M oz at 45 gpt.
- Silver Equivalent (AgEq): 290M oz at 70 gpt (includes gold).
- Deposit Type: Single open pit.
- Exploration: Only 10% of the 1,000-acre property has been explored/drilled.
- Development Stage:
- Cashed up with $5M from IPO.
- Planning drilling, resource update, and PEA (estimated by 2025-2026).
- Challenges:
- High Net Smelter Return (NSR) of 7.4%.
- Low grade could result in high costs, estimated at $30/oz.
- Metallurgy flagged as a risk (CEO claims ore is non-refractory).
- Strengths:
- Significant Free Cash Flow (FCF) potential at $100 silver.
- CEO has experience in building and operating mines.
- Active drill program: 7,500m planned for 2024 (with 25 holes).
FCF and Valuation Potential
At $100 silver and estimated costs of $30/oz:
- Annual Production: 8M oz AgEq (assumed for calculations).
- Annual FCF:
- FCF = Production × (Silver Price - Costs).
- FCF = 8M × ($100 - $30) = $560M USD.
- Market Cap Estimate (using 10x FCF multiple):
- Market Cap = $560M × 10 = $5.6B USD.
- Stock Price:
- Shares Outstanding: Estimate 200M shares after expected dilution.
- Stock Price = Market Cap ÷ Shares Outstanding.
- Stock Price = $5,600,000,000 ÷ 200,000,000 = $28/share.
Timeline and Key Risks
- PEA Expected: 2025-2026.
- Construction Decision: Likely 4-5 years away.
- Risks:
- High NSR and costs.
- Metallurgy concerns.
- Heavy share dilution needed for development.
Conclusion
If silver reaches $100/oz and Maverick Springs is developed into a mine, Sun Silver could achieve an estimated stock price of $28/share. This assumes successful development, strong metallurgical recovery, and favorable market conditions. Significant risks remain, but the upside potential is notable for this early-stage company.
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Disclaimer
The user RockeTeller holds no position in ASX:SS1. Simply Wall St has no position in any of the companies mentioned. The author of this narrative is not affiliated with, nor authorised by Simply Wall St as a sub-authorised representative. This narrative is general in nature and explores scenarios and estimates created by the author. The narrative does not reflect the opinions of Simply Wall St, and the views expressed are the opinion of the author alone, acting on their own behalf. These scenarios are not indicative of the company's future performance and are exploratory in the ideas they cover. The fair value estimates are estimations only, and does not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that the author's analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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