Southern Silver Exploration: Valuation and Upside Analysis

Key Metrics:

Cerro Las Minitas (CLM) Project:
- Resource Size: 300M oz AGEQ (275 gpt), including:
  - 125M oz silver (100 gpt).
  - 2B lbs of zinc.
- PEA (2024):
  - Annual Production: 14M oz AGEQ.
  - Mine Life: 17 years.
  - Capex: $388M.
  - AISC: $14/oz AGEQ.
  - IRR: 30% at $27 silver.
  - NPV (5%): $875M at $27 silver.
- Exploration Upside: Potential to grow to 350M oz AGEQ (10%-20% increase).
Business Model:
- Southern Silver plans to sell or JV the project rather than build the mine itself.
- The project likely requires $30+ silver to advance to production.
Ownership:
- Insiders own ~50%, aligning management with shareholders.

Valuation Scenarios:

Base Case ($27 Silver):
- FCF per oz: $27 - $14 = $13/oz.
- Annual FCF: 14M oz x $13 = $182M.
- Market Cap (10x FCF): $182M x 10 = $1.82B.
- Stock Price: $1.82B / 500M shares = $3.64/share.
Upside Case ($50 Silver):
- FCF per oz: $50 - $14 = $36/oz.
- Annual FCF: 14M oz x $36 = $504M.
- Market Cap (10x FCF): $504M x 10 = $5.04B.
- Stock Price: $5.04B / 500M shares = $10.08/share.
High-End Case ($100 Silver):
- FCF per oz: $100 - $14 = $86/oz.
- Annual FCF: 14M oz x $86 = $1.204B.
- Market Cap (10x FCF): $1.204B x 10 = $12.04B.
- Stock Price: $12.04B / 500M shares = $24.08/share.

Summary of Valuation Scenarios:

$27 Silver: $3.64/share.
$50 Silver: $10.08/share.
$100 Silver: $24.08/share.

Key Points:

Southern Silver is highly undervalued, trading at $0.20/oz AGEQ.
The project won’t advance until silver prices exceed $30/oz, making this a long-term play.
Management has a strong track record, including selling Western Silver for $1.2B.
The stock has 3x to 10x upside at higher silver prices ($50-$100/oz).

Risks:

Project timeline depends on higher silver prices.
Potential dilution from financing or JV agreements.
Stock performance is heavily tied to silver and zinc prices.

Conclusion: Southern Silver is a speculative but undervalued silver play with significant upside. If silver prices rise, this stock could deliver 3x to 10x returns in the long term.

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Disclaimer

The user RockeTeller holds no position in TSXV:SSV. 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.

$100 Silver/oz

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