Even within the notoriously cyclical mining sector, it's been a crazy few years for silver. After plummeting to a $12 low in March 2020, investor interest and pent-up demand from pandemic-related supply disruptions drove prices to an eight-year high early in late 2020.
Since silver's volatility can be two to three times greater than gold
on any given day, why is Metallic Minerals Corp. (MMG:TSX.V; MMNGF:OTCMKTS), a growth-stage exploration company, so excited by the conclusion of its 2021 Keno Silver exploration programs? Streetwise Reports sat down with Chief Executive Officer and Chairman Greg Johnson to find out.
At 166 square kilometers, the 100%-owned Keno Silver Project is the second-largest land position in the Keno Hill Silver District of Canada's Yukon Territory, one of the world's highest-grade silver districts. "This district is historically renowned for its ultra-high grade silver veins," Johnson says. "It has excellent existing infrastructure, including grid power, road access, and nearby community services."
"This year has been focused on getting our advanced stage targets to a critical mass while also working to push our discovery hits from last year into an advanced stage."
—Greg Johnson, CEO and chairman, Metallic Minerals Corp.
The company had several key goals for its 2021 Keno Silver programs. One priority was to follow up on discovery areas that were identified by Metallic Minerals in 2020. Another was to do reconnaissance drilling on less-explored areas. Says Johnson, "This year has been focused on getting our advanced stage targets to a critical mass while also working to push our discovery hits from last year into an advanced stage. Metallic Minerals takes a systematic approach to exploration using new models and technologies to facilitate discoveries in proven, but under-explored, mining districts. We identify an area that has the right geologic setting to have a world class deposit, which Keno Hill is for silver. We focus our exploration to develop new resources, and then we start to de-risk them through surface sampling and district-wide stratigraphic and structural mapping, induced polarization geophysics, reverse circulation and diamond core drilling. Some of the biggest growth in value for shareholders comes at these early discovery stages."
Johnson is a firm believer in silver's potential to create new opportunities for investors, especially as the global economy reopens in the wake of the pandemic. Metallic Minerals is backed by institutional holders including US Global, OTP Funds, Crescat, and MMCAP AM, as well as single investors such as Eric Sprott, who recently exercised his Metallic Minerals common share purchase warrants from the company's October 2019 private placement financing for total proceeds to the company of CA$1,562,500. Says Johnson, "This is Eric's third investment into the company. He's our biggest well-known resource investor with just over 16%, and he's very bullish long term on silver." As of Dec. 8, 2021, Metallic Minerals had 136.43M shares outstanding and a market capitalization of CA$42.04 million (~US$33.21 million).
In support of silver, Johnson cites the high electrical conductivity and durability that makes silver virtually irreplaceable in applications from cell phones and computers to environmentally friendly technologies. Electric vehicles use between 25 and 50 grams of silver per vehicle. Solar panels require 20 grams. "There's an amazing correlation between the solar panel industry and silver prices. A lot of people may not be aware of is that the number one growth area for silver is solar panels. It's completely replaced photography. And it's an annual use that that keeps going up every year."
Metallic Minerals is still awaiting multiple assay results from its Keno explorations, but based on current findings, Johnson anticipates sharing highly newsworthy details well into 2022. In 2021, he says, "We did the first-ever deep electrical geophysics, called induced polarization, or IP, that looks down a kilometer from surface." Johnson continues, "The use of technologies like IP opened it up to say the whole district is viable. We found continuous areas enriched in silver that are huge, up to 5 kilometers long and 2 kilometers wide. These are the scale of anomaly that the major miners travel all around the world looking for. It's truly a world class footprint."
But that’s not all. "The other thing that was really exciting for us was that some of the drilling hit zones that were typical of the Keno district with very high grade over several meters, but also areas with hundreds of meters of silver mineralization," Johnson says, "At Keno Silver, we've got three advanced stage targets that are already have mineral inventories and 12 separate multi-kilometer soil and geophysical anomalies that we're in the process of starting to test. In our first drill test of those areas, we hit in 26 out of 30 holes, which is amazing."
"There's an amazing correlation between the solar panel industry and silver prices. A lot of people may not be aware of is that the number one growth area for silver is solar panels. It's completely replaced photography. And it's an annual use that that keeps going up every year."
The Keno Silver project highlights not only how much the mining industry has changed over the past decade, but also how companies like Metallic Minerals are supporting their projects with technology-based research, quality geoscience surveying and in-depth analysis and feasibility reports. Another large-scale opportunity for Metallic Minerals is the La Plata valley in southwestern Colorado. "Spanish conquistadores first found silver there in the 1700s, followed by individual high-grade mines from the 1800s to the 1940s," Johnson says. "Following a period of exploration by major mining companies in the 1950s and 60s, Metallic Minerals is the first in 50 years to be able to come in and look at the area systematically and to apply new exploration models and modern technology to the area. We've determined that it's a multi-kilometer scale system, so it has scale, and it makes very high-grade silver and gold and economic grades of copper."
Johnson believes these are critical components to creating value for investors. "We want to see a system that has scale, measured in kilometers, and something that can be economic based on its concentrations of metal. In the case of Keno, we already have operating mines next to us, we have roads and power and infrastructure. This means any discovery we make here can be rapidly fast tracked." Shortening the time needed to go to the production stage can translate into quicker and more significant returns on investments.
Johnson's experience as one of the original co-founders at NovaGold is reflected in Metallic Minerals' business plan. "We took NovaGold from exploration stage to a multibillion-dollar market value over a period of about 10 years," he says. "We are looking to deploy the same kind of strategy and value creation at Keno and La Plata. We plan to have a large program at Keno next year and an expanded program at La Plata, and to run those two in parallel." A third program, in the Klondike district, is well underway. "Since the gold rush of 1898, they’ve continued to mine gold in the Klondike and have produced over 20 million ounces," Johnson explains.
"With silver's previous highs around US$50, there's a lot of room for silver to move."
"We picked up one of the largest blocks of un-mined ground in the Klondike. And with the recent discoveries there, they're calling it one of the biggest finds in the Klondike in decades." With three operators in place and room for another 10 or 15, full commercial could begin as early as 2022. The strategy, Johnson explains, is that "we don't put up any capital. We undertake the lease and help get permits in place and they pay us a royalty on the gold that's produced. The idea is that this will quickly start to cover some of our G&A costs to operate as a public company and, over time, can potentially make us self-funded."
And what about silver's crazy price fluctuations? Johnson points to the cyclical nature of the metals sector. "We've been going through a consolidation for about the last 14 months," he says. "It's not a full-blown, multi-year bear market. It's just one of those cycles in our sector, one that can be a year plus long and that gives a great reduced price for entry for savvy investors. From a timing point of view, I see it as early days in this metal price cycle and when you want to buy low and ride, this is a great opportunity.”
"Our role is to add value at the drill bit through exploration, growing resources and de-risking them," he concludes. "I think it's really important for investors to believe there's a reasonable prospect for metal prices to be higher in the future — and with silver's previous highs around US$50, there's a lot of room for it to move."
1) Wendy Hubbert compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor/employee. He/she or members of his/her household own securities of the following companies mentioned in the article: None. He/she or members of his/her household are paid by the following companies mentioned in this article: None. His/her company has a financial relationship with the following companies referred to in this article: None.
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