is focused on restarting production at its fully permitted La Guitarra silver mine in Mexico and advancing exploration at its Tepic and La Tigra projects, noted Beacon Securities analyst Bereket Berhe in a November 7 research report.
This report initiated coverage on Sierra Madre with a Speculative Buy rating and CA$0.75 price target.
La Guitarra Resource Grows Substantially
This month, Sierra Madre delivered an updated NI 43-101 mineral resource estimate for La Guitarra that increased the project's global resource by 275% to 47.3 million ounces silver equivalent.
The indicated resource rose 373% to 27.2 million ounces silver equivalent, and the inferred category grew 204% to 20.2 million ounces. The resource is contained within multiple epithermal vein systems across the 39,714-hectare property.
According to the analyst, Sierra Madre acquired La Guitarra in an all-share US$35 million deal, gaining a past-producing mine with substantial existing infrastructure. The company is fast-tracking a restart.
Near-Term Production Within Two Years
La Guitarra was in production from 2015-2018 before being placed on care and maintenance, averaging 1.0-1.5 million ounces silver equivalent per year.
Berhe highlighted that reopening the mine is significantly de-risked given the permitted processing plant, legacy underground development, and Sierra Madre management's prior experience operating La Guitarra.
The analyst sees the potential for Sierra Madre to resume commercial production within 1-2 years using the existing 500-tonne-per-day mill. The company could then expand throughput to 1,000 tpd.
Tepic and La Tigra Offer Additional Upside
Beyond La Guitarra, Sierra Madre's portfolio includes the Tepic project with over 10 million ounces silver in historical resources and the La Tigra property containing a past-producing underground gold mine.
The analyst believes current exploration results at Tepic and La Tigra highlight these assets' potential to add value.
Undervalued Relative to Precious Metals Developer Peers
Beacon Securities initiated coverage of Sierra Madre with a Speculative Buy rating and CA$0.75 price target. The firm sees the stock trading at a discount to comparable junior precious metals developers on EV/resource ounce and price-to-NAV bases.
The analyst's price target is derived from a discounted cash flow model for La Guitarra, producing 1.77 million ounces silver equivalent annually. Even assuming just 58% of the current resource, the model generates a CA$189 million NAV for the project.
In summary, the analyst views Sierra Madre as undervalued based on progress advancing La Guitarra towards a near-term restart of production. With exploration upside from Tepic and La Tigra, Beacon Securities sees potential for the stock to re-rate as the company delivers on its development plans.
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- Sierra Madre Gold and Silver Ltd. is a billboard sponsor of Streetwise Reports and pays SWR a monthly sponsorship fee between US$4,000 and US$5,000.
- As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of
- Sierra Madre Gold and Silver Ltd.
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Disclosures for Beacon Securities, Sierra Madre Gold and Silver Ltd., November 7, 2023
Does Beacon, or its affiliates or analysts collectively, beneficially own 1% or more of any class of the issuer's equity securities? ☐ Yes ☒ No
Does the analyst who prepared this research report have a position, either long or short, in any of the issuer’s securities? ☐ Yes ☒ No
Has any director, partner, or officer of Beacon Securities, or the analyst involved in the preparation of the research report, received remuneration for any services provided to the securities issuer during the preceding 12 months? ☐ Yes ☒ No
Has Beacon Securities performed investment banking services in the past 12 months and received compensation for investment banking services for this issuer in the past 12 months? ☒ Yes ☐ No
Was the analyst who prepared this research report compensated from revenues generated solely by the Beacon Securities Investment Banking Department? ☐ Yes ☒ No
Does any director, officer, or employee of Beacon Securities serve as a director, officer, or in any advisory capacity to the issuer? ☐ Yes ☒ No
Are there any material conflicts of interest with Beacon Securities or the analyst who prepared the report and the issuer? ☐ Yes ☒ No
Is Beacon Securities a market maker in the equity of the issuer? ☐ Yes ☒ No
Has the analyst visited the issuer's material operation(s)? ☒ Yes ☐ No
Did the issuer pay for or reimburse the analyst for the travel expenses? ☐ Yes ☒ No
All information contained herein has been collected and compiled by Beacon Securities Limited, an independently owned and operated member of the Canadian Investment Regulatory Organization (CIRO). All facts and statistical data have been obtained or ascertained from sources, which we believe to be reliable, but are not warranted as accurate or complete. All projections and estimates are the expressed opinion of Beacon Securities Limited, and are subject to change without notice. Beacon Securities Limited takes no responsibility for any errors or omissions contained herein, and accepts no legal responsibility from any losses resulting from investment decisions based on the content of this report. This report is provided for informational purposes only and does not constitute an offer or solicitation to buy or sell securities discussed herein. Based on their volatility, income structure, or eligibility for sale, the securities mentioned herein may not be suitable or available for all investors in all countries.
Dissemination Beacon Securities distributes its research products simultaneously, via email, to its authorized client base. All research is then available on www.beaconsecurities.ca via login and password.
Analyst Certification The Beacon Securities Analyst named on the report hereby certifies that the recommendations and/or opinions expressed herein accurately reflect such research analyst’s personal views about the company and securities that are the subject of the report; or any other companies mentioned in the report that are also covered by the named analyst. In addition, no part of the research analyst’s compensation is, or will be, directly or indirectly, related to the specific recommendations or views expressed by such research analyst in this report.