Initiating Coverage
We are initiating coverage on Southern Silver (TSXV: SSV) with a BUY rating and C$0.35 price target. Southern Silver is advancing its extremely large (272Moz Ag Eq) and high-grade (350 g/t Ag Eq) polymetallic Cerro Las Minitas project in Durango, Mexico of which it holds a 40% interest. The company is strategically partnered at the asset level with Electrum Global Holdings (60% ownership); thus, we expect minimal execution risk associated with commercial production by ~2025. Our model assumes an average payable production rate of ~11.8Moz Ag Eq per year over the first full 10 years of operation (4M oz of Ag, 77M lb. of Zn, 7M lb. Cu, 21M lb. of Pb and 1.0k oz Au). The company is expecting to publish a PEA in 2021 that should help highlight the economic potential that we see from the recent drill success. We expect the company’s stock to re-rate over the coming months as this data is released into the market.
