Analysts at Ventum Capital are significantly raising their price target for the shares of emerging Canadian silver producer Silver Tiger Metals (WKN A2P4YL / TSXV SLVR). While they previously considered CAD 1.00 to be a fair valuation, the experts now see potential for reaching CAD 1.60!
The trigger for Ventum’s decision to increase the price target by a solid 60% was groundbreaking news from Mexico for the company, where Silver Tiger is developing the El Tigre silver mine. Last Friday, after market close, CEO Glenn Jessome’s company announced that it had received all necessary permits for the construction of an open-pit mine at El Tigre!
As Ventum explains, this has very positive implications for Silver Tiger, but also for the mining sector in Mexico. These are the first such permits for a new open-pit mining project in the Latin American country since 2020. This allows Silver Tiger to now proceed with project financing and mine construction. In the analysts’ view, receiving the permit represents a significant reduction in project risk and supports a re-evaluation of the stock.
As it is now more likely that heap leaching will be pursued, they are raising the applied NAV (Net Asset Value) multiple for the asset from 0.4x to 0.6x. Together with the upwardly revised metal price assumptions, this supports the price target increase, according to Ventum Capital.
As the experts further elaborate, Silver Tiger plans to construct the El Tigre open-pit mine in two phases, according to the pre-feasibility study – initially 7,500, then 15,000 tonnes per day. This would result in an after-tax net present value of USD 222 million and an internal rate of return of 40% – however, based on a gold price of only 2,150 and a silver price of merely USD 26 per ounce.
According to the study, the project is expected to achieve an annual production of 4.8 million ounces of silver equivalent at AISC (all-in sustaining costs) of USD 14 and cash costs of USD 12 per ounce. Based on their assumptions and the updated price assumptions, Ventum analysts calculate a net present value for the El Tigre open-pit mine of USD 594 million.
The experts point out that, according to the pre-feasibility study, an initial capital requirement of USD 86.8 million is needed for the project’s construction. They assume that the company will therefore now enter a project financing phase and expect Silver Tiger to secure adequate financing through a mix of equity and debt. Currently, the company has approximately USD 30 million in cash, Ventum further states.
Editor’s note: Silver Tiger Metals has just announced that it is financing a portion of the construction costs through a CAD 40 million bought deal financing. For this purpose, 54,800,000 common shares of the company will be issued at 0,73 CAD. .
Additional Upside for Silver Tiger
The analysts also point out that Silver Tiger has further upside potential, which arises from the company’s plans for a subsequent underground mining operation. A Preliminary Economic Assessment (PEA) for this is still pending, Ventum further states. It is expected that Silver Tiger Metals will present this early next year.
The PEA, the Ventum research further states, is based on a 2024 resource estimate that indicated approximately 113 million ounces of silver equivalent material. Here, the analysts expect a plant throughput of 2,000 tonnes per day, which would lead to an output of 5 million ounces of silver equivalent per year.
Valuation of Silver Tiger Metals
Currently, according to Ventum, Silver Tiger is trading at a P/NAV (Price to Net Asset Value) ratio of only 0.21x and also shows a discount compared to the average of other silver developers evaluated by the analysts. Given the achievement of a significant project milestone and a substantial reduction in project risk, the NAV multiple for the open-pit component of the mine has been increased, and the price target has been raised from CAD 1.00 to CAD 1.60. Ventum also points out that Silver Tiger is a speculative position.
