Sun Silver Limited [ASX:SS1]
Metals & Mining
ASX’s largest pre-production primary silver asset gets even larger
We update coverage on Sun Silver Limited (ASX: SS1) with a revised 12-month Target Share Price of $6.54, representing the scope of a 287% upside from the current share price of $1.69 and a notable increase from our Target Share Price in our initiation report from August last year. Sun Silver is continuing to rapidly advance its flagship Maverick Springs Project in Nevada, the largest pre-production primary silver asset listed on the ASX, boasting a JORC Inferred Resource of 539Moz silver equivalent (AgEq) at 71 g/t. SS1’s impressive recent 3rd Mineral Resource upgrade in under 2 years since listing places its Maverick Springs Project as a standout, strategically significant U.S. primary silver asset at a time when silver is becoming an important element of the North American / western-based secure supply chain thematic
Maverick Springs: still open for further exploration upside
Maverick Springs continues to reaffirm our original thesis that, apart from just peer set leading primary silver asset scale, the asset is still open for notable further exploration upgrade. SS1’s last 2 Mineral Resource upgrades have increased both scale and silver equivalent grades, which is an uncommon facet of large projects. Importantly, and forming a key part of our bullish investment thesis, recent drilling and re-assaying results released post last December’s resource upgrade continue to show thick, highgrade silver-gold mineralisation at grades above the existing mineral resource, validating the strong lateral and vertical continuity of the multi-metal commodity at the Project. Additionally, near-surface shallow exploration via RC pre-collars shows mineralisation above the current ore body, validating our thesis of open-pit/low-strip mining potential, which SS1 will seek to confirm in future scoping studies.
Several additional value creation levers are in play
Alongside its significant exposure to silver (now a US-designated critical mineral), SS1’s Maverick Springs’ multi-commodity aspect allows investors to also benefit from valuable gold and antimony exposure. The Project exhibits a gold resource of over 2Moz at grades suitable for bulk tonnage mining, in addition to possessing re-assay and new drilling intercepts that point to the high likelihood of a near-term antimony maiden resource, allowing investors to also gain from antimony’s U.S. critical minerals status. Furthermore, SS1 recently increased its exploration land holding along strike, paving the way for more discoveries at a larger Maverick Springs. As a possible precedent step to an eventual US listing, since the time of our last report, SS1’s stock now also trades on the U.S. OTCQX Market, setting the stage for an eventual material rerate that rewards SS1 stockholders from the U.S. markets' silver premium. Additionally, we view the recent silver pullback as an opportune time to increase exposure to silver, given that the medium- to long-term structural thesis supporting silver remains intact.
Valuation range of A$5.96 Base Case – A$7.11 per share in the Upside
Our approach has been conservative given the prospectivity of Maverick Springs and its highly likely amenability to low-cost bulk tonnage heap leach mining. We have based our valuation on only 50% of SS1’s Mineral Resource and have refrained from rewarding SS1 more for its carbonate-hosted silver mineralisation (catalyst for a strong additional future re-rate).