Silver City Minerals - SCI
SCI is an explorer in the well known mining area around Broken Hill, NSW, Australia.
As per its recent announcements, SCI has further advanced its cobalt, lithium, gold, copper, silver, zinc and lead tenements surrounding Broken Hill.
SCI is nearby two companies I have done a good deal of research on (Broken Hill Prospecting (BPL, $12m MCAP) and Cobalt Blue (COB, fully diluted MCAP of $100m). Recent drilling and exploration results suggest that SCI is sorely undervalued compared to these two companies, as well as other resource explorers who focus more particularly on one type of metal or mineral.
The board, quite rightly, seems to favour small capital raises while the share price is still low.
The current round of exploration seems to be very successful. Any future capital raising may be at a premium to the comparatively low prices of today.
Near Term Catalysts
The big ones I am looking for are the additional drilling results at Copper Blow (and the other ongoing exploration at the tenements discussed below)
as well as the Copper Blow assay results due within 3 weeks.
Basic Numbers
The SCI AGM presentation dated 21 November 2017 says the company had $1.2m cash on hand (at 30 September 2017, it is not clear whether this includes the cash from the recent capital raising).
SCI has 196.2m shares on issue.
The Top 20 holds 37.2% of the SOI.
At 4.4 cents the MCAP is $8.6m, with an EV of $6.4m.
For an EV of $6.4m you seem to get a lot of bang for your buck, lets take a look!
Location
SCI has tenements all around the town of Broken Hill. The town has a high historical importance in Australia's mining and economic history, after the discovery of silver ore led to the opening of various mines, thus establishing Broken Hill's recognition as a prosperous mining town well into the 1990s. Broken Hill is Australia's longest running mining town.
Recent price performance
The chart shows exploration results appear to have acted as a catalyst for a 12 month intraday high of 6.7 cents. Interestingly, I can't identify a particular catalyst for the fall. It could be the world renowned sophisticated investor selldown after the capital raising. Not a bother, we've now had a long series of higher lows. OBV suggests that smart money have been accumulating during this time, particularly during the lows.
Given the relatively low SOI and MCAP of this stock, there is no obvious reason why the shareprice cannot exceed the intraday high. Supply appears to be drying up in an accumulating market.
Identifiable horizontal and SMA resistance from earlier in the 12 month period appear to have converted into supports. This suggests that a new base is forming for the next leg up.
The Cobalt Factor
Cobalt has commanded a very high sentiment lately. Many people have not heard of SCI, which is in its favour for a "re-rating" given that it has the two most sought after investment and exploration metals currently available on the ASX.
Metal prices
The 5 year price charts of gold, silver, copper, cobalt, lead and zinc are set out below. Note the solid gains over the last 1-2 years. SCI is well placed for market recognition given its robust and successful exploration in these metals. The company appears that it could be "in the right place at the right time" in that respect.
Cobalt
Copper
Gold
Lead
Zinc
Silver
Notable projects (project locations identified on the map in the first image of this post)
COPPER BLOW tenement, Broken Hill (75% SCI, 25% CBH, both contributing)
SCI noted of Copper Blow on 21 December 2017: "Historic drill intersections including 11.8 metres at 6.7% copper, 1.92 g/t gold and 13.7 g/t silver, 19.8 metres at 1.8% copper, including 3 metres at 4.6% copper and 15 metres at 2.7% copper, 0.53 g/t gold and 3.7 g/t silver were recorded but no subsequent drilling was undertaken to assess continuity at depth."
SCI is currently drilling this area and released an initial tranch of results on 22 January 2018:
https://www.asx.com.au/asxpdf/20180122/pdf/43qyn91g8692r5.pdf - Three holes were planned but they were so successful the company is doing a fourth towards an extension. The assays for these new drill cores are expected within the next few weeks. Here is a picture of one of the cores:
The company also has some previous assays with high grade copper, gold and silver results from October 2017:
https://www.asx.com.au/asxpdf/20171026/pdf/43nm0r6dnpkmpk.pdf
Interestingly, the company also says there is recorded cobalt grades of up to 2900 ppm, which is *double* much of the reported grades of nearby Cobalt Blue ($100m diluted MCAP with no interest in precious or base metals).
Magnetic testing is already completed and surface trenching has returned high grade results (
https://www.asx.com.au/asxpdf/20170927/pdf/43mp1fn59k2jx0.pdf)
YALCOWINNA tenement, Broken Hill
My reading of the situation at Yalcowinna is the company is planning exploration in this tenement. Rock chip samples have delivered very high results:
https://www.asx.com.au/asxpdf/20171017/pdf/43n9cq93j0tm21.pdf
Copper; 11.9%, 6.9%, 4.6% and 3.7%
Cobalt; 1650 ppm, 1500 ppm, 1200 ppm and 1100
SMITHS WELL tenement Broken Hill
In the same announcement as above the following rock chip sample results were published:
Cobalt; 1400 ppm, 1200 ppm, 800 ppm and 650 ppm
PARNALLEROO tenement, Broken Hill
In the same announcement as above the following rock chip sample results were published:
Copper; 3.6% and 2.3%
Cobalt; 2340 ppm, 550 ppm and 460 ppm
FAIRY HILL tenement, Broken Hill
In the same announcement as above the following rock chip sample results were published:
Copper ; 37.7%, 18.5%, 14.9%, 12.7% and 10.7%
Lithium exploration, Broken Hill
I'm not entirely sure what has happened to SCI's Lithium-Caesium-Tantalum exploration follow up work:
https://www.asx.com.au/asxpdf/20160927/pdf/43bh1kqlv47cms.pdf
On 27 September 2016, SCI mentioned that they found anomalous lithium bearing areas and said they would follow it up. Can't find any further mention of this. However they go say they found silver-lead-zinc and they would be following that up too.
Albeit page 2 of the 2017 annual report suggests that lithium exploration is not currently being pursued:
http://www.silvercityminerals.com.au/images/reports/2017/SCI-Annual-Report-2017.pdf
RAZORBACK WEST tenement, Broken Hill
Zinc, lead and silver. Apparently the company put this on hold while they went on Copper Blow but some results may start to appear:
https://www.asx.com.au/asxpdf/20171023/pdf/43ngl7rbx055fg.pdf
WILGA DOWNS tenement, Cobar
Heaps of lip-service to the Cobar project but I can't find much about it. Feel free to add to my post.
Next steps
I have spent a long time reading SCI announcements. I think the company looks like its Copper Blow project might really throw it under the spotlight. High grade copper, gold and cobalt could really put a rocket under it.
The next step in this research thread will be to compare available SCI grades to other, similarly placed companies. My preliminary view (looking at the likes of BPL and COB, starting off local) is that SCI is overdue some market attention. Looking further afield (out of Broken Hill) I think the strong exploration results place it well among its peers and make it sorely undervalued.
And by all means share your research on SCI with me too
