Disclosure, I hold shares in AVM and have purchased on-market.
Advanced Metals (AVM) Revised Value Proposition
1. Second highest-grade silver (AgEq) combined projects (Resource or Foreign Estimate) on the ASX
2. Projects located in most prospective silver region in the world, surrounded by some of the world largest silver deposits
3. 40Moz AgEq Combined Foreign Estimate with exploration upside
4. Lowest EV / Foreign Estimate or Resource Ounce Ratio amongst American Peers
5. Clear undervaluation to peers with re-rate potential in the multiples
6. Leveraged to gold with new prospective projects with proven high-grade gold
7. Victorian Goldfield peers demonstrate market rewarding exploration success
AVM Initial Investment Thesis
It was only a few months ago I had undertaken a deep dive into Advance Metals (AVM) Yoquivo Silver Project acquisition, which laid the foundation for the company’s new strategic direction and highly prospective investment thesis.
To review my initial AVM investment thesis, which breaks down the company fundamentals, Yoquivo Silver Project acquisition, silver backdrop and more, please see either of the below links:
Hotcopper - https://hotcopper.com.au/threads/ann-acquistion-of-high-grade-silver-and-gold-project-in-mexico.8278839/page-48?post_id=76364468
X - https://x.com/Twar91/status/1851559005363249510
However, management haven’t wasted anytime, having just announced the right to acquire an 80% interest in the Myrtleford and Beaufort Gold Projects in the Victorian Goldfields, Australia, whilst simultaneously acquiring 100% of the Gavilanes Silver Project in Durango, Mexico.
On top of this acquisition, gold and silver have surged year on year, so this announcement could not have come at a better time with such a strong commodity backdrop.
AVM Focusing on Silver, why Acquire a Gold Project?
Admittedly, with AVM’s recent acquisition & pivot to silver, the acquisition & exposure to gold was unexpected, however in my opinion now makes the value proposition more robust.
Having exposure to both gold and silver, offers several advantages, including:
1. Commodity Prices: Gold and silver prices often move in correlation but can also behave differently based on market conditions. Holding projects for both metals reduces exposure to a single commodity's price volatility.
2. Investor Base: Investors have varying preferences; some focus on gold as a safe-haven asset, while others are attracted to silver's increasing industrial applications. Catering to more market participants will widen AVM’s appeal.
3. Market Opportunities: Having both metals increases AVM’s flexibility to capitalize on market trends & sentiment such as when silver outperforms gold during certain economic cycles.
4. Geological Risk: Having multiple projects decreases the inherent risk associated with junior explorers, specifically should any of the project’s exploration programs be unsuccessful they can quickly pivot to other prospective projects.
The acquisition of the E79 Joint Venture appears to represent a very low-cost opportunity whilst already boasting significant high grade drilling results, against a backdrop of record high gold spot prices.
Gavilanes Silver Project
Located in the Most Prolific Silver Region in the World
The Gavilanes Project, located in Durango, Mexico, within the prolific Sierra Madre Occidental District, is an early-stage high-grade silver-gold vein system with significant upside potential.
The Gavilanes Project quite literally sits within one of the most prospective regions in the world for silver & gold.Most of the world’s largest and highest-grade silver mines can be found along the Sierra Belt.
Surrounding AVMs most recent project acquisition, includes:
• Metates Project 18.5Moz Au & 526Moz Ag - one of the world’s largest undeveloped gold-silver deposits.
• Prime Mining Corp ($247M Market Cap) – Los Reyes Project 2.5Moz Au & 112Moz Ag undeveloped deposit
• First Majestic Silver Corp ($2.9B Market Cap) – San Dimas 11Moz & 500Moz Ag, producing mine
AVM now have 40M oz of High-Grade Silver @ 386g/t AgEq (Foreign Estimate)With the acquisition of the Gavilanes Project, AVM’s Combined Foreign Estimate has increased to a notable 40Moz @ 386g/t AgEq. This is comprised of: • Yoquivo Project has a Foreign Estimate of 937Kt @ 570 g/t AgEq (2.1 g/t Au, 410 g/t Ag) for 17.23M oz (AgEq). Refer to AVM Announcement dated 28 October 2024 and;
• Gavilanes Project which has a Foreign Estimate of 22.4M oz AgEq at 245.6 g/t AgEq. (Table below).
Market Rewarding ‘Already Discovered’ Ounces, Particularly Precious Metals
One of the reasons why I like this acquisition, is that current market trends appear to have a preference for “de-risked” investments, with investors gravitating toward juniors with established resources/foreign estimates, as these projects offer lower perceived risk.
However, companies that can validate their resources/foreign estimates while showcasing exploration upside are being rewarded with the most significant share price re-rates.Some recent examples include:
What JBY, SS1 & MTH have all done well, is balance the market sentiment and concerns, by advancing known resources while strategically demonstrating the potential for growth through successful exploration.
Further to this, macro factors suggest we will continue to see the rise in precious metals prices largely because of sticky inflation, general global uncertainty and the US debt situation.
Year on year, we have seen a strong focus on precious metals with both gold and silver increasing ~29%.So, it is no surprise that some of the best performing junior exploration companies are those focused on precious metals, and in my opinion, this will continue into 2025.
Therefore, I consider AVM to be well-positioned to replicate these success stories, provided it can deliver on their exploration programs.
Updated Value Proposition
The Gavilanes Project acquisition has indeed enhanced AVM's value proposition, especially when compared to its American peers.
With a market capitalization of approximately ~$5.7 million (pre-acquisition), their appears to be a large valuation disparity relative to companies like Mithril Silver and Gold (MTH), Unico Silver (USL) and Andean Silver Limited (ASL).
AVM is currently trading at a valuation between ~12 and ~25 times lower than American peers.
To highlight this valuation disparity, MTH is currently trading at a valuation 12.2 times higher than AVM, despite AVM now boasting a larger combined Foreign Estimate (AgEq).
Moreover, ASL boast a resource which is approximately 1.2 times greater than AVMs, however, are trading at a valuation ~25 times higher.
Granted other factors will likely be playing a role in AVMs undervaluation including:
• Less advanced exploration having only just acquired the projects
• Projects being classified as Foreign Estimates under the NI43-101 code rather than JORC
Notwithstanding, even if you arbitrarily discounted the valuation discrepancy from the closest peer by half, AVM still offers a potential upside of 600% from its current valuation.
This also excludes any share price catalysts such as any upcoming exploration campaigns, which is likely to see the valuation gap reduce in my opinion.
Gavilanes Leveraged to Low-Cost Growth & Exploration Upside“The project spans a 135km2 land package with low to intermediate sulfidation epithermal polymetallic veins, offering substantial room for growth and development. Current exploration has tested just 0.17km2 of the main zone, while an additional 0.28 km2 of known veins remain undrilled.
Drilling to date has confirmed the presence of extensive untested veins and breccia zones, with veins extending over 2 km but drill coverage limited to less than 900 m along strike. Additional zones, including Central and Western Zones, show promise but require detailed mapping and sampling.
The deposit remains open at depth, with indications of increasing copper and gold grades. Recent discoveries of additional veins and alteration zones underline the project’s untapped potential. With supportive community relations, Gavilanes is positioned for expansion and advancement.”
“Eight mineralised structures have been identified in surface outcrop, and three, the Guadalupe Soledad, Descubridora, and San Nicolas zones, have been drill tested by prior project owner Santacruz Silver Mining Ltd.
The La Cruz structure was tested by three shallow drillholes completed by Hochschild.
The other four known mineralised structures or veins are untested by drilling.”
Second Highest-Grade Silver Equivalent Foreign Estimate or Resource on the ASX
With the inclusion of Gavilanes in AVM’s combined Foreign Estimate, the company now stands out for its substantial foreign estimate size, underpinned by an exceptionally high-grade foreign estimate @ 386g/t AgEq.
This positions AVM as the second highest grade ASX-listed company in terms of silver equivalent grade, a distinction that sets it apart from its peers.
For comparison, the highest-grade silver equivalent resources listed on the ASX are:
1. Mithril Gold and Silver (ASX:MTH) – Copalquin District Project: 477 g/t AgEq
2. Advance Metals (ASX:AVM) – Yoquivo and Gavilanes Project: 386 g/t AgEq
3. Andean Silver (ASX:ASL) – Cerro Bayo Project: 342 g/t AgEq
4. Maronan Metals (ASX:MMA) – Maronan Project: 227 g/t AgEq
5. Alicanto Minerals (ASX:AQI) – Sala Project: 285 g/t AgEq
With the second highest-grade silver equivalent Foreign Estimates on the ASX, AVM is well-positioned to capture investor interest, especially as silver continues to attract attention in the broader market.
Moreover, success in AVM's exploration campaigns and progress toward feasibility studies could further emphasize the advantages of a high-grade deposit. Compared to lower-grade peers, high-grade resources are typically associated with lower production costs, faster payback periods, and more robust project economics.
The bubble chart below illustrates the high-grade nature of AVM’s Yoquivo and Gavilanes projects, along with the company’s exceptionally low valuation relative to other key ASX-listed silver-focused juniors.
It is worth highlighting, AVMs Combined Foreign Estimate silver grade (258 g/t Ag) on its own ranks the highest amongst any ASX listed company with a Foreign Estimate or Resource.
Comparatively, the highest-grade silver Foreign Estimate or Resource listed on the ASX are:
1. Advance Metals (ASX:AVM) – Yoquivo and Gavilanes Projects: 258 g/t Ag
2. Andean Silver (ASX:ASL) – Cerro Bayo Project at 146 g/t Ag
3. Mithril Gold and Silver (ASX:MTH) – Copalquin District Project at 141 g/t Ag
4. Maronan Metals (ASX:MMA) – Maronan Project at 107 g/t Ag
5. Unico Silver (ASX:USL) – Joaquin & Cerro Leon Projects at 102 g/t Ag
With Mexico and the broader Americas acknowledged as the largest producer of silver in the world, it is no surprise that 4 of the 5 highest grade silver resources/foreign estimates on the ASX are from these regions, including AVM.
High-Grade Silver InterceptsThe Gavilanes project boasts several exceptionally high-grade silver intersections observed in numerous core samples.
I have listed some of these results in the table below, in addition to some highlighted drilling intercepts from AVM’s peers.
Lowest EV / Resource or Foreign Estimate Ounce (AqEq) Ratio Amongst American Peers
Like my initial assessment of AVMs Yoquivo acquisition, the EV/Resource or Foreign Estimate Ounce ratio is a useful indicator for peer analysis, especially for early-stage exploration companies.
However, there are cautionary notes required as a low EV/Resource or Foreign Estimate Ounce ratio may suggest undervaluation, however it doesn't always equate to a buy opportunity, and many other considerations need to be evaluated.
Even so, following AVMs Gavilanes Project acquisition, I believe this has fundamentally changed the value proposition for my investment thesis (for the better), largely due to their Foreign Resource Estimate having more than doubled.
Based on the EV/Foreign Estimate or Resource to Ounce Ratio (Blueline), AVM (0.09) is significantly below the average (1.0) and even further below outliers like MTH (1.46).
Looking solely at MTH, AVM has a comparable Foreign Estimate base (40 Moz AgEq) to MTH (37 Moz AgEq), however despite similar resources/foreign estimates, MTH trades at a ratio 16.2 times greater (1.46 vs. 0.09).
If AVM were to re-rate in line with MTHs 1.46 ratio, it would require AVMs share price to rise from $0.034 to ~0.36. That is 10.6 times increase from its current valuation.
To just bring AVM in line with the average American Peer ratio, it requires AVM’s share price to increase from $0.034 to $0.25 which is an approximate 7.4 times increase.
In my opinion, this value discrepancy is likely due to MTH’s 7-month head start, whereby they have been able to demonstrate exploration upside through their maiden drill campaign and high-grade intercepts, showing the projects potential.
While MTH has established itself as a leader in the exploration race, AVM’s comparable foreign estimate and discounted EV/Foreign Estimate or Resource ratio make it a significantly more attractive value proposition.
In the short term, any material exploration success or increased market awareness could act as a catalyst for a substantial re-rate, potentially bringing AVM closer to its peers’ valuations.
This supports my thesis for a potential re-rate, especially if AVM can bridge the gap in perceived risk and/or exploration success relative to its peers.
Myrtleford & Beaufort Gold Projects
Located in the World’s Premier Gold Producing Region
Whilst the Gavilanes Silver project acquisition is a standalone announcement for any company, it is not to be outdone by AVM’s two gold focused acquisitions.
The Myrtleford (418km2) and Beaufort (120km2) projects are extremely large land holdings strategically located in the heart of Australia's Victorian Goldfields, which is arguably one of the world’s most prolific high-grade gold belts.
Surrounded by globally significant operations like the Fosterville Gold Mine and multi-billion-dollar capped companies, the projects sit within a region which has delivered more than 80 million ounces of gold.
Further to this, the previous owner Serra Energy Metals (Serra) has already invested A$6 million in advancing the Myrtleford and Beaufort Gold Projects through several drilling programs which provides a significant foundation for AVM to build upon.
Whilst these projects do not contain an existing foreign estimate or resource like the Gavilanes Silver project, the potential of these projects cannot be understated and if the geology is favourable, can be company makers.
Myrtleford Project – Consolidates 70 Past Producing High-Grade Gold Mines
Spanning 418 km², the project consolidates hundreds of mineralized workings, including over 70 past-producing high-grade underground gold mines, many with grades exceeding 31 g/t Au, yet remain largely unexplored with modern techniques.
Historically, mining operations were limited to shallow depths due to water table constraints and exploration drilling is extremely limited over the license with there being virtually no drilling to test primary targets at depth.
The exception to this is two inaugural drilling campaigns completed by Serra at the historical Happy Valley Gold Mine (testing depth extension) and Twist Creek (limited to 5 drill targets across 3km of strike).
Serra’s drilling programs returned some exceptional results, such as 11.5 m @ 160.4 g/t Au (including 0.6 m @ 2340 g/t Au) and 5.9 m @ 66.2 g/t Au at Happy Valley Gold Mine, confirming that high-grade quartz veins extend well below the depth of previous mining activities.
This seemingly validates the potential for deeper high-grade mineralization and the possibility of substantial resource growth within the Happy Valley Trend.
Whilst the results at Happy Valley Gold Mine and Twist Creek certainly call for further exploration, I see the biggest value driver stemming from new phases of modern & systematic exploration across the tenement more broadly to identify new prospective targets.
After reading through Serra’s announcements over the past two years, the priorities of exploration appear solely focused on the known Happy Valley Gold Mine & Twist Creek targets, with no wider exploration across the km’s of strike extent.
For example, the 13 km-long ‘Happy Valley’ trend of significant gold mineralization, hosts numerous historic gold mines which produced high grade gold and were only mined to shallow depths during the late 1800s and early 1900s.
Many of these mines are located on mineralized structures that extend for km’s and remain largely untested by modern exploration.
The 7 km-long ‘Twist Creek’ trend has historic workings with multiple structures mined at exceptionally high grades, averaging 31 g/t gold, however only at shallow depths.
The ‘Magpie’ trend which extends over 16km exhibits multiple lodes exploited by early miners at shallow depths with historic production including the Waterloo prospect which produced 851k oz of gold at a grade of approximately 13.4 g/t (Easton, 1912) between 1861 & 1878.
With such a large land position, proven high-grade mineralization, and limited modern exploration, if AVM demonstrate a new discovery this opens the potential of a district-scale high-grade gold system within a Tier-1 jurisdiction.
Beaufort Project – Estimated 1.16Moz Au Historical Production & Gold Source Not Yet FoundThe project spans a 20 km trend which has been historically mined for alluvial gold which has been estimated to have produced up to 1.16Moz of alluvial gold, with the primary hard rock source yet to be identified.
Despite this, exploration work for bedrock sources of gold has consisted of limited and unsystematic soil sampling, rock sampling, mapping and limited ground magnetics.
This represents a unique opportunity for AVM to systematically evaluate and drill test target areas and associated anomalies which will hopefully identify the source of the alluvial production.
Interestingly, as depicted in the below image you can see the Beaufort gold field is an isolated and clearly defined area of production i.e. all the historical workings are defined within the tenement.
Further, with the alluvial production fields concentrated around a central north-south trending ridge, this makes for a potential target area for the source location of the alluvial gold deposition.
Source:
E79 Resources Enters Agreement to Acquire Beaufort and Myrtleford Gold Projects in the Victorian Gold Fields, AustraliaWhat is distinct is the distribution of alluvial workings in relation to the historically mapped shafts and the structures which trend North-South along the axis of the fold, as shown in the below image.
The setting is strikingly like a number of significant deposits in the Victorian Goldfields.
With historical production limited in depth, having produced an estimated 1.16 Moz of gold in addition to the primary source of the alluvial gold not yet identified, it makes for highly attractive investment proposition.
These features suggest that Beaufort may host significant hard rock gold deposits yet to be discovered.
Source:
E79 Resources Enters Agreement to Acquire Beaufort and Myrtleford Gold Projects in the Victorian Gold Fields, AustraliaSouthern Cross Gold, ~$12M MC Junior to ~$915M MC Victorian Gold Fields Success StorySouthern Cross Gold's (SXG) rise is a prime example of how a compelling exploration narrative can drive significant market valuation, even in the absence of a defined resource and challenging sentiment towards gold juniors.
After listing on the ASX in May 2022 at $0.20 per ordinary share with a market cap of ~$12M, the company has ascended to a staggering peak of $4.27 per ordinary share and a market cap of ~$915M (fully diluted) without even providing a defined resource.
That is a ~21 times return on initial investment, in a little over 2.5 years.
It underscores the premium investors place on the potential for a district-scale discovery, especially in a prolific region like the Victorian Goldfields.
This bodes well for other exploration companies in the area, especially those with large, under-explored land positions and systematic exploration plans, much like the Myrtleford and Beaufort Projects.
AVM & SXG Top Gold Intersections Comparison
AVM boasts several exceptionally high-grade gold intercepts at its Myrtleford project, which can be favourably compared to the equally impressive intercepts reported by SXG.
While it would be a stretch to suggest that AVM should command a valuation of ~$915M based solely on a handful of comparable drill results, the geological prospectivity of AVM’s projects is undeniable. The challenge AVM is faced with is demonstrating significant size and scale, much like SXG has successfully done.
Collectively, the Myrtleford and Beaufort projects encompass approximately 58 km of strike, featuring documented gold workings, numerous shallow historical gold mines, and outcropping targets ready for further exploration.
By comparison, SXG’s flagship Sunday Creek Project comprises five prospects within just ~1km of their 10 km mineralized strike extent.
Excluding the ~3 km at Twist Creek and the Happy Valley Gold Mine, AVM’s projects contain approximately ~54 km of strike that has seen no modern exploration, underscoring the vast untapped potential of these projects.
Southern Cross Gold Success Can Provide a Blueprint for AVMDrawing similarities between AVM after the Myrtleford & Beaufort project acquisitions & SXG at their IPO, I believe it can be ascertained that AVM already provides unrealised value, noting SXG commanded a market capitalization approximately double that of AVM, despite both boasting comparable project attributes as highlighted in the below table:
SXG's post-IPO journey highlights how a junior gold explorer can generate substantial shareholder returns in the Victorian Goldfields.
The company began exploration at historical shallow gold shafts, notably the 'Apollo Shaft' and nearby dykes, resulting in multiple high-grade intercepts, including 17.3m @ 3.9 g/t Au, which it has since expanded upon.
AVM's Myrtleford and Beaufort Projects share similar characteristics, including historical gold shafts, offering a strong foundation to emulate SXG's success and something the market can easily reference when attributing valuation.
Analysing SXG's timeline and key catalysts provides insight into a potential roadmap for AVM, especially if the geology at Myrtleford and Beaufort proves equally promising.
Disclaimer - This research article was commissioned and funded by Advance Metals Limited. The material contained in this article is for information purposes only. This article is not an offer or invitation for subscription or purchase of, or a recommendation in relation to, securities in the Company and neither this article nor anything contained in it shall form the basis of any contract or commitment.
This article is not financial product or investment advice. It does not take into account the investment objectives, financial situation and particular needs of any investor. Before making an investment in the Company, an investor or prospective investor should consider whether such an investment is appropriate to their particular investment needs, objectives and financial circumstances, seek legal and taxation advice as appropriate and consult a financial adviser if necessary.
This article has been prepared based on information available as at the release date and has not been independently verified. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness or correctness of the information, opinions and conclusions contained in this article. To the maximum extent permitted by law, none of Advance Metals Limited or its subsidiaries or affiliates or the directors, employees, agents, representatives or advisers of any such party, nor any other person accepts any liability for any loss arising from the use of this article or its contents or otherwise arising in connection with it, including without limitation, any liability arising from fault or negligence on the part of Advance Metals Limited or its subsidiaries or affiliates or the directors, employees, agents, representatives or advisers of any such party.
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