I have taken the time to give an update on the valuation of the SVL's project based on Gross Metal Value and their place in the delineation cycle.
A BASE SILVER PRICE of $5/oz is used. This is the standard price used by hedge funds in assessing junior exploration firms.
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The key questions in relation to size and grade to ask when assessing a valuation are the following;
1] How many potential tonnes of rock are there?
2] What is the gross $dollar value of the silver contained in each tonne of rock?
Please look below for tonnage, potential tonnage and its corresponding valuations. I will then compare it to the relative stock price of the company. It gives investors an idea of what SVL has to offer with their current resource estimate and new exploration targets.
Any questions, please feel free to ask.
Once again, please note that i used $5/oz of silver as SVL is a precious metal junior. As they delineate their resources and hit their targeted 50 million ounces, a higher base case will be factored in.
Tonnage estimation [according to their news releases]
The objective here is to convert the different types of reporting into a dollar amount for the rock unit mined.
Scenario 1: Current Resource Estimates indicate 1,233,000 MT of rock
Scenario 2: Current Exploration target of 7,000,000 MT of rock
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Scenario 1:
Current deposit reported in Metric = 1,233,000 MT @ 256g/t and silver at $5.00/oz [base case]
Current in-place grade = 256g/t Covert to oz/t = 256/31.1035 = 8.23oz/t
That is $41.15 rock!
That is, each ton of rock contains $41.15 of Silver [8.23oz/t X $5.00]
Therefore, GROSS METAL VALUE of the potential deposit;
1,233,000 MT X $41.15 = $50,737,950
Shares currently on issue = 135,105,168 shares
In ground value = $50,737,950
Estimate value per share = Approx $0.375 per share on GROSS METAL VALUE on $5/oz of silver
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Scenario 2:
If the exploration target is reached, deposit reported in Metric = 7,000,000 MT @ 256g/t and silver at $5.00/oz [exploration junior]
Current in-place grade = 256g/t Covert to oz/t = 256/31.1035 = 8.23oz/t
That is $41.15 rock!
That is, each ton of rock gives $41.15 of Silver [8.23oz/t X $5.00]
Therefore, GROSS METAL VALUE of the potential deposit;
7,000,000 MT X $41.15 = $288,050,000 dollars
Shares currently on issue = 135,105,168 shares
In ground value = $288,050,000 dollars
Estimate value per share = Approx $2.13 per share on GROSS METAL VALUE on $5/oz of silver.
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Comments:
Please note from the above that the OPEX costs for a polymetallic mining operation are relatively high compared to a standard mining operation. However, if SVL can get their head grade [256g/t] and intercepts consistent along their strike and at depth, then one can see some tremendous upside in their current share price.
It is important to observe that this is a gross metal value of SVL's WEBB project and CAPEX and OPEX costs will need to be factored into the overall economics when feasibility studies are done. Note that i have not included the by-product credits into the equation which would provide added share appreciation upside.
Ultimately, SVL's head grade will be giving giving their project some excellent potential profits. As such, it's consistency is crucial for the economic viability of their project. Their grades are really at the top end of silver plays on the ASX and if they get close to exploration targets of 50 million ounces of silver, their corresponding share price will be in the multiples.
Current share price of 23.5cps is VERY UNDERVALUED. Base case price should be 37.5cps with 1,233,0000 MT @ 256g/t.
There is definitely accumulation happening by the smart money. Indeed, the share price currently does not reflect its metal value. Eventually, the fundamentals and the share price will balance. With a rising silver price, the herd will come into the stocks.
All about patience here.
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Note that i utilised the following;
- Head grade of 256g/t - Silver base price of $5/oz instead of the current $41/oz
The above is just my opinion and calculations on SVL's POTENTIAL and should not be construed as ADVICE OF ANY SORT. It is a GROSS METAL VALUE CALCULATION based on factors present but will obviously change during the course of their drilling campaign.
SVL Price at posting:
17.1¢ Sentiment: Buy Disclosure: Held
(20min delay)