Sierra Madre Gold and Silver Ltd. announced that it had received a loan from major company First Majestic Silver Corp. to complete the work required to restart its 100%-owned La Guitarra silver and gold project. Find out why one analyst thinks the stock is undervalued.
Sierra Madre Gold and Silver Ltd. (SM:TSX.V; SMDRF:OTCQX) announced that it had received a $5 million loan from a major First Majestic Silver Corp. (FR:TSX; AG:NYSE; FMV:FSE) to complete the work necessary to restart its 100%-owned La Guitarra silver and gold project in Mexico.
The non-revolving, secured term loan will be used to complete the company's progress in facilities, equipment and infrastructure at the mine site, Sierra Madre said.
Work will include major orders for mining equipment, processing facility upgrades, plant repairs, full staffing and final underground development for an operational restart.
“After a thorough and thorough process, we are very pleased to announce this non-equity, non-dilutive financing,” said Alex Langer, President and CEO of Sierra Madres. “The loan will allow us to complete all the necessary steps to eventually restart the fully permitted La Guitarra silver and gold mine. We would like to thank First Majestic very much for providing this funding and for their continued support of La Guitarra.
La Guitarra is a licensed and formerly productive underground mine with a 500 tonne per day (tpd) processing facility that operated until 2018, the company said.
“The eastern part of the district was home to large, high-grade mines that were important producers during the Spanish colonial period,” the Sierra Madre website states. “This area has seen only limited modern drilling and exploration, although it is home to hundreds of old mines, prospects, workings and veins.”
Sierra Madre said the loan is for a term of two years and bears interest at a rate of 15% per annum, compounded monthly, which will be due and payable to the lender commencing six months from the commencement date of the loan. loan and due on the due date. last day of each calendar month thereafter. The company can repay the loan plus accrued and unpaid interest to the lender at any time without penalty.
As security for the Loan and the Company's performance of its obligations under the Loan Agreement, the Company has agreed to pledge all shares of its wholly owned subsidiary that owns La Guitarra in favor of First Majestic, and the Company and certain of its subsidiaries have entered into general security agreements in favor of First Majestic.
The catalyst: a growing resource
Sierra Madre said a mine restart study for La Guitarra is expected to be completed in the third quarter and will include new estimates of underground mining materials at the Guitarra, Coloso and Nazareno mines, the Los Angeles deposit and a cost estimate operating. It will also include an estimate of the capital cost.
Last year, the company filed a technical report increasing the project's Mineral Resource Estimate (MRE) by 373% in the stated category to 27.2 million ounces (Moz) of silver equivalent (Ag Eq) and increasing inferred resources by 204%, to 20.2 Moz Ag Eq. According to the resources report, the La Guitarra project hosts 3,842,000 tonnes of indicated silver resources grading 146 g/t Ag and 0.96 g/t Au and an inferred resource of 4,105,000 tonnes grading 113 g/t Ag and 0.52 g/t Au.
VSA Capital mentioned the resource update in a November 2023 note on Sierra Madre, rating the stock as a Buy for potential investors with a target price of CA$0.90.
“We expect the restart plan to confirm modest investment costs to reach the current nameplate capacity of 520 tpd (tonnes per day) in a phased manner,” the analysts wrote.
This same month, Bereket Berhe with Beacon Securities listed Sierra Madre as a “speculative buy” with a price target of CA$0.75.
“The analyst considers Sierra Madre to be undervalued due to progress in moving La Guitarra toward restarting production in the near term,” the analyst wrote.
Expert: Gold “will go very high”
Gold prices fell slightly this week but still remain above US$2,300 per ounce.
Some analysts are predicting a bull market for the yellow metal. Editor of the Captain Ewave newsletter recently analyzed movements in the precious metal and recommended going long gold.
“Are gold and gold mining values about to experience an explosive rise?” he wrote. “Based on our analysis, the answer appears to be a resounding yes.”
Seasoned investor Jim Rogers predicts that gold will “rise very high” under buying pressure from retail investors, institutional funds and central banks in developing countries.
“Gold prices have been declining for many years. In recent months they have started to move,” Rogers said. Business Today TV. “Whenever a commodity, which has been static for a long period of time, starts to move, it gains momentum. That's what's happening with gold right now. The momentum is building, and who knows how high gold prices will go.”
For now, the drag appears to be interest rates, with one Fed official indicating that rates could remain at their current high levels with “sideways” inflation for some time, Investopedia.com reported.
“Concerns about when the Fed might cut rates could have a negative impact on the price of gold,” the website notes.
Shareholding and sharing structure
Sierra Madre provided a breakdown of the company's ownership and shareholding structure, where management and founders own approximately 24.8% of the company. According to Reuters, President and CEO Alexander Langer owns 1.96% of the company, Executive Chairman and COO Gregory K. Liller owns 1.78%, Director Jorge Ramiro Monroy owns 1%, 33%, director Alejandro Caraveo owns 1.16%, director Kerry Melbourne Spong owns 0.43%. , and director Gregory F. Smith owns 0.16%.
Institutional investors own 12.9% of the company. Commodity Capital AG owns 4.4%, Reuters reported.
First Majestic Silver Corp. is a strategic investor and owns 44.9% of the company.
The rest belongs to retail and high-net-worth investors.
According to Refinitiv, there are 152.69 million shares outstanding and 73.21 million floating shares traded, while the company has a market capitalization of CA$67.05 million and trades on a range of 52 weeks ranging from CA$0.25 to CA$0.74.
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Important Disclosures:
- Sierra Madre Gold and Silver Ltd. is a billboard sponsor of Streetwise Reports and pays SWR a monthly sponsorship fee of between US$4,000 and US$5,000.
- As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their households) own securities of Sierra Madrea Gold and Silver Ltd.
- Steve Sobek wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee.
- This article does not constitute investment advice and does not constitute a solicitation for any investment. Streetwise Reports does not provide general or specific investment advice and the information contained in Streetwise Reports should not be considered a recommendation to buy or sell any security. Each reader is encouraged to consult their personal financial advisor and conduct their own comprehensive investment research. By opening this page, each reader agrees to Streetwise Reports' terms of use and full disclaimer. Streetwise Reports does not endorse or recommend the activities, products, services or securities of any company.
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