   | |||
Sierra Madre Plucks Silver Mine and Mill for PenniesBob Moriarty Sierra Madre Gold and Silver (SM-V) was another tiny young silver play in Mexico when in May of 2022 they announced an agreement with First Majestic Silver to buy the La Guitarra silver mine and 500 TPD mill in an all share deal giving First Majestic a 47.7% stake in Sierra Madre and a 2% NSR. First Majestic was issued 69 million shares at a deemed value of $.65 a share. That was the good news. The bad news is that approvals took far longer than expected. Sierra Madre went public in mid-2021 with a pair of silver projects in Mexico. First Majestic had a swarm of silver projects that were surplus to their needs. First Majestic had picked up the La Guitarra silver mine and mill in 2012. They operated it at a rate of 1.0 to 1.5 million ounces of silver EQ until 2018 before putting the mine on care and maintenance. The mine has a historic resource of 17 million ounces in high-grade silver. The management team from Sierra Madre was well acquainted with La Guitarra since they had actually operated it between 2006 and 2009 before First Majestic picked it up. As part of the deal with First Majestic, Sierra Madre was required to do a $10 million financing which they completed at $.65. Sierra Madre has a timeline of completing an initial 43-101 resource by year-end 2023. With their cash they plan on a steady drill program for the next two years. A PEA is planned for Q-2 2024 as they begin equipment procurement and mine planning. The company looks to be back into production in Q-2 or so of 2025. Sierra Madre is a good solid silver story with nice projects; cash in the bank and professional management. Since resuming trading in early June the shares have dropped from a high of $.52 to a low of $.37 a month ago. I’d guess most of that selling comes from bored shareholders who got tired of sitting on the stock with no ability to buy or sell as long as the shares were halted. I don’t think it has anything to do with the company or their prospects. Between the Tepic property with just over ten million ounces of silver EQ in a historic resource and the La Guitarra mine with its seventeen million ounce historic silver EQ resource, it seems to me the company is pretty cheap just on the amount of silver. But investors seem to be focused on the trees instead of the forest. La Guitarra comes with 236,000 meters of drilling that would cost about $150 a meter. So the replacement value of the drilling is worth about $35.4 million in USD, just short of what Sierra Madre printed off in share certificates. The 52km of underground development would cost another $72.8 million in USD or twice as much as they paid for the whole thing in paper. Building a mill for 500 TPD would add another $25 million at $50,000 per tonne of capacity. And the very real and necessary offices, scoops, drill and trucks would cost another $35 million. The mill and mine are fully permitted; they have a waiting tailings facility with power and water on site. Sierra Madre did not pay for all this with $36 million in cash. They paid for it with $36 million in paper. That’s a good deal for both Sierra Madre and First Majestic. It speaks to how highly First Majestic thinks of the Sierra Madre management and team. I participated in a private placement with Sierra Madre when they first went public and in their latest $10 million funding. They do advertise on 321gold so that has to make me biased. Do your own due diligence. Sierra Madre Gold & Silver ### Bob Moriarty 321gold Ltd |
Copyright ©2001-2024 321gold Ltd. All Rights Reserved