Silver Storm Mining, is re-rating underway?

There are several attractive, high-quality silver-heavy juniors with silver (“Ag”) back at ~$69.4/oz from last month’s low of ~$55/oz. One of my favorites is Silver Storm Mining (TSX-v: SVRS) / (OTCQX: SVRSF).

On August 21st, CEO Silver Storm announced a top up investment by legendary Ag enthusiast Eric Sprott for 15M units at C$0.50/share. Each unit includes a half warrant at C$0.70. This is notable as Sprott already owned 11.6% of the Company.

In addition, another significant high net worth investor (unnamed) is investing, bringing the total raise to C$15M. Some might complain about equity dilution, but a half warrant isn’t terrible and it’s Eric Sprott, not a bunch of retail flippers.

I take this as a vote of confidence in Silver Storm’s two 100%-owned crown jewel assets — La Parrilla & San Diego — both in Durango, Mexico. And, a stamp of approval in the mining jurisdiction and management team, led by CEO Greg McKenzie.

Sprott is presumably optimistic about the ramp up of La Parrilla being on schedule, and about next year’s prospects for renewed exploration/development to resume at San Diego. The following image shows a summary of a very recent webinar.

For the past three years the story has been entirely focused on the restart of its La Parrilla mining complex. While it’s too soon to declare mission accomplished, first pour was two months ago, ramping up to an annual run-rate of 3.0M Ag Eq. ounces in 1Q/27.

As can be seen in the following table, if Silver Storm only had La Parrilla, it would be undervalued. However, the Company has a second flagship asset named San Diego.

Both are in Durango State Mexico. In this article I focus on San Diego. Comparing it to peer projects suggests it’s worth C$100s of millions. That may seem hard to believe, but the comps speak for themselves.

I haircut the average peer EV/oz ratio by 33% due to a lack of recent development activity and modestly lower grade. Even with a 33% haircut, San Diego is arguably worth $327M.

Again, this may seem odd given that the entire enterprise value of Silver Storm is only about $412M. San Diego has been off the radar for so long that Investors have largely forgotten about it. Yet, at the end of 2020 it had a valuation as a standalone asset in a predecessor company of ~C$100M.

Given inflation in the past six years, and that Ag has tripled, perhaps a prospective value of C$327M is not as crazy as it sounds. Once La Parrilla is up and running, a lot more attention will be paid to San Diego.

Support for an estimate of C$327M can also be found in M&A for Ag-heavy names, most notably takeouts of producers Gatos, MAG Silver, SilverCrest, and early-stage pre-production developers Prime Mining & Australian-listed Adriatic Metals.

A key takeaway in the above table is the far right column showing the Ag price when each transaction was announced. The average of $33.6/oz half today’s level. In my view, M&A over the next few years will be at even more robust valuations.

To be clear, I’m not suggesting Silver Storm will be acquired anytime soon, I’m building a case for how much San Diego could be worth to a strategic investor. Having said that, if La Parrilla ramps up as planned, there’s no rush to secure a partner for San Diego.

San Diego could be self-funded for the next 12-24 months, through delivery of a PEA or perhaps a PFS. At that point, a strategic partner (if desired) would have to pay A LOT more to get a piece of the action.

If one agrees that C$327M is a reasonable estimate, what form of investment could Silver Storm potentially see?

In my view, not necessarily that of management, the 100% interest in San Diego could be farmed out for an upfront cash payment, plus the partner free-carrying all or most of Silver Storm’s remaining interest for several years —> through BFS, or all the way to production.

Given the potential size of a San Diego operation, reportedly 10-15M Ag Eq. ounces per year, the net present value (NPV) of being free-carried for 4-6 years through commercial production could be quite significant.

In the following table, please note how serious a 10-15M Ag Eq. oz operation would be. Fresnillo, Pan American Silver, and Coeur Mining will do 30-52M Ag Eq. in 2026, but notice that the bottom three multi-billion dollar producers are in the same ballpark as San Diego.

Obviously, San Diego at pre-PEA stage is a not apples-to-apples to these producers, but producers urgently need large projects, including early-stage ones. Especially in prolific mining-friendly & Western-friendly jurisdictions.

In the latest (2025) study, Durango ranked as Mexico’s 3rd safest state (out of 31) in the Mexican Peace Index. This annual ranking is conducted by an independent, non-partisan, non-profit think tank headquartered in Sydney, Australia.

According to CAMIMEX, Mexico’s main private mining industry association, there are currently 59 mines and/or active projects in Durango State.

As a frame of reference, a few years ago Vale announced a 60% earn-in for Ero Copper. I mention this deal b/c Ero Copper’s project was pre-PEA at the time.

The key takeaway here is the very considerable value of being free-carried. GROK estimates the NPV(5%) to be ~C$150M. Note that in Ero Copper’s case they received 71% free carry on the first $1B, and 65.5% on the subsequent $1B.

Imagine CEO Greg McKenzie using this template as a starting point, but saying his board wants a 80%-100% free carried interest. Or, consider the Freeport McMoRan investment into Amarc Resources for a 60% stake.

In September of last year, Freeport agreed to invest an additional C$75M to increase its interest by 10% to 70%. Amarc’s project in B.C. Canada is a very good one, but it’s very early stage, (pre-maiden resource).

Bottom line: Securing a strategic investor for San Diego would be a massive de-risking event that would arguably worth C$100s of millions, (my opinion only) to the enterprise value. That’s C$100s of millions of incremental value as the asset is currently valued near zero.

To reiterate, I don’t know if a strategic investor is in the cards for later this year, next year, or ever, only that numerous companies should be interested in a world-class Ag-heavy (~75% Ag!) project like San Diego.

While all eyes remain on the ongoing ramp up of La Parrilla, which again is reportedly going well, San Diego is an increasingly valuable hidden asset. Hidden assets are, by definition, undervalued or even valued closed to zero.

Next year, if not sooner, I believe San Diego will be rediscovered by investors. Even if not ascribed a C$327M asset value, a third or half of that figure included in Silver Storm’s enterprise value would be meaningful.

Disclosures/disclaimers: The content of this article is for information only. Readers fully understand and agree that nothing contained herein, written by Peter Epstein of Epstein Research [ER], (together, [ER]) about Silver Storm Mining, including but not limited to, commentary, opinions, views, assumptions, reported facts, calculations, etc. is not to be considered implicit or explicit investment advice. Nothing contained herein is a recommendation or solicitation to buy or sell any security. [ER] is not responsible under any circumstances for investment actions taken by the reader. [ER] has never been, and is not currently, a registered or licensed financial advisor or broker/dealer, investment advisor, stockbroker, trader, money manager, compliance or legal officer, and does not perform market-making activities. [ER] is not directly employed by any company, group, organization, party, or person. The shares of Silver Storm Mining are highly speculative, and not suitable for all investors. Readers understand and agree that investments in small-cap stocks can result in a 100% loss of invested funds. It is assumed and agreed upon by readers that they will consult with their own licensed or registered financial advisors before making investment decisions.

At the time this article was posted, Silver Storm Mining was an advertiser on [ER] and Peter Epstein owned shares in the company, acquired in the open market.

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