Last month, Silver Storm Mining (TSX-v: SVRS) / (OTCQX: SVRSF) restarted its 100%-owned La Parrilla mining complex in Durango State, Mexico via first pour of silver-gold doré. This is a very significant de-risking event.
The Company now expects to pour Ag-Au doré continually. Subsequently, management secured 4-yr. permits for the construction of 62 drill pads & 27 access roads. An initial exploration plan has been developed for the C340 and 14 Marcos targets.
At C340, Silver Storm has two objectives, upgrading the Inferred resources at the past-producing Rosarios mine to Indicated; and growing the resource by extending known mineralization to the west. Approximately 3,600 meters of surface drilling is planned.
At 14 Marcos, historical mining was carried out on two levels to a depth of ~100 meters. The expected down-dip projection of the vein, mined by artisanal miners, lies ~140 m south of mine development within the Rosarios mine. Silver Storm will conduct an initial 3,000 m of surface drilling to test mineralization to a depth of ~300 m.
Circling back to first pour, why is it so important? It demonstrates that the mill & circuit can run, the management can recover and pour saleable doré. This means operating systems are operable, and the plant works end-to-end.
Last week, Silver Storm announced the start of hot commissioning of the sulphide circuit at La Parrilla using stockpiled high-grade sulphide material to produce silver-lead and zinc concentrates — a key restart milestone.
Management also amended its Samsung C&T concentrate prepayment agreement, deferring payments to September 2026, and extending the supply period by six months. First Majestic also advanced a US$5M unsecured loan (15% interest, 36-months, prepayable any time without penalty).
Ramping up to an annual run-rate of 3.0M Ag Eq. ounces by 1Q/27 remains a challenge, but a routine restart challenge. Could there be delays? Yes. Cost overruns? Yes. That’s why CEO Greg McKenzie has a prepaid off-take facility with Samsung C&T, and obtained that US$5M loan from First Majestic.
Silver Storm is valued cheaply vs. peers on next year’s anticipated cash flow, AND, it has a second crown jewel asset, also in Durango, the large 100%-owned, early-stage San Diego project.
In late 2020, when Ag was around $24.5/oz, -60% below today’s $59/oz, San Diego was valued at up to C$100M in a single project predecessor company. I see no reason why it could not be worth ~C$318M based on comparable large scale, undeveloped, primary Ag projects. See table below.
Note, C$318M assumes a 50% discount to higher grade peers. New to the table is the U.S. IPO in June of Sinda ltd., a pre-PEA company with 100% of its primary Ag assets in Mexico. Sinda has good things going for it; the backing of highly successful Electrum Group, Fresnillo owns 5%, ~385M high-grade Ag Eq. ounces, and a strong team.
Sinda boasts an “exploration target” of 468M (additional) ounces. If one adds those prospective ounces, the total would be 853M Ag Eq., and the valuation ~C$3.10/oz. Readers are reminded that San Diego has booked 211M Ag Eq. ounces.
If one includes SGS Canada’s exploration target of 20-50M tonnes @ 100-150 g/t Ag Eq., (not a sure thing, timing unknown) the implied valuation would jump to C$489M (net of an estimated C$40M in exploration/drilling costs to find an incremental ~141M Ag Eq. ounces).
When SGS reported the 20-50M tonnes target in 2013, Ag was in the low $20s, so the prospective tonnage was largely ignored. At $59/oz, it’s a different story… San Diego is early-stage, but has booked 211M Ag Eq. ounces (so far). At spot prices, over 75% of its economic value would come from Ag, making it a true primary Ag project.
I recognize I’m throwing around big valuation numbers for San Diego, but it’s one of the largest undeveloped primary Ag projects in Mexico not owned by a much, much larger player.
Given the big market splash of Sinda’s IPO, it’s difficult for me to imagine a scenario in which San Diego isn’t worth C$100s of millions. Yet, the market is attributing close to zero value for it. In my view, as La Parrilla gets ramped up, a lot more attention will be paid to San Diego by management and investors.
Silver Storm’s enterprise value {market cap + debt – cash} on 7/17/26 was ~C$307M. That means investors get the restarted La Parrilla complex at a very large discount.
How often have readers heard a narrative about near-term operations funding other company initiatives? Even with Ag at $59, down from an all-time-high of $121 in January, La Parrilla could provide meaningful investment capital to advance San Diego.
Note: This undervaluation is substantial… Please take a moment to read the assumptions at bottom of table.
La Parrilla was a significant past producer (34M Ag Eq. ounces from 2006 to 2019) with a mill that delivered (mostly) Ag, + zinc & lead, from 2006 until 2019. When placed on care & maintenance, Ag was under $19/oz.
In its prime, production averaged ~3.5M Ag Eq. oz/yr, with a high above 4.5M. Although profitable, the operating margin was never more than US$10/oz, at least not for extended periods. CEO McKenzie stands by 3.0M Ag Eq. oz in 2027, but he’s cautiously optimistic about opportunities to increase production.
In the above table, producers are valued at an average 6.0x 2027e EBITDA multiple. By comparison, Silver Storm is at just 2.2x, with zero credit for the San Diego asset. My upside case (not vetted by management) is hardly a stretch. I use an Ag price of $65.6/oz on 3.5M Ag Eq. ounces vs. guidance of 3.0M. Note, Ag was $70/oz five weeks ago…
With blockbuster drill results incl.; 14.6 m of 1,810 Ag Eq., and 13.1 m of 911 Ag Eq., La Parrilla’s resource was upgraded & expanded to ~27M Indicated (40%) & Inferred (60%) ounces.
Latest Ag-heavy transactions done with Ag at half today’s level…
La Parrilla’s mine life is ~7 years, which is decent, and it could be extended with further internally-funded drilling. CEO McKenzie’s drill campaigns at La Parrilla have been successes –> low-cost, highly efficient, blockbuster grades.
Imagine if a much larger company were to sign a JV on San Diego, perhaps paying Silver Storm C$100M for a 35-40% interest, and free-carrying them to commercial production?
Who might do that? How about one of the following… Over a dozen producers should care. Note, this list is just Mexican-heavy names, U.S., Canadian & Australian focused producers would double or triple the number of prospective suitors.
To be clear, management does not necessarily need a partner for San Diego if it can meaningfully self-fund development from 2027 on, a very nice position to be in.
Although probably not this year’s business, these things take time, I imagine Silver Storm will one day be listed in the U.S. on the NYSE American or NASDAQ, which could drive index/ETF buying and attract generalist U.S. investors and institutions.
Metals/mining companies, including numerous Ag names like; First Majestic, Pan American Silver, Avino Silver & Gold, Americas Gold & Silver, Vizsla, Fortuna Mining, Endeavour Silver, and Contango Silver & Gold are dual-listed in Canada + the U.S.
Silver Storm Mining (TSX-v: SVRS) / (OTCQX: SVRSF) should have positive drill results and La Parrilla ramp up/commissioning news this Summer/Fall. Any update on San Diego would be icing on the cake.
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.
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