Silver Storm Mining

All metal prices are in US$, everything else is C$. All ounces are Silver (“Ag”) equiv. ounces

Silver Storm Mining (TSX-v: SVRS) / (OTCQX: SVRSF) had high & low points in 2024. We all know the low point — a trading halt due to a multiple-month delay in finalizing an audit on the purchase of the Company’s flagship La Parrilla [LP] primary silver (“Ag”) restart project in Durango State Mexico.

Prospective investors should watch this 5-minute video clip on La Parrilla.

There were no meaningful write-downs or restatements from the audit, or reports of major shareholders abandoning ship. Eric Sprott & First Majestic [FM] have participated in the current capital raise of $3.5M, which is a good sign.

High points included meaningful drilling success & solid progress at restarting LP in 2H/25. Not many junior miners can boast of having a top-18 (in the world) drill intercept in 2024, in two metals. Silver Storm did in Ag & Zinc. {source: @MinerDeck on Twitter/X}

In Durango State, Silver Storm has the 100%-owned, past-producing, (100% underground) LP mine & mill complex. Durango hosts two dozen operating mines, so it’s a mining-friendly jurisdiction. LP was acquired in 2023 from FM, who remains Silver Storm’s largest shareholder at ~36%.

LP averaged 3.5M oz./yr. from 2012-2018 [Ag ~$20/oz.] & 4.0M from 2012-2016 [Max 4.7M]

The Company owns the very large San Diego (“SD“) primary Ag project, also in Durango, valued at C$110M at the end of 2020 when it was the sole asset of a predecessor company. More on SD later.

CEO Greg McKenzie remains committed to a 2H/25 restart of operations at LP. Readers may recall that ~$15M is thought to be needed, but in my view, more might be raised to provide a margin for error. Perhaps $20 or $25M of [debt + equity], the majority being debt. The funding package should be known within a few months.

It doesn’t hurt that silver & gold (“Au“) are off to strong starts in 2025, and up > 35% from a year ago! I speak with several management teams with Ag-heavy projects in Mexico & Canada. There’s a feeling that something has changed with the election of Trump and the ouster of Trudeau.

There’s a swing away from liberalism & environmentalism towards cold hard economics. Trump has Canada & Mexico worried about tariffs, making them concerned about their economies. This should encourage existing precious metal producers to expand, and new entrants to flock to Mexico. Drill baby Drill!

At a margin of US$8-$10/oz., and 3.0 or 3.5M oz./yr., run-rate cash flow in 2026 could be C$34-$50M

In the above chart are operating scenarios for LP alone. The light green-shaded area is for 2026, and the remainder refers to 2027 and beyond when the mine could be operating at 3.5-4.0M oz./yr. The average cash flow for 3.5 or 4.0M oz. at a US$10-$12 margin is C$59M. C$50m+ in cash flow would pay off debt in under a year.

At 4.0M oz./yr., and a US$15/oz. margin, cash flow could be C$86M. Note that Ag traded as high as $34.90/oz. last quarter and LP’s costs could be ~US$20/oz. While existing producers also have upside to higher prices, few have as much leverage as Silver Storm.

Readers are reminded of strong-to-very-strong drill results at LP. The best intervals to date (all grades Au Eq.) at LP are [1,810 g/t Ag Eq. over 14.6 m], [911 g/t over 13.1 m] & [689 g/t over 9.4 m]. It would be nearly impossible to overstate how important these bonanza grades of 10+ meters are. 

1,810 g/t Au Eq. is a Top-5% drill result for intervals of at least 10 m, equating to ~20 g/t Au Eq. This year is off to a good start with [618 g/t Ag Eq. over 18.0 m] –> [302 g/t over 15.0 m] –> [565 g/t over 7.2 m].

If small pockets of ultra-high grade mineralization could be blended with 258 g/t material, it could be a game-changer, but it’s too soon to know how much bonanza grade there is.

Although FM divested the LP Complex, it maintains considerable leverage to the success of the asset through a meaningful investment of 38% in the Company.

The replacement value of above & below-ground infrastructure at LP, including the fully-permitted 2,000 tpd mill and a “partial mining fleet” is estimated at US$150M = C$215M. Replicating this infrastructure would take 5+ years of studies, permitting, funding, construction & commissioning.

LP hosts five underground mines and an open pit, surrounding a 2,000 tonne per day (“tpd”) fully-permitted mill consisting of parallel 1,000 tpd flotation & 1,000 tpd cyanidation leach circuits for oxide & sulfide ores.

The LP Complex was in continuous operation from 2004 to 2019, producing over 34M Ag Eq. ounces, {67% Ag & 33% lead/zinc/Au} and was profitable every year, even at much lower Ag prices.

Mineral resource estimates have been completed across 23 zones/veins in the Rosarios, San Marcos & Quebradillas areas. So far, LP has booked ~15.5M ounces grading ~258 g/t Ag Eq.

An additional estimated 3.8M ounces are contained in support pillars, which should be exploitable. A new resource is expected this quarter incorporating results from the 18,600m drill program. Readers are reminded that 258 g/t Ag Eq. is attractive, equating to ~5 g/t Au Eq. I believe the over/under on the new resource is 21M Ag Eq.

Twenty-one million ounces would be 4.67 to 7.00 years at 4.5 to 3.0M Au Eq. oz./yr. In my view, that’s a very healthy starting point LP. Given the run-up in precious metals — with no end in sight — Management will likely increase operations to 3.5 – 4.0M Ag Eq. oz/.yr. in 2H/26 or 1H/27.

Twenty-one million ounces would be 7.00 to 4.67 years at 3.0 to 4.5M Au Eq. oz./yr. In my view, that’s a very healthy starting point LP. Given the run-up in precious metals — with no end in sight — Management will likely increase operations to 3.5 – 4.0M Ag Eq. oz/.yr. in 2H/26 or 1H/27.

From 2012-18 LP averaged 3.5M Ag Eq. oz./yr. [high of 4.7M] at a time that Ag averaged just $20/oz. In the chart above, Silver Storm is compared to Ag-heavy producers. Due to a higher risk profile, Silver Storm is valued at a 65% discount to peers (1.8x vs. 5.1x).

However, this initial read fails to consider the much larger, 100%-owned SD project, also in Durango State. Investors at C$0.095/shr. get SD for free, an asset that has ~257M Ag Eq. ounces, making it Mexico’s third-largest undeveloped primary Ag project. SD is a potential 10M to 15M oz./yr. {see pages 25-32 of corp. presentation}.

Unlike most companies, Silver Storm’s reported grades are adjusted for estimated recoveries [~80% Ag] & smelter deductions, so it’s more like 300M ounces on an apples-to-apples comparison. How large is 257M ounces? It equates to ~3M Au Eq. ounces and is ~100M more than B.C. Canada’s Dolly Varden Silver.

Granted, Dolly has a higher grade, but it’s a pre-PEA stage company valued at ~$270M. In the chart below, if SD is valued at US$0.30/in-situ Ag Eq. oz., and there are 300M ounces, its per-share value is $0.21 vs. the current share price of $0.095. Clearly, the market is not attributing much if any value to SD as it will require many $10s of millions in cap-ex.

However, if cash flow from LP could help fund cap-ex, then equity dilution for SD might not be so bad. Or, perhaps Silver Storm could farm out 30% or 35% of the Project and get free-carried for several years.

According to SGS Canada, there could be an additional 35M tonnes at 125 g/t Ag Eq. at San Diego. If so, company-wide Ag Eq. ounces could be up to 418M, which would equate to ~4.6M Au Eq. ounces.

Investors today are getting the 100%-owned San Diego, or the 100%-owned La Parrilla for free. If events unfold reasonably as planned, each project should be worth > C$100M in a year or two.

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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