Thursday, 6 September 2012

Roth Capital Partners bullish on Silver Bull's Sierra Mojada project

Silver Bull Resources (TSE:SVB) (AMEX:SVBL) announced Wednesday that Roth Capital Partners initiated coverage on the silver miner earlier this summer with a "buy" rating and a 90 cent price target. 
The silver company is currently unlocking the potential of its Sierra Mojada project in northern Mexico that Roth's analyst Brian Post believes hosts more than 100 million ounces of silver and over 1 billion pounds of zinc. 
Since acquiring the 52,305 acre property in 2010, Post noted that Silver Bull has been aggressively expanding its silver base at Sierra Mojada. 
"We expect a resource update in 1Q13 to drive its current reported resources above the 100M oz threshold," the analyst took note. 
Roth Capital estimated the silver resource could increase by 25 per cent in the next update, with a smaller scale drilling program now underway expected to yield roughly another 20 million silver resource ounces. 
The 2012 Shallow Silver zone program will target the high-grade underground areas of the deposit identified by historical “long hole” drilling, with 3,000 metres planned to increase confidence in the historical data.
The project currently contains over 80 million ounces of silver and over 1 billion pounds of zinc NI 43-101 compliant resources. The silver mineralization begins at the surface and "also sits atop a separate and sizeable zinc ore body," the analyst said. 
Post also said the relative size of the asset, the "mining-friendly jurisdiction" and proximity to existing infrastructure such as rail and road make Silver Bull "an attractive acquisition target" for a large silver company. 
The report noted that Silver Bull recently shifted from pure-exploration to pre-development activities, now focused on expanding its reported resources, and the market lacks a formal framework by which to gauge "the true value" of Sierra Mojada. 
"We anticipate the company will remedy this issue, particularly concerns about the metallurgical profile at site, through the release of a preliminary economic assessment (PEA) in Q2 or Q3 of 2013," said Post. 
A detailed metallurgical study of the project is ongoing and Post expects the results of the analysis, to be included in the PEA, to prove Sierra Mojada to be amenable to lower-cost, cyanide leaching mining methods.
While the main silver deposit is attractive in its own right, the analyst notes, the project also has "plenty" of exploration upside. 
"The Palmos Negros and Dormidos satellite targets as well as the newly-discovered
Centanario silver zone provide opportunity to expand silver mineralization and transform Sierra Mojada from a single project to a full-fledged mining district. " 
Indeed, the research report cited the exploration upside as another characteristic that makes the company an attractive takeover target. 
Roth's Post said a valuation re-rating is on the horizon, with the resource estimate increase and the release of a preliminary economic assessment next year to lead to "multiple expansion". 
The equity research firm's 90 cent price target is based on an $1.50 EV/Ag oz value applied to Roth's silver resource estimate of just over 102 million ounces. The valuation excludes the value of any zinc assets at the site.
"We believe Silver Bull will emerge as an attractive silver exploration company over the next 12 months as the company continues to develop its resource base and build an economic case for development of its flagship Sierra Mojada project in northern Mexico," the note concluded. 
Aside from its asset in northern Mexico, Silver Bull also has active joint venture agreements on exploration properties in Gabon, Africa. 
The company's stock is up more than 14 per cent in the last month, and was lately changing hands Wednesdy afternoon at 48 cents. 

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