Land Holdings and Valuation
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By Dennis Boyko
Created on: January 31, 2010
Current version: 1.0 (November 23, 2010), updated reference links at account for Genco and Silvermex business combination plus updates to Impact Silver land holdings.
On a Average Ore Value per Tonne and Silver Equivalent Ounces metric basis, Silvermex Resources is much stronger than Impact Silver. Silvermex has a much larger resource than Impact Silver. Yet Impact Silver has a much higher valuation.
What is the possible explanation for Impact Silver's current valuation? I believe it comes down to land holdings and the resulting discovery potential. Also, given the similarities between Silvermex's La Guitarra and Impact Silver's lands, I believe Silvermex Resources's valuation should rise significantly higher than in Estimating Silvermex Resources Fair Market Valuation which does not factor land holdings in Silvermex's valuation.
Silvermex's La Guitarra property and the main Impact Silver properties are shown on the Mexican Epithermal Vein Belt chart (taken from slide 5 of 24 of Impact Silver corporate presentation viewed January 31, 2010). The Silvermex and Impact Silver properties are also marked on the Google map in this blog. Note, only the Silvermex La Guitarra property is shown. The San Marciel and other properties, which include significant land positions, are not included.
Silvermex holds 39,714 hectares of land in the Temascaltepec mining district where their La Guitarra mine and mill are located. Quoting from a Genco Resources 2007 Annual Report (p. 16 of 44) which was previous property owner:
The scale and size of this hydrothermal system creates the tremendous economic potential of the Temascaltepec Mining District. The core of the District is a mineralized belt over 15 kilometres long and at least 4 kilometres wide containing literally hundreds of documented veins. [Emphasis added]
The Impact Silver land holdings are best summaries with the following quote from the Impact Silver web site:
IMPACT plans to grow into a premier producer of silver through internal growth at the 272km2 Royal Mines of Zacualpan Silver District,
the 200km2 Mamatla District and the Zacatecas Silver Project as well as through additional external acquisitions.
On November 17th 2009, the Company announced it's first 43-101 resource definition in the Mamatla Silver District,
outlining the combined Capire and Aurora 1 Measured and Indicated Mineral Resources estimates at 7.2 million ounces silver,
94.3 million pounds zinc and 38.8 million pounds lead. This mineral estimate only covers %0.1 (0.2 sq km) of the 200 sq km
Mamatla Silver District (see November 17th 2009 news release or go to Mamatla District under the Projects tab for more information).
[Emphasis added]
and this quote from the Management's Discussion and Analysis For the Three and Six Months Ended June 30, 2010 (available at Sedar):
The Company has acquired control of almost two entire mineral districts in central Mexico; the
423 km2 Royal Mines of Zacualpan Silver District and the 200 km2 Mamatla Mineral District immediately southwest
of Zacualpan. The Company also controls the Veta Grande Silver Project in the Zacatecas Silver District, Mexico.
Note: 423km2 + 200km2 equals 62,300 hectares and
Land holdings, with in place mill capacity, in a target rich environoment is probably a major factor in explaining the current valuation Impact Silver is receiving from the market. The market appears to be anticipating positive future NI 43-101 report updates from Impact Silver
At a macro level, Silvermex Resources in the Temascaltepec Mining district appear to be on a par with those of Impact Silver in the Mamatia Silver and Zacualpan districts. In the Mexican Epithermal Vein Belt, Impact Silver holds 62,300 hectares while Silvermex Resources holds 39,700 hectares. The Silvermex holdings, like the Impact Silver holdings, are impressive in terms of future discovery potential. Silvermex is further advanced in terms of quantifyings the Reserve and Resource metal counts with NI 43-101 reports and based on current NI 43-101 Silvermex ore has significantly higher value per average tonne. On the other hand, Impact Silver has more in place mill capcity as of January 2010. However, Silvermex has a positive Feasibility Study in hand that would allow Silvermex to also match and exceed Impact Silver in terms of mill capacity.
Rather than explaining why Silvermex Resources is so extremely undervalued in the November 2010 market, land holdings suggest, that as Silvermex's potential is recognized in by the market, Silvermex should warrant a future trading premium based solely on the potential of its land holdings.
Average Ore Value per Tonne: US$232.08
Silver Equivalent Ounces: 184.8 M Oz
Fully Diluted Share Count: 297.3 M
Market Capitalization per ounce of Silver Equivalent: US$0.61
Average Ore Value per Tonne: US$90.76
Silver Equivalent Ounces: 7.7 M Oz
Fully Diluted Share Count: 73.2 M
Market Capitalization per ounce of Silver Equivalent: US$9.35
Silvermex Resources web site.
Impact Silver web site.
Silvermex Resources Metal Valuation Report and Impact Silver Metal Valuation Report
Sedar for all TSX regulator filings. Sorry but you'll have to navigate the Sedar site as they do not allow direct links to company specific lists of document filings.
I have listed a few links for anyone interested in researching Silvermex Resources or Impact Silver further. If you have a blog or site with like pages, please send me the link for review and I will include your work in the link section as appropriate.
Got comments? Questions? Please Talk Back.
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