Mackie Research sees significant upside in shares of Kootenay Silver Inc. (TSXV: KTN)
Capital Ideas Media | January 2, 2020 | SmallCapPower: Eric Sprott (10.9% stake), Pan American Silver Corp. (NASDAQ:PAAS) (TSX:PAAS) (6% stake), Coeur Mining Inc. (NYSE:CDE) and Agnico Eagle Mines Limited (NYSE:AEM) (TSX:AEM) have taken a shine to Kootenay Silver Inc. (TSXV: KTN). Now that we’ve got your attention by dropping Eric Sprott’s name, let’s take a look at Kootenay Silver.
(Originally published on Capital Ideas Media on November 26, 2019)
Mackie Research, in initiating coverage of the Company, calls it a “junior explorer that has amassed a large portfolio of silver-rich properties in the Sierra Madre region of Mexico.”
Mackie analyst Stuart McDougall started coverage with a “speculative buy” rating and a price target of $0.55 per share, which gives the stock about 95% upside from current levels.
McDougall says Kootenay is a good choice for investors wanting early exposure to a newly-emerging, high-grade silver discovery in Mexico.
Kootenay Silver’s stock had a big run in August when precious metals stocks were surging, partly on trade tensions and expectations of lower global interest rates, and has been consolidating those gains since.
KOOTENAY SILVER INC (TSXV:KTN) | 1YR CHART
Here are the highlights from Mackie Research’s report on Kootenay Silver:
The Company’s La Cigarra and Promontorio projects are well known for their bulk potential, but we think the real upside lies in the lesser-known and higher-grading potential of the Columba and Copalito projects.
Bonanza Silver with Golden Kicker
Columba, an Historic Mine with a Silver Lining
Since November 2018, when it signed an option to earn a 100% interest, KTN has mapped and sampled numerous veins in the vicinity of the past-producing property.
A first-phase drilling, believed to be the first ever conduction on the property, has also returned an unexpected surprise – up to 1,070 grams per tonne (g/t) over 0.9 metres (m) and as wide as 33.5m grading 112 g/t in the hanging wall of one of the two historically worked veins.
Mineralized veins have been intersected in the footwall as well, and one of the deeper holes has added gold to the system’s potential, intersecting 1.16 g/t, plus 755 g/t silver, over 1.75m.
The deepest hole drilled to date also confirmed the main vein’s continuation at depth, intersecting 0.56m at 283 g/t, some 50m below the lowest historic level.
Copalito, a Golden Opportunity
KTN can earn a 100% interest in the project, which is located 35 kilometres (km) east of the past-producing El Gallo mine, in Sinaloa State.
Until recently, work has been restricted to the surface, but numerous epithermal veins have been outlined for follow-up trenching and drilling.
One of these returned 8.2 g/t gold and 583 g/t silver across 1.1m of vein. KTN expects to begin drill-testing up to six priority targets in the New Year, having successfully signed an access agreement with the local ejido in early October.
La Cigarra and Promontorio
The most advanced of KTN’s projects, La Cigarra and Promontorio, host a combined 174 million ounces (Moz) silver-equivalent.
Both are potentially amenable to open-pit mining methods, and each remains open for expansion with further drilling.
The latter is also complimented by a separate but geologically-similar project, located 7km to the north and known as La Negra.
It and Promontorio were recently the subject of an earn-in agreement by Pan American Silver Corp.
PRIMARY SILVER ASSETS
Balance Sheet
KTN is well financed, with an estimated $11 million of cash and no debt, partly reflecting the closing of two recent equity financings that saw the Company issue a combined 38.9 million units to raise $7 million in gross proceeds. Proceeds are earmarked for working capital and ongoing exploration programs.
We recommend purchase of KTN as a “speculative buy” for investors wanting early exposure to a newly-emerging, high-grade silver discovery in Mexico.
Capital Requirements
The Company had 19.2 million options outstanding (as of June 30), having an average weighted average exercise price of $0.35 per share.
The options expire at various times over 4.5 years and would provide the Company with an equity capital inflow of $5.3 million, if exercised in full.
In addition, the Company had 87.2 million warrants outstanding having a weighted average strike price of $0.32, also expiring at various times over 4.5 years and providing for an additional equity capital inflow of $27.9 million, if exercised.
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