John Forwood favourite Mithril Resources is about to benefit from a combination of powerful market forces.
Firstly, as one of the few quality silver explorers on the ASX, MTH – named after the fictional metal found in J. R. R. Tolkien’s Middle-Earth — not only benefits from the sentiment associated with a hot metal, but also being on the right spot of the Lassonde Curve.
The Lassonde Curve is a graphical representation of the typical lifecycle of a junior mining company, from exploration to development:
The Lassonde curve:
• Buy pre-discovery
• Sell at the feasibility study
• Buy at start of production
• Sell before mineral depletion pic.twitter.com/CwCcAsl5Vc
— Michael Fritzell (Asian Century Stocks) (@MikeFritzell) May 5, 2022
Here, the most rewarding activity of all for mining investors in bull markets is making and then drilling a discovery.
Secondly, MTH is the only Aussie explorer with assets in world #1 silver producer Mexico, where upcoming elections are expected to result in a positive outlook for foreign mining investment.
And thirdly, MTH has missed a big chunk of the boom so far, having been in a halt for months awaiting an AGM to approve its recent financing, which raised ~A$5M, and a share consolidation.
The stock is expected to start trading again in the coming days.
The silver boom is upon us
A lot has changed since the tightly held stock was halted at 20c (post consolidation) in November last year following a failed merger with TSX-listed Newrange Gold.
Back then, gold was edging closer to a then all-time high of US$2075/oz, catalysed by the outbreak of the Israel-Hamas conflict which drew massive safe haven buying.
Silver, meanwhile, was treading water around ~US$22.50/oz.
Since then, silver has gained 40%, this week hitting 11-year highs above US$31/oz. Gold is up a very respectable 21% (~US$400/oz) over the same period.
“… the most furious part of the [silver] rally may be ahead,” says Alex Kuptsikevich, FxPro senior market analyst.
“Silver could be ready to repeat the growth spurt it showed in 2010-2011.”
This is due to the safe haven buying mentioned above, as well as the ‘we aren’t producing enough silver to meet industrial demand!’ thematic finally gaining traction with investors.
Quality stocks are already beginning to respond.
Positive sentiment was in full flight when IPO Sun Silver (ASX:SS1) hit the bourse mid-May, the US-based explorer stacking on a 200% gain by time of writing.
Other explorers and project developers are also reaping the rewards of this nascent boom market.
It is in this environment that MTH re-joins the bourse.
What’s so great about Mithril, anyway?
MTH’s main game is the high grade Copalquin silver-gold project in Mexico, which is home to 24% of the world’s silver production. All the big boys are here, including Grupo Mexico, Newmont, Agnico Eagle Mines, and Franco Nevada.
No ASX stocks though, which means MTH should stand out to local investors looking for silver exposure. This is the place to be for silver stocks, MTH says, especially once elections conclude mid-year.
“Mexico has elections June 2nd which will replace President Amlo who has been in power since 2018, with one of two possible Presidential candidates, either Xochitl Galvez or Claudia Sheinbaum,” the company says.
“President Amlo made a number of anti-mining industry statements and proposed new anti-mining and anti-industry development laws, all of which were struck down by the Mexican Courts.
“Whichever candidate wins it will be positive for the mining industry and will welcome foreign investors back to Mexico.”
Copalquin is high grade and open, everywhere
Copalquin is an easily processed high grade, epithermal system with historic production from 70 small scale mines. The asset has a current global resource of ~530,000oz at 6.8g/t AuEq, from the Refugio/Soledad area, but is wide open for expansion, MTH says.
In 2021 and 2022, the company hit some of the best results ever on the property.
Several came post the resource update and a lot of the hits were on the fringes including;
26m @ 80.3g/t Au and 705g/t Ag (almost 3oz over 8m) from one of the deepest holes drilled at Refugio (~200m from surface);
8m @ 74g/t Au and 840g/t Ag (~84g/t AuEq);
3m @ 34.7g/t Au and 3,129g/t Ag (~74g/t AuEq); and
7m @ 9.6g/t Au and 279g/t Ag (~13g/t AuEq) from one of the western most holes at Refugio.
One of these was a global top 10 hit for 2021.
Top $gold intercepts for the year 2021 #ASX pic.twitter.com/D1rxCNOgF0
— MinerDeck (@MinerDeck) January 3, 2022
These high-grade hits will be followed up when the drills start turning again in June. MTH’s plan is to initially double the 530,000oz gold eq resource.
“To date, drilling has only tested the system to a depth of ~200m,” the company says.
“Typically, these systems have 400-1000m vertical extent so there is ample room for the current resource to double or more with drilling to depth.”
MTH technical advisor Colin Jones visited Copalquin in April. His big takeaway was that there is great room for growth.
“I would expect that the Refugio/Soledad resource can be expanded to double its current size and that the potential to define other resources of similar size in at least two other locations is very good,” he said.
He also noted that with a focused mapping and first principle geological program that more ounces should be discovered.
Additionally, the Refugio and Soledad deposits have the strong potential of coming together at depth, creating another great near term drill target.
Which brings us to the world-famous curve of successful precious metals bug Pierre Lassonde, which hypothesises that there are optimum times from a junior resources investor to buy and sell a stock.
MTH sits nicely in Lassonde’s ‘discovery’ zone, where uncovering future mines and stacking on ounces is the name of the game.
This is where investors can expect big gains in a bull market.
This article was developed in collaboration with Mithril Resources , a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.
The post Mithril: A quality silver stock, in the right place, at the right time appeared first on Stockhead.
