From Exploration Towards Production: A Major Step Forward for La Guitarra
Sierra Madre Gold and Silver Ltd. (SM:TSX.V; SMDRF:OTCQX) has announced the commencement of industrial production at its La Guitarra processing plant, situated in the Estado de Mexico. Read more to learn how the company sees this as positioning the La Guitarra project toward precious metals production and exploration.
Sierra Madre Gold and Silver Ltd. (SM:TSX.V; SMDRF:OTCQX) has announced the commencement of industrial production at its La Guitarra processing plant, situated in the Estado de Mexico. Over the past two months, the facility has operated at 86% of its milling circuit's nameplate capacity, equivalent to processing 516 wet metric tonnes daily. This surpasses the engineering standard of 80% capacity over 30 days, a critical benchmark for declaring industrial production.
In October and November 2024, La Guitarra processed a combined 26,272 wet tonnes of vein material, yielding 614.54 dry tonnes of concentrate. This output included approximately 44,103 ounces of silver and 658.6 ounces of gold. The company reported 17 truckloads of concentrate shipped during this period, underlining the plant's growing operational momentum.
Sierra Madre's CEO, Alexander Langer, expressed satisfaction with the project's progress, noting in the news release, "Achieving industrial production ahead of schedule and within budget marks a significant milestone. Our transition from an exploration and development company to a producer demonstrates the dedication of our team and the potential of La Guitarra."
Underground mining at La Guitarra has also expanded, with 27 active working faces, including 20 targeting economically interesting vein material. Among these, three production stops are situated on newly discovered veins outside the 2023 resource estimate, suggesting additional exploration opportunities.
Trends and Insights in Precious Metals
On December 2, Silver Wars emphasized the persistent global silver shortage, referencing a 1982 statement from the Ministry of Machinery Industry of the People's Bank of China, which described the finite nature of silver mine resources. The report highlighted silver's critical role in modern technologies, noting its exceptional electrical conductivity, thermal conductivity, and reflectivity. A 2023 statement from the Hunan Geological Survey described silver as "indispensable." Despite this, the 2023 Critical Materials Assessment by the U.S. Department of Energy omitted silver from its list of high-risk materials, raising concerns about U.S. preparedness for escalating silver shortages.
On December 8, 321Gold reported on a bullish rally in the silver market, describing the progression of nested waves within the broader wave iii cycle. The analysis projected wave (iii) to reach US$36.64 and wave iii to rise to US$45.75. Interim retracement levels were identified at US$30.79 and US$29.78, suggesting short-term corrections within the longer-term uptrend. The report highlighted that higher silver prices remained likely, as wave iii appeared to be nearing completion at a low of US$29.75. This analysis suggested a sustained bullish outlook for silver, supported by technical patterns and market dynamics.
Beacon reiterated a "Speculative Buy" rating with a 12-month price target of CA$0.85 per share, emphasizing the company's strong operational potential and significant exploration upside at its extensive mining concessions.In a December 6 report, The Daily Gold discussed the necessity for gold to outperform the stock market and a traditional 60/40 investment portfolio (60% stocks, 40% bonds) to signal a secular bull market.
It noted that gold had broken out of a 13-year cup-and-handle pattern, advancing from US$2,100 to US$2,800, but had yet to achieve significant outperformance against these benchmarks. The report stated, "Gold and silver remain in uptrends, but it does not feel like a bull market," attributing this to a lack of fresh capital inflows into the sector. Analysts suggested that once gold outperforms the broader financial markets, both gold and silver, along with other leveraged plays, would experience a significant surge.
Also, on December 6, Ahead of the Herd described gold's ongoing "monster upleg," which saw a 53.1% increase over 12.9 months from October 2023 to October. This surge included 42 record nominal closes during the period. The analysis stated that the recent 8.0% pullback was not sufficient to invalidate the upleg, as it fell short of the 10% threshold required to trigger a correction. The report attributed gold's resilience to strong global demand, including significant buying from Chinese investors, central banks, and Indian consumers. It noted that gold exchange-traded fund (ETF) holdings in the United States, which historically drive such rallies, had not contributed meaningfully, marking a significant shift in the sources of demand.
Key Drivers and Future Milestones For Sierra Madre
According to the company's latest investor presentation, Sierra Madre is strategically positioned for continued growth at La Guitarra. Commercial production at full capacity is projected by the end of 2024, with an anticipated ramp-up of the underground to 500 tonnes per day by December 31, 2024. Weekly concentrate shipments are expected to sustain cash flows, reinforcing the financial stability required for future expansion.
La Guitarra offers significant upside potential due to its extensive exploration opportunities. The district hosts over 59 kilometers of untested mineralized structures, with historical production highlighting high-grade silver and gold outputs. Management is focusing on district-scale exploration alongside operational optimization.
Moreover, the company's partnership with First Majestic Silver Corp. (FR:TSX; AG:NYSE; FMV:FSE), which holds a 44.5% equity interest, underscores Sierra Madre's strong institutional backing. This relationship provides access to technical expertise and financial resources, supporting long-term development initiatives.
Expert Insights and Valuations Into Sierra Madre Gold & Silver Ltd
On October 30, Caesar's Report highlighted Sierra Madre's rapid progress at La Guitarra. The report praised the company's strategic planning, noting the successful implementation of a US$5 million financing agreement with First Majestic Silver and an offtake arrangement with MRI Trading. The ramp-up of operations has been impressive, with silver recovery rates remaining steady at 78% and gold recoveries increasing to 87%. Caesar's Report described La Guitarra as a "well-timed restart," benefiting from high silver and gold prices, and pointed out that the operation is positioned to reach a cash flow positive stage in the near future. The analysis underscored the broader exploration potential of the La Guitarra property, which hosts 59 known veins and vein systems, suggesting significant growth opportunities.
According to a report by VSA Capital on November 12, Sierra Madre Gold & Silver Ltd. achieved notable milestones during its test mining phase at the La Guitarra silver-gold mine. VSA Capital emphasized that the company has been effectively ramping up production, achieving an average processing rate of 425 tons per day (tpd) and targeting 500 tpd by year-end. The report highlighted Sierra Madre's potential to generate approximately US$80 million in post-tax cash flow over five years, supporting future expansions and exploration within its 40,000-hectare license area. VSA reiterated a "Buy" recommendation, setting a target price of CA$1.30 per share.
Beacon Securities Ltd., following a site visit to Sierra Madre Gold & Silver Ltd.'s flagship La Guitarra Mine in Mexico from December 4 to December 6, noted the company's rapid progress toward commercial production. According to the report on December 9, Sierra Madre was operating its mill at full functionality 24 hours a day and achieving test mining rates of 500 tons per day (tpd), up from 425 tpd. Beacon highlighted that Sierra Madre's pace exceeded expectations, with plans to expand to 650 tpd by 2026 and 1,000 tpd by 2027 five years ahead of previous projections. These advancements, alongside strong infrastructure and recovery rates of 80% for silver and 85% for gold, underscored the mine's operational efficiency.
Beacon Securities described Sierra Madre as undervalued compared to industry peers, trading at 0.34 times its net asset value (NAV) and an enterprise value per ounce of US$0.87. The report valued the La Guitarra project at a post-tax NPV of US$208 million, based on phased expansion to 1,000 tpd. Beacon reiterated a "Speculative Buy" rating with a 12-month price target of CA$0.85 per share, emphasizing the company's strong operational potential and significant exploration upside at its extensive mining concessions.
Streetwise Ownership Overview*
Sierra Madre Gold and Silver Ltd. (SM:TSX.V; SMDRF:OTCQX)
*Share Structureas of 5/9/2024Source: Sierra Madre Gold & SilverOwnership and Share Structure
Sierra Madre provided a breakdown of the company's ownership and share structure, where management and founders own approximately 24.8% of the company.
According to Refinitiv, President and CEO Alexander Langer owns 1.96% of the company, Executive Chairman and COO Gregory K. Liller owns 1.78%, Director Jorge Ramiro Monroy owns 1.33%, Director Alejandro Caraveo owns 1.16%, Director Kerry Melbourne Spong owns 0.43%, and Director Gregory F. Smith owns 0.16%.
Institutional investors own 12.9% of the company. Commodity Capital A.G. owns 4.4%, Refinitiv reported.
First Majestic Silver Corp. is a strategic investor and owns 44.5% of the company.
The rest is with retail and high-net-worth investors.
There are 153.94 million shares outstanding and 102.07 million free float traded shares, while the company has a market cap of CA$80 million and trades in a 52-week range of CA$0.25 and CA$0.70.
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Important Disclosures:
Sierra Madre Gold and Silver Ltd. is a billboard sponsor of Streetwise Reports and pays SWR a monthly sponsorship fee between US$4,000 and US$5,000. James Guttman wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. This article does not constitute investment advice and is not a solicitation for any investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Each reader is encouraged to consult with his or her personal financial adviser and perform their own comprehensive investment research. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company.For additional disclosures, please click here.