Silver stocks poised for re-rate as they catch-up to soaring metal price

The lament that gold equities had not kept pace with the rise in gold prices to record levels is a thing of the past.

With gold equities now better reflecting the margin surge that comes with record prices, it is the turn of the silver bugs out there to wonder when silver equities will be similarly re-rated.

Silver has recently pushed through $US40/oz to 14-year highs. That leaves it well short of the all-time (nominal) high of $US50/oz back in 1980 when the Hunt brothers from Texas tried to corner the market.

But 14-year highs and the recent price run up from the June half average of $US33/oz does suggest it’s time to cart what silver stocks there are on the ASX higher.

The same factors pushing silver higher are behind gold’s run to record levels. Silver has the added factor of it being an industrial metal, with runaway demand for solar panels pushing it into mine supply deficit.

What really matters is that ASX companies with silver projects under their belt can now start thinking about 50%-plus margins at their proposed projects. Spread that out over annual production measured in the millions of ounces, and the earnings potential starts to impress.

Again though, that has yet to trigger a gold-type run up in the silver stocks. Assuming silver holds at these higher levels and possibly has a crack at US50/oz before long, the silver stocks are bound to head higher.

And like the gold stocks, the readjustment to higher prices could be marked. That comes through in some recent analyst reports on ASX two leading silver stocks - Sun Silver (ASX:SS1), trading at 88c, and Andean Silver (ASX:ASL), trading at $1.58.

A company commissioned report on Sun Silver by East Coast Research (August 25) came with a 12-month price target of $4.61. And a Euroz note on Andean (July 24) arrived at a price target of $3.14.

CZR:

It was mentioned here back in October 2023 that in the absence of a collapse in iron ore prices, Mark Creasy’s 52%-owned iron ore play CZR Resources (ASX:CZR) was a monty to be taken over by the Rio Tinto-managed Robe River Iron Associates (Rio, Mitsui and Nippon).

The idea was that CZR had worked its 85%-owned Robe Mesa iron ore project in the Pilbara (owned 25% by Creasy) into a robust development proposition which would be even more of a robust proposition if it was wrapped into Rio’s Pilbara rail and port network.

After all, the project sits across a boundary fence from Rio-managed ground where resource definition drilling for an eventual development had been undertaken. CZR was trading at 14c at the time of the suggestion.

Well, the iron ore price did not collapse, and Rio and its Japanese partners did move to acquire the project from CZR, eventually at least.

In the interim, Miracle Iron lobbed a $102 million bid for CZR’s stake in Robe Mesa, with Creasy separately negotiating the sale of his stake to the Chinese-backed group. But the Foreign Investment Review Board stymied Miracle Iron by not getting around to giving its approval, or not.

That left the door open for Fenix (ASX:FEX) to make an all-scrip bid with an implied value of $70.8m for all of CZR in February this year.

It was an agreed offer which valued CZR at 30c a share and looked to be in the home straight until Rio and its Japanese partners knocked it off with a $75 million offer for CZR’s 85% stake in the Robe Mesa project alone.

No surprise that the FIRB was quick to wave that bid through after a national interest assessment. It seems that Rio and its Japanese partners were preferred bidders to a the China-backed Miracle Iron.

While CZR’s $75m collect from Rio and its partners falls short of the $102 million Miracle Iron never got to complete, the good news is that CZR now continues on as a cashed-explorer with a couple of quality exploration projects it can now sink its teeth into.

CZR was trading at 25c in Thursday’s market for a market cap of $59.25 million. It expects to pocket the $75 million next Tuesday for its Robe Mesa interest at which point it will be trading for less than cash if the share price stays put.

There are some loans to repay and an eventual decision by the company on a capital return to shareholders. Even so, it seems clear that CZR is now out to become an aggressive gold and base metals explorer.

Creasy is Australia’s most successful “prospector” and is presumably supportive of enough cash being held back from the Robe Mesa sale for CZR to have a real crack at its Croydon gold project along strike from Northern Star’s (ASX:NST) 11.2Moz Hemi gold development in the Pilbara, and its hunt for the next Golden Grove (29Metals:29M) deposit at its Edamurta copper-silver-zinc project in WA’s Midwest.

CZR managing director Stefan Murphy is likely to give a rundown on the where to from here for the cashed up company on the first day of the RRS Gold Coast Conference (September 17-18).

Mammoth:

Mammoth Minerals’ (ASX:M79) boss Glen Poole is also scheduled to present on the first day of the conference.

He could well get some pats on the back as he makes his way to the stage in the conference room at the RACV Royal Pines Resort for doing the market a real favour by overseeing a name change from the previous monicker of Firetail Resources (ASX:FTL).

It has long been a source of confusion on the ASX between Firetail, FireFly (ASX:FFM, copper in Canada) and Firebird (ASX:FRB, manganese in China/Australia). Becoming Mammoth helps with that.

The rebranding as Mammoth also points to the sharper focus Poole is bringing to the company, which traded in Thursday’s market at 10c for a market cap of $50 million.

There was a taste of that on Thursday with the overnight news that Mammoth would sell a 90% interest in its Paterson copper-gold-moly project in WA to the London-listed Cloudbreak Discovery PLC for shares worth about $3.1 million, representing 17% of Cloudbreak.

The project sits south of the Telfer gold-copper mine and the Havieron gold project now owned by the London and now ASX-listed Greatland Resources (ASX:GGP) - a celebrated value creation story in the Old Dart.

While Cloudbreak taps into that interest to give the Paterson exploration project fresh momentum, Mammoth goes for the ride with its ongoing 10% direct interest and its Cloudbreak shareholding.

To be honest, no one was valuing Mammoth for the project.

So the deal with Cloudbreak is a plus and allows for a greater focus by Mammoth on projects with greater near-term upside value – the high-grade Excelsior/Bella gold projects in the US, the Skyline high-grade copper project in Canada and the Picha copper-gold exploration in southern Peru.

Of note is that Picha was part of BHP’s Xplor 2025 accelerator program with junior explorers that have projects that might shape up into something big enough to meet BHP’s criteria for future development opportunities.

An update on Picha and the other projects will be welcome stuff at the conference.