MTH: Another high grade gold and silver hit

ASX:MTH

Published 18-OCT-2024 13:02 P.M.

9 minute read

Disclosure: S3 Consortium Pty Ltd (the Company) and Associated Entities own 3,675,000 MTH Shares and 2,005,000 MTH Options at the time of publishing this article. The Company has been engaged by MTH to share our commentary on the progress of our Investment in MTH over time.

Gold just hit US $2,700/oz...

Literally just now.

After hitting yet another new all time high last night.

Silver keeps creeping up and pushing beyond decade highs.

Perfect timing for our precious metals exploration Investment Mithril Silver and Gold (ASX:MTH) to deliver another ultra high grade silver and gold drill hit:

(Source)

MTH has 11 million oz silver and 373,000 oz gold or 529,000 ounces of gold equivalent JORC resource, over one of its targets (where it is currently drilling).

Its goal is to double this resource by next year.

This current resource only covers ~5% of the total land package for MTH and there are a number of potential targets over the project that could be of similar size...

Or bigger than this first one.

In today’s announcement, MTH’s CEO and MD John Skeet said that with 5,000m of drilling to come, “there are at least three further Target 1 size areas for future drilling plus several areas identified for field work.”

Target 1 is the area around the existing JORC resource.

So we really like the sound of these three additional areas.

Today, we also got a look at some more assays, as MTH published the final assays for the first part of the drilling program with hole 162 being the most interesting one.

The results of hole 162 were:

4.6m @ 5.51g/t gold, 182.4g/t silver from 99m, including
2.4m @ 10.24g/t gold, 335g/t silver from 100.4m

The goal of this hole was to test the west section of the target, and identify whether mineralisation extended in the shallower region.

This theory was confirmed by the result:

MTH also published results from hole 161 which hit mineralisation, but didn’t quite connect with the massive 33m @ 31.8g/t gold and 274g/t silver result published a few weeks ago.

So we still don’t know which way that ultra high grade mineralisation is going... yet.

What we can tell from MTH’s drill program so far is that there is plenty of high grade silver and gold here... lots of it.

BUT, the vein system is complicated, and the only way to better understand the mineralisation is to keep drilling.

Which MTH is currently doing...

MTH has a land package of 70km2, and this drilling has been focused on expanding the company’s JORC resource.

Recently, MTH conducted a LiDAR survey across the area.

It was thought that there were around 70 different workings over the project (which included ancient mine shafts and artisanal mining efforts).

After the LiDAR survey a further 300 workings were uncovered, indicating a much broader scale of historical mining over the area.

The new theory is that MTH’s first target is part of a much larger epithermal system of mineralisation that spans 10km east to west and at depth too.

There has been hardly any exploration over the project, and the hope is that all of this ancient surface mining is evidence of a greater system.

This system could be buried deep underground, and the mining efforts today could literally just be “scratching the surface” of something much bigger:

MTH will continue with the second phase of drilling soon, with refined targets from key learning in the first round of drilling.

CEO and Managing Director of MTH John Skeet spoke about the project in this video here:

(Watch the full video here)

The key takeaways are that MTH was at the start of the exploration journey, and there is plenty of scope and scale for the project to grow.

John Skeet has “been there, done that” when it comes to delivering success in Mexico precious metals mining.

He was the GM of Projects at Bolnisi Gold as it developed the Palmarejo silver deposit from a small cap exploration play to a $1.1BN takeover by Coeur Mining in 2007.

His take is that MTH’s project is very similar to the Palmarejo deposit, where there is lots of evidence at the surface of gold vein mineralisation, indicating a bigger system of gold mineralisation.

And the macro timing is looking very positive given gold and silver rising prices:

1 year gold price USD: (it literally just broke through a record $2,700 at time of writing)

1 year silver price USD:

What feels like an ever-improving macro environment, combined with a steady flow of resource growing high grade gold and silver hits, we think has put MTH in a great position to potentially achieve our ultimate upside scenario for our MTH Investment.

This leads us to our Big Bet for MTH:

Our MTH Big Bet

“MTH re-rates to a $150M market cap by expanding its Mexican gold-silver resource with new ultra high-grade silver (and gold) drill hits, taking the project into development and/or attracting a takeover bid at multiples of our Initial Entry Price”

NOTE: our “Big Bet” is what we HOPE the ultimate success scenario looks like for this particular Investment over the long term (3+ years). There is a lot of work to be done, many risks involved - just some of which we list in our MTH Investment Memo. Success will require a significant amount of luck. There is no guarantee that our Big Bet will ever come true.

Jurisdiction Update: Mexican Gold & Silver

Mining in Mexico has been in the spotlight over the past month with the new president Claudia Sheinbaum taking over.

Under the previous administration, there was a proposal to ban open pit mining, which would obviously be bad for gold and silver mining in the region.

(Note MTH is likely to be underground, not open pit, so this wouldn’t affect them - however, it does highlight a jurisdictional challenge).

Three weeks ago Sheinbaum published her “100 Steps for Transformation Plan” significantly watering down these proposals to kibosh mining in the region.

The first indication that these changes are positive for the region came soon after the plan was announced with Coeur Mining announcing a takeover of Silvercrest for $1.7Bn.

Mexico is already the largest producer of silver and 7th largest producer of gold in the world.

We think that more and more companies will turn to Mexico for precious metals exposure due to the recent change in government.

This all bodes well for MTH, if it can deliver more ounces of silver and gold in the ground.

What is next for MTH?

Below is a chart which outlines what MTH has planned in 2024-2028:

🔄 Additional assays (soon) - this will tell us how much additional, (hopefully) high grade gold-silver mineralisation is at MTH’s project in Mexico.

🔄 More drilling at resource and new targets (ongoing) - We want to see more drilling to expand the resource, and MTH to have a crack at one of numerous targets on its large project.

🔄 Ultimate goal: double JORC resource (Q1 2025) - this would enhance the scale of MTH’s project and make it more attractive as an investment for larger funds and increase its standing among precious metals projects around the world.

What could go wrong?

With drilling currently underway and more assay results to be published over the coming months, we think the key risk in the short term for MTH is “Exploration Risk” and beyond that, commodity price risk and funding risk.

It’s possible that MTH is unable to find enough significant economic mineralisation, which we would expect to impact MTH’s share price negatively.

Exploration risk

There is no guarantee that MTH’s upcoming drill programs in Mexico are successful and MTH may fail to find economic silver-gold deposits.

Source: “What could go wrong” - MTH Investment Memo 22 May 2024

With gold close to all-time highs at time of writing, there is always a chance that commodity price action reverses, and the same applies to silver.

Precious metals are having their time in the sun, but this may not last forever.

Commodity price risk

The performance of commodity stocks are often closely linked to the value of the underlying commodities they are seeking to extract. Should silver and gold prices fall, this could hurt the MTH share price.

Source: “What could go wrong” - MTH Investment Memo 22 May 2024

It is also worth noting that large drilling programs like the one MTH is undertaking require capital to sustain them. MTH had $1.5M at 30 Jun 2024 which was supplemented by $3.7M in funds from a capital raising, also in June. As a result, we will be keeping an eye on funding risk as well.

Funding risk/dilution risk

As a pre-revenue small cap company, MTH is reliant on capital markets to advance its projects. If something negative happens at a macro or company level, MTH could struggle to access capital on favourable terms. These capital raises may take place at a discount, and result in the issuance of new shares which incur dilution to existing shareholders - we saw this risk play out in the previous iteration of MTH before it went into suspension.

Source: “What could go wrong” - MTH Investment Memo 22 May 2024

How does this impact our MTH Investment Memo?

Today’s news directly relates to Objective #2 from our Investment Memo which is as follows:

Objective #2: Drilling to extend existing JORC resource

We want to see MTH run several drill programs to extend its existing JORC resource

Milestones
✅ Drill permits granted
✅ Drilling commenced
🔄 Drilling assays

MTH has stated its intention to double its resource in Mexico, something we think it is well on its way to doing, particularly after today’s result.

Our MTH Investment Memo

You can read our MTH Investment Memo in the link below.

We use this memo to track the progress of all our Investments over time.

Our MTH Investment Memo covers:

What does MTH do?
The macro theme for MTH
Our MTH Big Bet
What we want to see MTH achieve
Why we are Invested in MTH
The key risks to our Investment Thesis
Our Investment Plan

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