Silver price breakout during our MTH Silver and Gold Site visit

Disclosure: S3 Consortium Pty Ltd (the Company) and Associated Entities own 2,867,000 MTH Shares and 2,177,000 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.

The silver price just broke through US$35 per ounce...

The highest level it has been for over 13 years.

It even hit as high as US$36 per ounce overnight... twice.

And it looks set to keep going.

Since the 1950s there have been two monster breakouts in the silver price.

Now the macro conditions are aligning for a third:

By fate, the latest silver breakout finally happened while we were sitting in a tiny Cessna plane about to land on a pretty spicy mountain airstrip to visit our Investment Mithril Silver and Gold (ASX:MTH)’s project in Mexico:

MTH’s project has a 373Koz gold and 11Moz silver JORC resource.

MTH’s resource grades average around 4.8g/t gold and 141g/t silver - which are seriously high grades.

AND MTH is currently drilling with two rigs to double its resource size.

MTH is going after some more ultra high grade gold and silver hits to help grow its resource.

Assay results from recent drill holes are pending right now.

MTH’s project is in Mexico’s Sierra Madre trend.

The Sierra Madre trend is home to multi million ounce deposits that start small and eventually end up as “district scale” 1-5 million ounce gold and 50-100 million ounce silver projects.

Silver was Mexico’s biggest export from the late 1600s to the 1870s - 70% of all exports.

Now Mexico is the world’s largest silver producer.

The size of MTH’s gold and silver project is huge - more exploration still to come

MTH’s current resource sits in just “Target Area 1” shown in blue below (this is where MTH is drilling to double this to ~1 million ounces gold equivalent):

The red circles show other priority Target Areas 2, 3 and 5 where MTH is hoping they can discover and prove more million ounce deposits.

As it stands now, there are a total of around 12 target areas in MTH’s giant land holding.

There are many historical workings from the last 100 years dotted across MTH’s land holding, where old timers have mined out gold and silver:

The historical workings were done with old, basic mining tools and techniques - and it clearly points to there being gold and silver in MTH’s targets.

The ongoing drilling results from the two rigs on site will ultimately figure out how much high grade gold and silver MTH has.

All we need to see is some more ultra high grade hits at Target Area 1 to get MTH’s resource to 1 million ounces gold equivalent...

... then repeat the same again at Target Areas 2, 3 and 5...

(and the gold and silver prices to keep running)

Here’s some more photos of MTH’s district scale targets which we saw with our own eyes today (as we said before, the total land package is massive):

As we pointed out above, MTH now has two rigs going with assay results due any day now - here is a helicopter view of one of the rigs:

MTH’s share price has run on big silver-gold hits before

Now with silver breaking out we think the same could happen again.

Late last year MTH went from 10c to 80c after hitting 7.00m @ 144 g/t gold, 1,162 g/t silver, that result was on show today during the site visit (including a photo of the core that was responsible for this run):

Past performance is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance.

With the silver price threatening to test new highs, we think if MTH repeated drill results like that, it could be rewarded by the market.

And there is a lot of news to come from MTH inside the next 3-6 months

MTH has assays pending from:

• Target Area 1 – MTH is still actively drilling here. The holes we are looking out for are the deeper holes on the fringes of MTH’s resource... If any of those deep holes come in then we think it could be game changers for MTH’s current gold and silver resource.
• Target Area 2 - MTH recently announced a new discovery here. See our detailed note on that news here. Assays are pending from the follow up holes.

MTH is going to be drilling Targets 3 and 5 next quarter:

• Target Area 3 – Here we are hoping MTH can make a discovery that repeats its existing resources. The interesting thing we learnt about this target area today was that the locals in the area keep pointing out an old mine adit to the north of this area, which makes us think Target area 3 could actually grow in that direction.

(We are assuming the old miners went that far up because they saw and mined something they liked)

(Source)

• Target 5 – the team on the ground were clearly very excited about this target. Lidar survey, channel sampling and a 130m underground adit point to parallel veins going 500m in length and 1.6km wide...

MTH plans to be drilling both targets 3 and 5 NEXT QUARTER.

Now, it’s all about upcoming drilling results.

In the meantime we will also be looking out for any sampling results MTH puts out, especially across Target Areas 3 and 5.

We are hoping MTH can grow its resource (with or without new discoveries) and achieve our Big Bet which is as follows:

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 ourMTH Investment Memo. Success will require a significant amount of luck. There is no guarantee that our Big Bet will ever come true.

Reminder - 10 reasons why we are Invested in MTH

We first Invested in MTH back in May 2024 at 10c per share - here were the key reasons for us initially backing MTH.

Note: These reasons are now 12 months old, so some are slightly out of date. In those cases we have provided an update in bold and italics.

1. MTH was capped at >$110M in 2020 and is now recapped at $8.4M

Back in 2020 off the back of ultra high grade silver/gold intercepts, MTH’s market cap re-rated to above $110M. We made our Investment in MTH in the recap round at a market cap of $8.4M. With some drilling we hope it can re-rate back to those levels again.

Update: MTH briefly touched a ~$81M market cap in September 2024. Now MTH is trading at a market cap of ~$63M. We continue to be Investors, and MTH is one of our biggest positions.

2. High grade gold/silver JORC resource

MTH has a JORC resource with 373k ounces gold and ~11m ounces of silver. The gold grade for the resource is 4.8g/t and silver grades at 141g/t silver. Both extremely high relative to other gold/silver projects in the market.

Update: We are expecting a JORC resource upgrade soon. MTH has flagged a ‘doubling’ of the resource so we will keep an eye out for that - see more in Reason 4.

3. Drill rig already on site

MTH has a drill rig on site ready to go and so we should see a lot of newsflow over the next coming months. We are hoping the drilling leads to a material increase in the company’s JORC resource.

Update: After raising additional funds since we first Invested, MTH is now drilling its project with two rigs on site

4. Potential to double its existing resource

MTH has previously indicated it thinks the project has the potential for a “multi-million ounce gold and silver” deposit. Looking at some of the drill and rock chip results along the east-west trend, we think there is potential to quickly double the existing resource.

Update: MTH has hit some really good drill results in and around its existing JORC resource since our Investment Memo was first published. MTH’s JORC resource upgrade is now due within the next few months.

5. CEO & MD John Skeet has been there and done that (billion $ takeover)

John Skeet was GM of projects for Bolnisi Gold from 1997 through to a US$1.1BN deal for its Palmarejo project in Mexico. The takeover was done by the current 7th largest silver company by revenue, New York listed Coeur Mining in 2006. Bolnisi picked up that project in 2004, drilled it out, upgraded its resource and eventually sold it to Coeur 2006. We are hoping Skeet is able to repeat that success with MTH.

6. Silver price is hitting decade highs

Silver demand is increasing because of demand from the solar panel manufacturing industry. Silver production on the other hand is falling. As a result, prices are looking to breakout into decade highs.

Update: At the time of writing our MTH Investment Memo silver was trading at ~US$30/ounce.

Today silver is trading at ~US$35.70/ounce.

7. Gold price is at ALL time highs

Gold prices are currently trading at all time highs against almost every currency. MTH’s project also has exposure to gold with the current resource containing ~373k ounces of gold.

Update: At the time of writing our MTH Investment Memo gold was trading at ~US$2,300/ounce.

Today gold is trading at ~US$3,360/ounce.

8. Mexico top silver and gold producer (and this is in a mature mining area)

Mexico is the largest silver producer in the world, and the 7th largest gold producer. MTH’s project sits in Durango state along the “Sierra Madre Trend” which has produced as much as 6.2 billion ounces of silver - equal to roughly 10% of total global historical production. There are major gold-silver mines throughout the trend, home to multiple large precious metals mining companies.

9. MTH drilled one of the ASX’s best gold hits in 2021

In July 2021 MTH delivered a gold-silver hit of 8.26m @ 80.3 g/t gold, 705 g/t silver from 468.34m. This was one of the ASX’s top 10 best gold hits of 2021, and drilling will be taking place around this area of the project imminently, a drill rig is on site and ready to go.

Update: MTH hit 144 g/t Gold, 1,162 g/t Silver over 7.0 metres in early September 2024 and triggered a 7x rally in its share price.

We think MTH has the potential to deliver results like this again.

10. Low enterprise value relative to JORC resource

MTH currently trades at an EV per silver equivalent ounce valuation of 27c compared to its TSX and ASX peers which trade in a range of 35c to $1.98 per silver equivalent ounce. Based on the other Mexican high grade exploration/development peer group Mithril's shares could increase 2-4X based on its current resource alone (not including any resource upside potential).

Update: With rising silver/gold prices, most of MTH’s TSX/ASX peers have rallied and so we think there is still a valuation gap between MTH and its listed peers.

What are the risks?

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”.

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

We list more risks to our MTH Investment Thesis in our Investment Memo here.

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