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Sun Silver

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- Sun Silver
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Investment Memo:

Sun Silver (ASX:SS1)


Opened: 18-May-2024

Shares Held at Open: 3,810,000

What does SS1 do?

Sun Silver (ASX: SS1) is a high-grade gold-silver explorer and developer with a 292M ounce silver equivalent JORC resource in Nevada, USA.

What is the macro theme?

Silver is both an industrial and precious metal.

As a precious metal silver can be used as a hedge against inflation, which remains persistently high at the time of this memo.

Silver has a prominent industrial use case in the manufacture of photovoltaic cells for solar panels - and as such can be considered important to the energy transition.

Silver demand from solar panels is projected to grow exponentially through to 2050 - and it is the fastest growing source of silver demand currently.

Why did we invest in SS1?

Second largest silver resource on the ASX

$25M capped SS1 already has a ~292M ounce silver equivalent JORC resource (which is the second largest on the ASX). The most comparable peer is $294M capped Silver Mines with a ~400M silver equivalent resource. Currently Silver Mines market cap is more than 10 times SS1, with a resource only ~ 25% bigger. Based on this, we think there is upside in SS1’s market cap.

Potential to increase an already large JORC resource

Only ~20% of SS1’s project has been explored to date. With its first round of drilling, SS1 will be looking for extensions to its current JORC resource and potential nearby targets.

Silver price is hitting decade highs

Silver demand is fast outstripping supply. The silver price is re-testing an 11 year high at the time of writing. We think the long term macro tailwinds for silver are incredibly strong and should help SS1 as it looks to take its resource into development.

Project acquired and IPO priced while silver was “unloved”

SS1 acquired its 292M ounce silver equivalent JORC resource project while silver was boring and trading sideways. The ~$25M IPO market cap was set before silver's current price run.

SS1’s tight, clean capital structure supports share price re-rates

~55M of the ~125M shares on issue are escrowed for at least ~12 months. The top 20 hold ~65%. Most importantly there are no options on issue, meaning there is no extra “weight” being carried when the share price is responding to news. Current shareholders can NOT use a strategy to sell head stock while retaining upside via an option.

The US solar industry will need a lot more silver

Silver is a key material used in solar panels. Silver demand from solar energy is forecast to “go exponential”. In the next six years, the US government is aiming for more than 6x current solar capacity. And to satisfy solar energy targets for 2050, the world would need to dig up nearly EVERY single known ounce of silver EVER found in current reserves (98%).

US push to “onshore” solar industry away from China

SS1 has a giant supply of silver for solar panels on US soil (Nevada).The US has just applied a 50% tariff to solar cells that are imported from China into the US, up from 25% previously. We expect this to provide additional economic incentives and support to domestic US solar manufacturers while also creating further demand for domestically sourced silver and silver paste both of which SS1 is pursuing production of.

SS1 is based in a mining county in the top silver producing state in the US

The area of Nevada that SS1 is working in is called Elko County. There are major gold and silver mines scattered throughout this area of Nevada and Elko County is very familiar with the mining industry. $45BN Barrick and $14BN Kinross both own projects in the region.

Downstream value add: “Silver paste” production (for solar) could improve economics

Silver paste is made from silver and improves the efficiency of solar panels. Currently most of the world’s solar manufacturing capacity (including silver paste production) is heavily concentrated in China. If SS1 is able to produce silver paste in the US this could improve the overall economics of its project.

US Government to support domestic solar industry and help bring strategic projects online

SS1’s project may be seen as having strategic value to US onshoring of solar panel manufacturing. We think SS1 could benefit from US government tax incentives included in the Inflation Reduction Act, tariffs on Chinese solar panels and potential government grants for strategic projects and manufacturing initiatives.

JORC resource includes ~1.37M ounces of gold

The gold price is also at record highs. Included inside SS1’s 292m ounce silver equivalent JORC resource is a ~1.37m ounce gold resource. We think this gold has appeal as an inflation hedge/precious metal, which could pair nicely with the rapidly growing industrial use of silver from solar panels.

What do we expect SS1 to deliver?

Objective #1: Drilling to upgrade existing JORC resource

We want to see SS1 run geophysical surveys, identify new drill targets and then run an infill/extensional drill program to upgrade its JORC resource.


not done Geophysics survey

not done Drill permits granted

not done Drilling commenced

not done Drilling assays

Objective #2: Upgrade 292m Oz silver equivalent JORC resource

Pending positive results from extension and infill drilling through RC and diamond drilling, we want to see SS1 release an upgraded JORC Mineral Resource Estimate with more silver and gold ounces in it, and more of the resource in higher confidence categories.


not done Release upgraded JORC Resource

Objective #3: Enter feasibility studies

SS1 has signalled its intention to enter feasibility studies, which would provide a first pass assessment of the project’s economic viability. As part of the feasibility studies we will be keeping an eye out on the metallurgical testwork SS1 completes.


not done Metwork results

not done Start scoping study

not done Scoping study results

Objective #4: Progress downstream opportunities

If we got any material newsflow in regards to downstream funding OR silver paste opportunities then we think this could be an unexpected catalyst for SS1’s share price.

What could go wrong?

Exploration risk

There is no guarantee that SS1’s upcoming drill programs in Nevada are successful and SS1 may fail to find economic silver-gold deposits.

Funding risk/dilution risk

As a small cap, SS1 is reliant on capital markets to advance its projects. If something negative happens at a macro or company level, SS1 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.

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 SS1 share price.

Technology/substitution risk

Solar (PV) technology could improve such that less silver is needed, or another material such as copper could be used as a substitute for silver. Recycling technology may also reduce long term demand for silver.

Market risk

There is always the possibility that broader market sentiment gets worse and shares as a whole trade lower, taking SS1’s share price with it. Alternatively, there could be further sector specific pain ahead where junior explorers suffer a lot more than the broader market.

Development/delay risk

Should any or all of the above risks materialise, SS1 could wind up stuck in “development purgatory” where newsflow dries up and the project remains stagnant for a prolonged period of time, hurting the share price. Additionally, if delays occur in terms of material newsflow, the market could turn on SS1.

Political and geopolitical risk

There is always a risk that the US government changes course under a new administration or rolls back policies and incentives designed to support a US domestic solar manufacturing industry. Alternatively, the market may be flooded with cheap solar panels such that these policies and incentives do not have the desired effect, hurting the SS1 share price. Governments and policies change and these changes could impact the future economics of SS1’s project.

What is our investment plan?

We are Invested in SS1 to see it expand its resource and progress its project into development.

Our plan is to hold the majority of our position in SS1 for 3 to 5 years which we hope is enough time to see SS1 to move towards development (see “our long term bet” above).

After 12 months we will apply our standard de-risking strategy.

We may look to sell up to 20% of our holding if the company delivers on one or more of our Investment Memo objectives and/or the share price materially re-rates.

Any sell downs will be in accordance with our trading and hold policy disclosure.

Disclosure: Disclosure: S3 Consortium Pty Ltd (the Company) and Associated Entities own 3,810,000 SS1 Shares. The Company has been engaged by SS1 to share our commentary on the progress of our Investment in SS1 over time.

Our Investment Summary

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