$0.700
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.
Milestones
Geophysics survey
Drill permits granted
Drilling commenced
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.
Milestones
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.
Milestones
Metwork results
Start scoping study
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.
Silver price about to break out? SS1 delivers high grade extensional hit.
Oct 8, 2024
Oct 8, 2024 |
10 min
This morning SS1 announced a 73m thick intercept OUTSIDE of its current resource estimate. Within the 73m intercept SS1 hit a peak grade of ~524g/t silver via pXRF readings.
SS1 Secures Cornerstone Investment from Strategic, US Based Fund… and some from us.
Sep 19, 2024
Sep 19, 2024 |
10 min
The “planets are continuing to align” around our Small Cap Pick of the Year for 2024 Sun Silver (ASX:SS1). The silver price is moving up. A Chinese export restriction on critical metal antimony grabbed the market’s attention, given its strategic military uses. And last night the US Fed delivered its first rate cut in four years.
SS1’s high grade antimony readings - does it run across the whole project?
Sep 10, 2024
Sep 10, 2024 |
16 min
Sun Silver (ASX: SS1) has just confirmed the presence of anomalous antimony in a number of areas of its resource in Nevada USA.
SS1 is now the biggest silver resource on the ASX. Silver price moving too?
Aug 28, 2024
Aug 28, 2024 |
20 min
Our 2024 Pick Of The Year SS1 just announced a remodelled 423 million ounce silver equivalent JORC resource at its project in Nevada, USA.
SS1 announced antimony potential… weeks before antimony became “cool”.
Aug 21, 2024
Aug 21, 2024 |
11 min
Until this week we didn’t really care about a metal called antimony. Turns out antimony has many critical uses in military and defence. But the US has no domestic supply. …and a few days ago China announced “export controls” on antimony - it has just become one of the most in demand critical minerals…
SS1 hits another high grade silver intersection
Oct 17, 2024
Oct 17, 2024 |
2 min
Today, our US silver Investment, Sun Silver (ASX: SS1) announced another thick, high grade silver intersection from pXRF results.
SS1 announces thick silver intersection from pXRF results.
Oct 1, 2024
Oct 1, 2024 |
2 min
Today, our US silver Investment, Sun Silver (ASX: SS1) announced a thick silver intersection from pXRF results.
More high grade US silver
Sep 24, 2024
Sep 24, 2024 |
2 min
Today, our US silver Investment, Sun Silver (ASX: SS1) announced further thick high grade silver-gold intercepts
SS1 completes $13M raise - cornerstone fund invests at a premium
Sep 18, 2024
Sep 18, 2024 |
5 min
Our US silver Investment, Sun Silver (ASX: SS1) completed a significant raise today, which we think will provide it an excellent cash runway ahead of some significant milestones.
SS1 hits high grade extensions to its existing resource
Sep 12, 2024
Sep 12, 2024 |
3 min
Our 2024 Pick Of The Year Sun Silver (ASX: SS1) put out what we think are pretty strong drill results.
Market Optimism Peaks Ahead of the Holidays
Nov 16, 2024
Nov 16, 2024 |
11 min
The world is still digesting what exactly the US election result will mean for the next four years. The weeks after an election is often a “honeymoon phase”.
Major Announcements Driving Volatility in Small Caps
Oct 12, 2024
Oct 12, 2024 |
15 min
The mood is good in small cap land. Cautious… but good. It was another positive week, with plenty of green across the board.
Riding the Bull and Bear Cycles
Oct 5, 2024
Oct 5, 2024 |
19 min
Everyone's a “genius” in a small cap bull market. At least that is what it felt like between November of 2020 and June of 2022. All IPO’s oversubscribed, cap raises were highly competitive and good news was being rewarded with on-market buying. Everything was going up. (Remember things like Afterpay? Lithium at $80,000/t? Gamestop? Shells with a $10M EV? The occasional “50 bagger”?) Since then, it has been MUCH harder to navigate the small cap market during the “bear” winter.
Silver and gold shines again while med-tech companies make moves
Sep 28, 2024
Sep 28, 2024 |
13 min
With the AFL Grand final just around the corner we take a look at how Gold and Silver are shining through.
Rising Precious Metals Prices Fuel Optimism in Small Cap Markets
Sep 21, 2024
Sep 21, 2024 |
13 min
What a week for precious metals. Both silver and gold clocking in yet ANOTHER price rise overnight. And the market clearly has a growing appetite for precious metals stocks. Which is FINALLY trickling into small cap silver and gold stocks this week.
