"We have established ourselves as one of the very limited go-to names for silver exposure and therefore our company has attracted a lot of interest in preparation for the upcoming rush."
Discovery Metals made the 2020 TSX Venture 50 list with a share price appreciation of 247%. What do you think have been the main catalysts driving this market performance?
The silver space is relatively small, around one-tenth the size of the gold market. During a bull run, silver historically performs exceptionally well because the price is very sensitive to even marginal buying. We have established ourselves as one of the very limited go-to names for silver exposure and therefore our company has attracted a lot of interest in preparation for the upcoming rush.
In addition to silver’s rebound in 2020, our exploration work has corroborated and even enhanced the enormous potential of our Cordero project, one of the world’s largest silver projects (by total silver ounces). We have drilled over 100 holes to date at Cordero and our total program is going to be over 55,000 meters. The results so far have been very encouraging, which has translated to increased interest in our story from both institutional and retail investors; for example, Eric Sprott has increased his stake in Discovery Metals (DSV) to 27%. Looking ahead to 2021, Cordero’s PEA will be coming out in the second half of the year, and in the meantime, we will continuously be releasing drill results from Cordero which should continue to de-risk the project and drive value.
What have exploration results taught you about the type of mine that Cordero could become?
Cordero is swiftly developing all of the technical qualities of a Tier-1 silver asset and is located in a world-class mining belt. It is an asset that offers the scarce combination of margin, size and scalability. Cordero’s deposit geometry makes it very amenable to a staged capex approach, and the internal studies we have done suggest the NPV and payback can be optimized this way. Having scalability as well as size also distinguishes DSV in the silver space, where nine of the top ten primary silver mines are underground operations, which tend to be more difficult to scale up. Cordero has a higher-grade core surrounded by medium to lower-grade mineralization which means the deposit can be mined strategically and in a staged fashion to take advantage of the grade distribution of the deposit. Cordero is currently the fourth largest undeveloped silver resource in the world, and it seems very likely that it will eventually be a multi-generational mine.
Our current drilling program is focused on defining the higher-grade zones within Cordero’s huge, mineralized footprint. To date we have shown very robust grades over very broad widths and we have begun testing high-grade vein trends, a brand-new element to our story that has the potential to materially add to the open pit project. Our work will culminate in a completely revamped PEA which we believe will clearly confirm it as a Tier 1 silver asset.
How do you view the silver’s industrial qualities compared to its value as a precious metal investment?
During bull markets, industrial uses of silver typically face some substitution. Silver gets impacted by marginal retailing, but the bottom line is that interest in the commodity as an investment completely outweighs any reduction in industrial demand. Gold is a stronger barometer of economic conditions than silver however, in almost every bull market in modern history, silver outperforms gold materially. This has been evident in 2020 where silver’s returns have clearly outshone the returns on gold, and many think it’s just the beginning.
Additionally, silver’s industrial usage is expected to rise in the coming years, in part due to high-performance conductor applications such as photovoltaics and 5G networks. The forecasted shortage of silver at the end of this decade is around 250 million ounces, which is over 25% of the total global mine supply – even before you consider investment demand increases.
Do you think the AMLO government has impacted Mexico’s attractiveness as a mining jurisdiction?
Mexico continues to rank as of the world’s best mining jurisdictions from a skilled labor point-of-view as well as a capital and operating costs point-of-view. It is the one of the largest producers of many metals and is the largest silver producing nation in the world. Mining is a pillar of the country’s economy and AMLO has not been obstructive with policy. Permitting, community engagement and consideration for local stakeholders are aspects that have developed positively under his presidency. Cordero’s location also has the added advantage of being located in Chihuahua, one of the key mining states and home to a number of well-established mining operations and where permitting is transparent and clear.
Do you have a final message for investors?
The DSV story is a relatively simple one: we have a world class silver asset that will continue to get better as we de-risk and optimize it. DSV is an attractive value proposition despite the share price appreciation in 2020 as there are further significant catalysts that will continue to express value, including a resource update and PEA in H2 2021, and ongoing drill results of not only brownfield targets but also our first ever drill testing of highly prospective targets elsewhere on our large land package. We have a cash balance of over C$80 million and no debt, so we have significant firepower to continue to aggressively advance the project and drive value through the exploration and development.
A world-class asset of this magnitude coupled with an experienced management team and board is rare and merits the attention of investors in the precious metals space. If you are bullish on silver in the short- to medium-term there are not many companies with the kind of torque we have.