I may have mentioned Abraplata (ANRA/ABBRF) in the E-letter some time ago, but it's an entirely different story now, and a much stronger one. First, this is a South America asset heavy play primarily in Argentina and Chile. Some people are scared of Argentina and have been burned there before (including me). But, much of the risks lie in specific provinces, which is key. In addition, the Argentina government has been very clear recently that they want to support and grow their mining industry, which is quite small compared to their oil/gas sector, for example.
Nationalizing mines at this stage wouldn't get them much, so I'm not concerned about that anytime soon. The destruction of the Argentine Peso (again), is a tailwind for US/Canadian companies, because labor and costs are cheap. In addition, very recently we're seeing the big boys like Barrick enter the same province (Salta), that Abraplata's flagship Diabillos asset is in. The size of the project Barrick is earning into, is 1/10th the size of Diabillos! Barrick even highlighted the "mining friendly" Salta Province in their 2019 annual report.
But here is why I LOVE AbraPlata at this price, and at this stage of their development. First, Diabillos has had over $50M CAD/$35m USD spent on it already with nearly 500 holes drilled. The deposit is already large and past the PEA stage. The 2018 PEA, which I expect to be significantly enhanced later this year after fresh drilling, shows just under 10M ounces of silver equivalent production annually. They have 140m ounces of Ag equivalent or 1.7M AU equivalent ounces and it trades at barely a $15 million USD market cap!
The stock closed yesterday at .085 CDN, which means you can look at it two ways. First, it's undervalued at this stage just for the gold ounces, which would be approx $24 an ounce in the ground, and then you also get 80 million ounces of silver for free! Or, on a silver equivalent basis, buy the ounces in the ground at 6 and a half cents per Oz, when their peer group trades at an average of 3X that number!
Now, at a $1,300 an ounce gold price (!) and $20 silver, with a 7.5% discount rate, Diabillos has an after tax NPV of $212 Million and an IRR of 30%. That's on 8 years of 136,000 gold equivalent ounces produced annually. ABRA isn't even trading for 1/10th of their after tax NPV! Plus, this deposit is growing impressively. The last round of drilling in Q1 produced some excellent results including 7 meters of 20 gpt gold and 200 gpt silver. Then, 17.5m of over 600 gpt silver and another huge hole that hit 15m of 5.1% Copper (!), 2.35 gpt gold, and 658 gpt silver.
Moving Forward
The company will be closing a $2m financing any day and will get the drills ready for another round at Diabillos in about 30 days. The follow up targets are exceptional, and I expect more very compelling intercepts to roll out early in the summer. This stock should already be trading 3-4X higher than it is right now! This is an advanced project that has big upside and will, in my view, attract a major to buy it or JV with Abraplata.
Interestingly, Abraplata's two largest shareholders are Altius Minerals and SSR Mining, owning 33% of the company combined already. In addition, via the recent merger between Aethon Minerals and Abraplata (this is truly the new AbraPlata) they also have multiple assets in Chile. Rio Tinto signed a $25M earn in for up to 75% of their Arcas project in Chile, so we'll see lots of work being done there over the coming months/years. Rio Tinto hunts for elephants by the way, so we'll see what happens with what I look at as a free Chile call option.
I also see us weeks away from this story beginning to be told to many new investors going forward. It's too good not to get out there and pound the pavement, and that's the plan at Abraplata. This is a low priced, low market cap company, that is surrounded by BIG. Big assets, big companies, big partners, big shareholders, and big upside potential. More details can be viewed in their recent investor presentation:
Right now Abraplata is my favorite "hybrid" silver/gold junior resource play over the next 6 months or so. A re-rating, I believe, is inevitable. Liquidity is actually decent in this deal and should continue to improve. Anything between .10-.12 CDN is a compelling entry point. Under .10 is an urgent buy because it simply will not last down here for much longer.
