Mitre Mining given $2.30 price target by Canaccord on back of Cerro Bayo acquisition

Mitre Mining’s (ASX: MMC) acquisition of the Cerro Bayo silver-gold project in southern Chile and the company’s subsequent drilling success there is attracting growing attention amongst resource analysts.

Among those is Canaccord Genuity, which has revealed a ‘speculative buy’ price target of $2.30 in a new research note.

While Mitre’s share price is currently sitting at $0.725, Canaccord Genuity’s research note on the company has identified significant potential upside at Cerro Bayo at a time when silver and gold prices are soaring.

Existing infrastructure key

The research note highlighted that the Cerro Bayo acquisition featured $150 million in sunk infrastructure and significant resource growth/exploration upside potential.

This upside has already been highlighted in the short time Mitre has had control of the project, with the company recently identifying extremely high-grade mineralisation in new exploration results.

In May, Mitre reported it had received rock chip assays of up to 10,466 grams per tonne silver equivalent, suggesting the discovery of another swarm of silver-gold veins at Cerro Bayo.

Exploration potential

Canaccord highlighted the project’s large exploration potential with Mitre now owning 100% of two mining districts covering approximately 300 sq km.

Cerro Bayo contains the Cerro Bayo, Cascada, Marcella, Raul, Lourdes, Guanaco UG and OP mines, while Laguna Verde holds the Coyita, Delia, Fabiola, Dagny, Yasna, Temer and Cristal UG mines, as well as the historic Taito and Tranque OP mines.

The research note also highlighted Mitre’s solid financial position to back up its exploration plans with around $13m in cash, providing it with the potential to add more drill rigs to the two currently in the field.

During a recent site visit, the research firm also noted around 15 priority targets with high silver grades at the surface that Mitre can follow up.

Development scenario

The Cerro Bayo development scenario that Canaccord Genuity has forecast highlighted the potential to provide an economically robust restart.

Canaccord’s assumed development scenario identified a project capable of producing a silver-gold concentrate of 51,000 ounces per annum gold equivalent or 4.2Mozpa silver equivalent.

Presuming an 8-year mine life with around 90% recoveries at a low all-in sustaining cost with valuable gold by-product credits, Canaccord’s price deck sees an EBITDA margin of approximately 60% at the project.

The research note forecast that as the resource grows, the project may warrant a larger production scenario than Canaccord’s base case.

Note: the research not is not financial advice, nor is this article. Please see a financial expert before making any investment decision.