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CAPT: Single Asset, Single Focus: High-Grade Silver

What you need to know:
• Capitan Silver is focused on resource growth at its high-grade Cruz de Plata silver project in Durango, Mexico.
• The Jesus Maria Silver Zone is the Company’s clear focus, having recently consolidated the land along strike of the multiple parallel high-grade silver veins, CAPT looks to expand these zones with drilling.
• The project is showing early signs of a district-scale silver deposit.
• Capitan carries itself with a disciplined approach, limiting shareholder dilution, maintaining a tight share structure, and has no warrants.

Capitan Silver Corp. (CAPT:TSXV, CAPTF:OTC), is an exploration company focused on advancing its high-grade Cruz de Plata silver-gold project in Durango, Mexico. The project is known for its two historic silver mines and currently hosts two deposits which the Company is focused on expanding, specifically its high-grade silver zone, Jesus Maria. Capitan aims to continue to expand its silver resource with the goal of uncovering a deposit that would catch the eyes of the majors in the area, like its neighbour, Fresnillo PLC (FRES:LON, $9B mkt cap), the largest silver miner in the world. CAPT prides itself on its disciplined approach to exploration as well as its mitigation against unnecessary shareholder dilution, having no warrants outstanding and a tight share structure. We are initiating coverage on Capitan Silver Corp. with a BUY rating and a target price of $0.80/share.

Investment Thesis Summary
Robust Project Already Hosts Two Deposits. The Cruz de Plata Project hosts two deposits, one silver and one gold. This greatly reduces exploration risk as the Company expands the current zones and focuses on silver resource growth.

Substantial Growth Potential. The Cruz de Plata Project has five key high-grade silver structures identified, ranging from 1km to over 2.8km, all of which remain open along strike and depth. These structures support the growth potential that could result in a district-scale silver-gold deposit.

Grade is King. The Jesus Maria Silver Zone hosts 8+ high-grade silver veins which have intersected several intercepts over 1,000 g/t Ag, some over 3,000 g/t.

Strong Management & Institutional Support. Capitan is supported by excellent shareholders including Michael Gentile (17%), Construplan (10%), management & board (5%), Ninepoint Partners (3%), and U.S. Global (1%). This is impressive for companies of its size that typically struggle to attract institutional ownership. The management team last worked together at Argonaut Gold where they were instrumental in generating >$1B in market cap from their Mexico operations.

Good Capital Structure & Corporate Responsibility. CAPT has a healthy capital structure with only 84.1M shares outstanding, 6.2M options, and no warrants; emphasizing management’s focus on shareholder value. Its assets are contracted to be royalty-free, meaning it can capture more upside as its projects advance.

Cheap on an EV/oz Basis. After rallying 133% YTD, CAPT still only trades at US$0.48/oz in-the-ground. This compares to peers at US$0.74/oz and Vizsla Silver at US$1.5/oz which we believe showcases the potential for valuation expansion.