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Silver – Surging & Scarce; Highlighting Capitan Silver

What you need to know:
• The price of silver has surged, over doubling in the last ~12 months, which is supported by its persistent structural deficit.
• Silver miners are positioned for significant margins of +$60/oz at these price levels that can’t be ignored.
• The pipeline of quality silver development projects is scarce and continues to dwindle, garnering a premium valuation as a result, which was on display with recent M&A.
• Capitan Silver (CAPT:TSXV) is showing early signs of these quality assets at its Cruz de Plata Project.

2025 marked a pivot year for precious metals, with gold and silver rising ~65% and ~150%, respectively. The price of silver is inherently more volatile given its dual role as a monetary and industrial metal, which was reflected in the price movement. This momentum carried into early 2026 with gold breaking out >$5,000/oz, and silver surging >$100/oz. Over the last week, we saw healthy pullbacks for both metals, and prices have remained volatile. With that said, we remain in uncharted territory when looking back ~12 months, and fundamentals remain solid to support these levels. Silver has entered its sixth consecutive year of structural deficit, and demand continues to increase, while mine supply has stagnated.

Silver Miners Poised for Serious Profitability. Silver miners offer increased operating leverage, and with an average AISC just under $20/oz, the margins for pulling an ounce out of the ground have become explosive. Whether prices retrace to >$100/oz or stabilize in the $75-90/oz range, this profitability can’t be ignored at +$60/oz.

Silver Garners a Premium. With that said, silver producers are scarce, with only a handful of sizable producers globally, and a dwindling pool of quality silver assets that can provide meaningful scale to maintain silver leverage and take advantage of the resulting premium valuation. The majority of major silver producers are currently generating less than 50% of revenue from the metal and continue to struggle to find quality assets to add silver growth. This was on display last year with three single-asset Mexican producers (SIL, GATO, MAG) with quality assets getting acquired by senior producers at premium valuations, given the scarcity.

What Developers are in the Pipeline? Mexico hosts a significant portion of the silver industry, accounting for ~23% of mine production, and naturally, the majority of the quality development projects are also within the country. With the Mexican government now taking a more pragmatic approach to mining following years of stagnant permitting, we expect the country to continue to be the primary source for silver. In terms of well-known, construction-ready projects that are at the permitting stage, we would highlight VZLA, GGD, DSV, and SLVR (permit granted) as the most likely projects to come online in the near-term; however, in our view, the real value for investors is in identifying these quality deposits at an early stage.

Capitan Silver (CAPT:TSXV, BUY C$3.50 Target) is Demonstrating Early Signs. The Jesus Maria silver system at the Cruz de Plata Project in Durango, Mexico, possesses the characteristics to be advanced to a sizable quality asset, in our view. Key silver structures have been identified along a +3.7km mineralized trend, returning several intercepts over 1,000 g/t AgEq. The Company is beginning to establish scale, and only ~25,000m have been drilled to date. CAPT is now kicking off an extensive 60,000m drill program in 2026, which we expect will mark a pivotal year. In addition, management brings significant Mexican expertise, having financed and built numerous mines in the country.