Report

SCZ: Satisfies Acceleration Option for Bolivian Assets

What you need to know:
• Santacruz announced the successful completion of the fourth and fifth payments ($15M), including the final installment, to Glencore.
• This marks the satisfaction of the $40M Acceleration Option to complete the acquisition of the Company’s Bolivian assets.
• With these payments behind it, SCZ is well-positioned to allocate cash toward growth initiatives, M&A, and returning capital to shareholders, building on its proven success with the Bolivian portfolio acquisition.
• We are increasing our target price to C$2.50/share based on increased silver prices and multiple expansion in the sector.

This morning, Santacruz Silver (SCZ:TSXV) announced the successful completion of the fourth and fifth payments, including the final installment, totalling $15M to Glencore. This milestone marks the full settlement of the $40M Acceleration Option, completing the base purchase price for the Company’s Bolivian assets. The $15M installment, covering the September 5th and October 31st, 2025, payments alongside prior payments on March 20th, May 6th, and July 7th, fulfills the total purchase price and secures $40M in savings (see below) while reinforcing Santacruz’s disciplined financial approach. We are maintaining our BUY rating and increasing our target price to C$2.50/share (previously C$1.80/share) on SCZ.

We remind readers that in March 2025, Santacruz announced a new plan to accelerate its payments to Glencore, reducing its debt from $80M to $40M if paid by November 2025, saving the Company $40M, as detailed in our note here. Santacruz acquired Glencore’s Bolivian mining assets in October 2021. The transaction provided the Company with a 45% interest in the Bolivar and Porco mines, full ownership of the Sinchi Wayra business and Cabello Blanco complex, the Soracaya exploration project, and the San Lucas ore sourcing and trading operation.

Increasing Target Price
SCZ has been one of the best performers in the sector, being up 573% YTD on the back of the rising silver price, stable production, decreasing costs, and improving its balance sheet. This has led to major multiple expansion for SCZ, increasing from 1.9x 2025E CF when we initiated coverage to 6.6x today. However, this still comes at a discount to its peers despite the strong progress that SCZ has made to prove the quality of its assets. We have decided to increase our assumed silver price to $35/oz (previously $31/oz) and our target multiple to 8.0x 2025E CF (7.0x previously), resulting in our target price increasing to $2.50/share. The target price is equivalent to 1.3x NAV. We will note that due to the higher modelled silver price, our silver equivalent production estimates have decreased slightly (Figure 2).
Underlying
Santacruz Silver Mining

Santacruz Silver Mining is engaged in the operation, acquisition, exploration and development of mineral properties in Mexico, with a primary focus on silver, but also including gold, zinc and lead. Co. is focused on meeting and maintaining its primary production objective of producing approximately 1.5 million silver equivalent ounces on a yearly basis at its producing property, the Rosario Mine. In addition, Co. is exploring three other mineral properties, being the San Felipe Project (an advanced stage project), the Gavilanes Project (an exploration project), and the El Gachi Property (an early stage exploration project).

Provider
Atrium Research Corporation
Atrium Research Corporation

Atrium Research provides institutional quality issuer paid research on North American public equities using deep fundamental analysis. Our research reports are disseminated through Bloomberg, FactSet, Capital IQ, Reuters and many more, as well as through our social media and email distribution lists. 

Analysts
Ben Pirie

Other Reports on these Companies
Other Reports from Atrium Research Corporation

ResearchPool Subscriptions

Get the most out of your insights

Get in touch