I had the opportunity to sit down and talk with CEO Fred Davidson and CFO Jerry Huang of Impact Silver Corp. We talked about the projects they have, the current sentiment for silver, and why Impact Silver has the potential to become a leveraged play on silver.
On The Next Bull Market Move we have two new guests. We have the CEO and CFO of Impact Silver, Fred Davidson and Jerry Huang. How are you today guys?
Fred Davidson: We're doing really well. It's a spectacular day in Vancouver right now.
Excellent. Let's start by talking about the latest piece of news for Impact Silver. I understand that you guys have started a drilling program on the El Canelo Vein System at the Santa Teresa project. Can you give us an idea as to what you hope to achieve throughout this drilling program?
Fred Davidson: This has been a longer term project. The countryside we're in is fairly steep. The valley that we're drilling in is about 400 meters actually, physically below where our concentrator is located. And about 4 or 5 years ago we discovered a high grade gold vein that had been, if you will, uplifted a couple hundred meters, when we were drilling the silver vein up on the hill.
We were busy with other things but, early last year we put a team down into the valley and they were dealing initially with soils.
We came up with over a hundred targets that we identified there, that had one gram or more, and focused in on one particular vein.
We disclosed that one about a month or two ago. It was about 50 meters along at surface, about 1.6 meters wide, on average. We did a detailed sampling on it with cross cutting using a rock saw. It averaged about 6.5 grams gold over the distance.
That was, sort of, a higher grade target to this lower grade environment and we decided to follow it up and use it, if nothing else, as a model for a number of the other veins we've identified in the area.
The area is very similar to other areas we have in the 363 square kilometers. It's very perspective. The mineralization in the area is extensive.
We see copper, to some degree we see silver, lead, zinc. But traditionally at depth we find gold and copper in this area, and this is at depth. Including porphyritic rock, other indications of copper, what have you.
The area appears to have been explored at some stage or another about four or five hundred years ago through artisanal mining. It's a very attractive area to be working in.
Let's talk about the current sentiment for silver at the moment. The last five to six years have been very tough for investors in the silver market and for many junior silver companies. So what is the sentiment like for you as part of the junior silver company and does Impact Silver have enough cash to keep going?
Jerry Huang: Sure. Thanks Kerem for the great overview. As you know, Impact is a bit of a different company in this space. We're not just a pure silver explorer, we've also produced since 2006.
So one of the big appeals to a lot of our investors is that you have a bit of a cash flow and obviously a huge optionality on silver. We generally average anywhere from 800,000 to just under one million ounces of production per year and we've been at this since 2006.
So, year to date, since beginning of production we're just over eight million ounces produced and over a $165 million in cumulative revenue, while raising just a bit over $30 million, no debt.
And through just four rounds of financing, so not a lot of dilution over the years. A lot of companies have come and gone, and Impact still is here. This property, this very prolific track of gold and silver in Mexico, has seen historic production, Kerem, over 500 plus years and it was previously operated by some of the major names in Mexico like Group of Mexico.
So we certainly know what we're doing, and in terms of cash in the bank, as for the financing, Q3 of last year, I think we had just under $800,000 in the bank, we raised an oversubscribed financing for just $1.74 million.
In two tranches we set out to raise just 1.5. So to put that in perspective, it is a much smaller amount than what we've raised in the past, but we've raised what we need to showcase and do the exploration.
But, the right market is conducive. As Fred says, this El Canelo and Santa Teresa projects, we were drilling and exploring nearly ten years ago when gold was at $750 an ounce.
We were receiving drilling results of 3 meters and intercepts of 10-20 grams per tonne gold. If we were to even get close to that result right now in the valley of the area that we've drilled, that would be tremendously exciting as it could be proof of continuity of gold/copper zone from the collar of the valley down to the base. We'll likely maybe look at another financing as well to really expand that program.
So would you agree that Impact Silver is actually a leverage play on silver itself? I noticed in that past that when silver goes up, the percentage gains for Impact Silver are actually far greater than the price of silver. Can either of you comment on this?
Jerry Huang: Definitely Kerem - case in point in 2016-17, if you recall started as a dismal year for the junior mining market coming off of a historic low December 2015.
But throughout 2016, a series of black swan type events such as Trump election and Brexit, resulted in a risk-on environment where gold and silver really took off as safe haven assets. Gold went from thirteen hundred, to just around sixteen.
Silver went up much more than gold, being far undervalued in terms of gold and silver ratio (85:1) also a much smaller market. Silver doubled from just under $11 an ounce to a peak of $23 around July 2016.
Impact, in comparison, went up nearly 13 times. From 11 cents low at the beginning of 2016, to over $1.32 in July. Because of that, TSX Venture actually recognized Impact as one of ten top mining companies as a Venture 50 of that year, in 2017.
Therefore – Impact is very leveraged to the price of silver – every dollar silver goes up, Impact could potentially make an extra $800K in revenue at an annual production of 800,000 – 1,000,000 oz. Plus, if you simply look at buying an ounce of silver for $11, if that doubles, you're making another $11. If you bought $11 worth of Impact Silver shares, and it goes up 7x versus what silver does, you're a lot more ahead. This isn’t even accounting for the discovery and exploration upside in 350km of land.
Can you give us an idea of the plans you have for the rest of the year and what investors can expect regarding news flow. Is it a case of more exploration, perhaps for 2019 and for 2020 onwards?
Fred Davidson: Yeah, what we are doing is adjusting our mining methods right now and where we mine. As you might now, we mine from about four small, underground mines that service one mill. What we've done, as the price of silver has fallen off, we're redeveloping some of the higher grade sections and pulling out of the lower grade sections to A) raise our average grade and B) to drop our overall costs. We're about 2/3 of the way through that right now.
At the same time, we see that the true value of a mining junior is in fact exploration. When we announced the follow up program at Santa Teresa (El Canelo) vein in February the market got quite excited. Rightfully so, as the last time we worked on the collar of this 300 meter valley we are in we were drilling 3 meter intervals of 20g/t gold.
We are working on the first phase of El Canelo and hope to have results out soon. if the assays pan out the way we think makes sense for continuity given silver falls off but we start to see gold/copper, we may warrant an additional program to further test the potential.
Meanwhile, and something we don't normally publish, we've got an active underground billing program, normally just to establish our development program underground. But in certain cases, like some of the mines that we're working in, it's in many ways almost an early stage exploration.
In Guadeloupe, we've actually entered an area where the previous owner had stopped because he didn't have land title. We now have the land title, we're building on beyond that, and our targets there should be as good as the grades they were getting when they were working in this area previously.
San Ramon is another area where we've had almost 10 years of production out of with good grade material. Once we develop access into the areas we drill, we'll be doing an extensive underground drilling program there, proving up additional resources in that general area.
People don't appreciate the pure size of the San Ramon, and on our long section that we have on our website, if you stacked three Statue of Liberties on top of each other, you still wouldn't recognize the height of the mineralization we've been in. So, it's a fairly exciting target in its own right and as we expand that, it expands the potential going forward.
So as we start to wrap up the interview today, is there anything either of you would like to talk about in terms of advice for investors? Is your company designed to provide full leverage for the silver price going forward?
Fred Davidson: First of all, we are one the best leveraged to the price of silver publicly traded companies. Secondly, we've now discovered a whole new district that underlies the silver lead zinc district of copper and gold, and that in itself can be an exciting new potential for what we're doing. I don't even think we've really impacted more than 20% of the 353 square kilometers that we have with any serious exploration. So we have an exploration upside, gold, copper upside, and we have further development of the higher grade silver lead zinc.
Jerry Huang: Just to add Kerem, Impact has been publicly traded for 14 years and has never been rolled back, always financed through a combination of organic cashflow and select financing with private investors. The property is accessible and historically has produced over 200 million ounces of silver.
Under our ownership we’ve done just 8 million so far and believe there is plenty more to go.
Our last big finance was a non broker amount for nearly 7.5 million back in 2016 and there is no debt. There aren't too many companies out there that have been able to boot strap this whole operation.
Very proximate, central to Mexico, with great infrastructures in place and skilled workforce. Even have a secondary project, Capire, has an measured & indicated deposit and a mill ready to go on the southern portion of the project. And these have all been paid for by cash flow from operations.
So when Impact investors look at our company, we're not just building ounces in the ground, we're proving it by pulling it out once we discover it. That's something we can expect with our silver and lead zinc exploration programs and Impact has been at this long enough.
Investors these days are very great on transparency, you can take a look at Impact's feedback and reviews on a lot of our retail investor websites and you will quickly realize IPT has a lot of fans and retail base. In a lot of these comments you will see that we have very loyal shareholders from 10-12 years before, who have made multiples on the stock.
In the right market, Impact does very, very well and if you look at where the stock is right now, it's basically around where Impact IPO financing which was around 25 cents.
We've recently completed the financing at 27. So we have great people on board, we have great long term investors, and high networked individuals, who really believe in the short term upside on Impact and obviously on the silver price overall.
Just because, the ratio has been depressed for so long, when it goes, it goes up very fast. With only 84 million shares out of which the parent company as well, Energold owns 10% of, and so many other shareholders and the insiders are holding on. It's not hard to see Impact at a much higher price point when the news on the exploration and production for years to come.
Thank you very much Fred and Jerry for being on the show today.
Jerry Huang: Thank you Kerem.
Fred Davidson: Good talking to you, cheers.
The Next Bull Market Move
For more information on Impact Silver go to www.impactsilver.com
To view disclaimer click here