On June 8, Aya Gold & Silver Inc. (TSX: AYA) announced constructive, high-grade assay results from its 2021 drilling program at the Zgounder Silver Mine in Morocco. (Morocco is a constitutional monarchy with a favorable tax environment for mining projects.) To date, Aya has completed 22,000 meters of a planned 41,000-meter drilling program at the mine in 2021.
Specifically, Aya intercepted a 6.5-meter span with a silver (Ag) composition of 6,437 grams per tonne (g/t) of resources, a silver grade which is equivalent to a bonanza gold grade of 95 g/t. (Any result above 34 g/t of gold is considered bonanza grade.)
Equally important, the near-surface (35 to 41.5 meters depth) drilling results meaningfully extend Zgounder’s strike length and establishes a new high-grade silver zone.
Zgounder Mine
Located 260 kilometers east of Agadir, the underground Zgounder Mine entered commercial production in January 2019. It produced more than 726,000 ounces of silver in 2020. This year, Aya expects the mine to produce 1.2 million ounces. In time, the company believes that annual rate could reach 5 million ounces.
According to a mineral resources estimate published in March 2021, Zgounder contains 44.4 million ounces of silver on a Measured & Indicated basis. This represents a 340% increase from a similar estimate prepared in February 2018.
Operating Income and Operating Cash Turned Positive in 4Q 2020
Aya’s operating income and operating cash flow both turned positive in 4Q 2020. Based on 1Q 2021 results, the company’s annualized operating cash flow is in the US$17 million range. As of March 31, 2021, Aya had a cash balance of US$29 million and negligible debt.
| (in thousands of US $, except where noted) | 1Q 2021 | 4Q 2020 | 3Q 2020 | 2Q 2020 | 1Q 2020 |
| Revenue | $8,541 | $9,509 | $1,748 | $2,041 | $525 |
| Operating Income | $2,458 | $3,441 | ($2,118) | ($1,379) | ($777) |
| Operating Cash Flow | $4,224 | $3,409 | ($1,329) | ($896) | $94 |
| Cash – Period End | $29,051 | $30,533 | $30,035 | $14,411 | $14,831 |
| Debt – Period End | $280 | $316 | $38 | $353 | $61 |
| Shares Outstanding (Millions) | 94.5 | 92.2 | 92.2 | 79.5 | 79.5 |
| Total Silver Produced (Ounces) | 389,132 | 444,338 | 113,655 | 101,321 | 67,005 |
If Zgounder’s silver production were not to reach its 1.2 million-ounce target in 2021 or if its longer term annual production goal of 5 million tonnes has to be adjusted down, Aya’s share price could be pressured.
Aya is now generating around US$4 million of quarterly operating cash flow as its silver production at Zgounder has reached around 400,000 ounces per quarter over the last two quarters. If the company can reach its quarterly silver production goal of about three times that level, its cash flows could be expected to increase by a similar multiple.
Aya Gold & Silver Inc. shares last traded at $8.44 on the TSX Exchange.
Information for this briefing was found via Sedar and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
