Mining The Metals Correction: Impact Silver

As the stock market continues to pervert the nation’s youth, it often feels like it’s a tic tok trader’s market, and the rest of us are just trading in it. The sell side is reacting with sexed-up venture stage offerings designed to play on The Gram, and spawned various sectors along the way.

The COVID biomed sub-sector has caught on for obvious reasons, but various attempts at making mushrooms and vegan food popular investments haven’t yet drawn enough water to be taken seriously. There is objective traction in enviro-tech issues, and we’ll get around to those, but now seems like as good a time as any to focus on the sector that the TSX Venture does best.

Gold and silver’s continued corrections have the metals out of the brief focus window in this market’s mind, to return again, surely, on their next upward explosion, which will come whenever it does.

In the meantime, point and figure charts show that the bull-trend remains intact through these latest downward movements, and that means it’s time to look at what the market is telling us about venture-stage metals issues.

“Brace for IMPACT,” was rejected as a slogan by the marketing team.

IMPACT Silver (TSXV: IPT) traded 2 million+ TSX.V shares Wednesday, climbing +0.16 (20%) to $0.94 in a retracement of a slide down from $1.10 August 4th. IPT has averaged 1 million shares per day since breaking through a $1 share price July 20th, nearly three times its 1 year daily volume average of 374,000 shares.

Impact is a rare instance of an exploration-focused junior producer. In contrast to most of its peers, who develop reserve-bases as assets, de-risking deposits to make them bait for larger mining enterprises, Impact produces directly from their Mexican silver properties, and sells the ore to market. Over the past few years, the strategy has run a flat margin for a loss. But a better metals market stands to improve the top-line, and reward the company for relative fiscal discipline.

Impact has financed the development of the producing and yet-to-produce properties through the equities markets, carrying no debt or metals hedges, so a profit should map directly through to the share price without being squelched by interest expenses or the discount of advanced sales.

It’s been a tough going for Impact the past few years as silver prices failed to cooperate.
The bet is that better metals prices will turn this operation around.

The small producer recently closed a $9.5 million financing, with 1/2 a warrant at $1.30, which will further extend its cap table to 162 million shares outstanding, fully diluted.

Exerpt from Impact Silver MD&A, period ending March 30, 2020.

We expect that 34 million in-the-money options and warrants (as of May, 2020) are weighing on the share price, but Impact’s team is managing to keep the volume up high enough to make us believe it can work through that pressure in the near term.

A company presentation dated June 2nd, 2020 (the most recent available) on Impact’s website, lists a 20% institutional shareholding, and includes Eric Sprott and BCV fund Zurich, but doesn’t break that ownership down.

Impact shows 4.5 million tonnes of silver-lead-zinc resources at a $10/tonne cutoff as of 2016, and could end up being taken more seriously by more risk adverse institutional investors if their ongoing exploration efforts yield additional resources or upgrades the existing resources to reserves.

Information for this briefing was found via Sedar and the companies mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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