Sep 17, 2021
 in 
Precious Metals

AYA Gold and Silver (TSX: AYA) Set For Rapid Expansion

AYA Gold and Silver (TSX: AYA) is not your ordinary producer, the company has multiple world-class assets and at todays market close, Aya (TSX: AYA) will be added to the VanEck Vectors Gold Miners Index ETF and to the VanEck Vectors Junior Gold Miners Index ETF representing demand of 9.62m shares. In addition to its inclusion in the GDX and GDXJ, the corporation was added to the ETFMG Prime Junior Silver Miners ETF and the Global X Silver Miners ETF over recent quarters.

To be added to the GDX, gold miners must have a market cap of $750 million and trade more than 50,000 shares over the last three months. They are deleted from the ETF if their market cap falls below $450 million or if fewer than 30,000 shares change hands over three months.

To be added to the GDXJ, companies must have a market cap of more than $150 million and a free float of more than 10%. They must also trade more than 250,000 shares over the last six months. Gold miners are deleted from the ETF if their market cap falls below $75 million or their free float dips below 5%. They are also deleted if fewer than 200,000 shares are traded over the last six months.

AYA Gold and Silver (TSX: AYA) is fresh off a $70M bought deal, last traded at $9.80 and currently has 104.2M shares outstanding giving it a market cap of $1.01 BILLION.

Desjardins analyst Sclodnick has given a "buy" recommendation with his target price of $12.50. He says Aya's trading at a good entry point "given the slew of significant catalysts on the horizon, which has the potential to drive NAV growth." Mr. Sclodnick says in a note: "The company has no shortage of uses for the proceeds as the bulk of the raise will be allocated to the Zgounder expansion and the installation of a 2,000 tpd mill. With the strong drill results at Zgounder showing no signs of diminishing, we expect to see a continued aggressive drill program next year, while the grab samples from Imiter bis, bordering and along strike from Africa's largest silver mine, have certainly justified an ambitious drill program there."

AYA (TSX: AYA) trades at 1.59x NAV vs silver companies averaging 1.31x NAV with a peak of 2.16x, while its closest comp, Gatos Silver, trades at 1.64x. Longer-term, we believe there are many levers to pull for NAV accretion and we see the drill results at Zgounder backing a strong resource update to form the basis of an impressive feasibility study while we believe exploration results at Imiter bis could soon make the stock look cheap vs peers.

Aya (TSX: AYA) has targeted an increase in its resource estimate at Zgounder to more than 100moz Ag from its March 2021 M&I resource of 44.4moz Ag (see our Express Pulse). The resource target is based on adding ~6m tonnes at a grade of ~295g/t, which would see~60moz added to the resource. However, based on the positive drill results released by Aya thus far in its 2021 drill program, we see potential for the company to exceed its resource estimate target.

Latest Drill Results on Zgounder

Aya Gold & Silver (TSX: AYA) Intercepts 1,298 g/t Ag Over 9.5m, Extending Zgounder Silver Mineralization Further East Expands 2021 Drill Exploration Program

“Today’s positive results continue to expand known mineralized systems, such as hole ZG-21-36 which confirms the up-dip and on-strike continuity east of the newly discovered eastern zone. As a result, we have extended our Zgounder drilling program by 20% to 42,000m into year-end,” said Benoit La Salle, President & CEO.
Imiter Bis Project

Aya’s (TSX: AYA) Imiter bis project is located in Morocco, just 5km south of Managem’s Imiter mine, which has been operating since 1969 and is the largest primary silver mine in Africa. TheImiter mine has ~240moz Ag and Imiter bis is located along strike; the early exploration results are encouraging, showing that the mineralization continues onto Aya’s property. Imiter bis has the potential to be the next producing asset for Aya, and we believe that our valuation of Imiter bis at US$28.8m based on 24moz of resources will prove quite conservative. If Aya can eventually show half the resource base of Imiter, implying a 120moz resource base (just a little more than the company’s year-end target at Zgounder), then our US$1.20/oz credit (5% of our long-term silver price assumption) would offer a value of US$144m or C$1.77/share (US$1.39/share). However, with that resource base, we would value the project on a DCF basis. We expect to see a larger exploration program for the property next year, resulting in significant growth in resource ounces.

The positive results from the June-July 2021 fieldwork program helped to identify five priority target areas (see left figure). A 4,000-meter diamond drill program will be conducted over three (Middle Zone, South Zone and Cu-rich Zone) target areas as of October 2021.

  • 41 grab samples and 22 channel samples show potential for an epithermal Au-Ag structure over a 4-km strike, a porphyry or a large IOCG copper-rich deposit
  • Highlight grades include 15.42 g/t Au, 289 g/t Ag, 5.51% Cu, 31.23% Pb and 10.23% Zn

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