This Queensland junior is delivering silver service and solid ESG credentials

• Maronan Metals’ namesake project PEA shows economically robust operations
• Project benefits from soaring silver prices around US$48/oz
• Shareholder RDM sees upside and standout ESG credentials

Last month Maronan Metals (ASX:MMA) reported a robust preliminary economic assessment, for the silver-rich Starter Zone of its namesake project in Queensland.

That’s great news not just for Maronan, but for a stable of ASX companies, with long-term shareholder Red Metal (ASX:RDM) saying the PEA has defined a clear line of site towards development and is attracting new investors, lifting it from the Lassonde Curve’s ‘Valley of Death’ where many junior companies with advanced projects can find themselves.

RDM spun out the project together with an experienced mining team three years ago to rapidly accelerate Maronan towards development.

And after three years of excellent work by the MMA team and a buoyant silver price, their strategy and patience is now beginning to pay off as new investors are starting to recognise this emerging company’s near-term upside.

“We knew from our internal studies that Maronan has the ability to be economically mined but we needed a focused and expert mining team to turn this large discovery into a mine and capture its true value for Red Metal shareholders,” RDM MD Rob Rutherford said.

“So, we brought in Richard Carlton, a seasoned underground mine manager, who set up the expert mine development technical team at Maronan.

“They have done a very professional job and given the Maronan project the attention we always knew it deserved.”

PEA shows silver drives most revenue

The Maronan project has the potential to be one of Australia’s largest silver producers, generating industry leading margins over a long life – in part thanks to the recent turn in silver prices. They have hit around US$48/oz in recent weeks, climbing as high as a record US$54/oz at one point due to runaway demand for tightly-held physical silver.

The PEA considers a planned production target of 7.4Mt of silver-lead ore grading 103g/t silver, 4.1% lead and 0.1g/t gold, plus 900,000t of copper-gold ore at 0.72% copper, 0.86g/t gold and 9.3g/t silver.

The project is expected to deliver 20.7Moz of silver, 258,000t of lead, 4,600t of copper and 9,400oz of gold, with silver driving more than half of the revenue.

And all that value comes from just a small part of the project. The PEA only considers a fraction of the total resource – 25.7Mt of silver-lead and 31.1Mt of copper-gold remain outside the Starter Zone, highlighting the potential upside.

The PEA looked at two paths – processing ore onsite through a 1.2Mtpa standalone plant or trucking to a regional facility in the Cloncurry region.

It modelled $683m in free cash flow over a nine-year mine life, with average annual free cash flow in steady-state production of around $120m.

Both include developing an underground decline for bulk sampling and extra drilling to grow the indicated resource, paving the way for a future definitive feasibility study.

That study is expected to capture upside from favourable demand fundamentals for silver, copper and gold ahead of a final investment decision.

ESG head and shoulders above silver peers

Rutherford said the project also stands out compared to its peers because many emerging silver projects in Australia and the US are not in mining friendly jurisdictions. Those could face large added costs and time delays as they struggle to meet the many emerging environmental, social and governance challenges a new development faces.

“Our peers all have potentially economic resources in the ground, but investors should be asking which resource will come to development first,” he said.

“Which company has best addressed the ESG, metallurgical and geological risks.

“If investors do this, they will see MMA is relatively low-risk on all these fronts, and should be well above its current market valuation. “

Rutherford says the expert underground mining team is also key for project development.

“This fact is often overlooked, but having a committed expert underground mining team in MMA is one of its super powers, and allows it to fast track with confidence through the maze of ESG and technical hurdles on the road towards development,” he said.

Economic starter pit and exploration upside

Importantly, RDM was impressed that the strong PEA from the Starter Zone mineralisation considered just 22% of the total silver-lead resource base defined to date.

That means there’s plenty of exploration upside too.

“About 34% of global silver supply comes from base metal mines and one of the world’s larger silver mines is the nearby Cannington Mine – a large lead mine with strong silver credits,” Rutherford said.

“Maronan is Cannington’s little sister but remains open at depth and with time may grow into a project the size and scale of Cannington.

“The Isa district is blessed with several plus 120Mt lead-zinc-silver deposits and Maronan has outlined just over 30Mt to date, so the upside at depth is enormous.”

And with the silver price sitting pretty close to US$50/oz, RDM sees solid future growth for its stake in the company.

“Silver as a commodity has the unique status of being both a precious metal and industrial metal in high demand on both fronts,” Rutherford said.

“Forecasters predict near and longer terms shortfalls in supply which can only be good for holders of MMA stock.

“MMA is undervalued compared to its peers with Silver Mines (ASX:SVL), Andean Silver (ASX:ASL), Unico Silver (ASX:USL) and Sun Silver (ASX:SS1) trading anywhere from two to four times MMA’s current market cap.

“So, we see plenty of room for a share price re-rate.”

At Stockhead, we tell it like it is. While Maronan Metals and Red Metal are Stockhead advertisers, they did not sponsor this article.