The Conversation (0)
Description:
Shaw and Partners' recent research note, dated December 16, 2024, highlights a promising outlook for silver in 2025, emphasizing Boab Metals' (ASX:BML) strategic position to benefit from this trend.
With its flagship Sorby Hills Project in Western Australia, the company is poised to capitalize on rising silver demand and constrained global supply. The report highlights Sorby Hills' robust metrics, including a pre-tax net present value (NPV) of AU$411 million and a pre-tax internal rate of return (IRR) of 37 percent, underpinned by low operating costs and a significant lead-silver concentrate output.
The analyst firm also underscores the importance of the binding offtake agreement with Trafigura, which includes a US$30 million prepayment, providing financial flexibility and market access. Boab Metals' advanced project timeline and favorable economics position it as a standout player in the silver sector.
Key Insights:
- Silver Market Dynamics: The report identifies two primary drivers for silver's anticipated strength: its historical correlation with a rising gold price and increasing demand from the solar panel industry. This uptick is largely attributed to the solar sector, which has seen its share of silver consumption rise from around 5 percent in 2015 to approximately 14 percent in 2023.
- Sorby Hills Project: Boab Metals' Sorby Hills Project, located in Western Australia's Kimberley Region, stands out as one of the most advanced silver projects on the ASX. The project's Front-End Engineering and Design study, completed in June 2024, outlines compelling metrics: an upfront capital expenditure of AU$264 million, an average C1 cost of US$0.36 per pound of payable lead (inclusive of silver credits), a pre-tax NPV of AU$411 million, a pre-tax IRR of 37 percent, and an average annual EBITDA of AU$126 million.
- Offtake Agreement and Financing: A significant milestone for Boab Metals is the binding offtake agreement with Trafigura for the lead-silver concentrate from Sorby Hills. This agreement includes a US$30 million prepayment, bolstering the project's financing strategy. Additionally, the company is exploring debt funding opportunities with entities like the Northern Australia Infrastructure Facility, which offers concessional loans for infrastructure projects in northern Australia.
- Lead Market Perspective: Contrary to common misconceptions, the report underscores that lead consumption has been on an upward trajectory, averaging a 3.2 percent annual increase from 2004 to 2023. The forecast anticipates continued growth at 2.2 percent annually through 2030, driven by sustained demand in various industrial applications.
For the full analyst report, click here.
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