Research house Hallgarten & Company has started coverage on Argentina-focused mining play Golden Arrow Resources Corp (CVE:GRG) with a long position and a 12 month price target of C$1.45.
The current share price in Toronto is C$0.82 by way of comparison.
It could become the silver major in Argentina if its combination with Silver Standard goes ahead, reckons analyst Christopher Ecclestone.
Golden Arrow, which is the main vehicle of the Grosso Group - a pioneer in Argentinian mining - struck a business combination agreement with Silver Standard in late 2015 to jointly develop the the former's Chinchillas project and "an agreement to combine the producing Pirquitas Mine and the Chinchillas project, located approximately 35 kilometres apart in Jujuy Province of Argentina, into a single new operation".
The ultimate goal of is to form a Newco, to be managed by Silver Standard, that shall be owned 75% by Silver Standard and 25% by a new entity to be owned by the existing shareholders of Golden Arrow.
Chinchillas hosts a resource of 100 million ounces of silver in the higher confidence measured and indicated categories and 44 million ounces silver /90 million ounces of silver equivalent in inferred.
Ecclestone, however, says it's vital to note that in light of what he calls a "storming" zinc price, this resource dates from April last year and the metals prices used for the silver equivalent calculation were - silver at $19 an ounce, lead at $1per pound and zinc at $1 per pound.
"Zinc is nearly 30% higher now while silver is around 15% lower," he says.
Chinchillas has a measured and indicated zinc component of 401million pounds with a further 548 million pounds in inferred category.
"This is the type of stuff that gets our pulse racing."
The analyst suggests the question is whether Silver Standard “sold too early” in engineering this combination."We think not," he says.
"Production is over the hill at Pirquitas and its best chance of extending its own mine’s life and gleaning extra value out processing infrastructure at the mine is this combination."
At Pirquitas, he says, without an extra source of feedstock, a decision on whether to shut it would need to be made in the next two months.
"The obvious solution is to ramp up Chinchillas and start sending a stream of Silver (and Zinc) ore in the direction of Silver Standard’s processing facilities at Pirquitas.
We are constantly asked where the next big Zinc mine is coming from and have hitherto been saying Chesapeake’s Metates project or shrugging our shoulders.
"However with the silver and zinc planets aligning in Jujuy, the combined operation of Pirquitas and Chinchillas adds a major dark horse in the race to production," says Ecclestone.