Sphene Capital GmbH: Eloro Resources Ltd. | Rating: Buy

Classification of Sphene Capital GmbH to Eloro Resources Ltd.

Significant silver grades intersected with 962 g/t over 9.75 m

Hole DSB-75 yielded the highest-grade and longest silver intersection recorded by Eloro Resources to date in the definition drill program within the potential Santa Barbara starter pit area of the Iska Iska silver-tin polymetallic project in Bolivia. The drill hole returned 135 meters grading 151.47 g/t Ag (from 174 m to 309 m) within a broader 309-meter section averaging 90.92 g/t Ag (from 174 m to 483 m). Notably, the high-grade interval in hole DSB-75 includes 9.75 m at 962.23 g/t Ag within a wider 34.50-meter zone grading 440.09 g/t Ag.

This indicates that as definition drilling has expanded to cover a larger area in Santa Barbara, the concentration of high-grade silver values exceeding 50 g/t Ag has increased significantly. Additionally, the drilling data suggest that high-grade silver mineralization is likely quite extensive and that Iska Iska has strong potential for open-pit mining, which, in our view, could enable more economically attractive extraction.

We reiterate our Buy rating and raise our price target to CAD 12.50 from CAD 12.40 per share, adjusted for a higher number of shares and a more favourable USD/CAD exchange rate, representing a significant upside from the current share price of CAD 0.86. Our price target is based on the in-situ valuation of the Santa Barbara Breccia Pipe within the Iska Iska property in Bolivia, while fully excluding all other assets. Focusing on the higher-grade mineral resource, we estimate a net asset value (NAV) of USD 1,236 million. Applying a 0.70x multiple to our NAVPS estimate, we arrive at a target price of CAD 12.50 per share, indicating a potential 1,273.6% increase relative to the latest share price of CAD 0.91. We view the pullback in the company’s share price as an attractive entry opportunity for long-term investors, driven in part by erratic analyst downgrades and misunderstandings regarding the intrinsic value of the Iska Iska project. Additionally, we emphasize that our price target could rise further once the recently reported higher tin and silver grades are incorporated into the planned PEA. Additionally, given the fundamental undervaluation of the stock, we consider Eloro Resources a potential takeover candidate.