On January 14, I had a one-hour conversation with Kuya Silver’s CEO David Stein, and I asked him the questions that investors want to see answered, and not the ones that the executives like answering.
IMPORTANT: This was NOT a sponsored presentation. However, Kuya Silver is a paying customer of this website. My views on it should be considered biased. None of this is investing advice.
In this conversation, David and I spoke about Kuya Silver’s recent news where Kuya announced its first-ever mineral resource estimate on the Bethania Silver Project.
We also touched upon David’s outlook for silver in 2022.
Here’s an overview of the questions I asked, with the short version of David’s answer. For the complete version, and the full interview, visit this page:
Kuya Silver Resource Update & Silver Outlook with CEO David Stein (CEO BBQ – January 14, 2022)
#Q1: You did well, but what could’ve gone better?
We could’ve gone bigger. This was a very conservative drill program. Potentially, we could’ve targeted deeper holes and gotten better results. We’ll go bigger next time.
#Q2: 70,000 oz Au Eq indicated is not a lot. Is Bethania too small to matter?
If you only look at indicated resources, you will never make any investments, besides maybe the large (and overpriced) natural resource companies. Based on the permit, the mine life is still very good. Underground mines rarely get more than 5 years of mine life. However, these veins often times keep on going. You can’t compare us to an open pit operation, nor to other metals (like gold). The silver market is a lot more obscure. There are not many primarily silver-focused companies. There are thousands of gold-focused ones. We can get this thing into production. We can pay CAPEX back within a year. Everything looks promising to me.
#Q3: The news didn’t move your stock. Why?
This even more so reflects the sentiment on silver, and the fact that we’re in a bears-led market. It’s hard to get retail investors to buy silver exploration stocks in this type of market.
#Q4: What’s the step-by-step plan for exploration in 2022?
We now have the 1.5km mining concession, and about 1/3rd of that is in the resource already. We have expansion potential to the north, and the south. We’ll be doing exploration work on that.
We’ll do surface work first. Once we’ve found another area we want to focus on, we’ll bring in the team and start drilling, with the main goal of putting the resources on paper. Just to the East of the mine area, the Hilltop zone, is a very interesting zone for us. We’ll probably start there
Once the crew is done sampling Bethania, we’ll move them to Carmelita and have them do some sampling work there.
Then we’ll start doing the phase 2 drilling on Bethania. We’ll get deeper holes out of the main mine area.
When that’s done, if the time allows it, we’ll start the phase 1 drill program at Carmelita as well.
#Q5: Is that drill program, underground, going to be more expensive?
Not necessarily. Also, we might look at drilling the deeper holes from surface. Can’t say for sure yet. Of course underground exploration can be more expensive, but the upside of that is that you don’t have to drill as many meters, which is how drill programs are charged.
#Q6: Will you have to dilute the shareholders to get money to do all of that?
We have to plan for some kind of a financing in the next few months anyways, for the mine development. We’ll try to combine the share issuance with that financing. 50/50 debt/shares looks attractive to me at this point, but nothing is yet certain.
#Q7: Will you spend more money on staff this year? Will the CEO take more money home?
I’m probably going to take less money home this year. For most executives, there won’t be a big change. We do have to hire more people this year. Mine workers, and management jobs to manage the new sampling project, and the to staff the drills.
#Q8: What’s the main plan here?
Get Bethania to production ASAP. Dilute as little as possible and use as much as possible from the free cash flow to finance further exploration. I want, ASAP, to have internal discussions about whether we should pay a dividend, or buy back stock, instead of talking about dilution.
#Q9: Will you have troubles with the construction permit because of the escalating political situation in Peru?
I don’t think so, but these things can be unpredictable. We’ve done all the technical work we needed to do on our end, and we expect to get the permit very soon. Might be a month, or two months or a bit longer, but soon. It’s difficult to time.
#Q10: What’s the CAPEX for the mine & mill?
We don’t know yet for sure. We’ll publish the numbers in the PEA shortly. However, $15,000,000 is what we’ve estimated internally, but please understand that those are just raw estimations that carry no more importance than a random guess.
#Q11: When will you get into production? 2023?
The actual construction of the mine shouldn’t take longer than a year. Some of the work (underground) has already been done by the previous owners. Good for us. We can build very quickly once we have all our duck in a row. Early 2023 looks probable. We might even be doing some commissioning in late 2022.
#Q12: What’s up with the Kerr Project? Results soon?
Yes. Very soon. The results are at the lab. The labs are jam-packed and are taking much longer than expected. Update coming in the next few weeks.
#Q13: If the price of silver is too low once you get into production, will you hold back selling it?
No. That doesn’t make sense to do, for smaller companies like us. I was happy with Bethania at $16 silver. So, at $22 I’m very happy, and I’d be even happier at $30, but Kuya Silver is not a call option on the silver price.
#Q14: Going back to that 50/50 split you mentioned, why would you go for debt?
The main thing that has me favouring debt in this situation is the quick payback time. We expect to pay back CAPEX in less than a year, after we’ve started producing. That way we’re carrying lower risk, and not diluting the shareholders, of which I’m a large one.
#Q15: What’s your outlook for silver in 2022?
I expect silver to closer higher in 2022, than it did in 2021, mainly because of negative real interest rates and growing inflation.
Further on in our conversation, David and I spoke about the fundamentals and the state of the silver market. David shared with me his 2022 outlook for the silver price and told me that he expects silver to close higher in 2022, than it did in 2021, and he thinks we’re nowhere near the end of the precious metals bull market.
There will be a separate summary of that part of my conversation with him posted on this website shortly. If you want to watch it already, head over to:
Kuya Silver Resource Update & 2022 Silver Outlook with CEO David Stein (CEO BBQ – January 14, 2022)
IMPORTANT: This was NOT a sponsored presentation. However, Kuya Silver is a paying customer of this website. My views on it should be considered biased. None of this is investing advice.
