Kuya Silver (KUYA) - Buy Cheap, Sell High Silver Developer

Kuya Silver Corporation is a Canadian-based silver-focused mining company that owns the Bethania mine and holds the concession, permits and other rights of the property located in Central Peru. Privately owned for the past 40 years, the mine produces high-grade sulphide ore from several veins in a structurally controlled swarm. 

We had our first conversation with David Stein, President & CEO of Kuya Silver and were interested in learning more about the new mining company and their plans for the future.

Company Overview

Kuya is a Silver-focused mining company developing a mine in Peru. They acquired the Bethania Silver mine which was a producing mine until 2016. Currently, it's on care and maintenance, and is an under-capitalised, private Peruvian mine. They plan to invest some capital, make it bigger and better, and put it back into production which they're on track to do in the next year or so.

The Foundation & History of the Company

David Stein started the company in 2017 when Silver prices were down. They found the asset and saw the grades were so high that they could mine it at a low cost and could make money even at low silver prices.

Team Experience & Background: Lessons Learned

Stein has a technical background and trained as a geologist, worked in the capital markets as an equity analyst covering mining companies for 9-years and then moved to the Silver sector in the mid-2000s. He then became a senior Gold analyst and worked with a merchant bank on investments on royalties, loans, public equity and private equity. As the bear market in mining started he started to focus more on private equity and then started Kuya in 2017. They found the Bethania asset, arranged a deal to acquire it in an earn-in joint venture structure, then took the company public a few months ago.

During the time spent as an analyst, Stein probably covered 50 or 60 companies over those 9-years, which has given him the experience he needs now for Kuya. The company is aiming to build a mining company and they feel that they have a good asset to do so. Bethania is not so big that they can't handle it, and they hope to be making real cash flow, in a relatively short time frame. Kuya has got one flagship asset and wants to get it into production to start making money, and growth will come through both expanding the flagship asset Bethania and other projects that they might be looking at already or in the future. 

Up until Kuya went public, they just focused on building the team in Peru. The man in charge of the Peruvian technical side is an engineer with a background in metallurgical engineering called Christian Aramayo. While they were a private company, they got the EIA approved for the new plant and tailings that they're intending to build. Now, as a public company, they’re starting to build the corporate team in Canada and have brought in some excellent people.

The Bethania Silver Project: What Have They Got?

Bethania is a high-grade Silver mine that was in production up until 2016. Stein first looked at the project in 2017 and it needed some money immediately, but had great potential. The mine has very high Silver grades but also other metals as well. It has 60%-65% Silver by revenue and has Lead, Zinc, Copper, and Gold as by-products in the project. Capital needs to be invested to build a plant at the mine which they have started and plan to get up and running by 2022. 

Kuya raised CAD$13M in October which was largely to close the acquisition of the mine which they completed in December. Meanwhile, with the rest of the money, they're carrying out a drill programme costing CAD$1M - CAD$1.5M and are finishing the detailed engineering as well. They have hired Mining Plus to do the underground design and to put together a PEA. They have probably raised CAD$18M-CAD$19M in total to date.

Unearthing the Opportunity: Business Plan & Value Growth

Kuya plans to do some infill drilling at Bethania. They have inherited a database showing samples taken underground in all the veins that have been mined, all of which still have mineralisation. The drill results will add to that database and increase confidence in the resource. They also have a 43-101 report, a resource estimation and Mining Plus will use the information and put it all together in the mine plan and the PEA.

Kuya did a 43-101 technical report last year, before they went public, which is available to read. In that, there is the historical resource that is not 43-101 compliant, but is 8.3Moz and at the 350t per day rate that they’re permitted, would give a 4-year mine life producing about 2Moz a year at the expected head grades.

Phase 1 is to build the plant and from there, the upside for Kuya is to keep drilling to make the resource at Bethania even bigger, as there is great potential. Drilling is required to extend the veins at depth and along strike and then the plant could be expanded to make the production profile at Bethania bigger in phase 2. The 4-year mine life is planned to be extended with the expansion potential at the Bethania site itself where the mine is located, but they also have other bigger property land packages in the area near the mine so there is opportunity to find satellite deposits too. 

At Bethania there is a simple geological model with parallel veins, relatively close together, and multiple veins can be accessed from the same tunnels underground. This will enable Kuya to get into production quickly which means they are making money and means they can reinvest that cash flow in exploration.   

Mining in Peru: Potential Restrictions & COVID-19 Impact

Peru had a very strict lockdown back in March when Covid hit and then they lifted the restrictions, particularly for the mining industry, soon after that. They realised that they need the mining industry going, and it’s a huge generator of taxes, employment, and other benefits and is the biggest industry in Peru. There are new Covid health and safety protocols Peru which Kuya has established at their site and have to pass government inspections to prove the protocols are correctly set up and managed. It is currently summer in Peru and the seasonal effect of Covid does seem to play a big role so Covid seems to be under control at the moment and with the vaccine on it’s way and the increased restrictions, they are hopeful that it stays that way.

2021 Goals: What Will Success Look Like? 

Kuya has very ambitious plans for 2021. The first is the drill programme and the resource estimate, 43-101. At the same time, they want to finish permitting, finish the project financing for the plant and tailings, and get the plant constructed over the second half of the year. The plant is a fairly small project so will be a quick build. 

At the same time, they have picked up a secondary project and are in the process of making an acquisition in Canada with a Silver dominated project in Ontario. They have plans for a Bethania style, small, high-grade mine and aim to start small, produce a few million ounces of Silver there per year, and grow it like they plan to do in Peru. They have an earlier stage project there but want to make some headway there and aim to build a resource by the end of the year on that property.  

We look forward to following the Kuya story and their plans for 2021 with the Bethania project and also the potential of a new acquisition in Canada too. 

To find out more, go to the Kuya Silver website.