Strategic Silver: Cerro de Pasco Resources Offers Compelling Exposure to Critical Metals

• Silver prices have increased significantly from $15.50 per ounce in December 2018, with recent trading exceeding $80 per ounce in late 2025/early 2026, representing gains of over 400%.
• Recent drilling confirmed significant gallium deposits (53.2 g/t average), positioning CDPR to supply a critical mineral where China controls 98% of global production.
• Tailings reprocessing eliminates 40% of typical mining costs, with extraction expenses between $1-$2 per tonne versus $2-$200 for conventional mining.
• The company secured a historic land easement and has strengthened its social license through formal agreements with the Quiulacocha community.
• Quiulacocha tailings contain an estimated 423 million ounces of silver equivalent already extracted material requiring no traditional mining operations.
  
  

As silver prices breach multi-decade highs and geopolitical tensions amplify demand for safe-haven assets, Cerro de Pasco Resources Inc. (TSXV: CDPR) presents investors with leveraged exposure to both precious metals momentum and critical mineral supply chains. The Vancouver-based company controls what it describes as the world's largest above-ground metal resource: the Quiulacocha Tailings Storage Facility in Peru's historic Pasco mining region. As Guy Goulet, CEO of Cerro de Pasco stated,

“We own the mineral rights on what we expect to be the largest above ground mineral resource on the planet.” 

The investment case transcends typical exploration risk. Unlike junior miners dependent on speculative discoveries, CDPR's flagship asset comprises 75 million tonnes of previously extracted material containing silver, zinc, copper, gold, and lead. Recent drilling revealed significant concentrations of gallium and indium, two strategic metals critical to defense applications, semiconductors, and renewable energy technologies.

The macroeconomic backdrop reinforces the opportunity. Silver markets recorded supply deficits for four consecutive years (2021-2024), with 2024's shortfall reaching 149 million ounces driven by record industrial consumption of 680.5 million ounces, according to the Silver Institute's World Silver Survey 2025. The institute projects 2025 to mark the fifth consecutive year of deficit at 117.6 million ounces. Photovoltaic demand alone reached 197.6 million ounces in 2024, having more than tripled since 2015.

Company Overview: Legacy Infrastructure, Modern Opportunity

Cerro de Pasco Resources operates from a foundation of historic mining infrastructure in Peru's Pasco region, approximately 175 kilometers northeast of Lima. The company holds 100% interest in the El Metalurgista mining concession covering 95.74 hectares, including mineral rights to 57 hectares of the Quiulacocha Tailings Storage Facility. This deposit accumulated material from 1906 through 1992, representing decades of production from what was once Peru's most significant silver producer.

“Believe it or not, that mine has never stopped its operation since [1906]. Cerro de Pasco became the largest gold, copper, silver mine in the world.”

The Cerro de Pasco Corporation, founded in 1902 with backing from J.P. Morgan, became Peru's largest private employer by 1955, developing extensive hydroelectric infrastructure, railway networks, and processing facilities. This legacy infrastructure, including roads, power grid access, abundant water, and proximity to operational processing facilities, significantly de-risks CDPR's reprocessing plans.

CDPR's management team brings complementary expertise across mining operations, finance, and Latin American business development. The board includes John Carr, co-founder of New Century Resources, who led the restart of Australia's Century Zinc Mine into one of the world's top 15 zinc producers. Notable investor Eric Sprott holds a 14.5% basic position (19.6% fully diluted), providing both capital credibility and strategic validation.

“The main shareholder owns close to 20% of the shares, Eric Sprott. We’ve got right now $16 million at the bank.”

Key Development: From Historic Estimate to Modern Validation

The Quiulacocha tailings facility’s resource estimate is based on historic metallurgical balances rather than modern NI 43-101 standards. The deposit contains two distinct material types: copper-era tailings (1906-1965) estimated at 16.4 million tonnes averaging 1.6% copper and 80 grams per tonne silver, and polymetallic-era tailings (1952-1992) totaling 58.3 million tonnes with 1.3% lead, 2.2% zinc, and 39 grams per tonne silver.

“If you put the copper, the lead, the zinc, and the gold into silver equivalent, you end up at 423 million ounce of silver equivalent. It’s $14 billion worth of metal above ground.”

Recent drilling results provide modern validation and additional upside. The company completed 40 drill holes with assays confirming average grades of 1.66 ounces per tonne silver, 1.47% zinc, 0.89% lead, and 0.09% copper.

“So far we have performed 40 holes. We’re exactly where we expect to be except we’re a little bit low on copper. By the way, it’s 4.3 ounce per ton of silver equivalent.”

More significantly, the drilling revealed substantial gallium concentrations averaging 53.2 grams per tonne and indium at 19.9 grams per tonne. These strategic metals add approximately $28 per tonne in potential value at current pricing.

“Suddenly we just realized we’ve got 53 g per ton of gallium and we got 20 gram per ton of indium from nowhere unexpected. If we can recover all the gallium, we can support the planet by ourself for four years.”

The May 2024 land easement from Peru’s government marked a critical de-risking milestone. This Supreme Resolution grants CDPR access to the El Metalurgista Concession for exploration and remediation activities. Alfonso Palacio Castilla, MIMMM Chartered Engineer and the company’s Senior Project Manager, serves as Qualified Person for NI 43-101 compliance.

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Strategic Significance: Critical Minerals & Market Timing

CDPR's gallium discovery carries strategic weight beyond financial metrics. The U.S. Department of Defense assessment explicitly identifies tailings reprocessing as the optimal pathway to reduce import dependence. The US Department of Defense’s assessment on securing gallium supply:

"Recovery of gallium from existing waste streams is the fastest way to make the material more available, including efforts that reprocess mine tailings."

Gallium underpins military radar systems, satellite communications, 5G infrastructure, and advanced semiconductors. With China controlling 98% of global supply and leveraging export controls as geopolitical tools, Western governments are prioritizing domestic supply chain development. The strategic imperative extends beyond market pricing to national security considerations, potentially creating premium offtake opportunities.

The silver market dynamics create additional strategic value. Industrial applications now represent the dominant demand driver, with photovoltaic solar panel production consuming 197.6 million ounces in 2024, according to the Silver Institute. The Silver Institute projects 2025 will see a continued deficit of 117.6 million ounces as above-ground inventories decline and primary mine production faces permitting delays and grade deterioration.

Zinc and lead, comprising 30% and 12% respectively of CDPR's estimated value, also benefit from favorable fundamentals. Global zinc supply faces constraints from mine closures while lead demand for battery storage provides upside exposure to energy transition themes.

Current Activities: Advancing Toward Feasibility

The company’s 2026 catalyst timeline focuses on four key objectives: delivering metallurgical recovery results, advancing feasibility studies, executing Phase 2 drilling across copper-silver-gold tailings, and formalizing claims on surrounding government-owned tailings. The metallurgical work will be particularly significant, as recovery rates directly impact project economics.

“It will Q2 or Q3 2026 when we’ll be able to put the number. When we finish that feasibility study, you end up with an NPV. This is where the market will pay.”

CDPR’s internal economic projections model two scenarios. The base case assumes 40% average metal recovery and 10,000 tonnes per day processing capacity, generating $49 per tonne net smelter returns against $10 operating costs. This yields $39 per tonne profit margins, translating to $140 million annual profit over a 20-year mine life totaling $2.9 billion.

“On 75 million tons, it’s $2.9 billion US profit on life of mine. At 10,000 ton per day it’s $140 million US per year profit.”

The upside case models 70% recovery and 20,000 tonnes per day throughput, producing $85 per tonne margins and $610 million annual profit totaling $6.3 billion over the project life.

“It’s $6.3 billion US profit life of mine. At 20,000 ton per day it’s $610 million US profit per year. We’re trading at 150 million Canadian market cap.” 

These projections incorporate conservative metal prices of $30 per ounce silver, $3,000 per tonne zinc, $2,000 per tonne lead, $9,000 per tonne copper, $2,500 per ounce gold, $550 per kilogram gallium, and $350 per kilogram indium.

The operational plan utilizes submersible pumps on floating barges to extract wet tailings, eliminating trucking, dust generation, and explosives use. Third-party processing facilities with 20,000 tonnes per day combined capacity provide near-term production optionality without major capital investment.

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Comparative Advantages: Why Tailings Reprocessing Makes Economic Sense

The economic advantages of tailings extraction over conventional mining operations warrant detailed examination. Traditional open-pit mining requires drilling, blasting, hauling, and waste-management infrastructure, with costs ranging from $2 to $15 per tonne. Underground operations face costs of $30 to $200 per tonne due to shaft development, ventilation systems, and dewatering requirements. Grade dilution in conventional mining typically ranges from 10% to 50%.

“To produce base metal and precious metal, 40% of the cost is mining. There’s no mining here. This is why this is the richest tailings on the planet.”

Tailings extraction eliminates most of these cost centers. The material is already fragmented, so no drilling or blasting is required. Wet tailings can be pumped directly to processing facilities. Grade dilution factors range from 0% to 5%, preserving the inherent metal content. This cost structure creates significant operating leverage to commodity prices.

Conventional mining projects typically require 5 to 10 years from discovery to production. Tailings reprocessing leverages existing disturbed areas, shortening environmental review processes. The remediation component can actually expedite approvals by addressing legacy environmental liabilities.

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Environmental & Social Dimensions

Tailings reprocessing offers environmental remediation alongside resource extraction. The Quiulacocha facility currently generates acid mine drainage that impacts local water quality. Removing and processing the material eliminates this ongoing contamination source while recovering valuable metals. This circular economy approach aligns with Peru’s sustainable development objectives.

“The community want this project to move forward. We’re going to create the wealth back in Cerro de Pasco. We’re going to assume the cost of treating the acid water. In 20 years there will be no more acid water since these tailings and these stockpile will have been all reprocessed.”

The social license component carries material risk mitigation value. CDPR’s formal agreement with the Quiulacocha community, combined with the project’s remediation benefits and job creation potential, differentiates its risk profile. Cerro de Pasco’s established mining workforce provides ready access to skilled labor without the training requirements typical of greenfield projects.

The 20-year project life at planned processing rates provides sustained economic activity, supporting long-term community relationships and reducing the risk of social opposition that has derailed numerous mining projects across Latin America.

Investor Takeaway: Valuation & Risk Considerations

At a $300 million market capitalization against base-case profit potential of $2.9 billion over mine life, CDPR trades at approximately 10% of projected total returns. This valuation assumes successful permitting, financing, and operational execution. However, the gap between current enterprise value and potential cash flows suggests meaningful upside for investors with appropriate risk tolerance.

The company benefits from multiple re-rating catalysts over the next 12 to 24 months. Positive metallurgical results demonstrating recovery rates above 40% would support upside case economics. A preliminary economic assessment, or pre-feasibility study, provides third-party validation and typically attracts institutional investor interest. Strategic partnerships for gallium offtake could de-risk revenue streams and provide development capital.

Risks include commodity price volatility, regulatory delays in Peru, financing requirements, and execution risk in achieving projected recovery rates and operating costs. The historic nature of the resource estimate creates uncertainty around actual contained metals. Investors should monitor progress toward NI 43-101 resource classification, metallurgical testing results, and environmental permit advancement.

The Investment Thesis for Critical Metals Tailings Reprocessing

• Diversify into tailings reprocessors if silver maintains above $30/oz and gallium supply concerns intensify
• Allocate to junior producers with existing infrastructure and near-term production pathways versus pure exploration plays
• Consider CDPR exposure as a strategic metals hedge if China export restrictions on critical minerals expand
• Monitor metallurgical results for recovery rate validation before significant position sizing
• Evaluate CDPR as a silver proxy with embedded gallium optionality and lower capital intensity than conventional mines
• Track feasibility study progression as the key catalyst for institutional investor participation and valuation re-rating

Cerro de Pasco Resources represents an asymmetric opportunity at the intersection of precious metals momentum, critical mineral supply security, and innovative extraction economics. The company's control over estimated 423 million ounces of silver equivalent in already-extracted material eliminates traditional mining risks while maintaining leveraged exposure to silver's structural deficit and gallium's strategic value.

The investment requires tolerance for junior mining execution risk, regulatory uncertainty in Peru, and dependence on commodity price assumptions. However, the combination of historic infrastructure, modern metallurgical validation, strategic metal diversification, and experienced management provides risk mitigation relative to typical exploration-stage opportunities. The current valuation appears to embed significant project risk while offering substantial upside if execution proceeds as planned and commodity prices remain supportive.

TL;DR

Cerro de Pasco Resources controls an estimated 423 million ounces of silver equivalent in Peruvian tailings, offering leveraged exposure to silver's price appreciation amid structural market deficits. The Silver Institute reports four consecutive years of deficits (2021-2024) totaling 148.9 million ounces in 2024 alone, driven by record industrial demand of 680.5 million ounces. Recent drilling confirmed high-grade material averaging 5.5 oz/t silver equivalent including significant gallium concentrations. Tailings extraction eliminates 40% of conventional mining costs with $1-$2/tonne processing versus $2-$200 for traditional operations. The company's base case projects $2.9 billion profit over 20 years. Key 2026 catalysts include metallurgical results, Phase 2 drilling, and feasibility advancement.

FAQs (AI-Generated)

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