The silver bet: Why Fresnillo is investing in Silver Viper – Hecla Mining already expensive

Hecla Mining: The American rock in the storm

For conservative investors, Hecla Mining remains the first port of call in the silver sector. As the largest silver producer in the US, the Company is benefiting massively from the "onshoring" trend. With its flagship mines, Greens Creek in Alaska and Lucky Friday in Idaho, Hecla delivers exactly what Western investors are looking for: security of supply in a politically stable jurisdiction. The Company has proven in recent quarters that it can grow profitably even in an inflationary environment. However, the market is already paying a significant premium for this security. Hecla is fundamentally strong, but due to its already high valuation, it offers little potential for the high short-term returns that speculative investors are looking for in the current cycle.

Fresnillo: The giant seeks new paths

The situation is different for Mexican giant Fresnillo. The heavyweight, listed on the London Stock Exchange, remains the world's largest primary silver producer, but is struggling with the geological reality of its aging mines. To maintain production levels, Fresnillo must develop new deposits. But instead of sending its own expensive exploration teams into new areas, management now appears to be pursuing a more capital-efficient strategy: outsourcing the risk and instead investing in promising explorers. This tactic allows the group to secure access to enormous resources without having to bear the operational burdens of the early development phase. This is precisely where Silver Viper Minerals comes into play.

Silver Viper: The incubator model in the Coneto district

Silver Viper Minerals was long a classic explorer focused on the La Virginia project in Sonora, Mexico. However, a recently announced transaction has fundamentally shifted the landscape. By acquiring the Coneto project in the heart of Mexico's silver belt, Silver Viper has not only secured an asset with historically proven reserves, but also brought Fresnillo on board as a major shareholder. As part of a pure share swap worth around USD 15 million, the shares in the project were transferred to Silver Viper. In return, Fresnillo now holds around 17% of the explorer's shares, making it the dominant anchor shareholder.

Market observers view this deal as much more than a mere portfolio adjustment on Fresnillo's part. The structure of the transaction suggests that Fresnillo is using Silver Viper as a vehicle to develop the Coneto project more quickly and agilely than would be possible within its own corporate structure. It is possible that Silver Viper will expand the resources through comprehensive drilling programs and take the project to a new stage. If this is achieved quickly, Silver Viper and Fresnillo would benefit twice over, given the current silver hype.

Is there already an exit plan?

For investors, this constellation gives rise to a clear fantasy. If Silver Viper expands its resources under the leadership of its management, Fresnillo could take advantage of its favorable position and buy back the project or even the entire company. Silver Viper's current market value of around CAD 120 million hardly reflects this scenario. While Hecla and Fresnillo correlate with the price of silver as producers, Silver Viper offers direct leverage on exploration success and the likelihood of a takeover. Fresnillo's presence as a shareholder in Silver Viper acts as a kind of insurance: the global market leader would hardly invest its promising property and thus its own capital in a company whose technical competence it is not convinced of. In a market where good silver projects are scarce, Silver Viper is positioning itself as the logical takeover candidate for the next wave of consolidation in the sector. The exploration successes at La Virginia to date also show that the entire company could ultimately disappear from the market.

Silver Viper shares are attractive

Silver Viper's share price has risen in recent weeks and is already sparking imagination. If good drill results make later production increasingly likely, the share price could rise further. Silver Viper is a speculative option for investors who want to profit from the current silver boom and appreciate the constellation with Fresnillo.