Original-Research: Eloro Resources Ltd. (von Sphene Capital GmbH): Buy

Classification of Sphene Capital GmbH to Eloro Resources Ltd.

40,000 m drill program launched, financing secured

With two differentiated deposit styles juxtaposed against one another-a large, silver-zinc-lead-dominant system adjacent to a high-grade tin system-and several identifiable near-term catalysts, we believe Eloro offers an attractive risk-reward profile for investors seeking early exposure ahead of the forthcoming drilling campaign. The advancement of a previously underexplored property into a potentially open-pittable porphyry-epithermal silver-tin polymetallic system underpins significant upside potential, while downside risk appears comparatively limited at current valuation levels, in our view. Reflecting materially higher commodity prices, particularly for silver and zinc, we increase our price target to CAD 21.80 from CAD 14.10. This valuation is based exclusively on an in-situ assessment of the higher-grade portion of the Santa Barbara Breccia Pipe at the Iska Iska project in Bolivia, excluding all other assets. Based on the current share price of CAD 2.60, our revised target implies an upside potential of 838.5%. Accordingly, we reiterate our Buy recommendation on Eloro Resources.

We met Eloro Resources' management during a Munich roadshow, where the Company provided further details on its recently announced 40,000 m drill program. The contract was signed with Major Drilling Group International, the world's leading provider of specialized drilling services for the metals and mining industry. Following the recent change of government in Bolivia, Major Drilling Group has resumed operations in the country, and the 40,000-meter drill program with Eloro represents its first contract in Bolivia since the transition. The 9 months program is designed to complete 50 m and 25 m infill drilling within the Santa Barbara corridor and to advance drilling across the remaining five mineralized zones at the Iska Iska silver-tin polymetallic project. The objective is to expand the resource footprint to support future economic studies while also testing additional prospective targets within the Iska Iska Caldera.

The main portion of the drill program will be financed through a bought-deal private placement of 3,846,200 shares at CAD 2.60 per share, generating gross proceeds of CAD 10 mn. During the roadshow it was mentioned that due to excess demand the financing was increased to CAD 15 mn with an added CAD 2 mn broker over allotment provision exercised. While dilution remains moderate, we believe the proceeds will be sufficient to reach the next key milestone, namely an updated Mineral Resource Estimate (MRE) incorporating new definition-drilling data, which management expects in the coming months, followed by a Preliminary Economic Assessment (PEA).