Classification of Sphene Capital GmbH to Eloro Resources Ltd.

Optimising future mine plan rather than increasing tonnage

The current drilling campaign is explicitly positioned as part of the PEA process rather than as stand-alone exploration. This distinction is important, in our view, since every successful drill hole now has the potential to influence pit optimisation, mine scheduling, production profile, cut-off grade, and project NPV. We maintain our Buy rating but reduce our price target to CAD 18.00 from CAD 20.80 per share, reflecting the recent decline in silver prices. Our price target is based on the in-situ valuation of the Santa Barbara Breccia Pipe within the Iska Iska property in Bolivia, while excluding all other assets.

Eloro has commenced a 40,000-metre diamond drilling campaign consisting of approximately 75 drill holes. According to the company, drilling will concentrate on 50-metre spacing within the higher-grade core area. Completion is planned for the first quarter of 2027e. The drilling program has three primary objectives: (1) expand the overall mineral resource, (2) convert Inferred Resources into the higher-confidence Indicated category, and (3) enlarge the higher-grade starter pit area.

Among them, in our view, the continued emphasis on the higher-grade starter pit is the most important aspect, as higher-grade starter pits typically combine lower initial strip ratios with stronger early cash flows, accelerating capital payback, enhancing project IRRs, reducing financing risk, and increasing overall project robustness.

Eloro confirmed that the known high-grade silver-tin polymetallic shoots remain open both along strike and at depth. Eloro intends to test these extensions during the current campaign, which means that rather than drilling speculative exploration targets, Eloro is extending mineralisation that has already been demonstrated through previous drilling. Consequently, the probability of further positive drill intersections appears materially higher than during earlier exploration phases, in our view.

The updated MRE currently contains 85.17 Mt Indicated and 945.43 Mt Inferred Resources. Although the overall resource is exceptionally large, the vast majority still resides in the Inferred category. Inferred Resources receive substantially lower weighting in DCF models, PEA mine plans or M&A valuations. A conversion into the Indicated category substantially reduces geological uncertainty and increases the economic credibility of the whole project.