In a March 6 research note, Macquarie analyst Michael Gray reported the key points from MAG Silver Corp.'s (MAG:TSX; MAG:NYSE.MKT) technical luncheon at the PDAC Conference.
MAG President and CEO George Paspalas and Chief Exploration Officer Peter Megaw made the presentation, which took place "only days after Fresnillo's strong signaling of an imminent positive Fresnillo board approval for Juanicipio," Gray pointed out.
A primary message at the luncheon was that the Juanicipio operation could start sooner and last longer, Gray noted. The infrastructure being built there is for a mine life that well exceeds the scenario outlined in the preliminary economic assessment and for a 4,000-tonne-per-day (4 Ktpd) operation. Whereas Macquarie modeled first production for Q1/21, MAG noted that it could happen even before H2/20.
A second significant point is the Upper Mine design would potentially allow for 5,000 tpd of production from the Bonanza zone, which Macquarie considers likely achievable, indicated Gray. Such a scenario needs to be assessed for potential upside risk and added costs.
Third, recent infill and expansion drilling at Juanicipio yielded "solid results," Gray wrote, and "a new Pre-Anticipada hanging wall vein—this is a bonus." Pre-Anticipada, which ranges from 0.6–3.2 meters in thickness and has "very good silver grades," is interpreted to be a "second, deeper, "silver-rich vein outboard of Valdecanas." Anticipada returned 3.8 meters at 227 grams per ton gold and 2.1 grams per ton gold, for instance.
The fourth highlight was the discovery of yet another vein, Venadas, this one with a north-northeast direction, and thus representing the first of its kind in the Fresnillo district to be recorded. The vein "generally has high silver and gold over true thicknesses of about 40 centimeters to about 2 meters," Gray described. "It is still early, but we think Venadas has the chance to develop into incremental resources that could be free upside."
Finally, additional prospectivity and, thereby, value is suggested by Fresnillo's success in exploring to the east of the Juanicipio joint venture acreage along with, perhaps, the new geologic structural interpretation. Gray commented, "The new Huizache mine trend (now in production) and other vein target trends have high potential to strike onto the joint venture lands."
Macquarie has an Outperform recommendation and a CA$22 per share price target on MAG, whose stock is currently trading at around CA$14.40 per share.
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Disclosures from Macquarie, MAG Silver Corp., March 6, 2019
Analyst Certification: The views expressed in this research accurately reflect the personal views of the analyst(s) about the subject securities or issuers and no part of the compensation of the analyst(s) was, is, or will be directly or indirectly related to the inclusion of specific recommendations or views in this research. The analyst principally responsible for the preparation of this research receives compensation based on overall revenues of Macquarie Group Ltd ABN 94 122 169 279 (AFSL No. 318062) (MGL) and its related entities (the Macquarie Group) and has taken reasonable care to achieve and maintain independence and objectivity in making any recommendations.
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