Source: Streetwise Reports 11/14/2017
Five analysts explain why “several significant improvements” led to their Buy recommendations and highlight what investors need to know.
In a Nov. 7 announcement, MAG Silver Corp. (MAG:TSX; MAG:NYSE.MKT) released the results of its 44%-owned Juanicipio project preliminary economic assessment (PEA). “We are very pleased to see the strong positive impact of the enhanced project scope on the already remarkable economics of the Bonanza Zone,” said George Paspalas, MAG Silver’s president and CEO. “The upside to higher metal prices is obvious, but equally important, the project even shines brightly at significantly lower metal prices: At $8/oz silver and $0.75/lb zinc, the project still delivers an after-tax IRR of 15%,” Paspalas stated.
Bhakti Pavani, an analyst with Euro Pacific Capital, pointed out in a Nov. 9 report that “the new PEA on the Juanicipio project is robust with a significant increase in the mineral resource estimate, in our opinion.” She highlighted that “while the mineral resource estimate has increased 64% from its previous resource of 15.2MM, the majority of the increase is in the Deep Zone, where the Company has been actively drilling since 2015. We believe the new PEA economics are robust and have increased significantly despite the lower metal prices.”
Pavani also noted that “despite the increase in the throughput (from 2,650 tpd to 4,000 tpd), the mine life of the project has increased from over 15 years to over 19 years following an increase in the mineral resource estimate. Also, the key to note is the improvement in metal recoveries. For instance, the recovery of silver, gold, and zinc has improved from our estimate of 90% Ag, 69% Au and 87% Zn to 95% Ag, 82% Au, 90% Zn, respectively. The improvement in recoveries should significantly increase in the Net Asset Value of the project, in our opinion.”
She noted that Euro Pacific has updated its “financial model for the new resource estimate, mine life, recoveries and operating cost estimate following which the NAV of the project has increased from $1.2 billion to $1.3 billion. Accordingly, we reiterate the ‘BUY’ rating on the stock but are increasing the PT from US$15.70 to US$17.50.”
Another Nov. 9 report, released by PI Financial analyst Philip Ker, stated that “with Juanicipio now set to turn into a more aggressive story, we continue to believe Juanicipio is one of the leading development projects on the planet.” He highlighted that “the economic study integrated an updated resource which included the discovery and expansion of the Deep Zone which contains a more base metal rich component of the high grade epithermal system. The PEA is quite conservative whereby only 17Mt of the 24.5Mt resource was used along with below average payable rates, higher than market TC/RC charges and operating costs well above what is being realized at the Saucito operation. Despite the conservative efforts MAG still reports a robust after-tax IRR of 44.5%.”
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Source:: The Gold Report