In an Aug. 5 research note, National Bank of Canada analyst Don DeMarco discussed the results of MAG Silver Corp.'s (MAG:TSX; MAG:NYSE American) 2020 drill program at its Juanicipio joint venture property.
DeMarco reiterated that the campaign encompassed 110 holes, 33 surface and 77 underground, in two primary locations plus in some additional zones. Definition drilling was done in the Valdecañas Bonanza zone, and infill and expansion drilling was conducted in the Valdecañas Deep zone.
"Overall, we ascribe a neutral bias, noting potential for resource expansion is tangible," DeMarco wrote.
As for the Bonanza zone, from which ore is planned to be mined initially at Juanicipio, 55 holes were drilled there. Intercept grades were high, 655 grams per ton silver equivalent (655 g/t Ag eq) on average, and generally consistent with the resource grade of 789 g/t Ag eq. Highlight hole MIC-6 showed 3.3 g/t gold and 1,356 g/t silver, or 1,599 Ag eq, over 5.2 meters (5.2m).
"Results confirm and add confidence in the high-grade silver resource within the upper parts of the Valdecañas Bonanza zone," DeMarco wrote.
In the Valdecañas Deep zone, 21 holes were drilled, seven of them from surface. Average grade shown in the intercepts was 565 Ag eq, and it, too, was mostly in line with the zone's resource grade of 601 Ag eq. Highlight hole-D1-6-1 returned 1,046 g/t Ag eq over 18.1m.
"Results confirm, expand, and allow improved modeling of the continuous wide mineralization of the Valdecañas Deep zone," wrote DeMarco.
Regarding the additional zones drilled, results indicate they "bode well for mining flexibility in later years of the mine life, including expansion and improved modeling of the Anticipada vein," DeMarco noted. For instance, the hanging wall veins returned an average grade of 489.3 g/t Ag eq over 3.1m; the Venadas family veins, 472.4 g/t Ag eq over 0.8m; and the footwall veins, 306.2 g/t Ag eq over 1.6m.
The National Bank of Canada has an Outperform rating and a CA$31 per share target price on MAG Silver, the stock of which is currently trading at about CA$24.47 per share.
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Disclosures from NBF, MAG Silver, August 5, 2021
The Research Analyst(s) who prepared these reports certify that their respective report accurately reflects his or her personal opinion and that no part of his/her compensation
was, is, or will be directly or indirectly related to the specific recommendations or views as to the securities or companies.
NBF compensates its Research Analysts from a variety of sources. The Research Department is a cost center and is funded by the business activities of NBF including Institutional Equity Sales and Trading, Retail Sales, the correspondent clearing business, and Corporate and Investment Banking. Since the revenues from these businesses vary, the funds for research compensation vary. No one business line has a greater influence than any other for Research Analyst compensation.
Non-Operator: MAG’s primary asset is the Juanicipio property (44%) being developed in partnership with Fresnillo Plc (56%). As a non-operator, MAG does not directly control the future production or development of the asset and any delays in the forecasted production schedule could negatively impact revenue and indirectly impact the valuation of the company.
Financing & Liquidity Risk: MAG is responsible for its share of development capex for Juanicipio. Post-development of the Juanicipio property, MAG will be exposed to risks related to fluctuating silver, gold, zinc, lead and fuel/power prices.
National Bank Financial Inc. has acted as an underwriter with respect to this issuer within the past 12 months.
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