chux03
26th February 2009, 02:00
www.magsilver.com/s/Home.asp
This was from an email "report" I received tonight from Weiss research titled The Golden Phoenix by Sean Brodrick www.moneyandmarkets.com/the-golden-phoenix-29869
Mag Silver is a silver explorer working in Mexico. The company was founded with the express purpose of finding “district-scale” (very big), high-grade deposits that are large and rich enough to make it through multiple market cycles.
Mag Silver is focusing on two resources. First, Mag owns 44% of the Juanicipio Property in Zacatecas State, Mexico. Mexican mega-miner Fresnillo (the world's largest primary silver producer) owns the other 56% of Juanicipio. Second, Mag owns 100% of the Cinco de Mayo Property in north-central Chihuahua State, Mexico. It has a pipeline of 7 other projects.
Fresnillo has launched a low-ball takeover bid for the company. Look at why Mag Silver looks dirt-cheap, and why Fresnillo wants to buy it.
* Pounds in the ground. Mag’s 44% share of Juanicipio gives it an inferred resource of 100 million ounces of silver, 200,000 ounces of gold, and a little less than a half-billion pounds combined of lead and zinc. This is right next to Fresnillo’s property.
* Juanicipio is a high-grade resource. The same goes for Cinco de Mayo. There should be a new resource estimate on Juanicipio coming out soon. Fresnillo is especially interested in the Valdecanas Vein at Juanicipio, which contains an inferred resource of 238 million ounces (Mag’s share of that would be 104.5 million ounces). Valdecanas is just one of three silver rich veins on the joint venture and there is the potential for much more.
You can see these are rich veins, and Mag Silver is drilling like crazy to try and prove up those pounds. The company is also working to delineate the resource at Cinco de Mayo, so it’s not coming out with a resource estimate soon, but it’s had bonanza-grade results. Near the center of the mineralization, the company hit 612 grams per tonne over 3.46 meters.
* Plenty of cash. Most explorers are scraping by, but Mag Silver has $55 million in the bank. It has an aggressive drilling program going on and will spend $17 million this year, but even at that rate, the company has enough cash for three years.
* Great infrastructure. Mag Silver is next door to one of the biggest silver mines in the world. All the infrastructure is there -- power, roads, water, etc.
* Costs should be very low. Cost analysis and other studies aren’t on the table yet. But if Mag can produce ore containing 500 grams per metric tonne -- which seems very possible now -- that’s 16 troy ounces per tonne. Mining costs for a similar Fresnillo mine were figured at $40 a tonne.
Trying to Make Sense of Fresnillo’s Bid So how much is the mine really worth? Valuation is tricky on a project like this. Obviously, a lot more drilling needs to be done, and the surprises in that process can be both good and bad. You might think that Mag Silver would be worth more to Fresnillo because it is right next door. Fresnillo has its reasons for the price it offered. But when it offered U.S.$4.54 a share, the price of silver was just $10. Now, silver is trading over $14. Just on that basis alone, Mag looks a lot more valuable. Dr. Megaw says Fresnillo tried to make a “stink bid” because at the time the markets seemed to be headed lower and Fresnillo probably “felt they could pull it off.”
Fresnillo’s bid initiated a formal valuation (which Fresnillo has to pay for). Fresnillo says it cooperated with the independent valuator, but Mag Silver says it didn’t. Mag says they believe Fresnillo has detailed costs and mine plans that incorporate the Valdecanas Vein into their Fresnillo II development project. In part, this is based on the construction of a shaft and ramp that seems pointed at the Valdecanas Vein.
It’s all going to end up in the lap of the Ontario Securities Commission.
Fresnillo is PROBABLY going to have to at least double its offer for MAG. In fact Mag Silver is an $8 to $10 stock. However, when lawyers are involved, stay away. It seems unlikely, but maybe Fresnillo’s bid will go through. In that case, anybody who buys at today’s prices will look foolish.
But keep an eye on MAG Silver....
This was from an email "report" I received tonight from Weiss research titled The Golden Phoenix by Sean Brodrick www.moneyandmarkets.com/the-golden-phoenix-29869
Mag Silver is a silver explorer working in Mexico. The company was founded with the express purpose of finding “district-scale” (very big), high-grade deposits that are large and rich enough to make it through multiple market cycles.
Mag Silver is focusing on two resources. First, Mag owns 44% of the Juanicipio Property in Zacatecas State, Mexico. Mexican mega-miner Fresnillo (the world's largest primary silver producer) owns the other 56% of Juanicipio. Second, Mag owns 100% of the Cinco de Mayo Property in north-central Chihuahua State, Mexico. It has a pipeline of 7 other projects.
Fresnillo has launched a low-ball takeover bid for the company. Look at why Mag Silver looks dirt-cheap, and why Fresnillo wants to buy it.
* Pounds in the ground. Mag’s 44% share of Juanicipio gives it an inferred resource of 100 million ounces of silver, 200,000 ounces of gold, and a little less than a half-billion pounds combined of lead and zinc. This is right next to Fresnillo’s property.
* Juanicipio is a high-grade resource. The same goes for Cinco de Mayo. There should be a new resource estimate on Juanicipio coming out soon. Fresnillo is especially interested in the Valdecanas Vein at Juanicipio, which contains an inferred resource of 238 million ounces (Mag’s share of that would be 104.5 million ounces). Valdecanas is just one of three silver rich veins on the joint venture and there is the potential for much more.
You can see these are rich veins, and Mag Silver is drilling like crazy to try and prove up those pounds. The company is also working to delineate the resource at Cinco de Mayo, so it’s not coming out with a resource estimate soon, but it’s had bonanza-grade results. Near the center of the mineralization, the company hit 612 grams per tonne over 3.46 meters.
* Plenty of cash. Most explorers are scraping by, but Mag Silver has $55 million in the bank. It has an aggressive drilling program going on and will spend $17 million this year, but even at that rate, the company has enough cash for three years.
* Great infrastructure. Mag Silver is next door to one of the biggest silver mines in the world. All the infrastructure is there -- power, roads, water, etc.
* Costs should be very low. Cost analysis and other studies aren’t on the table yet. But if Mag can produce ore containing 500 grams per metric tonne -- which seems very possible now -- that’s 16 troy ounces per tonne. Mining costs for a similar Fresnillo mine were figured at $40 a tonne.
Trying to Make Sense of Fresnillo’s Bid So how much is the mine really worth? Valuation is tricky on a project like this. Obviously, a lot more drilling needs to be done, and the surprises in that process can be both good and bad. You might think that Mag Silver would be worth more to Fresnillo because it is right next door. Fresnillo has its reasons for the price it offered. But when it offered U.S.$4.54 a share, the price of silver was just $10. Now, silver is trading over $14. Just on that basis alone, Mag looks a lot more valuable. Dr. Megaw says Fresnillo tried to make a “stink bid” because at the time the markets seemed to be headed lower and Fresnillo probably “felt they could pull it off.”
Fresnillo’s bid initiated a formal valuation (which Fresnillo has to pay for). Fresnillo says it cooperated with the independent valuator, but Mag Silver says it didn’t. Mag says they believe Fresnillo has detailed costs and mine plans that incorporate the Valdecanas Vein into their Fresnillo II development project. In part, this is based on the construction of a shaft and ramp that seems pointed at the Valdecanas Vein.
It’s all going to end up in the lap of the Ontario Securities Commission.
Fresnillo is PROBABLY going to have to at least double its offer for MAG. In fact Mag Silver is an $8 to $10 stock. However, when lawyers are involved, stay away. It seems unlikely, but maybe Fresnillo’s bid will go through. In that case, anybody who buys at today’s prices will look foolish.
But keep an eye on MAG Silver....