Let's Resolve This with a Good Ol' Bullfight

ERIC ZAUNSCHERB, Canaccord Genuity (02/10/2009)
Mexico's Fresnillo said its Fresbal unit has asked the Ontario Securities Commission to review the decision by MAG's independent committee's decision to suspend work on the valuation, which it alleged on Friday was a delaying tactic.

With shares of MAG trading above the bid, ever since it was announced, the market is also expecting bigger things to happen. At the start of this month, MAG said its valuation was halted because Fresnillo had failed to provide key information, a charge Fresnillo denied. MAG, whose main asset is a 44% stake in the Juanicipio property, a joint venture with Fresnillo, is now ramping up exploration at its other assets to try to generate as much good news as possible.

Canaccord Adams Senior Mining Analyst Eric Zaunscherb has highlighted a number of important catalysts for MAG's market price near-term:

  1. Results from a metallurgical study are expected imminently. Our modeling employs recovery rates encountered in the Fresnillo operation, but we understand that studies have been ongoing to improve gold recoveries given superior gold grades at ValdecaƱas

  2. The ValdecaƱas vein on the Juanicipio joint venture currently hosts a global resource of 238 million ounces of silver, plus significant quantities of gold, lead and zinc. By the end of February we expect a resource update for ValdecaƱas, which will likely take the global resource to close to 300 million ounces silver

  3. The joint venture is conducting a "pre-scoping" study, results of which are expected by the end of February after incorporating the updated resource. Our model follows the latest guidance on development at Juanicipio, whereby Juanicipio would be developed at the tail end of the Fresnillo II plan for 2015-2016. This pre-scoping study, however, may conclude that Juanicipio, with its superior grades, could be developed on a faster timeline with inherently higher value

  4. Watch for ongoing drill results from exploration of the Encino and Juanicipio veins on the Juanicipio joint venture with important implications for valuation. Results from the wholly-owned Cinco de Mayo project may also add incrementally to the company's valuation.

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