Progress and steady results has been the mantra for MAG Silver Corp.'s (MAG:TSX; MAG:NYSE.MKT) "world class silver-gold-lead-zinc" JV Juanicipio project (56% owned by Fresnillo Plc) in Mexico, according to Canaccord Genuity analyst Kevin MacKenzie. In a recent report, Mackenzie looked back at the history of the Juanicipio project, explaining that over the last two to three years the underground exploration has made steady advances leading to the discovery of the high-grade Dilatant Zone. Due to this discovery, "the joint venture is now contemplating expanding the project's designed throughput to 4,000tpd (previously 2,650tpd), as well as sinking an internal shaft to allow for earlier access to wider zones of mineralization at depth," MacKenzie wrote.
Mackenzie pointed out that the updated technical PEA will most likely "capture the impact of the materially larger resource base" and include costing similar to the Saucito Mine owned by Fresnillo Plc (FRES:LSE). Viewing MAG Silver "to be one of the premier investments within the silver developer space," MacKenzie noted that another near-term rerating may be necessary due to "the potential discovery of another high-grade vein." Currently MacKenzie rates MAG Silver as a speculative Buy with a target price of $24 per share. MAG shares are currently trading at around $16.
Rodman & Renshaw analyst Heiko Ihle also has a positive outlook on the Juanicipo project, rating MAG Silver as a Buy and highlighting the "continued exploration success at the project, along with further advancement toward production." In a July 10 research report, Ihle focused on the success the company has had at its Deep Zones "which contained 333 g/t silver, 16.87g/t gold, 4.47% lead, 3.77% zinc and 1.04% copper over 5.2 meters." The results will most likely lead the joint venture partners to "consider sinking an internal shaft to access deeper zones. . .where strong gold grades have also been discovered." Although the cost could mean a 30% increase in capital, Ihle believes the expansion would add value to the project.
Ihle also points out that "underground development activities have recently accelerated, primarily in order to allow for the expected increase in processing capacity at the project. To date, ramp development at the project has exceeded 3,500 meters, and construction of additional ventilation raises continues to progress." The target price of $20.50 "is a reflection of the larger 4,000 tpd scenario in our model, slightly offset by our expectation of increased capital required to build out the facility," concluded Ihle.
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