I posted the following on Coach's Corner yesterday, immediately after meeting with some of the management from MAG Silver at a reception they were hosting at the Round Up. I know MAG had another huge day today, but I still think the upside is at least another double from the current price range. My personal investment style makes me very gunshy to add to a position after it has already made several hundred percent returns, but I am seriously considering doing so, and will definately be a buyer if we get a pullback...
Here are my comments:
I just finished wining and schmoozing with a some of the senior management team for MAG, and a handfull of other companies, at the Round Up in Vancouver. I am going to post this on our forum only for today, and then maybe on SH and Silicon Investor, because I feel this latest info is important enough and I want our members to have the chance to act first.
First, I will get the personal disclosure out of the way. I do not have any paid relationship whatsoever with MAG, and have not participated in their PPs. I have written an article on the company for Smartinvestment.ca in the past, and recently wrote an article that was published in Resource World, that paid me as a free lance writer. I also own stock in the company, and have been a shareholder as far back as 2003. I recently made a big mistake and took some profits at $1.60, and I wish I had seen the latest info before I made that decision. So I do consider myself unbiased. I have a tremendous amount of respect for Peter Megaw, the geologist behind most of the property holdings for MAG.
Having said all of the above, I am extremely bullish about the future for this company. I do not, and will not, issue a recommendation to buy, but my personal opinion is that MAG has room for significant appreciation in the share price.
The company recently released excellent results for drilling at their wholly owned Batopilas Project, and for their JV deal with Penoles at their Juanicipio Project. Both projects have ongoing work underway and additional assays pending. Penoles operates the biggest producing silver mine in the world less than a kilometer away from the latest discovery. Peter believes that the intercept that was reported is actually the lower extremity of the vein system and that higher grade results over a wider interval will be encountered with the next drilling program. This would project to one of the richest discoveries in the entire history of the district. Even though Penoles has already identified over 15 years of production ore, he feels that it will become a significant enough discovery that a priority will be placed on developing Juanicipio, and they will invest to increase the capacity of their mill to accomodate this.
MAG is currently drilling at Batopilas, and expects they will complete all 10 drill cores as early as March. The targets for that program are all very strong conductive anomalies indicating potential native silver deposits which could run to several thousand ounces per ton (not grams). If they do hit a significant interval of that ore it will immediately vault the company to the forefront of the active explorers in Mexico.
The company is also about to commence another project in the vicinity of the Juanicipio project, at the Lagartos northern claim blocks. This claim is believed to be another extension of the same Fresnilo geology that hosts the Penoles mine adjacent to Juanicipio, and MAG owns 100% of the entire district. If they can duplicate the success at Juanicipio, this will once again represent one of the biggest new discoveries in all of Mexico.
To have so many drill programs underway simultaneously, and ownership of entire districts of favourable geology, is unique for any junior. The company could potentially outline resources in the magnitude of hundreds of millions tons. Most of the large discoveries in Mexico recently have amounted to either low grade bulk tonnage stories, or high grade narrow vein systems. MAG is potentially the next big discovery story and yet they have only about 40 million shares in the market, so there is tremendous upside potential. The company is well financed with over $7 million cash in the treasury, plus additional cash as warrants are exercised. Penoles has also committed to buy more of their shares in the future to inject capital.
I know believe that MAG shares are cheap at $2.70 and my personal instinct is to take money off the table once a stock has tripled in value over a short period of time, but in this case I think there is much higher share prices in the future for this company. Based on the strong silver market, the entrance of new investment capital into the sector, and the frequent news flow that will be generated with the flury of activity the company is engaged in, I think we could see the beginning of another meteoric rise in market cap. PJO, BCM, and SVM are all silver stories that have gone to rapid increases and MAG could easily outstrip the gains of those companies based on the discovery potential of their properties.
This is a company that certainly warrants a very close look. I do not have a crystal ball, and if we get a significant sector-wide correction, I will not be surprised, but if we continue as things are going, I will be very surprised if MAG does not at least double again from the current price range.
cheers!
COACH247 |
