MAG Silver Corp.'s (MAG:TSX; MAG:NYSE American) Deer Trail project in Utah showed instances of extensive, high-grade, polymetallic mineralization at depth, on drilling, reported Stephen Soock, Stifel vice president and analyst, in an Aug. 3 research note.
Each of the three reported holes, all drilled within 1 kilometer of the Carissa zone, intersected a different mineralization style: high grade gold, copper-gold and silver-lead-zinc.
"The different mineralization style validates the carbonate replacement deposit (CRD) characteristics and 'hub and spoke' geologic thesis, indicating a long-lived system from a source copper-moly porphyry intrusive center," Soock wrote.
Buy rated, 56% return
Stifel values the exploration potential at Deer Trail at US$25 million and has a target price on MAG of CA$23 per share target, noted Soock. Currently, the Canadian miner is trading at about CA$14.70 per share. The gap between these prices implies a 56% return for investors.
MAG remains a Buy.
High grades encountered
Soock presented the highlights of the new findings. In one hole, MAG encountered one of the thickest instances of manto-style mineralization (silver-lead-zine) to date at Deer Trail. It was shown to host semi-massive sulphides at 525 meters (525m) downhole.
Deeper in the hole, MAG hit 3m of 156 grams per ton (156 g/t) silver skarn "near the contact of the felsic intrusive found at depth," noted Thompson.
Other standout intercepts included:
- 150 g/t silver, 0.7 g/t gold and 8.9% lead/zinc over 5m
- 7.5 g/t gold over 0.65m
- 2.2 g/t gold and 2.1% copper over 4.2m
Next for project
To follow up on these and other recent drill results, MAG plans to carry out a third phase of drilling and exploration work at Deer Trail, targeting the source of the manto, skarn and epithermal mineralization.
"We remain optimistic about the prospects of MAG defining multiple high-grade CRD deposits on the property through their science-based approach to exploration," wrote Soock.
Going forward, exploration and drilling will be a key growth driver for MAG, given that its joint venture mining project in Mexico, Juanicipio, is ramping up toward nameplate capacity.
Possible dividend to come
Stifel expects future cash flow from Juanicipio to support "a notable dividend, likely commencing in 2024," Soock noted.
This is based on MAG getting an estimated $440 million (using today's spot prices) in free cash flow from Juanicipio over the next five years. At the company's current share price, this equates to a 6% average annual free cash flow yield.
| Want to be the first to know about interesting Gold, Base Metals and Silver investment ideas? Sign up to receive the FREE Streetwise Reports' newsletter. | Subscribe |
