Explorer Uncovers Premium Gold-Silver Resource in South America

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Canadian mineral exploration company Magma Silver Corp. (MGMA:TSX; FSE:BC21; WKN:A411DV) said the table was set at its flagship Niñobamba Project in Peru by majors like Newmont, Anglo Gold, and Bear Creek. But the main course, featuring significant amounts of mineralization found during the historical drilling there, is yet to come.

The initiative encompasses an 8-kilometer stretch of mineralized terrain within a highly productive geological region of the prolific South American country. Earlier owners have spent as much as CA$14.5 million in the project to date.

Peru is the third-largest silver producer in the world, according to GlobalData and the company's investor presentation. Almost 15% of Peru's GDP comes from the mining industry. The country has three of Latin America's largest high-sulfidation gold-silver districts, including Yanacocha.

"In internal reports and conceptual plans prepared by predecessors, there is the potential for a significant amount of gold and silver and lots of blue sky on a new gold discovery," Chairman and Chief Executive Officer J. Stephen Barley told Streetwise Reports. " We know where the historical potential is and it is much simpler to find something when you already know it’s location."

The country expects mining investment to increase there to US$4.8 billion this year, Peru's Energy and Mines Minister Jorge Montero said, according to a report by Reuters published on Mining.com June 3.

Historical Drilling

The company, which had its stock hit a new 52-week high last week, said historical drilling and recent discoveries at Niñobamba confirm significant silver and gold mineralization across the project. Highlights include 72.3 meters of 1.19 grams per tonne (g/t) Au, including 24.6 meters of 1.07 g/t Au; with an 8-kilometer trend exhibiting strong gold-silver mineralization demonstrated by intersects of 56 meters of 1.03 g/t Au and 98.9 g/t Ag, and 21 meters of 1.32 g/t Au and 102 g/t Ag.

Magma said community consultation and environmental studies are complete for drilling in its Jorimina zone in Q3, where it plans to re-drill Newmont’s 2012 mineral inventory and conduct infill drilling with the goal of establishing a NI 43-101-compliant resource.

It also said permitting for the Niñobamba North and South Zones is in progress, with drilling permits expected later this year. Exploration will start with fieldwork before progressing to drilling by the end of the year.

Trench Results 'Spectacular'

Geologists more than a decade ago laid about 20 trenches on the project that were "just spectacular," company Director Michael Townsend said. "There is a very obvious blue sky with all of these trenches that have never been drilled underneath."

The 4,100-hectare (ha) project is less than 500 kilometers from Lima and 45 minutes from the city of Ayacucho, which offers daily flights to Lima, the company said. It's also just 7 kilometers from a major highway and the power grid.

The Jorimina concession was acquired through auction, while the remaining claims were secured by staking, Magma said.

The company also said the Randypata Zone was re-staked during the pandemic, allowing previously held Newmont concessions to lapse, along with a 2% NSR.

"This is the first time that these three contiguous, but separate projects have been all grouped together," Barley said.

He also noted the mineralization on the trend is very similar to that on bigger projects on the same trend in Peru.

Niñobamba has seen extensive exploration, including drilling done by Anglo Gold in 2000 and Bear Creek in 2002. Magma acquired the project from Rio Silver.

The Catalyst: Gold Consolidating, But Bulls Still Running

According to report by FX Street on June 6, gold fell back into a narrow range of consolidation on Friday, trading around US$3,360 after the U.S. Nonfarm Payrolls report showed a resilient labor market.

The U.S. economy added 139,000 new jobs, beating analysts' expectations of a 130,000 increase. In the interim, the joblessness percentage stayed steady at 4.2%, presenting a conflicting yet somewhat more hopeful perspective on employment market dynamics, the article reported. The more robust than anticipated primary statistic has delivered momentary support for the dollar, alleviating worries that the Federal Reserve (Fed) might require prompt action through interest rate reductions. Nevertheless, fundamental weakness in additional employment indicators from earlier this week continues to justify prudence in the wider policy perspective.

Based on the CME FedWatch Tool, the likelihood of a July interest rate reduction has declined dramatically to 16.5%, falling from 33.9% before the announcement. The information has momentarily reduced strain on the Fed to respond rapidly, indicating that policy officials may embrace a more deliberate approach in the immediate future, according to FX Street.

Some experts are predicting higher prices for gold. Garth Friesen wrote for Forbes on March 15 that DoubleLine Chief Executive Officer Jeffrey Gundlach said, "I think gold will make it to US$4,000. I'm not sure that'll happen this year, but I feel like that's the measured move anticipated by the long consolidation at around US$1,800 on gold."

And according to an April 10 post on Goldfix, Goldman Sachs has revised raised the upper boundary of its forecast range for the end of the year to US$3,520 an ounce and even introduced a "tall-risk scenario" as high as US$4,500 an ounce.

Ownership and Share Structure

According to the company, about 12.2% of the company is owned by insiders and management. Refinitiv reports 5% owned by strategic corporate entities. The rest is high net worth investors close to management.

Top shareholders include Townsend with 7.5%, Barley with 1.32%, and Cannon Bridge Capital Group with 4.96%, according to Refinitiv.

Its market cap is CA$7.64 million with 33.97 million shares outstanding. It trades in a 52-week range of CA$0.04 and CA$0.26.