A new resource estimate and preliminary economic assessment (PEA) confirm that the Juanicipio asset is a “robust, high-grade, high-margin underground silver project.”
The companies released the updated documents on Tuesday (November 7), stating that the PEA base case points to a production rate of 4,000 tonnes per day and an initial mine life of 19 years. Juanicipio has an after-tax NPV of $1.14 billion at a 5-percent discount and an IRR of 44.5 percent; initial CAPEX is estimated at $360 million.
In a note on Wednesday (November 8), Raymond James describes the PEA as being “generally in-line with expectations,” and says there are significant improvements over the 2014 PEA, “driven primarily by a significant increase in estimated resource, justification for a 50% larger project scope.”
Specifically, the PEA increases the amount of silver at Juanicipio by 18 percent and the amount of gold by 66 percent. Lead and zinc estimates are up by over 100 percent. Raymond James notes that the majority of the gains are in the project’s Deep Zone, which is the subject of a current drill program.
The firm also says that Juanicipio’s initial CAPEX estimate of $360 million “compares favourably with [its] estimate of $386 million,” adding that its life-of-mine sustaining capital estimate of $480 million is “above [its] estimate” of $370 million, mostly due to an increase in mine life. OPEX is estimated at $58.67 per tonne, which is slightly higher than Raymond James’ estimate of $55 per tonne.
MAG Silver and Fresnillo expect to have a feasibility study for Juanicipio ready in Q1 2018 and a positive construction decision is anticipated. Raymond James says it expects the feasibility study to differ significantly from the PEA “due to the omission of inferred resources.”
First production is anticipated at Juanicipio in the first half of 2020, with commercial production starting during the same year. Raymond James is maintaining its “strong buy” recommendation for MAG Silver, and has a target price of C$25; the company’s share price was at C$14.80 at close of day Wednesday.
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Securities Disclosure: I, Melissa Shaw, hold no direct investment interest in any company mentioned in this article.
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