Value Microcaps Junior Miners

[Bobwins]

Magna Gold Corp, MGR.v/MGLQF US$.95

Magna is a new name for an old asset. Timmins Gold started producing from the San Francisco mine in 2010 and produced around 100K oz/yr for about 8 years. The last two years, the mine struggled under the new name for Timmins of Alio Gold. In early 2020, Magna purchased the mine from Alio for $5million in cash in the future plus 20% of the stock in Magna.

Magna is run by the former CEO of Timmins, Arturo Bonillas. Alio had fired many of the managers at the mine but Mr. Bonillas has reassembled the team.
The dramatic fall in production from 100K oz in 2016(the last year Mr. Bonillas was involved) to 83K in 2017, 51K in 2018, 36K in 2019 and 18K so far in 2020 has been attributed by Mr. Bonillas to poor knowledge of the asset by the management and the contractors they used.

Since the purchase in spring 2020, Magna has been working to ensure that the gold can be recovered as it was during the Timmins era. They just received an updated PFS that determined they could produce an average of 69K/yr for 8 years from the San Francisco mine at an AISC of ~$1200.

Mgmt thinks they can do this in 2021 and improve production by an additional 30K by pursuing underground mining beneath the current pit AND mining a nearby deposit.

So Magna will gear up for full production during the next few months and has aggressive plans to increase production further.

The mine has current reserves around 750K and 1.4million oz of total resource. At current gold prices the NAV for the mine is US$231million.

At current prices of US$.95 and 90+million shares FD, Magna has around a $86 million dollar market cap. This is very low for a proven producer. Obviously the troubles of Alio will make this a prove it type investment but I believe the old mgmt can revive the San Francisco mine and aggressively explore to expand production. Their goal is 200K/yr by 2023 and they outline several nearby deposits that could help them increase production. They have drilling plans and should have results in the next few months.

Magna raised capital to buy the mine this spring but didn't actually have to pay any cash out to secure the mine. This gives them drilling money now before full production ensues.

The mine is in good condition with a mill that can grind 16,000tpd. Imagine the capital cost of building that big a mill now. No more dilution is going to happen to build the mill or buy the asset.

Assuming they can get back to 70K/yr+, Magna is undervalued at $86million. If they can get to 100K/yr, they should be in the 200-400million market cap range. If they reach 200K in a couple of years, they could be in the 500million+ range.

The San Frisco mine is one of the first mines I encountered with a low grade gold deposit. The average grade of the ore is below .50 grams/tonne. I missed the runup in Timmins because I just didn't like the low grade. But the stock took off without me because the strip ratio is low and the mine is a pretty simple operation.

Here is the latest presentation by Magna.

https://www.magnagoldcorp.com/_resources/presentations/Magna%20Gold%20Investors%20Presentation%20October%2021%2C%202020.pdf

Here is a video about Mr. Bonillas and Magna.

The CEO says they haven't done much PR and that's why the stock price is so low. I looked on several message boards and there are few, if any comments so I believe the stock is very unknown. The stock hit a low of about US$.70 but ran up to the .90's this week before I could buy. I bought this week and feel this has very good near term upside. If they hit mid 2021 with anything close to 30-40K oz gold production, this should be a double.

Comps I looked at were Premier Gold, pg.to and Americas Gold and Silver, USAS. Both are below 100K producers and Americas is just bringing a new deposit online that will put them at 90K/yr. Premier has a $508mm market cap and USAU is at US$329MM market cap. USAU is already valued that high even though their gold deposit is still in startup mode.