Categories: Precious Metals
Topics: General Precious Metals

Magna Gold (TSX-V: MGR)(OTC: MGLQF) CEO Arturo Bonillas on Full-Scale Production at San Francisco Gold Mine & Start of Exploration-Drill Programs at Six Other Fully-Owned Gold-Silver Projects in Mexico

Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is the president & CEO of Magna Gold — Mr. Arturo Bonillas. Buenas tardes, Arturo! ¿Cómo estás?

Arturo Bonillas: Buenas tardes, Gerardo! I'm very happy to talk to you again. It's been a while now.

Gerardo Del Real: It hasn't been for a lack of news! I'm very happy to talk with you as well. We've tried several times. But you've been busy raising C$10 million. You've been busy adding exploration programs across six assets. You've also been busy nearing the completion of the ramp-up, and you're on-track now to return to full-scale commercial production by next month.

First off, congratulations! That type of activity isn't easy to execute on. And it isn't easy to do the way that you've done it. You and your team have done absolutely everything that you promised us you would do before the company even went public. So… got to say as a shareholder… couldn't be any happier! Congratulations and don't forget to rest every now and then!

Arturo Bonillas: Yeah, highly required! Thank you very much, Gerardo. Yes, Magna Gold is now entering into a new stage in its evolution. We are a producing company with significant exploration potential on the properties that we've acquired. We are on-track with the objectives of Magna Gold since its creation which was not long ago. 

And at the same time, we have been very careful in not over-diluting the company. We just completed a financing to explore our main targets/properties; we have three gold and two silver properties. So we have announced the financing programs; we'll do exploration on all of them, and we'll do them quite fast. 

Important to mention that operations at the mine are back at full-scale production. We took control of the mine last May, and we had to remove a lot of waste to get to the ore. But now, we are there. And so the mine, beginning next month, she'll be generating sufficient cash flow to do its own expansion of resources and reserves. So we're very happy about it. 

And we've also completed at the mine our first piece of drilling to increase reserves and resources at the mine. So we are currently compiling the drill hole information, and we will soon be calculating new reserves and putting out a new mine plan. So we hope to do that very soon. We'll do that with an independent engineering company. 

And, of course also, we will become more active on the M&A front. So the company is bigger, and it’s better capitalized. And so that's where we’re at, Gerardo. We’re very happy!

Gerardo Del Real: A couple of points, Arturo. And first off, let me make this point and then we'll talk about the M&A in a second. So the first point is, I congratulated you and your team for the technical acumen and what you've been able to do with the San Francisco Mine, which was one of the better negotiated deals for shareholders in a very long time. 

You are on the verge of getting the strip ratio down from 6.9:1 to, I believe, 3.5:1 during the second half of this year. Is that accurate?

Arturo Bonillas: That's very accurate, yes. That's very accurate given life-of-mine, the strip ratio is 2.5:1, which we will continue to improve as we put additional drill holes on the deposit, yes.

Gerardo Del Real: Excellent! And then you mentioned M&A… and I laugh! And the reason that I laugh is because you just secured C$10 million in funding with a founding and strategic shareholder to go and explore and initiate drill programs and exploration programs across six different assets. 

The deal that was struck was struck at a conversion price of C$1.25 [per share], which is a significant premium; a 35.5% premium to the 10-day weighted average, right?

Arturo Bonillas: That's correct. 

Gerardo Del Real: And so Delbrook obviously believes in the company… believes in the execution… believes in the plan. It's a deal that, frankly, is not very dilutive especially if it's going into the ground. 

And so what I heard from you is that, in addition to the six exploration programs, and in addition to the production guidance of 55,000 to 65,000 ounces — which I'm going to speculate, and this is just my opinion — will come in higher than that because I've known you for some time now, and you like to underpromise and over-deliver. But on top of that — you are still on the M&A hunt.

Arturo Bonillas: I think it's very important to the M&A hunt. There are good opportunities now in Mexico. There are smaller operations that are being made available; good operations… small that we can grow. So things like that that fit our model. 

We will soon be approaching the 80,000 ounce per year production rate capacity; in that range. And it will be very good, too, for us to acquire a producer that would take us to 130,000, 140,000, 150,000 ounces per year in the short-term. That changes things for the company.

Gerardo Del Real: In the short-term… so we're talking, again, I think you're undervalued with just the 55,000 to 65,000 ounces at today's gold prices, right? I think if that's all you were doing and that's all you did for the next 7-8 years… I think there's tremendous value in Magna Gold shares, right? 

You have a market cap of under C$100 million; it's around C$92 million. On top of that, you're saying your short-term goal is to become a producer, annually, of 135,000 to 145,000 ounces a year. Did I hear that correct?

Arturo Bonillas: That's correct, yes. That's, I think, the next stage of the company as a producer. And the only way to do that is by acquiring. And also, it's very important to say that we have tremendous shareholders; Delbrook Capital has been a tremendous support for the company since day one. And so they allowed us to start our exploration programs outside of the mine. 

And also, very important to say or to tell that our team… we have an outstanding operating team in Mexico; very resourceful. And that's the word I can use for what we went through last year to get to this point with actually very little money. And that's highly required. Our team was resourceful enough to get us here. 

So that's why we want to go M&A… because we have the people to do it and the support. The financial support, I think, will be very important for us.

Gerardo Del Real: You've made the final payments for the San Francisco Mine. And in a year and a half, two short years, you've taken an operation that the prior team didn't want anything to do with. And you're now turning this into an absolute cash cow. And again, I haven't even talked about the leverage to a rising gold price. We'll get into that in a separate conversation. 

But I am excited to hear about the M&A opportunities. I'm looking forward to drill results from San Francisco. I'm looking forward to the resource estimate and, of course, results from exploration at the six properties. Did I miss anything, Arturo?

Arturo Bonillas: No, I think you didn't miss anything. And as well — I forgot to tell and you just said it… it's our mine now. We paid for the mine. So we're very happy about it… we paid for it last week. 

Gerardo Del Real: It's absolutely incredible work. In a space that is often not very good as far as being caretakers and good stewards of capital, I don't know that there's a shareholder of Magna that has been with the company since the beginning that would be unhappy with what you've been able to do. 

Again, I'm encouraged by the fact that you're still excited about M&A opportunities. It sounds like that's something in the near-short-term that we'll hear more about. And, again, nothing to say but congratulations and I can't wait for the next update.

Arturo Bonillas: Thank you very much, Gerardo. And we have to take advantage of this window that we have in the gold and silver spaces.

Gerardo Del Real: Well said. Arturo, thank you for your time. Go get some rest!

Arturo Bonillas: I will, Gerardo! Great talking to you again. Goodbye.

Gerardo Del Real: Take care. We'll chat soon. Bye now.

Arturo Bonillas: Take care. Adiós.