Gerardo Del Real,
Editor
Oct. 20, 2021
Editor’s Note: Copper, lithium, zinc, and uranium prices are surging. Seems like everything but gold is higher which presents a compelling opportunity to buy producers for pennies on the dollar. One of my favorite speculations in the entire space right now is Magna Gold (TSX-V: MGR)(OTC: MGLQF).
Magna just announced its best quarter ever and one of the San Francisco mine’s best quarters in quite some time. Magna is profitable, producing, exploring, and on the M&A trail. Enjoy the interview.
Let's get it!
Gerardo Del Real
Editor, Resource Stock Digest
GERARDO DEL REAL ARTURO BONILLAS
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. Arturo, muy buenas tardes! ¿Cómo estás? How are you, sir?
Arturo Bonillas: Gerardo, muy buenas tardes! I'm very well, thank you!
Gerardo Del Real: Congratulations on a quarter of production that far exceeded even what I was expecting. The quarter-over-quarter production increase of 63% combined with the strip ratio dropping from 2.62:1 to 2.5:1 is something that you and the team at Magna should absolutely be proud of.
I've told you privately — and I've said it to everyone that'll listen — you've delivered on every deliverable that you promised a few years back when we talked about Magna and what the goals were.
I want to go ahead and let you talk about the cash cost, the quarter that you just had, and the reduction of the strip ratio, which, of course, leads to profitability, right?
Arturo Bonillas: Of course, Gerardo, and thank you very much! You've been following us since day one. And since two or three years ago, we started with experience, and what we have reached this quarter is what has been in the plan.
We announced that we were back in full-scale production in June of this year. So this was the first quarter of full-scale production that we completed, and it came out according to plan. We produced 19,102 ounces, which was a big jump from the previous quarter. And we had good cash costs a little below what we projected; cash costs estimated at US$1,134 per ounce — which is pretty good.
We hit our sales-realizing goal price at $1,776 per ounce. So on 19,100 ounces, you can do the math. The mine is making money; the mine is generating cash. And so that makes me and the rest of the team very happy. And we will continue like this.
This is, again, part of our mine plan for the next 7 to 8 years. And now we are ready for growth, and that's where we're really focusing on. So yeah, I'm happy.
Gerardo Del Real: I know, Arturo, that you've been very, very active behind the scenes… and you've been vocal about it… but you've been very active behind the scenes on pursuing accretive opportunities. You just reiterated full-year production gold guidance of 55,000 to 65,000 ounces.
I've known you long enough to know now that, in 2022, that number will likely be significantly higher. And I've also known you long enough to know that you're likely working on multiple fronts, looking for accretive assets that can complement the San Francisco Mine.
Now, with that being said — because I know you likely won't comment too much on the specifics of that — you're also looking to release a maiden resource estimate and a PEA on your Margarita Silver Project, which, again, I'll argue that, just on the San Francisco Mine alone, you're extremely undervalued.
If you add in the multiple other projects — and let's just talk Margarita right now — you're getting zero credit for Margarita. Can you speak to that project a bit?
Arturo Bonillas: Yes, we are getting zero credit for our Margarita property. It's a really interesting project. We've obtained all of the necessary exploration permits and we're advancing on the project.
We actually are set to begin drilling in a couple of days. Everything is mobilized. The idea here is to complete a PEA by the end of Q1 2022; we say, a PEA by PDAC! That shall bring the value of that property to a different number, which will be added to the value of the company. And that is going to be a good surprise. I like the grades; I like the area. It's an underground situation and, believe it or not, I really like underground.
And so we are on our way there. But also very important to mention that Magna Gold has the capacity to create a lot of value with the properties and the targets that we already have, including the growth of the San Francisco pit plus the other gold exploration properties around the mine that we'll be advancing.
So the company is tremendously underrated. One thing I'd like to say is we are the 80K-oz producer that’s not very well-known. And so it's our job now to get ourselves to be known in the markets.
Gerardo Del Real: Listen, I'll be very blunt. There are few producing companies that are priced as attractively as Magna. If gold never goes up another dollar — and everyone knows how I feel about the gold price… I think it's headed higher — but let's say it just stays at that US$1,776 per ounce price that you realized during this most recent quarter. And let's say that you never grow the mine, which I know, again, that's unlikely. But let's say it's just 65,000 ounces forever at a profit of approximately $600 per ounce… you're looking at US$41.6 million in profits annually.
That's without an increasing gold price; that's without adding to the mine life; that's without Margarita and the other exploration assets. A lot to like! Anything else to add to that, Arturo?
Arturo Bonillas: Well, that's correct… the math I asked you to do… and you are totally right. We are on our way to becoming a several hundred thousand ounces per year gold producer.
Again, the number that I have been telling you since Day-1 that, by 2023, we should be close to or at 200,000 ounces of gold equivalent production and we shall have 5 million ounces of gold or precious metals in the ground as resources — we are a third of our way there.
Actually, I can tell you that we have already mapped out how we're going to get there… and it's all a matter of hard work. And so that's basically where we're at now. We're very happy… and the team is happy with good spirit.
And yes, we are being very aggressive on the M&A front. Magna Gold, as it stands now, can operate two other mines with the team we have and the contacts and the relationships we have in Mexico. So that's where we're aiming at, Gerardo.
Gerardo Del Real: US$41.6 million in profits annually if the price of gold never goes up… if you never add ounces to the mine… and you have a market cap of C$74.25 million right now.
I would love, if anyone in the audience has a more compelling speculation that's profitable at these levels with this valuation… please send it in… please send it in!
Arturo, thank you so much for your time!
Arturo Bonillas: Thank you as well, Gerardo.