Event
On Friday morning, MAG released assays from 34 holes from the Pozo Seco (PS) Mo-Au zone at its 100%-owned Cinco de Mayo property in Mexico.

Action

Impact is positive. We encourage investors to accumulate shares on exploration potential at the Juanicipio and Cinco de Mayo projects.

Analysis

Strike Extended 600 m. A total of 27 holes were drilled along the Saint Lucia Fault at PS Prime, the main PS moly-gold zone, and Tres Amigos. Strike length of continuous mineralization was extended 600 m (to 1,700 m total) to the NW. Highlights include 0.326% Mo over 53.94 m in hole 175. A further seven holes were drilled south of PS Prime (three at two separate Au zones and four at “Sub-Prime Area,” a lower grade moly-gold zone).

Back of the Napkin Size Estimate. MAG estimates the known PS molygold zone to be 1,700 m strike x 250-350 m average width x 50 m thick. We estimate this equates to roughly 65 mln tonnes of shallow, open-pittable, mineralized material. Assuming average grades of 0.3 g/t Au and 0.1% Mo, as well as, our LT US$900/oz Au and US$17/lb Mo assumptions, we calculate a notional in-situ rock value of US$45/t or ~US$3 bln (vs. our NPV of C$27 mln or C
.46/sh).

Further Upside at Tres Amigos. Highlights from Tres Amigos include 116.9 m grading 0.098% Mo and 0.25 g/t Au in hole 182. Importantly, stepout hole 189, which intersected 0.143% Mo over 1.79 m, may suggest a 1,200 m extension of known Mo-Au mineralization to the NW. Assays are pending for ten holes drilled to confirm continuity of this step-out, which could extend strike length to ~2.9 km (PS Prime plus Tres Amigos).

Searching for Cinco’s Heart. MAG also identified two gold-dominant zones to the south of PS Prime. Highlights include 13.82 m grading 1.85 g/t Au including 0.85 m grading 22.70 g/t. The presence of high-grade gold further bolsters the view that Pozo Seco may be related to a feeder for the regional CRD system. Two rigs (of five on the property) are focused on
searching for this potential higher-grade Pb-Zn-Ag zone. Valuation We are maintaining our OUTPERFORM rating and $9.50 target. Our target is derived from a $7.25 (from $7.45) NAVPS and a 1.3x P/NAV multiple. Our P/NAV multiple reflects the 1x-2x multiple historically attributed to precious metal equities. Our reduced NAVPS reflects updated exit 4Q09 stock options.

You can read the report here for yourself:
http://www.zshare.net/download/74437663c20099fa/