January 26, 2021
TORONTO, January 26, 2021 – Magna Gold Corp. (TSXV: MGR, OTCQB: MGLQF) (“Magna” or the “Company“) is pleased to provide the following letter to all shareholders from the Chief Executive Officer.
Dear Fellow Shareholders and Investors,
For Magna, 2020 was a year full of achievement, goal fulfillment and great transformation. In the face of an unquestionably challenging period for our industry and with limited capital, we were able to grow our company through strategic acquisitions and targeted exploration as we embarked on our journey to evolve from a junior exploration company to an intermediate gold producer in Mexico. By leveraging our strategic adaptability and resources and relationships in-country, we successfully identified and executed on several opportunities that we believe have positioned the Company for significant value creation in 2021. Since the Company’s inception in 2017, we have returned 10x to the Company’s shareholders. Our commitment is to continue delivering returns on our existing and future portfolio of assets through disciplined capital allocation and our country advantage of having our senior management, including me, in Mexico.
Our evolution in 2020 was driven by several strategic initiatives as outlined below:
1. Commitment to ESG
Magna has an unwavering commitment to the protection of health, safety, and the environment. We operate in a sustainable and socially responsible manner that is consistent with our values by actively promoting and developing systems to minimize risk and impact. We work cooperatively with local stakeholders and governmental agencies using the best technologies to ensure safe and efficient use of resources. Our commitment to the country of Mexico and our economic, social, and environmental impact will continue to be transparent.
In 2020, the San Francisco Mine in Sonora, Mexico (the “San Francisco Mine“) surpassed two million man-hours, including contractors and suppliers, without any disabling incidents or accidents in the workplace. The company has earned and maintained several accreditations for social responsibility, environmental stewardship, and inclusivity in the workplace. These include (i) ESR – Empresa Socialmente Responsable, (ii) Empresa Familiarmente Responsable, and (iii) Seguridad Sanitaria.
2. Add Immediate Production and Cash Flow
Magna acquired the past producing San Francisco Mine in May 2020, with limited dilution to our shareholders. Since acquiring the San Francisco Mine, we have re- invigorated the operation and transformed a residual leach operation approaching the end of its life into a cornerstone mine that will produce approximately 66,250 ounces of gold per year, at declining all-in costs for eight years based on the Pre-Feasibility Study we completed in August 2020.
Since acquiring San Francisco Mine, Magna has sold 20,235 ounces of gold and generated revenues of US$37 million. From the revenue generated, the Company has reinvested approximately US$12 million towards plant and equipment refurbishing, leach pad construction, infill drilling to increase resources, pre-stripping of the pits, and underground mine exploration and development.completion of the San Francisco Mine’s turnaround period and anticipate the full ramp-up to be completed in Q1 2021.
The San Francisco Mine contains several incremental production opportunities that we are continuing to explore and plan to exploit this year. These include the expansion of the current operating pits through additional drilling and the ongoing development of an underground mine inside one of the open pits. In addition, there are at least three other satellite open-pit opportunities near the San Francisco Mine with historical drilling and positive results.
3. Solidify the Balance Sheet
In May 2020, Magna closed a non-brokered private placement for total gross proceeds of $7 million, which included lead investments by Mr. Eric Sprott and two other mining participants.With cash flow generation from the San Francisco Mine, including re-investment into our assets, our cash balance is currently US$7.2M as of December 31, 2020 and the Company remains well-positioned to execute on our growth strategy in 2021.
4. Create Value at the Drill Bit
Magna implemented several productive exploration programs in 2020 that targeted the development of new gold and silver projects.
Geological work at Mercedes projects in Sonora, Mexico (“Mercedes“) was a team effort by Magna geologists who conducted: (i) geological mapping over an area of 4 square kilometers; (ii) collected over 1300 rock samples; and (iii) completed the successful initial phase of a reverse circulation drilling program that included 2,723 m in 21 holes. Drilling at Mercedes by Magna successfully confirmed oxide gold mineralization hosted in an altered andesite at La Lamosa Hill (see press release dated November 14, 2019).The Company is contemplating follow- up drill programs to test mineralization at depth and the extent of the zone to the north of La Lamosa.This second round of drilling will be done as a follow-up program that is expected to confirm and increase the oxide potential.
La Lamosa Hill selected drill results phase 1 Selected chip sampling at other targets
In December 2020, Magna completed a Phase I diamond drill program at its 100%-owned La Pima Silver Project located in the Mojave/Sonora Mega shear in Sonora, Mexico (“La Pima“) (see press released date December 8, 2020).Magna drilled a total of 1,719 meters in nine core holes. La Pima is an early-stage silver target with an excellent surface target of historical mine workings and outcrops. Magna completed a geophysical survey on the property in September and results were positive.
La Pima Silver Project – selected drill results
5. Expand the Exploration Pipeline
Our acquisition of the San Francisco Mine was coupled with the acquisition of several attractive precious metal exploration projects that we believe have the potential to host significant mineral resources and aid in the Company’s long-term growth and value generation.
(i) In January 2020, Magna entered an exploration and option to purchase agreement pursuant to which Magna acquired the option to acquire a 100% undivided interest of two mining claims (the “San Judas Project”) located in Sonora, Mexico.
(ii) In November 2020, Magna acquired a 100% undivided interest in the mining concessions comprising the Margarita Silver project in Chihuahua, Mexico (the “Margarita“). Margarita is comprised of two mining concessions, covering 125.63 hectares, located within the prolific Sierra Madre Gold Belt, which hosts numerous multimillion-ounce gold-silver deposits, 88 kilometers south of the state capital of Chihuahua in the Municipality of Satevo, State of Chihuahua, Mexico.
Margarita is a low to intermediate sulphidation epithermal Ag-Pb-Zn system (primarily Ag) with 7km of outcropping multiple veins inside the property. Channel sampling returned values of 100-900 g/t Ag. Only one vein has been drilled. A total of 35 DD holes were completed along 1,700 m of the Margarita vein, with over 1kg/t AgEq values in some drill intercepts. Please refer to press releases by Sable Resources dated July 26, 2018 and June 11, 2019 for the full set of these drill results.
Margarita Silver Project – selected drill results
OUTLOOK FOR 2021
As the precious metals market continues to gain momentum in the coming years, Magna will remain focused on bringing forth rapid and sustained market capitalization appreciation. The Company has several remarkable and compelling catalysts for continued growth that we believe positions Magna favourably to take advantage of a stronger precious metals environment. Magna has over 45,000 hectares of highly prospective ground, a gold operation with increasing resources, two very promising gold projects, and a portfolio of four silver properties including La Pima and Margarita – all in two of the most mining-friendly states in Mexico.
Magna has mobilized a crew to commence work on Margarita. This work will include taking possession of 5,097 meters of HQ core, acquiring detailed topographic maps of the project site, and satellite images. Field work of mapping and sampling is scheduled to commence in Q2 2021. An infill drill program is being planned for Q4 of this year at Margarita. In addition to Margarita, Magna is planning field work on their La Pima, San Judas, Mercedes, and Los Muertos holdings. Magna has a highly experienced “boots on the ground” management team that keeps a close watch on operational progress and is quick to identify any potential challenges and needs, as well as opportunities – we will remain nimble and be prepared to ensure operational success. Magna’s Chief Executive Officer, who resides in Mexico in proximity to the Company’s projects and operations, is highly engaged, responsive, and involved in financial and strategic planning. Given our in-country relationships and resources, we have an edge over most foreign mining and exploration companies, and we are poised to leverage our knowledge and expertise within the mining industry in Mexico.
Ramp-up efforts at the San Francisco Mine are progressing at a strong pace. With the full ramp-up of the mine expected to be completed during Q1 2021, Magna expects the San Francisco Mine to produce 66,267 ounces this year, please refer to the NI 43-101 F1 Technical Report Pre-Feasibility Study for The San Francisco Gold Project, Sonora, Mexico dated August 28, 2020. The production profile is weighted to the latter half of fiscal 2021, representing approximately 60% of the yearly production, which will result in a very strong operational progression through 2021. This outlook assumes no material impacts due to COVID-19.
In continuing our path of aggressive growth and successful execution, the Company is now fortifying our organization in full gear with additional leadership from seasoned and experienced individuals to fulfill duties in key positions. These include the positions of a Chief Financial Officer, a Market Development and Investor Relationships VP, and an Independent Chairman of the Board.
We encourage you to follow our performance and progress this year as Magna continues to strive to drive share value. We are grateful to our shareholders and investors for your business and trust, and are grateful to our employees that continue to show consistent dedication and effort towards making Magna a successful and growing company in Mexico.