Agoracom

The drop in share value last week is normal trading behaviour from an irrational and ignorant market.  Anyone even remotely aquainted with the story knew that there were 5 drill cores sent for assay and that the results from the final hole were due shortly.  So I do not think it was anything inspired by 'insiders' that caused the drop.  However, a quick look at the chart shows that a steady increase in volume accompanied the previous news releases.  The traders discovered this story and were prepared to ride it up.  When the last news came out, they sold and moved on, as hot money tends to do.  It was not any reaction to the content of the news at all, IMO.

Having said that, I do believe the speculators were disappointed by what they saw in that last drill core.  The overall grades were lower and the interval of mineralization was smaller.  What people fail to understand is that the drilling targeted an area of the property that was not expected to be mineralized.  It would have been considered waste rock in the original mining plan from the 90s with Rio Tinto.

When the previous drill cores successfully defined porphyry structures at Aguila and Aguila East, the overall target size increased by 200-300% for the project.   There was a body of country rock in between the two porphry structures, and it would still make economic sense to design a mine pit that included that 'waste rock' interval since the grades and tonnage of the rock on either side would still generate a profit.

Now with the results of Hole 5, we know that area of sedimentary rock between the porphry zones is also mineralized, and 0.2%Cu is still going to generate a profit itself after the mining and processing costs are factored in.  So instead of having a greater item on the cost side of the balance sheet, we now have significant additional tonnage that can be added to the resource category and will appear on the profit side of the ledger for a PFS.  Lower grade, but profit nonetheless...

The trouble with an ignorant market is that little details are overlooked, even though they may be important.  If the bananaheads are out there selling this news, that just creates opportunity for the investors to accumulate cheaply.

Just for an illustration of my point, lets assume a 200 million tonne deposit, with average grades of 0.5%CuEQ (which is below the average grades that have been reported for all zones).  That would suggest 10 pounds of Cu per tonne of ore, or a gross deposit of 2 billion pounds of Cu.  Now even assuming only $3 Cu, that still generates a gross metal value of $6 Billion.

Unlike many other deposits that ignorant investors seem to think are better, Aguila has many favorable economic circumstances already in place.  It was already a producing mine in the past, and has adequate access to road, power, and water infrastructure.  It is in a low-cost jurisdiction for mining.  The deposit geometry is favorable for development into an open-pit mine, with most of the projected deposit envelope falling within a reasonable pit design.  It is located near surface, with minimal overburden, and a low projected strip ratio.  And data from the previous operator is sketchy, but there is evidence that the metallurgy is positive,  and that a good percentage of the contained Cu and Mo will be easily recovered from conventional processing.

Add up all of the above factors, and that would suggest that Aguila will be a prime candidate for acquisition by a mine developer.  So I do not feel like I am going way out on a limb to assume a 5% NAV assumption on the gross metal value of $6 Billion.  That then projects about $300 million for Aguila.

MMG controls half of the deposit and should therefore be worth more than $150 million in market cap for its share.  Yet the company is currently valued at around half of that, despite the other projects in the PF, the value of the DRV shares it controls, and the cash in the bank.

I think MMG is sharply undervalued in the market, and the selloff was a temporary event from bozo speculators that wouldnt know a rock from a baked potatoe.

cheers!

COACH247