The Fresnillo trend has been responsible for a billion ounces of production, about 25% of the world's total, over the years. Dr. MeGaw bought the rights to land directly adjacent to Saucito that Fresnillo overlooked.
Fresnillo believed the silver mineralization was pushed to the surface and eroded away over millions of years.
Dr. MeGaw had a hunch that ore was pushed deeper by the faulting, so in his first drill hole he found the best silver ore body in the world on his first drill hole. MAG Silver's average silver grade is about 600 g/t. Needless to say, the Juancipio mine is extremely profitable.
Low grade deposits are for suckers.
These naive investors believe that when gold increases the low-grade mine will become profitable.
Don't hold your breath.
You see when gold increases, it is due to inflation and dollar devaluation.
Well guess what? When inflation rises, mining costs escalate as well. Labor, machinery, cyanide, oil all cost more.
You can't just build a spreadsheet economic model and adjust the gold price higher versus fixed costs. You need to increase your cost estimates as well.
A low grade cow pasture now will still be unprofitable even if gold rises to $5,000/oz gold.
Let me share with you another way to get exposure to these world-class, high grade assets.
One of my favorite companies owns a piece of the best mine in Canada that produces 600K gold ounces per year, a Tier one asset measured by low costs and large reserves, that is beginning production of about 500K gold ounces this year.
A mine in Nevada that has been in production for 50 years and sees about 400K gold ounce production to at least 2038.
And I cover this company inside of my Golden Portfolio 10X model portfolio, which you can claim access to here.
That's it for today…
Keep an eye out tomorrow for Part 4 of my Masterclass, where I'll cover how to steer clear of miners that habitually dilute their share prices.
Best,
Garrett Goggin, CFA
Founder, Golden Portfolio
_01JBW1A7D89F7HZCR9WY9KSM43.png)
