First Majestic Silver (AG) has now executed a definitive option agreement granting Silver Dollar Resources a potential 100% interest in First Majestic’s La Joya silver-copper-gold property.
Located in the south-eastern portion of the State of Durango in the Mexican Silver Belt, La Joya consists of 15 mineral concessions totalling 4,646 hectares and hosts the Main Mineralized Trend (MMT), Santo Nino and Coloradito deposits.
Silver Dollar now has an exclusive option to acquire an initial 80% interest in the property, and if exercised, a second option to acquire an additional 20% interest.
For the 80% interest, Silver Dollar will pay First Majestic a total of $1.3M plus annual holding costs for the property and will issue 19.9% of its shares to First Majestic, as well as incurring exploration expenditure of $1M on the project in the next few years.
Within 30 days after exercising its first option, Silver Dollar may exercise its second option and acquire the remaining 20% interest by issuing a further 5% its shares to First Majestic. In addition, First Majestic will reserve a 2% net smelter returns royalty interest in all minerals produced from La Joya.
“The signing of the definitive agreement to have an option to acquire the La Joya project is a very important milestone for us,” said Mike Romanik President of Silver Dollar. “We engaged some expert help to assist in our due diligence review of the historical data on the project and the unanimous feedback is that La Joya has incredible exploration and development potential, particularly in light of the significant move in metals prices since we signed the letter of intent.”
Shares in First Majestic are trading up 6% year-to-date, and analysts have a cautiously optimistic Moderate Buy consensus on the stock’s outlook. That’s alongside a $13 average analyst price target indicating upside is limited from the current share price.
HC Wainwright analyst Heiko Ihle has just ramped up his AG price target from $11.50 to $16.50 after revising his gold and silver price estimates.
“We feel macroeconomic improvements related to precious metals are increasingly evident in the market… While we note a variety of potential headwinds to continued strength in pricing, including less fear related to COVID-19, we nonetheless believe that longer-term economic impact from the recent pandemic has paved the way for strong pricing in the future” he explained.
As a result the analyst raised his long-term gold price forecast to $1,900/oz from $1,700/oz and his silver price estimate to $25.00/ oz from $18.00/oz. (See AG stock analysis on TipRanks)