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Due Diligence and Valuation Report
Arrowhead Code:
20-01-02
Coverage initiated:
05 02 2015
This document:
29 04 2015
Fair share value bracket:
CAD 0.42 to CAD 0.66i
Share price on date:
CAD 0.22ii
Company:
Ticker:
Headquarters:
Chief Executive Officer:
Analyst Team
Samarth Agrawal
Kanniga Rajamanickam
[email protected]
[email protected]
Website:
CAD0.185 – CAD0.49iii
Average Daily Volume:
32,675iv
Market Cap. on date:
CAD 28.03MMv
Estimated SOTP Value (in CAD)
Value
Bracket
Zgounder
Boumadine
Implied Fair
Value
Low
0.29
0.20
0.42
High
0.38
0.35
0.66
Fiscal Year (FY)
Québec, Canada
Guy Goulet
www.mayagoldsilver.com
In FY15, the company expects silver production of
570koz at cash costs of USD 11.50-12.38/oz Ag.
The initial processing will be through cyanidation
process; however Maya plans to add flotation
circuit to the processing flow in the NTM,
increasing production to 1.4MMoz silver annually.
Along with increasing production from the
established underground deposits, Maya aims to
simultaneously conduct exploration to delineate
additional resources and reserves in Zgounder. It
commenced a 6,000m surface drilling program in
April 2015, which will be funded through
CAD1.2MM raised through private placement in
March 2015.
1st January – 31st December
Summary
Maya Gold and Silver (MYA), an international
mining company, is focused on exploration and
development of its precious and base metal assets
in Morocco. The company aims to advance
production on its flagship Zgounder mine, and
simultaneously
conduct
exploration
in
the
Boumadine polymetallic deposit.
The company plans to develop Boumadine
polymetallic mine (operational till 1992). As per
BRPM’s (previous operator) estimates, this project
has 3.84MMT historical resources in the project at
0.86% Pb, 3.9% Zn, 203 g/t Ag and 3.60 g/t Au.
The company plans metallurgical and exploration
works on the Boumadine project in the near term
at an estimated cost of USD 1MM to establish NI
43-101 compliant mineral resource estimate.
The Zgounder deposit was a historically operating
silver mine, processing 500kT ore in 1982-1990. It
was acquired by Maya in 2012, and is considered
as the most important silver mine in Morocco after
Imiter – the largest silver mine in Africa. PFS on
the mine estimated an IRR of 128% (6 years LOM,
at 200-300tpd feed rate and USD 20.5/oz Ag).
Arrowhead believes that the company’s projects
benefit from the historical resource estimate,
stockpiles, and underground broken ores left in the
stopes, enabling production in a relatively shorter
span of time. Further, company’s Zgounder project
will also benefit from the expected rebound in
silver prices, along with good infrastructure,
government support, and tax benefits on exports.
The Zgounder mine has mineral reserve estimate
of 152kT proven reserves and 421kT probable
reserves, containing 5.845MMoz silver. Claude
Duplessis Eng. Sr. Geological Engineer from GMG
Inc. independent Qualified Persons under NI 43101 standards, estimates additional resource
potential of 1-2MMT in the deposit.
In July 2014, the company started production the
mine, producing 3,746 kg silver ingots during
FY14. During 1Q15, the company produced
2,382kg silver – though the production was lower
Maya Gold & Silver – Arrowhead BID
Due Diligence and Valuation Report
TSX.V:MYA, OTC: MYAGF
in January (482kg) due to adverse weather, it was
offset by the record production in March
(1,117kg). Currently, silver is produced from
mineralized material and ore (from broken ore left
in the stopes, and blasting). Maya plans to
commence commercial production by 3Q15.
Market Data
52-Week Range:
Maya Gold & Silver Inc.
Given due diligence and valuation estimations
based on Discounted Cash Flows of the company’s
projects, we believe that Maya’s fair share value
lies between CAD 0.42 and CAD 0.66.
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TSX.V:MYA, OTC:MYAGF
See important disclosures on page 21 of this report.
Table of Contents
Company Presentation ......................................................................................................3
News .................................................................................................................................5
Listing Information ...........................................................................................................7
Contacts ............................................................................................................................7
Major Shareholders ...........................................................................................................7
Management and Governance ...........................................................................................8
Assets and Projects ...........................................................................................................9
Technologies and Markets ...............................................................................................13
Project Risk Profile Analysis ............................................................................................15
Risk Parameters – Definition ...........................................................................................16
Value ...............................................................................................................................18
Analyst Certifications and Important Disclosures............................................................21
Valuation .........................................................................................................................22
Notes and References .....................................................................................................25
Maya Gold & Silver – Arrowhead BID
Due Diligence and Valuation Report
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TSX.V:MYA, OTC:MYAGF
See important disclosures on page 21 of this report.
Company Presentation
Maya Gold & Silver, a TSX-V listed firm, holds precious and base metal assets in Morocco. Currently, the
company is concentrating on developing its flagship project, Zgounder, to full production. The deposit
shares similar geological characteristics with the largest silver mine in Africa, Imiter. The company also
plans to conduct exploration on Boumadine polymetallic deposit.
Maya started production in Zgounder in July 2014, and as of March 2015, 6,128kg silver has been
produced from the stockpiles and underground broken ore left in the stopes by the previous operator. It
estimates to commence the commercial production in the mine by 3Q15.
The company estimates an annual production of 570koz at 340g/t in the first year with a feed rate of
187tpd. It also plans to introduce flotation cells in FY16 to increase the production to 1.4MMoz silver, at
an estimated capital cost of USD3.5MM.
Additionally, the company plans to conduct exploration in the project area (at a cost of USD1.5MM) to
expand the resource base. In March 2015, the company raised CAD 1.2MM through a non-brokered
private placement, by issuing 4.8MM units at CAD0.25 per unit, with each unit consisting of 1 common
share and 0. 5 share purchase warrant. The proceeds of the capital raise will be used to fund a 6,000m
surface drilling program (commenced in April 2015).
The company is also concentrating to conduct exploration on its Boumadine project, which as a historical
resource estimates of 3.84MMT and 240kT in recoverable material at surface tailings. The company
plans to conduct exploration and metallurgical work on the site at an estimated cost of USD 1MM. It
further plans to raise USD 2.0MM for working capital.
Portfolio and Premiums
Project location offers accessibility to infrastructure facilities and manpower: The infrastructure and
transport system in Morocco significantly benefits the mining industry. Zgounder mine is well connected
to road network, and has access to ports for export – it is located 56 km from the Agadir-Ouarzazate
main road, and 260 km from the port of Agadir. Boumadine mine is also located 295 km to the east of
Ouarzazate and 71 km southwest of Errachidia. Besides, state significantly contributes (50-70%) of total
costs for infrastructure requirements of the mining projects.
Location of Zgounder mine with respect to
Agadirvii
Morocco’s Infrastructurevi
Maya Gold & Silver – Arrowhead BID
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TSX.V:MYA, OTC:MYAGF
See important disclosures on page 21 of this report.
The company has skilled labor for its ongoing project, Zgounder, since the manpower available in the
nearby villages had earlier worked in the same mine for previous operators such as Somil and CMT.
Favorable taxation laws for export-oriented mines: In Morocco, the taxation laws of the mining industry
is the most advantageous for international players, most particularly for export-oriented mines. The
Kingdom of Morocco provides a corporate tax holiday for the first five years of the mining business.
Following the first five years, the state levies a corporate tax of 35%, with a provision of 50% tax
reduction on income from exports. We believe that Maya is well-positioned to take the benefit of these,
as the output of its mines will be primarily exported (the current production of Zgounder mines is
delivered to a refiner in Switzerland).
Similar characteristics to the largest African silver mine, Imiter: Imiter is the 11th leading primary silver
mines in the world in 2013 with a production of 6.24MMoz, according to the Silver Institute’s World
Silver Survey 2014 publicationviii. The Zgounder deposit bears structural, lithological and mineralogical
resemblance with the Imiter depositix, and is considered to be the 2nd important silver mine in Morocco
after Imiterx.
Relatively shorter timeframe to resume production: The company‘s flagship Zgounder deposit has the
advantage of having existing infrastructure (partly developed), and existing stockpiles and underground
broken ores (left by previous operators), in addition to the potential mineralization from underground
deposit. Also, Boumadine has potential mineralization from underground deposits and surface tailings.
We believe that the existing infrastructure, coupled with material from tailings would help resumption of
production in a relatively shorter span of time, thus entailing early cash-flows for the company while
developing the mine to process underground deposits.
Portfolio and Risks
Capital Expenditure Financing: The company has planned an expenditure of USD5.0MM for near-term
exploration and upgradation of the Zgounder project. Additionally, an investment of upto USD 36MM
over 48 months will be required in the Boumadine project for exploration and development. Though we
believe that the company would be able to secure financing for its near-term exploration activities;
significant financing requirements will be required as the company progresses to advanced stages,
particularly in Boumadine project.
Commodity price risk: Maya Gold and Silver’s projected revenue and operating margins significantly
depend on the price of silver. The volatility in silver prices exposes the company to commodity price risk.
However, we believe that the commodity price risk will diversify following the commencement of
production from Boumadine mine (polymetallic deposit containing gold, silver, zinc, and lead).
Corporate Strategy:
Ramp-up production and conduct further exploration in Zgounder mine: The company aims to ramp-up
the production process of Zgounder by increasing the feed rate to 500tpd, a 2.5x increase from 187tpd
(as suggested by the pre-feasibility study), resulting in a near threefold increase in production to
1.4MMoz silver. Simultaneously, the company is also conducting exploration to establish additional
resource and reserve estimates in the project area, and has allocated a budget of USD 1.5MM for the
same during FY15.
Development of Boumadine mine: In addition to its flagship Zgounder project, the company also plans
to concentrate on Boumadine polymetallic deposit, which contains lead and zinc mineralization with gold
and silver as byproducts. As soon as possible, the company plans to commence metallurgical and
compilation works in the project, at an estimated cost of USD 1MM.
Maya Gold & Silver – Arrowhead BID
Due Diligence and Valuation Report
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TSX.V:MYA, OTC:MYAGF
See important disclosures on page 21 of this report.
News
Commenced 2015 drilling program at Zgounder: On April 21, 2015, the company announced
commencement of the 2015 spring drilling program has commenced at its Zgounder Silver Mine. The
program has been extended to 6000m (previously 4300m). The objective of this surface drilling program
is to validate the widespread mineralization hypothesis, to explore lateral extension of the deposit to the
north and the east and to explore extension at the depth of the deposit.
Zgounder silver production – 35,912oz in March 2015: On April 9, 2015, the company released
March 2015 production figures of 35,912oz silver at the Zgounder silver mine – the highest monthly
production to date. The achieved results were produced from 4,370T at 307.6g/T Ag. The recovery rate
was 83.07% with most of the mineralized materials comes from fresh hard rock. The company also
delivered 1,189.9kg of ingots (98.2% fineness) to MKS refiner on March 25, 2015, for the net sales
proceed of 37,257.4oz silver metal.
Non-Brokered Private Placement of CAD1.2MM for exploration at Zgounder: On March 23, 2015,
the company raised CAD 1.2MM capital through a non-brokered private placement. The company issued
4.8MM units at CAD0.25 per unit, with each unit consisting of 1 common share and 0. 5 share purchase
warrant. The company plans to use the net proceeds to complete a 13-hole drilling program at its
Zgounder Silver Mine. The drilling program is scheduled to commence in May 2015.
Zgounder production and FY15 outlook: On March 2015, Maya reported the production of 512kg,
482kg and 783kg of silver in the month of December 2014, January and February 2015 respectively.
The production was lower during December 2014 and January 2015 due to intensive rainfall and adverse
cold weather; however production increased in February 2015 due to improved weather conditions. The
company also provided a production guidance of 570koz silver for 2015 at an estimated cash cost of
USD11.50–12.38/oz.
Zgounder silver production – 33,565oz (1,044kg) in November 2014: On December 17, 2014,
Maya released November 2014 production figures 33,565oz (1,044kg). This shows a production growth
rate of 9%, compared to previous month, in spite of unusually intensive rainfall and flash floods across
the region. The company also delivered 82 ingots for 849 kg (26,755 oz) silver and created a further
inventory of 203kg Ag.
Zgounder silver production – 945.5kg in October 2014: On November 19, 2014, Maya Gold &
Silver announced the production of silver from its Zgounder silver mine in October 2014. It produced
945.5kg (29,409oz) of silver from 86 ingots grading an average of 98.4%Ag within 24 days of operation
with mineralized materials from ancient stockpiles and underground stockpiles. Underground broken ore
were left in the stopes Level 2035 by the previous operator and Mill facility operated at an average of
187 tpd.
Maya officially inaugurated Zgounder, which produced 796kg silver in September: On October
8, 2014, Maya announced that the Zgounder silver mine has been officially inaugurated on September
20th, 2014 amidst the presence of a large delegation from the Ministry of Energy, Mining, Water and
Environment of Morocco, led by the Minister Mr. Abdelkader Amara, the Governor of Taroudant, Mr.
Fouad M’Hamdi and several members of the board of Maya. It also announced the production of silver
from Zgounder in September 2014, amounting to 796kg (25,591oz) from 67 ingots, grading an average
of 99% Ag. It was the result of 24-days operations with mineralized material from ancient stockpiles on
hand and underground stockpile. The mill facility was operated at an average of 187.4tpd.
Maya’s Shareholders Exercised USD2.0MM Worth of Warrants @ USD0.35: On September 18,
2014, Maya Gold & Silver Inc. announced that four shareholders exercised 5,779,791 warrants at an
exercise price of USD0.35/share pursuant to the previously announced private placements of the
Corporation closed in September and November 2012. The exercise of warrants has led to the total
receipt of USD 2,022,900.
Zgounder second silver pouring recorded, ramped up to 484kg (15,434oz) of Silver: On
September 17, 2014, Maya announced that Zgounder silver mine ingots poured silver for the second
time on September 10th, 2014. It produced 483.92kg (15,434oz) of silver from 42 ingots grading an
Maya Gold & Silver – Arrowhead BID
Due Diligence and Valuation Report
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TSX.V:MYA, OTC:MYAGF
See important disclosures on page 21 of this report.
average of 99.6% Ag. It was the result of a 17-days operation with mineralized material from ancient
stockpiles on hand and underground stockpile. The mill silver metal recovery achieved around 87%.
Maya announced its First Silver Pour at Zgounder Silver Mine: On August 28, 2014, Maya
announced its successful first time silver pour at Zgounder silver mine in Morocco during the ramp-up
period. The ingots poured 234.5kg of silver on August 25, 2014 from 20 ingots grading between 9097%Ag. Mill silver metal recovery achieved around 86%.
Zgounder silver mine started operations in Morocco: On July 22, 2014, the Corporation announced
that the milling operations have started at Maya’s flagship Zgounder silver mine in Morocco. It started
the processing of ore, grading at an average of 245 g/t and the silver recovery is expected to be in the
range of 92%. This ore has been sourced from 35kT of mineralized rocks that were transferred to
storage areas adjoining the plant from the existing 66kT of “ancient stockpiles”.
Pre-Feasibility report produced positive results for Zgounder Silver Mine and Maya announced
first Mineral Reserves at Zgounder: On May 22, 2014, Maya announced that Zgounder silver mine’s
pre-feasibility report (PFS) has been filed on SEDAR and the results from PFS report, outlined by
GoldMinds Geoservices Inc highlighted the significant presence of inferred resources, which have the
potential to be converted to reserves with additional drilling. There remains an excellent exploration
potential to further expand the size of the existing mineral inventory. This report provided the profitable
estimate as compared to the Preliminary economic Assessment (PEA), due to the exclusion of inferred
resources.
Maya Gold & Silver provided an update on production at Zgounder, granted options and
announced the date of AGM: On May 13, 2014, Maya provided an update on Zgounder production
that 35kT of ore are present from existing stockpiles at 245 g-Ag /t, which are stored close to the mill.
The mill balls and cyanide, which are required to start the mill of silver metal, are expected to arrive in
Casablanca on May 18th and June 8th, 2014 respectively. It also informed that the underground
development is well underway and the production is expected to start in mid-June.
Maya completed CAD10MM financing: On March 28, 2014, Maya announced the closing of the third
and final tranche of its non-brokered private placement amounting to CAD7.9MM as part of a total of
CAD 10MM. It is an 8% unsecured convertible debentures of Maya, which has a maturity period of 36
months and interest on the same will be payable on a quarterly basis.
Preliminary Economic Assessment (PEA) for Zgounder Silver mine announced: On March 20,
2014, Maya announced that it has filed Preliminary Economic Assessment (PEA) report and the associate
mineral disclosure on SEDAR for its Zgounder Silver mine in Morocco. Based on Mineral resource
estimate by GoldMinds Geoservices Inc, the economic potential and exploration potential of the
Zgounder Mine were confirmed. The results stated that the Zgounder mine has a potential mining life of
10 years with the current resources and silver production of 647koz in the first year, followed by a
regular production of 1027koz/year at a total average operating cost of USD113.5/t. High Mill feed grade
was estimated at 360g/tAg. The NPV is expected to be USD65.9 MM, which is discounted at 6.5% at a
silver price of USD22.0/Oz and has an IRR of 174%. There is also an additional capital requirement of
USD 3.8MM, including the concentrator expansion.
NI 43-101 Preliminary Economic Assessment gave positive results on Zgounder Silver Mine:
On March 5, 2014, Maya announced the NI 43-101 Preliminary Economic Assessment results at the
Zgounder Silver Mine in Morocco, effective from January 10, 2014. SGS Geostat Blainville (SGS)
prepared the PEA Study with the contributions of Goldminds Geoservices Inc. Québec City (GMG).
Maya Gold & Silver – Arrowhead BID
Due Diligence and Valuation Report
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See important disclosures on page 21 of this report.
Listing Information
Maya Gold& Silver (MYA) was listed on the Toronto Stock Exchange (TSX) in Canada on July 2, 2008.
Contacts
Head office
10 de la Seigneurie Blvd. East Suite 207, Blainville, Québec, J7C 3V5 (Canada)
Telephone
+1 450 435 0700
Facsimile
+1 450 435 0705
E-mail
[email protected]
Major Shareholders
Equity Holder
No. of ordinary shares held
(MM)
Percentage
shareholding
Belgian Shareholders (6 HNIs)
44.136
36%
Float
28.198
23%
18.39
15%
14.712
12%
Board
9.808
8%
Swedish (1 Institution + HNIs)
7.356
6%
5 European Institutions
Praetorian
Source: Corporate presentation as on February 2015
Maya Gold & Silver – Arrowhead BID
Due Diligence and Valuation Report
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See important disclosures on page 21 of this report.
Management and Governance
Personnel
Designation
Current and total experience
Réjean Gosselin
Chairman
Rejean Gosselin, a geologist and corporate executive, has over 25 years
of experience as director and officer in several Canadian public mining
companies. He had obtained a Master Degree in geology from Universite
Laval in 1979. He has involved in Mining exploration in Mexico for the
past 5 years. He was President, CEO and Director of Dia Bras
Exploration Inc., before founding Maya Gold & Silver Inc. in 2008.
Guy Goulet
Chief Executive
Officer & Director
Guy Goulet graduated with an engineering degree in geology from
l’Ecole Polytechnique de Montreal. Over the past 20 years, he has sat on
several boards of directors for both public and private mining
companies. From 2000 to 2008, he was the CEO and Chairman of the
Board of H2O Innovation and joined Maya as President in November
2008.
Noureddine
Mokaddem
President & Director
Noureddine Mokaddem, a professional Industrial Engineer, holds a B.Sc.
Engineering from State School of Engineers, Mons in Belgium. He has
held senior roles within, ONA Group and OCP Group and has been
instrumental in the development of several large projects and mining
operations such as Akka Gold and Guemassa in Morocco.
Alain Lévesque,
CPA, CA
Chief Financial
Officer
Alain Levesque has been a member of l’Ordre des Comptables
Professionnels Agréés du Québec since 1995 and holds a BA in Business
Administration from Université Laval. He has over 16 years of
experience in this business, including the accounting firm Raymond
Chabot Grant Thornton and Deloitte as an auditor. He also worked for
several years as a consultant for various companies. Later, he occupied
the position of Chief Financial Officer at Ranaz Corporation. Through his
various jobs and mandates, he has acquired extensive experience in
financial reporting and management in several sectors including mining.
René Branchaud
Corporate Secretary
Director
René Branchaud has been a practicing lawyer since 1983 and also a
partner with the law firm Lavery, de Billy. He practices in the areas of
securities law, mergers and acquisitions and corporate law. He assists
companies in connection with their incorporation, corporate structure,
shareholders’ agreements, private placements, public offerings, stock
exchange listings as well as dispositions and takeovers. He is also on the
Board of Directors of several public corporations. In addition to this, he
serves on several committees of the board of directors, including
corporate governance committees and ad-hoc committees created for
specific transactions (mergers, takeovers). He also advises directors
who sit on ad-hoc committees.
Maya Gold & Silver – Arrowhead BID
Due Diligence and Valuation Report
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TSX.V:MYA, OTC:MYAGF
See important disclosures on page 21 of this report.
Assets and Projects
Maya Gold & Silver Inc is currently focused on advancing its precious and base metals assets in Morocco.
Currently, the company has concentrated on its flagship project, Zgounder – the second largest silver
mine in Morocco. The company is also working on developing the Boumadine project, with a potential of
polymetallic mineralization of silver, gold, lead and zinc.
In addition to Zgounder and Boumadine, the company also holds several properties in Morocco –
Amizmiz, Azegour (a former W, Mo, Cu Mine), 233263 permit and Touchkal.
Company’s Asset Portfolio
Project locations
Project overview
Zgounder Silver Mine
Morocco
•Target Commodity: Silver
•Surface Area: 16 km².
•Interest - 85% carried interest
Boumadine
Polymetallic Mine
Morocco
•Target Commodity: Silver and Lead-zinc
•Surface Area - 32km2
•Interest - 85% working interest
Source: Company filings
Source: Company filings
3,746 kg silver ingots during FY14, with initial
feed being sourced from the historical residues,
stock piles and underground ores and processed
in a cyanidation plant. Between Jan-Mar 15, the
company has produced 2,382kg silver – the effect
of lower production in January was offset by the
record production in March 2015.
Zgounder Silver Mine Project
Company’s interest:
85% carried interest,
remaining 15% interest held by ONHYM
Asset Summary: Zgounder is a historically
operating mine, and is spread over an area of 16
km².
The
mine
has
similar
geological
characteristics to Imiter Mine – the largest silver
mine in Africa. The company has completed a
pre-feasibility study on the mine, suggesting
economic
viability
of
the
project
from
underground reserves.
The company is on track to commence
commercial production in 3Q15. During 2015, the
company has guided production of 570koz silver
at an estimated cash cost of US$ 11.50-12.38/oz.
Maya is also considering a significant ramp-up of
production
from
2016
onwards
through
introduction of flotation circuit, which would
increase feed rate while simultaneously reducing
the production and other costs involved. The
floatation cells will require an investment of USD
3.5MM. Post the introduction of flotation cells, the
company estimates production of 1.4MMoz silver
at a feed rate of 500T/day.
The mine has a proven and probable reserve
estimate of 573kT ore at an average grade of
317g/T silver. In April 2015, the company
commenced a surface drilling program to obtain
further information on potential extensions of
known mineralized structures.
In July 2014, the company commissioned the
milling operations in the project and produced
Maya Gold & Silver – Arrowhead BID
Due Diligence and Valuation Report
Target commodities: Silver
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See important disclosures on page 21 of this report.
Location: Taroudant province of Morocco, 265
km east of the port city of Agadir.
Historical stockpiles: The Zgounder mine is
estimated to contain ancient residues, recent
tailings and underground workings (left by
previous operators) of 66kT (cutoff: 325g/t Ag),
500kT (cutoff: 125g/t Ag), and 870kT (cutoff:
405g/t Ag) respectively.xi
Regional geology: The project is located along
the central Anti-Atlas Mountains on the NorthWest Siroua massif. The deposit is estimated to
be of late Neoproterozoic age (approx. 550 million
years, similar to Imiter mine), and primarily
comprises of three major geological formations –
Blue, Brown and Black. While the Blue and Brown
formation are characterized with a major clastic
component intercalated with volcanics, Black
formation is composed of a basal felsic volcanic
complex overlaying the two formations.
Additional resource potential: The current
resource in the mine is estimated over 750m
strike length, 100m width, and 275m depth.
GoldMinds Geoservices Inc (GMG) also estimates
an additional potential of 1-2MMT mineralization
at average grade of 300-400g/T Ag. However,
these are not NI 43-101 compliant, and will
require further exploration and drilling.
Zgounder – Regional Geology
Pre-Feasibility Report: In May 2014, the
company released the Pre-Feasibility study (PFS)
on the project. The report estimated a mine life of
6 years, with an NPV of USD 27.9MM (at discount
rate of 6.5% and Ag price of USD 20.5/oz) and
IRR of 128%.
The report suggests an initial feed rate of
200T/day during the first year and 300T/day
thereafter. Silver production is expected to be
582koz in Year 1, and would subsequently
increase to 885.4koz in Year 2 and 3, and 914koz
in the last three years. The report estimates
additional capital cost of USD 3.8MM for
concentrator
expansion,
and
the
average
operating cost is estimated to be USD109.50/T.
Source: Company filings
Potential mineralization: The project has a NI
43-101 compliant resource estimate of 538.7kT
Measured and Indicated resources (at avg. grade
of 343g/T Ag), and 352.8kT of inferred resources
(at avg. grade of 463g/T).
Resource
estimate
Tonnage
Ag grade
g/T
Contained
Ag (MMoz)
Measured
142,100
304
1.391
Indicated
397,000
357
4.560
M+I
538,700
343
5.948
Inferred
352,800
463
5.254
Historical mining: Zgounder was an operating
mine from 1982-1990. The mine was operated by
Somil, which processed 500kT ore at 330g/T
silver during the period. Since 1990, the mine has
been put under care and maintenance by ONHYM.
In 2012, Maya Gold and Silver acquired 85%
interest in the mine from ONHYM for a cash
consideration of USD 5.65MM.
FY14 Production: On July 22, 2014, the
company announced commencement of milling
operations at the project from ancient stockpiles
of ore left in the stopes. During FY14, the
company produced 3,746 kg silver ingots as part
of its ramp-up operations. Of this it shipped 3,410
kg silver ingots to MKS refiner in Switzerland
(accounting for fusion and melting loss, payments
were made for 3,331kgs of 99.9% fine silver).
In May 2014, the company released reserve
estimate of 573kT, containing 5.845MMoz silver
at an average grade of 317.3g/T (cutoff grade:
161 g/T Ag).
Reserve
estimate
Tonnage
Ag grade
g/T
Contained
Ag (MMoz)
Proven
152,000
281
1.371
Probable
421,000
330
4.474
Total
573,000
317.3
5.845
Maya Gold & Silver – Arrowhead BID
Due Diligence and Valuation Report
Recent Developments: In October 2014, the
company initiated underground development to
generate further stock piles for processing. It has
advanced the underground development in 2015,
and
expects
commercial
production
from
underground mining from 3Q15. Currently, the
10
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See important disclosures on page 21 of this report.
silver
was
produced
through
processing
mineralized material and ore (from broken ore
left in the stopes, and blasting).
GMG recognizes additional structures and depth
extensions, which could potentially offer resource
upside – however, this needs to be confirmed by
drilling.
During FY15YTD, the company had produced
2,382kg silver (Jan: 482kg, Feb: 783kg, Mar:
1,117kg). Production was lower in January due to
adverse weather conditions; however it recovered
in February 2015, and achieved the highest
monthly production to date in March 2015.
Further exploration: As per PFS estimate, the
mine has a mineral potential between 1.5 and 2.0
MMT at 300 to 400g/t Ag, in addition to its
existing resources.
In April 2015, the company commenced a
6,000m surface drilling program to validate
widespread mineralization hypothesis, explore
lateral extension (to the north and the east), and
extension at depth. To finance the program, the
company raised CAD1.2MM through private
placement in March 2015.
FY15
guidance:
The
company
provided
production guidance of 570koz silver for FY15,
and estimates cash costs to remain at levels of
USD 11.50-12.38/oz Ag. It also expects to
increase its mill recovery once it reaches
commercial production in 3Q15.
Zgounder – exploration targets
Proposed capacity upgrade: Initially, the plant
feed rate is estimated to be at levels of 200300T/day, which implies a mine life of 6-8 years.
The feed will be processed in a cyanidation plant,
already installed in the mine.
The company is considering increasing the feed
rate 500tpd through introduction of grinding and
flotation circuit. The introduction of flotation cells
will significantly benefit the company, in terms of
increased and early production (from 0.6MMoz
silver to 1.4MMoz silver), coupled with lower cost
profile (from USD12.38/oz to USD 10.52/oz).
Source: Company filings
Proposed Process Flowsheet
Boumadine Polymetallic Mine
Company’s interest: 85% working interest,
remaining 15% interest held by ONHYM.
Asset Summary: Boumadine is a polymetallic
deposit (operational till 1992), and consists of
two permits spread over an area of 32km2. The
project has a historical resource estimate of
3.84MMT, along with recoverable 240kT from
surface tailings. The company plans to conduct
metallurgical and exploration works on the
project with an investment of USD 1MM.
Subject to the results of the exploration program,
it plans to extract the resources in two phases.
Phase 1 will comprise extracting gold and silver
from surface tailings through a roaster. Phase 2
of
the
project
will
extract
polymetallic
underground resources, with introduction of
flotation and grinding circuit. Phase 1 and Phase 2
are expected to incur capital expenditure of USD
21MM and USD 15MM respectively.
Source: Company filings
Project Schedule: The company is currently
focused on bringing the mine to commercial
production by 3Q15.
Initially, production is expected to be 570koz
silver at feed rate of 187T/day. Post the initial
phase, the company plans to increase the feed
rate to 500T/day by 2016 through flotation cells.
The grinders and flotation cells are expected to
cost USD 3.5MM.
Maya Gold & Silver – Arrowhead BID
Due Diligence and Valuation Report
Target commodities: Silver, Gold, Lead and
Zinc
11
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Location: 17km north of Tinejad, accessible from
the N10 Highway. It is located 295 km to the east
of Ouarzazate and 71 km southwest of Errachidia
resources at average grades of 0.86% Pb, 3.9%
Zn, 203 g/t Ag (25.1MMoz) and 3.60 g/t Au
(444.3koz).
Regional geology: The project is characterized
as low-intermediate sulphidation epithermal
silver-gold base metal deposit, with the potential
of
discovering
Cu±Au
porphyry-type
mineralization at depth.
Historical residues: The deposit also contains
240kT recoverable material from surface tailings,
at average grade of 178g/t Ag and 2.80g/t Au.
Project schedule: The company plans to
commence metallurgical and compilation works in
the project, at an estimated cost of USD 300k
and USD 700k, respectively. Following the study,
the company plans to conduct a drilling program
to validate and establish the historical resources
in the project area.
Boumadine – Porphyry Cu-Au target zone
Boumadine – Compilation and
exploration program
Source: Company filings
Source: Company filings
The mine is located within Ougnat Proterozoic
window, comprising folded & metasedimentary
rocks cut by late granodioritic plutons and
unconformably overlain by Late Proterozoic
volcano sedimentary sequences. The basal
sequence is made
of ignimbrite sheets,
vitroclastic tuffs, and intercalations of andesite
flows
modeling
the
Tamerzaga-Timrachine
Formation (TTF). The deposit is contained within
the TTF, which is covered by shallow lacustrine
sedimentary and minor volcanic rocks.
Medium term production plan: Subject to the
results from the metallurgical and compilation
study, the company plans to extract the
resources in two phases (surface tailings, and
underground resources):
Phase 1: In the first phase, the company plans to
retrieve gold and silver from surface tailings. The
extraction and processing will require investment
in roaster (USD 21MM), which would enable
production of 0.8MMoz Ag and 12.5koz Au. The
production cost is expected to be USD 7.50/oz Ag
and USD 750/oz Au. The company plans to
commence Phase 1 operations by mid-2017.
Historical
mining:
Boumadine
was
an
operational mine till 1992, and was operated by
BRPM, SODIM, and SODECAT. During the period,
261.5kT ore was extracted from the mine, at
average grade of 1.5% Pb, 3.8% Zn, 200g/T Ag,
and 3.5g/T Au.
Phase 2: In the second phase, the company plans
to
extract
and
process
the
polymetallic
underground resources (Gold, Silver, Lead and
Zinc). The company also plans to introduce
Grinders and Flotation Cells (USD 15MM), which
would enable production of 0.7MMoz Ag, 13.0koz
Au, 1.5Mlbs Pb, and 11.0MMlbs Zn.
The
production cost is expected to be USD 8.50/oz Ag
and USD 850/oz Au, USD 950/T Pb, and USD
850/T Zn.
In 1Q13, Maya Gold and Silver acquired 85%
interest in the mine from ONHYM for a cash
consideration of USD 5.15MM.
Potential mineralization: In November 2013,
the company filed a NI 43-101 report to support
the historical resources estimated by BRMP in
1998. The report suggests 3.84MMT historical
Maya Gold & Silver – Arrowhead BID
Due Diligence and Valuation Report
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Technologies and Markets
Major silver producing firms (2013)
Silver
Chemistry and Propertiesxii: Silver is a white,
soft and lustrous metal, with the symbol Ag and
atomic number 47. It is also a strong, malleable
and ductile metal with the highest electrical and
thermal conductivity than any other metal. The
metal is stable in pure air and water; however it
gets tarnished when exposed to ozone or
hydrogen sulfide, when a black layer of silver
sulfide is formed. Silver is easily soluble in nitric
acid
to
produce
silver
nitrate
that
is
photosensitive and readily soluble in water.
Sources xiii : Silver generally occurs in its pure
form, as an alloy (mainly with gold), in minerals
(argentite) and in ores containing sulfur, arsenic
and chlorine. The main sources of silver are
copper, nickel, lead and zinc ores. It is mostly
found in Peru, Bolivia, Mexico, China, Australia,
Chile, Poland and Serbia.
Source: Silver Institute
Applications xvi : Silver is primarily used as a
precious metal in jewelry, since it does not react
with sulfuric acid as a result of which it helps to
remove copper oxide while making jewelry. Its
halide salts like silver nitrate are used in
photography, which helps to record a latent
image as it is photosensitive. It is mainly used for
making
currency
coins,
jewelry,
utensils,
dentistry (for dental fillings), photography and
electronics (due to its high conductivity) and
other industrial applications. It is also employed
in electrical industry, where silver paints are used
to make printed circuits.
Productionxivxv: In 2014, silver mine production
increased by 3.8% to 854MMoz attributable
mainly
to mining sector, which had strong
growth from the beginning and the ramp up of
production operations. Mexico was the largest
silver mine producer, followed by China, Peru,
Mexico, Australia and Russia.
Global Silver Mine Production (2014E)
Demand xvii : The demand for silver is mainly
driven by its physical demand and its use in
industrial application.
In 2013, the global demand for physical silver
and industrial applications demand were down by
less than 1%, to 586.6 MMoz. However, in Asia,
there was a 3% increase in the industrial silver
demand, which is mainly due to the demand in
China from electrical and electronic sectors and
ethylene oxide industry.
The global silver jewelry demand increased by
10% compared to the previous year in 2013.
Likewise
the
global
silverware
fabrication
increased by 12% to a three-year high due to
strong gains in India and China. However, the
demand for silver in photography declined by 7%
in 2013, the lowest decline percent in the last
nine years.
Source: USGS
The major producers (2013) were Fresnillo Plc in
Mexico (output of 38.8MMoz), followed by BHP
Billiton (37.6MMoz, Australia), KGHM Polska
(37.3MMoz, Poland), GlencoreXstrata (37.1MMoz,
Switzerland) and Gold Corp (30.3MMoz, Canada).
Maya Gold & Silver – Arrowhead BID
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Since 2011, the uncertainty in the global
economy has impacted silver demand heavily,
particularly in the 2014. Silver has shed 67%
since it peaked at USD49.0/oz in 2011. In 2014,
Silver prices came down 12%, compared to 1%
drop in gold prices.
World Silver demand by category
In 2015, the silver prices are expected to
increase, backed by the expected growth of global
economy. According to Macroeconomic Capital
economics consultancy, the silver prices are
expected to outperform gold and would increase
to a maximum of USD25/Oz by 2016.
Silver price trend over past five years
Source: GFMS, Thomson Reuters
Supply xviii : According to the Silver Institute’s
World Silver Survey 2014 publication, the total
silver supply has dropped by 23.2% to 199.7
Moz, of which, scrap was reduced by 20%, after
averaging to 25% of the total supply in the
previous two years. This served as a substantial
contributor to the physical market deficit posted
in 2013.
Market Trends: Commodity Pricesxix
Currently silver is trading in USD16-16.5/oz
range, and averaged USD19.08/oz in 2014xx.
Maya Gold & Silver – Arrowhead BID
Due Diligence and Valuation Report
Source: www.kitco.com
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Project Risk Profile Analysis
Based on our analysis of the project stage,
resource
characteristics
and
management
expertise, we believe that the Zgounder project
has a LOW Risk Profile, while the Boumadine
project has MEDIUM TO HIGH Risk Profile.
Zgounder Project – LOW
–
Though the production was impacted by
adverse weather conditions in December 2014
and January 2015; we consider this as a oneoff situation which is unlikely to effect the
operations in future.
–
The initial feed rate is expected to be
187T/day. The management further plans to
introduce grinding and flotation cells to the
plant, which will increase the feed rate to
500T/day.
–
Further, the project has no known regulatory
or environmental interferences which will
hamper the development.
Considering the above factors, we believe that
the
project
has
attractive
operational
characteristics. As such, we believe the
project to have a LOW operational risk profile.
Project Stage Risk – LOW
–
The project is on track to
commercial production in 3Q15.
–
The mine has a proven and probable reserve
estimate of 573kT ore, containing 5.845MMoz
silver.
–
A prefeasibility study on the mine, released in
May 2014, also suggests the economic
feasibility of the mine. However, the feasibility
study on the project is not yet completed.
Key Personnel Risk – LOW
–
–
commence
Based on the above factors, we consider the
Zgounder project to have a LOW project risk.
Financing/Capex Risk – MEDIUM
–
Post its acquisition in 2012, the company has
invested significant capital to bring the asset
to production.
–
The company is planning to upgrade the
process to increase the capacity to 500T/day,
which is expected to result in a capital
expenditure of USD 3.5MM.
–
The current management has experience in
exploration, project development, mining
operations and financial and consulting fields.
–
The management team was also involved in
development of mining projects, both in
Morocco and abroad.
–
Considering the diversified experience of the
management, we consider the project to have
a LOW Key Personnel Risk profile.
Boumadine Project – MEDIUM to HIGH
–
The company has raised CAD 1.2MM through
private placement to fund its spring drilling
program, commenced in April 2015.
–
–
Based on the above factors, we consider
Zgounder to have a MEDIUM financing risk
profile. While the delay in the financing would
not
significantly
impede
the
existing
production, the capex risk would substantially
decrease as the company secures funding for
mine up gradation and further exploration.
The mine has a historical resource estimate of
3.84MMT. However, significant metallurgical
and exploration work is required in the deposit
to establish NI 43-101 compliant resource and
reserve estimates.
–
In the near term, the company expects to
incur USD 1MM in exploration and compilation
work, and USD 2MM in working capital.
–
Subject to the results of the exploration, the
company will then have to establish feasibility
and raise significant capital to further advance
the project.
–
Based on the above factors, we consider the
project to have MEDIUM to HIGH risk profile.
However, we expect the risk to decrease as
the project advances to the next level.
Operational Risk – LOW
–
–
Zgounder was an operating mine till 1990. It
is well connected to the road network, and is
265 km from the port city of Agadir.
In July 2014, the company commenced the
production from ancient stockpiles of ore left
in the stopes.
Maya Gold & Silver – Arrowhead BID
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Risk Parameters – Definition
like capex and opex, project stage risk is reduced
from high to medium.
Project Stage Risk
The following are the various stages of a project:






Low risk: As the project advances site
construction and commissioning, the project
stage risk is reduced further to the low risk
category.
Early stage exploration: In this stage, the
exploration location is decided using a
combination of various techniques such as
samplings, drilling, geophysics, and other
extensive geological and exploration services.
Project Financing Risk
Initial stages of project development, including
exploration and resource estimation, require
higher levels of capital investment. Investments
in the exploration stage can be riskier as the
economic viability of deposit is not established.
The risk level of the capital reduces as it
advances through various exploration stages.
Pre-feasibility study: A preferred base-case
option is identified from the possible options
available to the company. The preferred basecase option provides some level of confidence
in the production capacity, ore grades, metal
recovery, capital and operating costs, project
schedule, and project risks/opportunities. A
financial analysis is also carried out to assess
the economic viability of the project.
Initial stages of exploration and development of
the project attract high-risk-capital investors. As
the project stages proceed, the company has
varied options such as equity (IPO) and debt
financing, among others.
Feasibility study: This includes a collection
of more detailed information, additional
designs, and project-specific cost information
to refine the project cost and schedule. It also
addresses information
gaps, issues of
concern, risks, and opportunities identified in
the advanced exploration stage.
High risk: Companies in the initial stages of
project development without proper estimates on
fund requirement and clear view on financing
options are considered to have high financing
risk.
Detailed engineering: Detailed designs
based on the project scope, concept designs,
and the purchase of key plant equipment are
completed.
Medium risk: When a company has established
reasonable estimates on fund requirement and
has visibilty on early funding for planned project
milestones, it is estimated to have medium
financing risk.
Site construction: Site construction starts as
per the field engineering designs and is
expected to confirm adherence to appropriate
quality-control practices.
Low risk: When the company’s fund requirements
are clearly stated and has already secured
adequate funding, the company has low financing
risk.
Commissioning and start of operations:
After
the
completion
of
construction,
operability testing, and acceptance, the owner
is asked to confirm if the project construction
and performance are as per the design and
meet the required plant performance and
safety requirements. The final operating
control programs are then completed,
installed, and tested for functional efficiencies.
Operational Risk
Following are the various parameters considered
to measure operational risk:

Geopolitical and Regulatory factors: The
location of projects and their regulatory
environment are key factors in acquiring
licence and the subsequent development of
the project. Obtaining necessary approvals
can be time consuming, the delay of which
could result in monetary losses, and
operational delay.

Environmental factors: The potential for
environmental damage caused by mining
activity and the likely cost to be covered by
High risk: We consider a project to have high-risk
when it is in the initial stages of development and
is yet to report a resource estimate on the
prospect.
Medium risk: On the completion of a prefeasibility report having initial evaluations of mine
characteristics and other operational estimates
Maya Gold & Silver – Arrowhead BID
Due Diligence and Valuation Report
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the company contribute to the economic
viability of the project.


High risk: The Company has a high operational
risk profile with assets that are in an early stage
of development and located in countries with
regulatory uncertainties.
Mining technique: The development plan for
the
mines,
including
the
extraction
methodology and the corresponding capex
estimates, together define the operational
efficiency of the project. The high quality of
ore reserves (grade) and the ease for
extraction
provide
higher
return
on
investment and reduce the operational risk
involved.
Medium risk: As the company progresses toward
the acquisition of necessary licenses and
environmental clearances, regulatory risks are
reduced. Also, depending on the resource grade
and the possible methodologies of extraction, an
operational risk profile is assigned in comparison
with peers.
Geotechnical and other factors: Mining
machinery transportation, implementation of
new
technology
for
operations,
and
availability of power supply in areas with
complicated geological and climatic conditions
determine operational risks. Other risks
include chances of flooding, pit slope, rim
slide and accidents caused by the use of
mining transport equipment in adverse
weather conditions.
Low risk: A company that is in the advanced
stages of development has attractive project
characteristics such as ore grade, capex, opex.
NPV and IRR too have low operational risk profile.
Key Personnel Risk
We consider a project to be of a lower risk profile
if the management team is highly qualified, has a
good experience in the resource sector and has
lower dependability on a few people. It is
desirable that the company has independent
directors on its Board and does not rely heavily
on a few individuals.
We consider a project based on all the above
parameters and assign high/medium/low risk
profiles in comparison with their peers. Also, as
the company moves to advanced stages,
operational risk is reduced considerably.
Maya Gold & Silver – Arrowhead BID
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Value
The Fair Market Value of Maya Gold & Silver’s shares stands between CAD 53.12MM and CAD 84.51MM.
The Fair Market Value for one Maya Gold & Silver’s publicly traded share stands between CAD 0.42 and
CAD 0.66.
Maya Gold & Silver Balance Sheet Forecast
CONSOLIDATED BALANCE
SHEET
year ending Dec 31
all figures in '000
CAD, unless stated
differently
Low bracket
estimates
2015E
2016E
2017E
2018E
2019E
2020E
2021E
Total Current Assets
Total Non-Current Assets
1,608
35,403
2,316
45,953
13,540
54,337
31,240
62,225
49,372
61,497
64,904
59,391
80,597
57,284
TOTAL ASSETS
37,011
48,269
67,878
93,465
110,869
124,295
137,880
Total Current Liabilities
Total Non-current Liabilities
12,345
8,310
14,087
15,430
16,062
22,310
18,103
29,330
19,365
31,130
20,591
31,130
22,092
31,130
TOTAL LIABILITIES
20,655
29,517
38,372
47,434
50,496
51,721
53,222
Total Shareholders’ Equity
16,355
18,752
29,505
46,031
60,374
72,574
84,658
TOTAL LIABILITIES and
EQUITY
37,011
48,269
67,878
93,465
110,869
124,295
137,880
Important information on Arrowhead methodology
The principles of the valuation methodology employed by Arrowhead BID are variable to a certain
extent, depending on the sub-sectors in which the research is conducted. However, all Arrowhead
valuation researches possess an underlying set of common principles and a generally common
quantitative process.
With Arrowhead commercial and technical due diligence, the company researches the fundamentals,
assets and liabilities of a company, and builds estimates for revenue and expenditure over a coherently
determined forecast period.
Elements of past performance such as price/earnings ratios, indicated as applicable, are mainly for
reference. Still, elements of real-world past performance enter the valuation through their impact on the
commercial and technical due diligence.
Arrowhead BID Fair Market Value Bracket
The Arrowhead Fair Market Value is given as a bracket. This is based on quantitative key variable
analyses such as key price analysis for revenue and cost drivers or analysis and discounts on revenue
estimates for projects, especially relevant to projects estimated to provide revenue near the end of the
chosen forecast period. Low and high estimates for key variables are produced as a valuation tool.
In principle, an investor comfortable with high brackets of our key variable analysis will align with the
high bracket in the Arrowhead Fair Value Bracket, and, likewise, in terms of low estimates. The investor
will also note the company’s intangibles to analyze the strengths and weaknesses, and other essential
company information. These intangibles serve as supplementary decision factors for adding or
subtracting a premium in investor’s own analysis.
The bracket should be taken as a tool by Arrowhead BID for the reader of this report and the reader
should not solely rely on this information to make his decision on any particular security. The reader
must also understand that while on the one hand global capital markets contain inefficiencies, especially
in terms of information, on the other, corporations and their commercial and technical positions evolve
rapidly. This present edition of the Arrowhead valuation is for a short-to medium-term alignment
analysis (one to twelve months). The reader should refer to important disclosures on page 21 of this
report.
Maya Gold & Silver – Arrowhead BID
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See important disclosures on page 21 of this report.
Information on the Maya Gold & Silver valuation
Maya Gold & Silver’ valuation methodology: The Arrowhead fair valuation of Maya Gold & Silver is
the based on the Discounted Cash Flow valuation method (DCF). We have presented a Sum-of-the-Parts
valuation (SOTP) methodology, and have valued each projects separately due to different stages of the
projects.
Time horizon: The Arrowhead fair valuation for Maya Gold & Silver is based on a DCF method. The time
period chosen for the valuation is the life of mine of the individual projects. While revenue is expected to
ramp up during 2017-2018 as both Zgounder and Boumadine project will be operational, the later years
are heavily discounted and have a marginal effect on valuation, which are included primarily to present a
full project cycle situation.
Underlying business plan: Maya Gold & Silver is currently focused on advancing exploration and
development of its flagship project Zgounder Silver Mine.
Terminal value: The terminal value is estimated to depend on a terminal growth rate of 0%,
representing the maturity, technology change, and prospective competitiveness in the business.
Prudential nature of valuation: This Arrowhead Fair Value Bracket estimate is a relatively prudential
estimate, as it is based on the company’s current flagship projects – Zgounder and Boumadine (with a
significant discount to Boumadine considering relatively early stages), and excludes the value of other
projects – Amizmiz, Azegour, 233263 permit and Touchkal.
Maya Gold & Silver – Arrowhead BID
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See important disclosures on page 21 of this report.
Key variables in Maya Gold & Silver revenue estimations
Variable 1 – Hypothesis for production
We have considered production to be in line with company estimates, including the increased production
from flotation cells from FY16 onwards.
Zgounder Ag Production (koz)
2015-2016
2016-2020
Low
500
1,300
High
570
1,400
For Boumadine project, we assume processing of Gold and Silver from surface tailings as part of Phase 1
production plan (scheduled in 2016). Post 2017, we have assumed production from underground
deposits (incl. addition of flotation cells). We have applied 10% discount to arrive at LOW estimates.
Boumadine 2016-2017
Production (koz)
Silver(Ag)
Gold (Au)
Low
720
11.2
High
800
12.5
Silver(Ag)
(koz)
Gold (Au)
(koz)
Lead (Pb)
(klbs)
Zinc (Zn)
(klbs)
Low
630
11.7
1,350
9,900
High
700
13.0
1,500
11,000
Silver(Ag)
(USD/oz)
Gold (Au)
(USD/oz)
Lead (Pb)
(USD/lbs)
Zinc (Zn)
(USD/lbs)
Low
16.0
1,150
0.8
0.9
High
18.0
1,250
1.0
1.0
Boumadine 2017-2022
Production
Variable 2 – Metal prices
Price
Variable 3 – Exchange rate
We have estimated the USD/CAD exchange rate based on current and expected economic conditions.
USD/CAD Exchange Rate
Low
1.20
High
1.25
Variable 4 – Implied P/NPV multiple
We have discounted the NPV of the project with P/NPV multiple to account for the inherent project risks,
including the current stage and the timelines to bring the project to production. The P/NPV multiple, in
conjunction with company’s interest in the project, is used to determine the implied equity value.
Being at the advanced project stage, we have assumed a P/NPV multiple of 1.0x for Zgounder project.
For Boumadine, we have estimated a multiple of 0.6x, accounting for the historical resources,
mineralization and previous operations in the project, thus relatively reducing the project risk and
increasing the probability of successful metallurgical and exploration program.
P/NPV
Zgounder Mine
1.0x
Boumadine Mine
0.6x
Maya Gold & Silver – Arrowhead BID
Due Diligence and Valuation Report
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See important disclosures on page 21 of this report.
Analyst Certifications and Important Disclosures
Investors are advised to gather and consult
multiple information sources before making
investment decisions. Recipients of this report are
strongly advised to read the information on
Arrowhead Methodology section of this report to
understand if and how the Arrowhead Due
Diligence and Arrowhead Fair Value Bracket
integrate alongside the rest of their stream of
information and within their decision taking
process.
Past performance of securities described directly
or indirectly in this report should not be taken as
an indication or guarantee of future results. The
price, value of, and income from any of the
financial securities described in this report may
rise as well as fall, and may be affected by simple
and complex changes in economic, financial and
political factors.
Should a security described in this report be
denominated in a currency other than the
investor’s home currency, a change in exchange
rates may adversely affect the price of, value of,
or income derived from the security.
This report is published solely for information
purposes, and is not to be considered as an offer
to buy any security, in any state.
Other than disclosures relating to Arrowhead
Business and Investment Decisions, LLC, the
information herein is based on sources we believe
to be reliable but is not guaranteed by us and
does not purport to be a complete statement or
summary of the available data.
Arrowhead Business and Investment Decisions,
LLC is not responsible for any loss, financial or
other, directly or indirectly linked to any price
movement or absence of price movement of the
securities described in this report.
Analyst Certifications
I, Samarth Agrawal, certify that all of the views
expressed in this research report accurately
reflect my personal views about the subject
security and the subject company.
I, Kanniga Rajamanickam, certify that all of the
views expressed in this research report accurately
reflect my personal views about the subject
security and the subject company
Important disclosures
Arrowhead Business and Investment Decisions,
LLC received fees in 2014 and will receive fees in
2015 from Maya Gold & Silver Inc. for researching
and drafting this report and for a series of other
services to Maya Gold & Silver Inc., including
distribution of this report, investor relations and
networking services.
Aside from certain reports published on a periodic
basis, the large majority of reports are published
by Arrowhead BID at irregular intervals as
appropriate in the analyst’s judgment.
Any opinions expressed in this report are
statements of our judgment to this date and are
subject to change without notice.
This report was prepared for general circulation
and
does
not
provide
investment
recommendations specific to individual investors.
As such, any of the financial or other moneymanagement instruments linked to the company
and company valuation described in this report,
hereafter referred to as “the securities”, may not
be suitable for all investors.
Investors must make their own investment
decisions based upon their specific investment
objectives and financial situation utilizing their
own financial advisors as they deem necessary.
Maya Gold & Silver – Arrowhead BID
Due Diligence and Valuation Report
21
TSX.V:MYA, OTC:MYAGF
See important disclosures on page 21 of this report.
Valuation
WACC
1.58%
1.0
Risk-free rate
Beta
xxi
Production
capacity
xxii
Risk premium
9.0%
xxiii
WACC
0.0%
xxiv
Max
value
Exchange rate
Please refer to the Key Variable Section
Min
value
10.13%
Terminal Growth Rate
Commodity
price
Cumulative Cash Flows and Valuation
FCFE (High) Time
Period -->
2015E
2016E
2017E
2018E
2019E
2020E
2021E
2022E
3,596
12,680
31,550
44,989
37,698
29,759
29,553
29,347
29,139
46
(47)
(243)
(425)
(5,782)
(4,785)
(4,749)
(4,713)
(4,676)
Capital Expenditure
(4,237)
(19,208)
(14,333)
(14,625)
(3,750)
-
-
-
-
Free Cash Flow
Present Value of
FCF
(596)
(6,575)
16,974
29,939
28,165
24,974
24,804
24,634
24,463
(541)
(5,421)
12,708
20,353
17,385
13,998
12,624
11,384
10,265
2015E
2016E
2017E
2018E
2019E
2020E
2021E
2022E
2023E
1,763
8,139
21,224
29,879
25,050
19,878
19,700
19,521
19,342
62
(15)
(167)
(310)
(3,588)
(3,071)
(3,040)
(3,009)
(2,977)
EBITDA
Tax
2023E
FCFE (Low) Time
Period -->
EBITDA
Tax
Capital Expenditure
(4,189)
(18,440)
(13,760)
(14,040)
(3,600)
-
-
-
-
Free Cash Flow
Present Value of
FCF
(2,363)
(10,315)
7,296
15,529
17,863
16,806
16,660
16,513
16,365
(2,146)
(8,505)
5,462
10,557
11,026
9,420
8,479
7,631
6,867
In the model, the valuation is continued till 2028 from which point the terminal value is established. For all data see reference table below
Arrowhead Fair Value Bracket
High
Low
Implied value – Zgounder project
48,205
36,714
Implied value – Boumadine project
44,795
24,962
Implied value – Corporate
(1,720)
(1,720)
xxv
+ Net Cash
(6,839)
(6,839)
Equity Value Bracket
84,507
53,116
Shares Outstanding (in '000)
127,403
127,403
Fair Value Bracket
0.66
0.42
Current Market Price
0.220
0.220
Current Market Capital (CAD MM)
28.03
28.03
Target Market Capital (CAD MM)
84.51
53.12
in CAD ‘000
Maya Gold & Silver – Arrowhead BID
Due Diligence and Valuation Report
22
TSX.V:MYA, OTC:MYAGF
See important disclosures on page 21 of this report.
Valuation – Zgounder project
FCFE (High) Time
Period -->
2015E
2016E
2017E
2018E
2019E
2020E
2021E
2022E
2023E
4,004
13,090
13,648
14,228
7,734
-
-
-
-
(64)
(158)
(165)
(174)
(961)
-
-
-
-
(3,029)
(4,375)
-
-
-
-
-
-
-
Free Cash Flow
912
8,558
13,482
14,055
6,772
-
-
-
-
Discount Factor
Present Value of
FCF
0.91
0.82
0.75
0.68
0.62
0.56
0.51
0.46
0.42
828
7,056
10,094
9,554
4,180
-
-
-
-
2015E
2016E
2017E
2018E
2019E
2020E
2021E
2022E
2023E
2,172
8,549
8,890
9,244
4,996
-
-
-
-
(48)
(125)
(131)
(138)
(486)
-
-
-
-
Capital Expenditure
(3,029)
(4,200)
-
-
-
-
-
-
-
Free Cash Flow
(905)
4,224
8,759
9,106
4,510
-
-
-
-
EBITDA
Tax
Capital Expenditure
FCFE (Low) Time
Period -->
EBITDA
Tax
Discount Factor
Present Value of
FCF
0.91
0.82
0.75
0.68
0.62
0.56
0.51
0.46
0.42
(821)
3,483
6,558
6,190
2,784
-
-
-
-
Implied Value Bracket – Zgounder
High
Low
56,712
43,193
1.0x
1.0x
Maya’s interest in the project
85.0%
85.0%
Implied Equity value
48,205
36,714
in CAD ‘000
xxvi
Present Value of FCF + TV
Implied P/NPV
Maya Gold & Silver – Arrowhead BID
Due Diligence and Valuation Report
23
TSX.V:MYA, OTC:MYAGF
See important disclosures on page 21 of this report.
Valuation – Boumadine project
FCFE (High) Time
Period -->
2015E
2016E
2017E
2018E
2019E
2020E
2021E
2022E
2023E
-
-
18,313
31,172
30,375
30,171
29,966
29,759
29,552
(4,788)
EBITDA
Tax
-
-
(188)
(362)
(4,932)
(4,896)
(4,860)
(4,824)
Capital Expenditure
(1,208)
(14,833)
(14,333)
(14,625)
(3,750)
-
-
-
-
Free Cash Flow
(1,208)
(14,833)
3,792
16,185
21,693
25,275
25,106
24,935
24,764
Discount Factor
Present Value of
FCF
0.91
0.82
0.75
0.68
0.62
0.56
0.51
0.46
0.42
(1,097)
(12,230)
2,839
11,003
13,391
14,166
12,777
11,523
10,391
2015E
2016E
2017E
2018E
2019E
2020E
2021E
2022E
2023E
EBITDA
-
-
12,744
21,047
20,466
20,290
20,112
19,934
19,755
Tax
-
-
(147)
(283)
(3,213)
(3,182)
(3,151)
(3,120)
(3,088)
FCFE (Low) Time
Period -->
Capital Expenditure
(1,160)
(14,240)
(13,760)
(14,040)
(3,600)
-
-
-
-
Free Cash Flow
(1,160)
(14,240)
(1,163)
6,723
13,653
17,108
16,961
16,814
16,666
Discount Factor
Present Value of
FCF
0.91
0.82
0.75
0.68
0.62
0.56
0.51
0.46
0.42
(1,053)
(11,741)
(870)
4,571
8,428
9,589
8,632
7,770
6,993
Implied Value Bracket – Boumadine
High
Low
87,833
48,944
0.6x
0.6x
Maya’s interest in the project
85.0%
85.0%
Implied Equity value
44,795
24,962
in CAD ‘000
Present Value of FCF + TV
Implied P/NPV
Maya Gold & Silver – Arrowhead BID
Due Diligence and Valuation Report
24
TSX.V:MYA, OTC:MYAGF
See important disclosures on page 21 of this report.
Notes and References
i
ii
iii
iv
v
vi
vii
viii
ix
x
xi
xii
xiii
xiv
xv
xvi
xvii
xviii
xix
xx
xxi
xxii
xxiii
xxiv
xxv
xxvi
Arrowhead Business and Investment Decisions (ABID) Fair Value Bracket. See information on valuation on pages 18-24 of this report
and important disclosures on page 21 of this report
Bloomberg as on 28-Apr-2015
Bloomberg as on 28-Apr-2015
30-day average volume from Bloomberg as on 28-Apr-2015
Bloomberg as on 28-Apr-2015
Source: ONHYM
Source: Pre-Feasibility study report of Zgounder silver mine
https://www.silverinstitute.org/site/supply-demand/silver-production/
http://mayagoldsilver.com/wp-content/uploads/2013/02/MoM-Zgounder-Jan-Feb-2013.pdf
Source: ONHYM
http://mayagoldsilver.com/properties/zgounder/
http://www.webelements.com/silver/
http://www.lenntech.com/periodic/elements/ag.htm
http://www.mineweb.com/news/silver/global-silver-production-3-8-2014/
http://minerals.usgs.gov/minerals/pubs/commodity/silver/mcs-2015-silve.pdf
http://www.lenntech.com/periodic/elements/ag.htm
https://www.silverinstitute.org/site/supply-demand/silver-demand/
https://www.silverinstitute.org/site/supply-demand/silver-supply/
http://www.investing.com/commodities/silver
https://www.silverinstitute.org/site/silver-price/historical-prices/london-fix-price/
Bloomberg as on 14-Jan-2015
Arrowhead Estimate
Bloomberg as on 14-Jan-2015
Arrowhead Estimate
Company’s cash and cash equivalents, less debt position (incl. Credit facility and debentures) – as on Sep 30, 2014. Includes impact of
the CAD 1.2MM private placement in March 2015
Includes USD 25MM replacement value of the cyanidation process
Maya Gold & Silver – Arrowhead BID
Due Diligence and Valuation Report
25
TSX.V:MYA, OTC:MYAGF
See important disclosures on page 21 of this report.