I made out a spreadsheet to estimate the Valdecanas resource from the information provided in the press releases and I thought I would share it with the board. Please note carefully: I Am Not A Geologist, or mining engineer or geophysicist, so you must take this estimate with a grain of salt. Also, you must understand that this estimate is for the Valdecanas vein only. It does not include the Fresnillo, Foot Wall, Hanging Wall or Encino veins that have already been identified on the property (and would likely double the resource, at least), nor does it include any discoveries on any of the other properties such as Cinco de Mayo or Lagortos or Batopilas, etc., etc. Therefore, this estimate constitutes a lower-bound for the ounces contained in MAG's share of the Fresnillo JV.

There have been quite a few impressive resluts posted since my last estimate, but with that said, not a lot has changed from my previous estimates. My method is a simple one: I average the grades and widths of the drill results over the overall dip and strike length. The overall strike of the ore body, if I have interpreted the results correctly, has increased to 1.6 km in length. The dip has remained at 500m. I think this is a fair way to estimate the size of the body, since the grades are so amazingly consistent throughout the ore body. There are comparitvely very few reported intercepts grading <500 g/t (the average grade that Penoles has been profitably mining in the district for over 100 years). I threw out the results from magic holes like GD (grading over 10,000 g/t Ag and 30% Pb), in order to be more conservative. So, I bet you're bored now and are wondering what I came up with:

If one considers the 'narrower, higher-grade' results from each drill hole, the Valdecanas is a body of ore 1.6 km long x 500 m deep and 3.2 m wide, containing an average grade of 1,611 g/t Silver, 3.9 g/t Gold, 3.8% Lead and 4.9% Zinc. This results in a resource of:

374M oz Silver
909,159 oz Gold
608M lbs Lead
778M lbs Zinc

Of this, MAG's share is:

165M oz Silver
400,000 oz Gold
268M lbs Lead
342M lbs Zinc

If one considers the slightly 'wider, lower-grade' results from each drillhole, the Valdecanas is a body of ore 1.6 km long x 500 m deep and 5.8 mwide, containing an average grade of 1,205 g/t Silver, 3 g/t Gold,3.1% Lead and 4.6% Zinc. This results in a resource of:

506M oz Silver
1.2M oz Gold
891M lbs Lead
1.3B lbs Zinc

Of this, MAG's share is:

223M oz Silver
558,000 oz Gold
391M lbs Lead
583M lbs Zinc

Needless to say, that's a lot of metal. Now, I know what you're thinking. You're thinking these estimates MUST be way off, since Penoles' release estimate for the Valdecanas said the vein contained 'only' ~238M oz of silver overall (~105M oz in MAG's share). Well, we also know that Penoles' subsidiary, Fresnillo also made a lowball offer for all of MAG that is and was considerably below the price the shares were trading at, so I'm sure the thinkers among you can do the math.

But don't take just my word for it. Raymond James released their coverage on MAG dated Jan 26 2009 and state:
"We are maintaining our STRONG BUY rating and $14.00 target. Our target is derived from a $12.80 NAVPS and a 1.1x P/NAV multiple. Our NAVPS is predicated on a US$3.50/oz metric applied to a 336 mln oz AgEQ resource. Our P/NAV multiple continues to reflect exceptional exploration potential, solid financial position, quality management and a historical 1-2x P/NAV premium typically exhibited by precious metal equities."

You can view the whole report here.