Orogen Royalties Inc. (OGNRF) reported that First Majestic, the operator of its sole cash-flowing royalty mine, announced a new discovery at depth and adjacent to the Ermitaño mine. Six out of seven drill holes into the Navidad zone hit mineralization, with some grades, notes Adrian Day, editor of Global Analyst.
Although this is early days, First Majestic has moved four drill rigs to the area, to the west of the main mine. Given the depth, it may plan to put in a drift from existing workings, rather than drill from surface. This would also mean that eventual mining in the new zone would have lower capital costs and come sooner.
It is possible that mining Navidad would continue without pause after the main Ermitaño is exhausted in four or five years, thus extending Orogen’s cash flow well into the 2030s.
Orogen Royalties Inc. (OGNRF)
There are two other major prospective areas as well included in Orogen’s royalty area: Luna to the east, which has seen some drilling but is deeper and so far lower grade than Navidad; and potentially Cumobabi, well to the south and east, which has not yet received any drilling from First Majestic. There are also some gold targets to the east.
All in all, there is potential for the overall mine to continue for many years to come, particularly given the mill facilities are already in place.
Separately, shareholders and analysts are expecting an update on Silicon-Merlin, and in particular, the extensive drilling to the west. The market is also waiting for the decision from Altius’ arbitration on the area-of-interest of its own royalty. Once that decision is out, we expect Altius to move rapidly towards concluding a transaction on its royalty, which will then put Orogen’s royalty into play.
Recommended Action: Buy OGNRF.
