Mega Precious Metals Inc MPRXF

Jennings Capital: Buy rating and $0.25 target price for MGP

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According to Jennings Capital:

https://personal.crocodoc.com/k4Bg0lf

MEGA PRECIOUS METALS INC.

Recommendation: SPECULATIVE BUY

12-Month Target: C$0.25

INITIATING COVERAGE

GROWING 3.6M OZ AU RESOURCE WITH A TUNGSTEN KICKER

- Mega Precious is developing the Twin Lakes deposit on its Monument Bay project, located in northeastern Manitoba. The deposit currently stands at ~4 km in strike length and ranges in width from 30 m to 130 m.

- In-pit resources total 3.1M oz Au grading 1.4 g/t Au. However, the deposit lends itself to a much higher-grade starter pit of 0.7 M oz Au grading 2.7 g/t Au.

- A key element of the asset not to be overlooked is the presence of a valuable tungsten by-product credit. While the Company has yet to deliver a maiden resource for tungsten, we estimate that the tungsten stream might represent a US$200 per ounce by-product credit.

- A resource update is expected soon. Not only will it include a maiden resource estimate for tungsten, it will include an additional 12,000 m of drilling and results from the 30,000 m OCAP (Old Core Assay Program). This resource update is in advance of the delivery of a PEA, which is expected in Q1/15.

- A mining scenario that might be explored in the PEA is development of the high-grade starter pit, followed by a mill expansion phase, to allow mining of the much bigger (albeit lower grade) open pit resource. There is also potential to continue with an underground mining phase, but this would be at the end of a very long open pit mine life.

- Geologically, there is ample room for resource expansion along strike in both directions and down dip. The Company also has other mineralized zones at Monument Bay (Mid East Zone and AZ Zone) that could be expanded with additional drilling.

We value Mega using a “comparable producers” approach, made difficult by the fact that Mega does not yet have a stated tungsten resource, complete tungsten metallurgy and a PEA. We have elected to take a conservative valuation approach that we can easily modify as more of this important information becomes available. Our estimates could vary significantly from the information in the forthcoming PEA.

Recommendation

We are initiating coverage on Mega Precious Metals Inc. with a SPECULATIVE BUY recommendation and 12-month target price of $0.25/share.