In a May 19 research note, Cormark Securities analyst Richard Gray wrote that MAG Silver Corp. (MAG:TSX; MAG:NYSE A) and joint venture (JV) partner Fresnillo remain on track with construction to meet their Q4/21 Juanicipio mill-commissioning target.
Gray noted that mechanical installation of the major processing equipment is nearly finished. The next major tasks are completing the building envelope and finishing the pipework and electrical/instrumentation installation.
The transition to commissioning "is the next major milestone that could drive the multiple higher," the analyst wrote.
Following commissioning, the Minera Juanicipio JV intends to ramp up processing to 40–50% of the mill's 4,000 tons per day capacity by year-end 2021 and to 90–95% of capacity next year.
This timeline "compares favourably to the 2017 PEA [preliminary economic assessment], which envisioned the ramp up to full production taking three years after commissioning of the process plant," Gray wrote.
As for processing at the Fresnillo plant, in Q1/21 it amounted to 36,395 tons, below the JV's goal of 16,000 tons per month.
"However, Q2/21 is shaping up well with processing in April of 16,771 t exceeding the targeted rate," Gray wrote.
As for grade, the analyst relayed, the silver grade of the ore processed in Q1/21 was 458 grams per ton, "a material improvement from the head grade of 328 [grams per ton] in 2020." Q1/21 metals sales were 431,188 ounces of silver, 631 ounces of gold, 199 tons of zinc and 137 tons of lead.
"This resulted in gross profit of US$8.2 MM at Minera Juanicipio, which helps offset the initial capex on the project," Gray commented.
The total remaining initial capex for Juanicipio is US$168 million. Of that, MAG is responsible for US$74 million, which "can easily be funded," noted the analyst, from three sources: MAG's corporate cash, the US$3 millin of joint venture monies and expected cash flow from the JV operation.
MAG now has US$69 million in cash and no debt after advancing US$24 million to Minera Juanicipio after Q1/21 for plant construction and further underground development at Juanicipio.
Read what other experts are saying about:
Disclosure:
1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: MAG Silver. Click here for important disclosures about sponsor fees.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the decision to publish an article until three business days after the publication of the article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases.
Disclosures from Cormark Securities, MAG Silver Corp., Morning Note, May 19, 2021
Each research analyst and research associate who authored this document hereby certifies that the recommendations and opinions expressed in the research report accurately reflect their personal views about the subject company (ies) and its (their) securities and that they have not been and will not be receiving direct or indirect compensation in exchange for expressing the specific recommendation(s) in this report.
The Disclosure Statement Chart for MAG Silver can be found on the website.
