Q4/22 production at MAG Silver Corp. (MAG:TSX; MAG:NYSE American) and joint venture partner Fresnillo's Juanicipio project was soft, but "the key driver for MAG remains the Juanicipio plant's ramp," reported Canaccord Genuity analyst Michael Fairbairn in a Jan. 25 research note. MAG owns 56% of the project.
"We reiterate our focus on the bigger picture for MAG," Fairbairn wrote.
Slight Ramp-Up Delay
The estimated time at which Juanicipio will reach nameplate capacity of 4,000 tons per day (4 Ktpd) has been pushed back slightly to mid-to-late 2023 from Q2/23, Fairbairn noted. Accordingly, Canaccord Genuity forecasts Q3/23 production to be 3.8 Ktpd with the 4 Ktpd target achieved in Q4/23.
In the meantime, additional ore material will continue to be processed at Fresnillo's nearby plant, Fairbairn wrote.
Q4/22 Production a Miss
The analyst presented Juanicipio's Q4/22 and full-year 2022 (FY22) production numbers.
Fairbairn pointed out that Q4 was the project's weakest quarter in 2022 in terms of production, which fell short of Canaccord Genuity's estimate. This underperformance in Q4/22 came after "a record Q3/22 for the project in terms of throughput and silver production."
Total Q4/22 silver production was about 1,860,000 ounces (1.86 Moz). This compares to Canaccord Genuity's estimate of about 2.74 Moz and Q3/22 production of 2.62 Moz.
Canaccord Genuity has a Speculative Buy rating and a CA$27 per share price target on MAG Silver, the current share price of which is about CA$18.25.
Q4/22 gold production was 5,400 (5.4 Koz), also below Canaccord Genuity's projection, of 6.6 Koz projection.
Two factors drove the miss, Fairbairn wrote, lower-than-expected throughput and processed silver grades. Q4/22 throughput was about 165,800 tons (1.658 Kt). It was lower than the Q3/22 throughput of 180.8 Kt but higher than that of Q1/22 and Q2/22.
The grade of silver processed in Q4/22 was a miss and the lowest of the year, at 415 grams per ton (415 g/t). This compares to the Q3/22 grade of 513 g/t, the Q1/22 grade of 600 g/t, and Canaccord Genuity's estimate for Q4/22 of 515 g/t.
As for FY22 figures, Juanicipio produced, in total, 9.25 Moz silver and 22.3 Koz gold.
Canaccord Genuity has a Speculative Buy rating and a CA$27 per share price target on MAG Silver, the current share price of which is about CA$18.25.
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Disclosures For Canaccord Genuity, MAG Silver Corp., January 25, 2023
Analyst Certification: Each authoring analyst of Canaccord Genuity whose name appears on the front page of this research hereby certifies that (i) the recommendations and opinions expressed in this research accurately reflect the authoring analyst’s personal, independent and objective views about any and all of the designated investments or relevant issuers discussed herein that are within such authoring analyst’s coverage universe and (ii) no part of the authoring analyst’s compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by the authoring analyst in the research, and (iii) to the best of the authoring analyst’s knowledge, she/he is not in receipt of material non-public information about the issuer.
Analysts employed outside the US are not registered as research analysts with FINRA. These analysts may not be associated persons of Canaccord Genuity LLC and therefore may not be subject to the FINRA Rule 2241 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.
Company Specific Disclosures: Canaccord Genuity or one or more of its affiliated companies intend to seek or expect to receive compensation for Investment Banking services from MAG Silver Corp. in the next three months.
General Disclaimers: See “Required Company-Specific Disclosures” above for any of the following disclosures required as to companies referred to in this report: manager or co-manager roles; 1% or other ownership; compensation for certain services; types of client relationships; research analyst conflicts; managed/co-managed public offerings in prior periods; directorships; market making in equity securities and related derivatives. For reports identified above as compendium reports, the foregoing required company-specific disclosures can be found in a hyperlink located in the section labeled, “Compendium Reports.” “Canaccord Genuity” is the business name used by certain wholly owned subsidiaries of Canaccord Genuity Group Inc., including Canaccord Genuity LLC, Canaccord Genuity Limited, Canaccord Genuity Corp., and Canaccord Genuity (Australia) Limited, an affiliated company that is 80%-owned by Canaccord Genuity Group Inc.
The authoring analysts who are responsible for the preparation of this research are employed by Canaccord Genuity Corp. a Canadian broker-dealer with principal offices located in Vancouver, Calgary, Toronto, Montreal, or Canaccord Genuity LLC, a US broker-dealer with principal offices located in New York, Boston, San Francisco and Houston, or Canaccord Genuity Limited., a UK broker-dealer with principal offices located in London (UK) and Dublin (Ireland), or Canaccord Genuity (Australia) Limited, an Australian broker-dealer with principal offices located in Sydney and Melbourne.
The authoring analysts who are responsible for the preparation of this research have received (or will receive) compensation based upon (among other factors) the Investment Banking revenues and general profits of Canaccord Genuity. However, such authoring analysts have not received, and will not receive, compensation that is directly based upon or linked to one or more specific Investment Banking activities, or to recommendations contained in the research. Some regulators require that a firm must establish, implement and make available a policy for managing conflicts of interest arising as a result of publication or distribution of research. This research has been prepared in accordance with Canaccord Genuity’s policy on managing conflicts of interest, and information barriers or firewalls have been used where appropriate. Canaccord Genuity’s policy is available upon request.
The information contained in this research has been compiled by Canaccord Genuity from sources believed to be reliable, but (with the exception of the information about Canaccord Genuity) no representation or warranty, express or implied, is made by Canaccord Genuity, its affiliated companies or any other person as to its fairness, accuracy, completeness or correctness. Canaccord Genuity has not independently verified the facts, assumptions, and estimates contained herein. All estimates, opinions and other information contained in this research constitute Canaccord Genuity’s judgement as of the date of this research, are subject to change without notice and are provided in good faith but without legal responsibility or liability.
From time to time, Canaccord Genuity salespeople, traders, and other professionals provide oral or written market commentary or trading strategies to our clients and our principal trading desk that reflect opinions that are contrary to the opinions expressed in this research. Canaccord Genuity’s affiliates, principal trading desk, and investing businesses also from time to time make investment decisions that are inconsistent with the recommendations or views expressed in this research. This research is provided for information purposes only and does not constitute an offer or solicitation to buy or sell any designated investments discussed herein in any jurisdiction where such offer or solicitation would be prohibited. As a result, the designated investments discussed in this research may not be eligible for sale in some jurisdictions. This research is not, and under no circumstances should be construed as, a solicitation to act as a securities broker or dealer in any jurisdiction by any person or company that is not legally permitted to carry on the business of a securities broker or dealer in that jurisdiction. This material is prepared for general circulation to clients and does not have regard to the investment objectives, financial situation or particular needs of any particular person. Investors should obtain advice based on their own individual circumstances before making an investment decision. To the fullest extent permitted by law, none of Canaccord Genuity, its affiliated companies or any other person accepts any liability whatsoever for any direct or consequential loss arising from or relating to any use of the information contained in this research.
