Production From Mexico Mine in Q1/24 Notable
Research Report

Overall Q1/24 production at MAG Silver Corp.'s (MAG:TSX; MAG:NYSE American) joint venture (JV) Juanicipio project in Mexico was 7% higher than BMO Capital Markets' estimate, driven by better-than-expected silver grades, reported analyst Kevin O'Halloran in an April 24 research note.

44% Return Implied

On the news, BMO maintained its target price on the Canadian silver producer of CA$24 per share, compared to its share price at the time of the report of about CA$16.62 per share, noted O'Halloran. The difference between the current and target prices reflects a 44% return for investors.

MAG remains Outperform rated.

Operations Looking Good

O'Halloran presented four key takeaways from MAG's Q1/24 production results:

1) Production a beat. Total production surpassed BMO's forecast by 7%. Specifically, Juanicipio produced 6,400,000 ounces of silver equivalent (6.4 Moz of Ag eq) compared to BMO's 6 Moz projection. Of the total, 1.96 Moz of silver, 4,400 ounces (4.4 Koz) of gold, 3,830,000 pounds (3.83 Mlb) of lead, and 6.45 Mlb of zinc were attributable to MAG (44%).

Total silver production was 4.45 Moz, higher than BMO's 3.77 Moz estimate. This equates to 30% of the midpoint of silver production guidance of 15.05 Moz. Overall gold production during the quarter, however, was lower than BMO's projection, at 9.9 Koz versus 13 Koz. The grade of gold produced was 1.32 grams per ton (1.32 g/t), below BMO's forecast of 1.45 g/t.

2) Silver grade higher. The grade of silver produced at Juanicipio in Q1/24 was 476 g/t. This exceeded both BMO's estimate of 410 g/t and the JV's 2024 guidance of 380–420 g/t.

"We forecast 400 g/t for the remainder of the year," O'Halloran wrote.

3) Throughput in line. Despite four days of halted production in March, throughput was generally as expected, at 326,000 tons. BMO's estimate was 333,000 tons.

Throughput on days of operation averaged 3,980 tons per day (3,980 tpd), and throughput guidance, in comparison, is 4,000 tpd.

4) Recoveries better. The recovery rates at Juanicipio for all metals in Q1/24 were improved over those in Q4/23. For example, recoveries of silver and gold in Q1/24 were 89.2% and 71.8%, respectively, versus 86.5% and 69.3% in Q4/23.

Catalysts To Watch For

MAG will announce its Q1/24 financial results on May 14.

Further, two potential stock-moving events for the mining company on an ongoing basis, O'Halloran pointed out, are exploration results from Juanicipio and its other projects, as well as continued cash flows from the Juanicipio JV.

Important Disclosures:

1. Mag Silver Corp. is a billboard sponsor of Streetwise Reports and pays SWR a monthly sponsorship fee between US$4,000 and US$5,000. 
2. Doresa Banning wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor.
3.  This article does not constitute investment advice and is not a solicitation for any 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. Each reader is encouraged to consult with his or her personal financial adviser and perform their own comprehensive investment research. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company. 

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Disclosures for BMO Capital Markets, Mag Silver Corp., April 24, 2024

Analyst's Certification I, Kevin O'Halloran, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report. Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and their affiliates, which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generating new ideas and in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service to clients. Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets Limited are not registered as research analysts with FINRA. These analysts may not be associated persons of BMO Capital Markets Corp. and therefore may not be subject to the FINRA Rule 2241 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.

Company Specific Disclosures Disclosure 1: BMO Capital Markets has undertaken an underwriting liability with respect to MAG Silver within the past 12 months. Disclosure 2: BMO Capital Markets has provided investment banking services for remuneration with respect to MAG Silver within the past 12 months. Disclosure 3: BMO Capital Markets has managed or co-managed a public offering of securities with respect to MAG Silver within the past 12 months. Disclosure 4: BMO Capital Markets or an affiliate has received compensation for investment banking services from MAG Silver within the past 12 months. Disclosure 5: BMO Capital Markets or an affiliate received compensation for products or services other than investment banking services within the past 12 months from MAG Silver. Disclosure 6A: MAG Silver is a client (or was a client) of BMO Nesbitt Burns Inc., BMO Capital Markets Corp., BMO Capital Markets Limited or an affiliate within the past 12 months: A) Investment Banking Services Disclosure 6C: MAG Silver is a client (or was a client) of BMO Nesbitt Burns Inc., BMO Capital Markets Corp., BMO Capital Markets Limited or an affiliate within the past 12 months: C) Non-Securities Related Services. Disclosure 16: A research analyst has extensively viewed the material operations of MAG Silver. Disclosure 17: MAG Silver has provided at its expense some or all of the itinerant travel for the research analyst related to facilitating a material site visit. Methodology and Risks to Target Price/Valuation for MAG Silver (MAG-TSX)

Methodology: Our target price is derived from a 100% weighting assigned to a 1.8x P/NPV multiple.

Risks: Risks to our valuation include: operational risks at Juanicipio particularly as the ramp-up to full production is completed; financing risk in the case of further capital calls from the JV, although we view this scenario as relatively unlikely; and exploration risk, which we view as high for the company's secondary assets given their early-stage nature.

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