In a Feb. 27 research note, ROTH Capital Partners analyst Joe Reagor noted that MAG Silver Corp. (MAG:TSX; MAG:NYSE A) and joint venture partner Fresnillo Plc (FRES:LSE) moved up the production start for Juanicipio and raised preproduction capex estimates. "These results are essentially offsetting," Reagor noted.
Production from Juanicipio's underground mine now is slated to begin in mid-2020. "The pull forward of production as a significant positive for the company as it should provide cash flow to offset ongoing capital expenditures," Reagor wrote.
The joint venture partners will not commission the flotation plant at Juanicipio until mid-2021, however. In the interim, ore will be processed at one of Fresnillo's nearby plants.
Now, preproduction capex for Juanicipio is forecast to be $440 million, up 11.4% from $395 million. "This had a negative impact on our discounted cash flow, but we still estimate the company has the necessary funding to complete construction without further dilution," Reagor commented.
ROTH has a Buy rating and a US$23 per share price target on MAG, whose stock is currently trading at around US$9.64 per share.
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Disclosures from ROTH Capital Partners, MAG Silver Corp., Company Note, February 27, 2020
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