In a May 18 research note, BMO Capital Markets analyst Ryan Thompson reported on MAG Silver Corp.'s (MAG:TSX; MAG:NYSE A) available cash relative to its share of remaining capex for the company's Juanicipio joint venture project with Fresnillo.
Thompson noted that MAG had US$94 million (US$94M) in cash, including about US$1M in the joint venture (JV), at the end of Q1/21, "largely in line with our expectations." The company owes US$74M of the remaining US$168M of initial capital required for the project. Once MAG pays this, it will be left with roughly US$20M in cash, excluding revenue the JV's ore processing operation generates.
The Canadian mining company "has enough cash to get Juanicipio across the finish line, however, the margin for error is not overly forgiving," Thompson wrote.
No funds were transferred to the joint venture during Q1/21, but already in Q2/21, MAG advanced US$23.7M to it. During Q1/21, the joint venture generated a gross profit of US$8.2M and a net profit of US$1.4M.
Thompson noted that during Q1/21, the JV processed 36,400 tons of ore at the Fresnillo plant, the silver head grades of which were 458 grams per ton, 40% higher than in 2020 grade in Q4/20. The JV sold 431,000 of silver, 631 ounces of gold, 199 tons of zinc and 137 tons of lead.
Construction of the Juanicipio plant continues. Near-term goals are to finish installing the semi-autogenous grinder and ball mills, expected in Q2/21; complete the building envelope; and install the pipework and electrical/instrumentation. Work has begun on the initial tailings storage facility.
Until the new plant is running, the JV will keep processing ore material at the Fresnillo plant, aiming to process about 16,000 tons per month. In April, the JV exceeded that goal by processing 16,700 tons.
BMO has a Market Perform rating on MAG Silver, which is trading today at about CA$24.68 per share.
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