In an October 27 research report, Scotia Capital Inc. (Scotiabank
Canada) Analyst Trevor Turnbull, MBA, MSc commented that
Canadian mining company MAG Silver Corp. (MAG:TSX; MAG:NYSE American), which is codeveloping the high-grade silver-gold-lead-zinc Juanicipio project in Zacatecas, Mexico is presently engaged in pre-commissioning activities and is on schedule for rapid production
ramp-up through early 2022.
Through a joint venture, MAG Silver holds a 44% interest in the Juanicipio project along with the project's operator, Fresnillo Plc., which owns the other 56%. The JV partners are now finalizing construction of new 4,000 tpd mill that is expected to be fully commissioned in Q4/21.
The analyst team covering gold and precious minerals at Scotia bank including Analyst Turnbull and Associates Ben de Wit, P.Eng, MEng, MFin and Charles Ehidiamhen, CFA, MBA, ACA, advised that the outlook for MAG Silver is very positive now that the new Juanicipio processing plant is approaching mechanical completion and pre-commissioning work has started.
Scotiabank pointed out that during Q3/21, the Juanicipio JV successfully processed more than 57,000 tonnes of development ore which was almost 20% greater than the 48,000 tonnes (16 Kt/mo.) that was previously scheduled.
The report noted that during the latest quarter, total pre-payable production at the Juanicipio mine was 668 Koz Ag and 1.1 Koz Au with MAG's 44% attributable share equating to 294 Koz Ag and approximately 0.5 Koz Au. Scotiabank noted that these values imply a grade of roughly 380 g/t Ag, which is slightly lower than the material grades recorded in H1/21.
The analysts stated that MAG Silver shares are currently trading at 1.20 times its spot silver and base metal valuation which is lower than other producing silver companies which typically are valued at higher than 1.5 times the spot price valuation metrics.
Scotiabank indicated that given current spot metal prices, MAG's revenue would come about 75% from silver, 14% from gold and remaining 11% from lead and zinc.
The analyst pointed out that the new processing plant at Juanicipio is now on track for commissioning and is now seeking authorization to connect to the national power grid commence no-load testing. It is anticipated that water testing will be performed this month (November) and that full load commissioning will initiated before the end of December 2021.
Scotiabank advised that its forecasting models call for commercial production to commence in Q2/22. The research firm stated that it projects a run rate of approximately 9 Moz Ag of pre-payable production attributable to MAG based upon it 44% attributable share in the JV. The analysts noted that all-in sustaining costs (AISC) at spot prices for the gold, lead and zinc by-product credits are expected to be lower than US$4.00/oz Ag.
Scotiabank stated that its net asset valuation is based on silver prices of $25.00/oz in 2022, $23.00/oz in 2024 and $20.00/oz thereafter.
The firm listed that some of the key risks for the company which hold true for most mining operations include the potential for multiple contraction, decreases in commodity prices and technical, operational and geopolitical risks.
Scotia Capital Inc. currently rates MAG Silver Corp. as a "Sector Outperform" with a 12-month price target of US24.00/share. The company's shares trade under the symbol "MAG" on the NYSE-American Exchange and last closed for trading on November 8, 2021 at US$20.88 per share. In addition to its U.S. listing, the firm's shares also trade under the same ticker symbol on the Toronto Stock Exchange and last closed for trading on November 9, 2021 at CA$26.02 per share.
1) Stephen Hytha compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. He or members of his household own securities of the following companies mentioned in the article: None. He or members of his 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 Corp. Click here for important disclosures about sponsor fees.
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