Afterreported its Q2/22 financials, Stifel lowered its target price on the miner by CA$1, to CA$28.75 from CA$29.75, reported analyst Stephen Soock in an August 18, 2022 research note.
This resulted from Stifel increasing future cost assumptions for MAG's Juanicipio joint venture (JV) project to reflect recent and expected inflation.
"Despite the increase in go-forward cost assumptions, we still see the company generating extremely robust cash flow," Soock of Stifel highlighted.
Despite the changes, Stifel still considers MAG, now trading around CA$15.92 per share, a Top Pick and a Buy.
"Despite the increase in go-forward cost assumptions, we still see the company generating extremely robust cash flow, a total attributable to MAG of US$735 million (US$735M) at current spot metal prices from 2023 to 2027 for an average yield of 11.4%," Soock highlighted.
This capital, the analyst added, should support "a robust dividend," exploration at Juanicipio and MAG's other properties, and internal funding of the Juanicipio mill construction, now estimated by Stifel at US$160M versus US$130M previously.
Soock noted MAG's financials for the quarter that ended June 30, 2022, were "positive," and he provided the highlights. MAG posted earnings per share of US$0.08 from its 44% interest in Juanicipio.
During the quarter, Soock relayed, the Juanicipio JV processed 154,000 tons of 781 grams per ton silver equivalent, which generated US$19.2M in revenue. This took the JV's total cash amount to US$37.5M.
Soock reviewed the revisions Stifel made to its MAG model. One on hand, Stifel increased various cost forecasts, wrote Soock. For instance, it raised mining cost projections related to Juanicipio in 2023 to US$46 per ton from US$35; processing costs to US$26.75 per ton from US$20.37; and general and administrative costs to US$4.40 per ton from US$3.35. For 2024, Stifel increased costs by another 6%.
On the other hand, Stifel boosted the estimated mineable resource base at Juanicipio to 25% from 20% to include results of drilling completed since 2017, he noted.
Upcoming catalysts for MAG, Soock pointed out, include initial drill results from its newly acquired Larder property and, at Juanicipio, final connection to the Mexican power grid and maiden results from the nearby Cesantoni target.
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Disclosures For Stifel Research, MAG Silver Corp., August 18, 2022
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