After a delay of more than a year, MAG Silver Corp.’s (MAG:TSX; MAG:NYSE American) 4,000 tonne-per-day processing plant at its large-scale Juanicipio property in Mexico has been connected to the power grid and is on its way to opening.
The state-owned Comisión Federal de Electricidad approved the facility’s connection to the electrical grid, and final testing of the downstream power distribution and control systems at the plant is now complete. The plant is expected to reach full capacity in Q2 2023.
“The entire system has now been energized,” MAG announced.
Asset manager Chen Lin, who follows the company, said the development was big news for the company. Even before the news, at least eight analysts stuck with MAG and kept their Buy ratings on the stock despite the delay.
“It is a major milestone,” Chen told Streetwise Reports.
Construction of the plant began in 2019, and it was expected to come online by the end of 2021, but the state electric authority said just before Christmas that year that more equipment needed to be installed on the system.
MAG is mining the Bonanza zone of the Valdecañas vein in the Zacatecas state of Mexico. A preliminary economic assessment (PEA) in 2017 estimated a 19-year mine life with 4,000 tonnes per day.
“Connection to the power grid is a long-awaited milestone for the Juanicipio Project, our stakeholders, and shareholders alike, and we are thankful for the understanding and patience,” MAG President and Chief Executive Officer George Paspalas said.
The Catalyst: The Wait Is Over
Many analysts stuck by the company through the wait for the power hookup. Stifel GMP analyst Stephen Soock named the stock one of his “top picks” for the third quarter. In November, he rated MAG a Buy with a CA$28.25 target.
Stifel GMP analyst Stephen Soock named the stock one of his “top picks” for the third quarter.
“We look forward to the final electrical connection allowing the ramp up to commercial production at the Juanicipio mill, inaugural results from the (Los Tajos) target at the JV (just 4km from the Juanicipio mine), and initial assays from MAG's recently acquired, 100%-owned Larder property in the Abitibi as near-term catalysts,” Soock wrote in August.
MAG’s operator for the project, Fresnillo Plc., has been processing loads from Juanicipio’s mine throughout 2022. More than 180,000 tonnes of mineralized materials were passed through the nearby Saucito and Fresnillo plants during the third quarter for net sales of more than US$25 million, compared to 154,000 tonnes in Q2.
The two plants produced 2.4 million payable silver ounces, more than 4,900 payable gold ounces, more than 1,300 payable lead tonnes, and more than 2,000 payable zinc tonnes during that quarter.
About 70% of the amount processed was through the Saucito plant, which more closely resembles the new Juanicipio plant, which should help give insight to the new operators.
The Silver Institute has predicted that global silver demand will reach a new high of 1.21 billion ounces in 2022.
On the strength of those totals, MAG recorded a net income for Q3 of more than US$8.2 million versus a loss of US$2.3 million during the same quarter in 2021.
MAG owns 44% interest in the Juanicipio project, and Fresnillo owns the remaining 56%. The mine generated nearly 252,000 tonnes of mineralized material last year, including 3.2 Moz silver and 6,577 ounces of gold, MAG said.
New Demand for Silver
The Silver Institute has predicted that global silver demand will reach a new high of 1.21 billion ounces in 2022, up 16% from 2021. Industrial demand, including vehicle electrification and other green technologies, is on course to grow to 539 million ounces (Moz).
“This is what I have been predicting for a while,” Chen wrote in his newsletter What is Chen Buying? What is Chen Selling? “It is pretty obvious we are having a huge surge in silver demands as solar panels are the biggest usage of silver.”
MAG continues to explore and develop the remaining Juanicipio property, its Deer Trail project in Utah, and the Larder gold project, which it gained with the purchase of Gatling Exploration Inc. earlier this year.
Ownership and Share Structure
Top shareholders include Juanicipio project operator Fresnillo with 10%, BlackRock Asset Management with 6.9%, Sprott Asset Management with 5.2%, Van Eck Associates with 4.7%, mining financier Eric Sprott with 4.6%, First Eagle Investment Management with 4.2%, and ETF Managers Group with 2.6%.
The company is covered by a plethora of analysts, including Stephen Soock of Stifel, among others. Newsletter writers Peter Krauth of the Gold Resource Investor, Chen Lin of What Is Chen Buying? What Is Chen Selling? and Bob Moriarty of 321 Gold. Click "See More Live Data" in the data box above to view them all.
MAG Silver has a market cap of US$2.17 billion and 98.8 million shares outstanding, 97.8 million of them floating. It trades in a 52-week range of US$25.16 to US$13.60.
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1) Steve Sobek wrote this article for Streetwise Reports LLC. 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.
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