MAG Silver Corp.'s (MAG:TSX; MAG:NYSE American) joint venture project in Zacatecas, Mexico performed well in Q2/23, from production to ramp-up, reported PI Financial analyst Chris Thompson in a July 26 research note.
"We are impressed with the delivery of Q2/23 operating results significantly ahead of our conservative expectations," Thompson wrote. "We are also impressed by the advanced speed of ramp-up at Juanicipio."
Stock offering 29% return
Thompson noted the current potential return for investors in this British Columbia-based producer is significant, at 29%. This is reflected in the difference between PI's target price on the company, CA$19.15 per share, and the company's current price, about CA$14.82 per share.
MAG is a Buy.
Solid progress in quarter
Q2/23 production at MAG and Fresnillo's Juanicipio project was 6,942 ounces of silver equivalent (6.942 Koz Ag eq), reported Thompson. This was 77% higher than PI's projection of 3.926 Koz of Ag eq. The amount also represents about 39% of PI's estimate of MAG's full-year 2023 production of about 18 Koz of Ag eq.
Thompson also highlighted that throughput in Q2/23 reached 85% of the Juanicipio mill's 4,000-tons-per-day nameplate capacity. MAG's target for when Juanicipio will reach 100% has been Q3/23, but PI's has been Q4/23. PI, though, adjusted its expectation to align with MAG's after the producer announced Q2/23 results.
"We now see our estimates as potentially conservative," Thompson wrote.
Ore processing during Q2/23 was done at the Saucito and Fresnillo as well as Juanicipio plants. Looking forward, Thompson indicated, PI expects processing to rise at Juanicipio as it decreases at the other two.
Other higher numbers
The grade of silver produced at Juanicipio during Q2/23 also was higher than anticipated, Thompson pointed out. While PI estimated it to be 363 grams per ton (363 g/t), it in fact was 498 g/t.
Feed grade was better in Q2/23 than in Q1/23, the analyst reported. This was likely due to less material being processed from lower-grade, commissioning-designated stockpiles.
What to watch for
In terms of possible MAG stock catalysts in the near term, updates are anticipated from Juanicipio as the ramp-up there continues, wrote Thompson.
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