TICKERS: MAG

Q3/23 Production at Silver Mine a Beat, Analyst Says
Research Report

Source: Chris Thompson (10/26/23)

This is impressive given that ore processing was shifted to entirely the new plant at the Mexico project during the quarter, noted a PI Financial report.

MAG Silver Corp.'s (MAG:TSX; MAG:NYSE American) joint venture mining project with Fresnillo, Juanicipio, produced more metal than expected in Q3/23 as the ramp-up of the processing plant was being finalized, reported PI Financial analyst Chris Thompson in an Oct. 25 research note.

"Following the announcement of commercial production at the company's 44%-owned Juanicipio mine in Mexico at the end of Q2/23, we are impressed with the delivery of Q3/23 operating results, ahead of our expectations," Thompson wrote.

Rating is Buy

Accordingly, PI maintained its Buy rating and CA$19.15 per share target price on MAG. The Canadian producer's current share price is about CA$14.97.

Based on these two figures, PI's projected return for investors is a compelling 28%.

Operational overview

Thompson reviewed the Q3/23 numbers out of Juanicipio.

Production there during the third quarter was 4,782,000 ounces (4.782 Moz) of silver, higher than PI's estimate of 4.159 Moz of silver. Q3 production represents about 29% of PI's expected full-year 2023 (FY23) production of silver, which is 16.482 Moz, wrote Thompson. Q3 production makes up about 28% of PI's FY23 estimate.

Grades of the precious metals milled Q3/23 were higher than expected. For silver, the grade was 523 grams per ton (523 g/t) versus 450 g/t. For gold, it was 1.32 g/t versus 0.98 g/t.

The total of tons milled missed expectations slightly. This was due to processing being shifted to solely the new Juanicipio plant in August, explained Thompson. Lower throughput, though, was offset in part by the head grades, improved over those in Q2/23.

Looking forward

Thompson pointed out that while the Juanicipio plant achieved nameplate capacity of 4,000 tons per day in Q3/23, PI expects it to do so for longer periods in Q4/23, in part due to current optimization efforts.

"With reliance on Fresnillo's Fresnillo and Saucito plants now in the rearview mirror, we see the joint venture as well-positioned to deliver Q4/23 at close to nameplate capacity," the analyst wrote.

Also, Thompson noted he expects additional updates on Juanicipio from MAG through year-end 2023.

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