received its first monies from the Juanicipio silver mining project joint venture, US$11.3 million (US$11.3M) in loan principal repayment and interest, reported BMO Capital Markets analyst Kevin O'Halloran in a November 10 research note.
"We expect cash distributions from Juanicipio to the joint venture partners to accelerate in the coming quarters," O'Halloran wrote.
MAG ended Q3/23 with US$58.5M in cash. The joint venture, of which the Canadian silver company owns 44%, had US$23.4M in cash.
Notable Return, Outperform Rating
MAG's current price is about CA$13.66 per share, and BMO's target price on the company is CA$23.50 per share. As such, the projected return for investors is attractive, at 72%.
BMO continues to rate MAG Outperform.
EPS Lower Than Expected
MAG's earnings per share in Q3/23 was CA$0.09, which fell short of BMO and the consensus estimate of CA$0.16/share, reported O'Halloran. He attributed the miss to the timing of sales and accounting differences now that Juanicipio is in commercial production.
As for the gap between the EPS and BMO's estimate, the analyst indicated it was due mostly to BMO underestimating depreciation on the Juanicipio processing facility. Whereas BMO forecasted depreciation would be CA$11M, it actually was much higher, at CA$21.6M.
Operation Costs Declining
O'Halloran also pointed out that production costs overall have improved since the Juanicipio operation moved solely to using its own processing facility and achieved nameplate capacity in September. Specifically, cash costs in Q3/23 were about CA$9.40 per ounce ($9.40/oz), lower than CA$11.12/oz in the previous quarter.
On a byproduct basis, in Q3/23, Juanicipio achieved a CA$4.68/oz cash cost and a CA$9.19/oz all-in sustaining cost.
On the Horizon
Investors can expect a few potential catalysts for MAG in the near term. One, as mentioned, is the first cash flows from the Juanicipio joint venture.
Another is an updated resource and technical report on the Juanicipio project, due out in Q1/24. Third, further exploration results are expected from MAG on an ongoing basis.
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- Mag Silver Corp. is a billboard sponsor of Streetwise Reports and pays SWR a monthly sponsorship fee between US$4,000 and US$5,000.
- Doresa Banning wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor.
For additional disclosures, please click here.
Disclosures for BMO Capital Markets, Mag Silver Corp., November 10, 2023
Analyst's Certification I, Kevin O'Halloran, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report. Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and their affiliates, which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generating new ideas and in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service to clients. Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets Limited are not registered as research analysts with FINRA. These analysts may not be associated persons of BMO Capital Markets Corp. and therefore may not be subject to the FINRA Rule 2241 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.
Company Specific Disclosures Disclosure 1: BMO Capital Markets has undertaken an underwriting liability with respect to MAG Silver within the past 12 months.
Disclosure 2: BMO Capital Markets has provided investment banking services for remuneration with respect to MAG Silver within the past 12 months. Disclosure 3: BMO Capital Markets has managed or co-managed a public offering of securities with respect to MAG Silver within the past 12 months. Disclosure 4: BMO Capital Markets or an affiliate has received compensation for investment banking services from MAG Silver within the past 12 months. Disclosure 6A: MAG Silver is a client (or was a client) of BMO Nesbitt Burns Inc., BMO Capital Markets Corp., BMO Capital Markets Limited or an affiliate within the past 12 months: A) Investment Banking Services
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Click here for data vendor disclosures when referenced within a BMO Capital Markets research document. For assistance with accessible formats of online content, please contact [email protected]. The recommendation contained in this report was produced at November 10, 2023, 17:17 ET. and disseminated at November 10, 2023, 17:17 ET.