MAG Silver Corp. (MAG:TSX; MAG:NYSE American) released an updated technical report on Juanicipio, its joint venture project in Mexico with Fresnillo, which "confirms robust economics," reported Roth MKM analyst Joe Reagor in a March 27 research note. However, some differences between estimates in the report and in Roth's model led the investment bank to lower its target price on the Canadian silver producer to US$14 per share from US$15.50.
That said, Reagor wrote, "We are maintaining our Buy rating as we continue to believe MAG is undervalued by the market. Additionally, we continue to believe the market significantly undervalues the potential for new discoveries on the project."
In comparison to the new target, noted the analyst, MAG's current price is $9.01 per share, and this implies a 55% return for investors.
Overall Strong Economics
Reagor highlighted that the newly outlined economics of Juanicipio overall are favorable.
"The technical report showed a robust net present value of US$1.2 billion ($1.2B) after tax on base case prices, or US$1.48B at current spot prices," he wrote.
The report noted an increase in the size of the existing resource at Juanicipio, and it included a maiden mineral reserve estimate, both positives, noted Reagor. These updates led to Roth adding four years to its mine life estimate for this project.
Reasons for Target Price Reduction
Where the technical report diverges from Roth's model is in its lower estimates for sustaining capital and for metal recoveries, Reagor pointed out. Accounting for these differences led to Roth lowering its target price on MAG.
Specifically, the report estimates sustaining capital over the mine life, of 13 years, to be US$413 million. As well as being higher than Roth's forecast, this figure represents a "significant" increase over the amount in the previous preliminary economic assessment.
"We had estimated inflation would increase these costs but not to the extent in the technical report," he wrote.
Regarding recoveries, the report's estimate for gold recovery is higher than Roth's forecast, but its projected recovery rates for silver, lead, and zinc are lower.
"We note management described these estimates as conservative as they were based on initial startup data," added Reagor.
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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.
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Disclosures for Roth MKM, Mag Silver Corp., March 27, 2024
Regulation Analyst Certification ("Reg AC"): The research analyst primarily responsible for the content of this report certifies the following under Reg AC: I hereby certify that all views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. 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.
Disclosures: ROTH makes a market in shares of MAG Silver Corp. and as such, buys and sells from customers on a principal basis. A Research Analyst and/or a member of the Analyst's household own(s) debt or equity securities of MAG Silver Corp..
ROTH Capital Partners, LLC expects to receive or intends to seek compensation for investment banking or other business relationships with the covered companies mentioned in this report in the next three months. The material, information and Page 4 of 5 MAG SILVER CORP. Company Note - March 27, 2024 facts discussed in this report other than the information regarding ROTH Capital Partners, LLC and its affiliates, are from sources believed to be reliable, but are in no way guaranteed to be complete or accurate. This report should not be used as a complete analysis of the company, industry or security discussed in the report. Additional information is available upon request. This is not, however, an offer or solicitation of the securities discussed. Any opinions or estimates in this report are subject to change without notice. An investment in the stock may involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Additionally, an investment in the stock may involve a high degree of risk and may not be suitable for all investors. No part of this report may be reproduced in any form without the express written permission of ROTH. Copyright 2024. Member: FINRA/SIPC.
