MAG Silver Corp. (MAG:TSX; MAG:NYSE American) achieved an earnings beat in Q1/25 primarily due to lower-than-estimated costs, reported Scotiabank Analyst Ovais Habib in a May 8 research note.
"We ascribe a positive bias to this result as Juanicipio continues its focus on cost control and optimization efforts, delivering another good quarter of production costs beat relative to ours and consensus' expectations," Habib wrote. Juanicipio is a joint venture (JV) project owned by MAG (44%) and operator Fresnillo Plc (FNLPF:OTCMKTS; FRES:LSE) (56%).
21% Return Implied
Scotiabank has an $18.50 target price on the Canadian producer, trading now at about $15.23 per share. The price difference implies a potential gain for investors of 21%.
MAG remains rated Sector Outperform
Improved Costs Drive EPS Beat
Habib reviewed the highlights of MAG's Q1/25 financial results. Earnings per share of $0.28 was a beat for the quarter, versus Scotiabank's $0.25 estimate, and consensus' $0.26 forecast.
"The beat on Q1 earnings was mainly due to lower-than-expected production costs and depreciation," Habib explained.
Total cash costs, net of byproducts, also were better than expected, at ($0.91) per ounce [($0.91)/oz] of silver. This was 60% better than Scotiabank's $0.57/oz estimate. Likewise, the all-in sustaining cost (AISC) of $2.04/oz was lower than Scotiabank's $7.39/oz estimate, by 72%.
MAG reiterated 2025 production and cost guidance for Juanicipio. The project is expected to produce 14,700,000–16,700,000 ounces (14.7–16.7 Moz) of silver, yielding 13.1–14.9 Moz of payable silver at an AISC of $6–8/oz (net of byproducts).
Cash at a Glance
As reported by Habib, MAG generated $34.1 million ($34.1M) in cash flow during Q1/25. At quarter's end, the miner had $156.4M in cash, down from $162M in Q4/24.
During Q1/25, the company declared its second dividend, this one $0.20 per share, and payable on May 28.
As for the Juanicipio JV, it generated a total of $77.4M in free cash flow in Q1/25. The JV ended the quarter with $131M, up from $53M in Q4/24. MAG did not receive cash from the JV, likely, Habib purported, because working capital was lower than $120M.
Exploration at Juanicipio
Exploration work continues at Juanicipio, Habib reported. In Q1/25, 6,692 meters were drilled there from underground, results of which are pending.
Regional surface drilling is slated to start at the project this quarter.
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