Top-Tier Producer Uncovers High-Grade Silver in Mexico
Research Report

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With MAG Silver Corp.'s (MAG:TSX; MAG:NYSE American) second-quarter production numbers already pre-released at 4.3 million ounces silver (Moz Ag), the company reported earnings of US$0.32 per share, which fell short of our estimate of US$0.35 per share but slightly exceeded the consensus of US$0.30 per share, CIBC Analyst Cosmos Chiu wrote in an updated research note on August 11.

The discrepancy with the forecast was mainly due to higher-than-anticipated general and administrative and exploration expenses, along with lower-than-expected sales during the quarter, Chiu noted. Additionally, the company declared a third dividend of US$0.144 per share.

Regarding costs, MAG reported all-in sustaining costs (AISC) of US$0.65 per ounce, significantly lower than both CIBC's estimate of US$3.22 per ounce and the consensus of US$8.32 per ounce, Chiu noted.

On May 11, 2025, MAG Silver and Pan American Silver Corp. entered into a definitive agreement for Pan American to acquire all issued and outstanding common shares of MAG. The transaction is anticipated to close in the second half of 2025, pending customary closing conditions, including clearance under Mexican antitrust laws and approval for listing the Pan American shares to be issued in the transaction on both the Toronto Stock Exchange and the NYSE.

"Overall, given the transaction between MAG and PAAS, and earnings missing our expectation in Q2, and with MAG shares currently trading at 1.6x P/NAV, at a premium to the peer group average of 1.0x P/NAV, we maintain our Tender rating at this time," Chiu wrote.

Q2 Operational Highlights

For Q2 2025, MAG reported processing 343,000 tonnes of ore at an average silver head grade of 417 grams per tonne (g/t) at Juanicipio, resulting in silver production of 4.3 Moz (or 6.6 Moz silver equivalent, or Ag Eq) and 10,465 ounces gold (Au). In the first half of 2025, MAG reported production of 8.8 Moz Ag and 20,663 ounces Au from Juanicipio, keeping on track to meet its 2025 guidance of 14.7 to 16.7 Moz Ag (100% basis), the analyst noted.

Third Dividend Announced

Alongside the Q2 2025 results, MAG declared a fixed dividend of US$0.02 per share and an additional cash flow-linked dividend of US$0.124 per share (approximately 30% of the US$40.9 million cash generated from Juanicipio attributable to MAG), totaling US$0.144 per share. This announcement reinforces the company’s core strategy of providing shareholders with direct exposure to its profits.

MAG has consistently maintained a disciplined and transparent approach to returning capital to investors, Chiu said.

On Exploration at Juanicipio

In its latest release, MAG highlighted key developments from both underground and surface exploration efforts at Juanicipio. The summary included the completion of 9,494 meters of underground drilling at Juanicipio (with assay results pending), while surface drilling totaled 6,174 meters.

The 2025 underground drilling program continues to focus on further delineating near-mine targets and a southern deep skarn target, as well as infill target areas of the resource expected to be mined in the near to mid-term, including the Valdecañas, Anticipada, Ramal 1, Ramal 2, and Venadas veins, the CIBC analyst wrote.

Meanwhile, the surface drilling program is aimed at further testing the Cañada Honda structure and the newly identified Magdalena structure. Surface drilling at Mesa Grande is expected to commence in Q3 2025.