In a May 19 research note, H.C. Wainwright & Co. analyst Heiko Ihle discussed MAG Silver Corp.'s (MAG:TSX; MAG:NYSE A) 2021 drilling plans as well as other company news.
Regarding exploration work at Juanicipio, assays are expected sometime during this quarter from the 2020 drill program, comprised of 33 holes over 27,900 meters, Ihle noted.
For this year, 2021, MAG Silver and joint venture (JV) partner Fresnillo budgeted $6 million for exploration at their Mexico project. The campaign calls for stepout and infill drilling of the Valdecañas vein system and drill testing of three main target areas on the property.
As for MAG's Deer Trail project in Utah, Ihle relayed, the company is currently working its phase one drill program there, having completed about 70% of it so far. It also plans to conduct a phase two program, based on incoming core and draft lab results.
"We remain optimistic towards the initial phase one exploration results from MAG's Deer Trail 100% earn-in project, as we expect assays to be received shortly after the program's conclusion," Ihle wrote.
The analyst also reported that H.C. Wainwright raised its target price on MAG Silver to CA$22.50 per share from CA$21.50 after updating the financial component of its model on the mining firm. Ihle discussed MAG's Q1/21 financial results in his report but noted they are "largely irrelevant as the site is not producing at commercial levels yet."
During the quarter, he relayed, MAG garnered US$85,000 in revenue from interest earned on cash, cash equivalents and term deposits and incurred a net loss of US$3.7 million versus US$0.03 million and US$14.9 million, respectively, a year earlier. "The narrower net loss was mostly driven by MAG recognizing a $0.6M equity pick-up in 1Q21, compared with an equity loss of $4.7M in 1Q20," Ihle noted.
At the end of Q1/21, the Canadian explorer-developer had US$92.8 million in cash and cash equivalents, and owes US$73.9 million in initial Juanicipio capex, its portion of the remaining US$168 million. Ihle pointed out that "present expected cashflow generated from material processed at Fresnillo's (FRES.L; not rated) plant should continue to help offset the remaining construction costs for the operation."
Regarding Q1/21 Juanicipio operations and revenue, Ihle relayed, the JV batch processed 36,385 tons of ore at the Fresnillo plant at an average silver head grade of 458 grams per ton. This amount takes the total ore processed since August 2020 to 108,254 tons. Also, the JV sold 431,188 ounces of silver, 631 ounces of gold, 199 tons of zinc and 137 tons of lead, for a gross total of US$10.1 million.
These efforts garnered the JV a Q1/21 gross profit of US$8.2M. Also beneficial to the bottom line, during the quarter deferred income tax expenses were US$1.6 million, compared to US$8.7 million a year earlier.
Commissioning of the Juanicipio processing plant is slated for Q4/21, a major catalyst for MAG Silver, the analyst noted.
H.C. Wainwright has a Buy recommendation on the company.
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Disclosures from H.C. Wainwright & Co., MAG Silver Corp., May 19, 2021
I, Heiko F. Ihle, CFA, Tyler Bisset and Marcus Giannini, certify that 1) all of the views expressed in this report accurately reflect my personal views about any and all subject securities or issuers discussed; and 2) no part of my compensation was, is, or will be directly or indirectly related to the specific recommendation or views expressed in this research report; and 3) neither myself nor any members of my household is an officer, director or advisory board member of these companies.
None of the research analysts or the research analyst's household has a financial interest in the securities of MAG Silver Corp. (including, without limitation, any option, right, warrant, future, long or short position).
As of April 30, 2021, neither the Firm nor its affiliates beneficially own 1% or more of any class of common equity securities of MAG Silver Corp.
Neither the research analyst nor the Firm has any material conflict of interest in of which the research analyst knows or has reason to know at the time of publication of this research report.
The research analyst principally responsible for preparation of the report does not receive compensation that is based upon any specific investment banking services or transaction but is compensated based on factors including total revenue and profitability of the Firm, a substantial portion of which is derived from investment banking services.
The Firm or its affiliates did receive compensation from MAG Silver Corp for investment banking services within twelve months before, and will seek compensation from the companies mentioned in this report for investment banking services within three months following publication of the research report.
H.C. Wainwright & Co., LLC managed or co-managed a public offering of securities for MAG Silver Corp. during the past 12 months.
The Firm does not make a market in MAG Silver Corp. as of the date of this research report.
H.C. Wainwright & Co., LLC and its affiliates, officers, directors, and employees, excluding its analysts, will from time to time have long or short positions in, act as principal in, and buy or sell, the securities or derivatives (including options and warrants) thereof of covered companies referred to in this research report.
