In a July 28 research note, Scotia Capital Inc. (Scotia Bank) Analyst Trevor Turnbull, MBA, MSc, provided an update on recent activities at advanced stage silver development and exploration company MAG Silver Corp. (MAG:TSX; MAG:NYSE American) Juanicipio JV project in Zacatecas, Mexico.
Turnbull commented in the report that MAG Silver reported on Q2/21 pre-production results at the Juanicipio JV, which is owned 44% by MAG and 56% by Fresnillo Plc (FRES:LSE) and added that the project's ore processing plant is scheduled for commissioning in Q4/21. According to the report, the JV processed a total of around 44,400 tonnes of ore that produced 435 Koz Ag. with sales attributable to MAG of 166 Koz.
Analyst Turnbull pointed out that MAG Silver continues to be one of Scotiabank's leading picks as it is expected to become a rapidly emerging low-cost silver producer in H1/22. Turnbull noted that as production gears up fully, all-in sustaining costs (AISC) are expected to be only half of the current producer average.
The report listed that at the end of Q2/21 MAG held approximately $65 million in cash on its balance as it enters the final stages of construction at the new 4,000-tonne-per-day plant at Juanicipio. Scotiabank projects that the cash balances will decrease to around $26 million at year-end during plant commissioning. It is anticipated that pre-commercial production in the range of 48,000 tonnes per quarter will help in funding capital outlays.
Scotiabank advised that it is making an adjustment to MAG Silver's net asset valuation (NAV5%) to US$13.49, up from US$13.35 and stated that pending financial reporting is expected in mid-August. No significant changes were made to its capex forecast or business valuation model. Analyst Turnbull indicated that the updated NAV calculations were the result of changes in its estimates for future silver prices to US$27.25/oz in H2/21, US$32.00/oz in 2022, and US$28.00/oz in 2023. For 2025 and beyond, the firm's models incorporate a long-term silver price of US$20.00/oz.
Scotiabank currently has a Sector Outperform rating for MAG Silver Corp. with a target price of CA$23.51/share. The company's shares trade on the Toronto Stock Exchange under the symbol MAG and closed for trading at CA$22.65/share on August 17, 2021.
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Disclosures from Scotia, MAG Silver, July 28, 2021
I, Trevor Turnbull, certify that (1) the views expressed in this report in connection with securities or issuers that I analyze accurately reflect my personal views and (2) no part of my compensation was, is, or will be directly or indirectly, related to the specific recommendations or views expressed by me in this report.
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