MAG Silver Corp. (MAG:TSX; MAG:NYSE American) offers investors a twofer, in Juanicipio and in its newly acquired project, Larder Lake in the Abitibi Greenstone Belt, wrote PI Financial analyst Chris Thompson in a June 22 research note.
"Now is the time to take a second look at MAG, not only for the near-term cash flow that Juanicipio will be generating but for the long-term value offered by a robust exploration pipeline," Thompson added.
The Canadian miner has an attractive valuation at its current levels, the analyst noted, due to delays in Juanicipio getting connected to the Mexican electrical grid and weakness in the silver price. PI Financial has a target price on MAG of CA$23.50, and the stock is trading at around CA$16.11.
Regarding Juanicipio, it is expected that MAG will reward shareholders once commercial production is reached there this year, noted Thompson. This should happen after grid hookup is completed.
"Once that occurs, we expect a quick ramp-up to nameplate capacity (4,000 tons per day) that will allow the company to deliver on its promise to become a cash flow machine," the analyst added. "We currently expect attributable after-tax cash flow of +$115 million annually for the next three years alone at $21.50 per ounce silver (spot) or +$120 million at $22.50 per ounce silver (PI's base case)."
In addition to Juanicipio, Thompson noted, "we see MAG having much more to offer with a promising exploration pipeline in the works." One, which the company highlighted at the recent PDAC convention, is MAG's newest addition, Larder Lake.
"While it is still early days for Larder Lake, we see MAG being well-positioned to rapidly unlock the potential value offered by one of the best gold-finding addresses in Canada," Thompson commented. Nearby prolific mines include Macassa, Malartic, and, bordering MAG's property, Kerr-Addison.
MAG came to own Larder Lake through its acquisition of Gatling Exploration, which closed in late May.
Located "in the heart of elephant country within the Abitibi Greenstone Belt" in Ontario, Canada, Larder Lake has a combined open-pit and underground resource of about 1.3 million ounces grading 3.4 grams per ton gold, developed by Gatling.
That resource, however, according to Thompson, is "patchy." It stretches over a strike length of about 4 kilometers with deeper shoots where wildcat holes struck high-grade gold at depths reaching 1,500 meters," he explained. Most of the Larder Lake property has not been explored.
"Limited follow-up work has left low-hanging fruit for a better-funded suitor (MAG) to take advantage of," added Thompson.
PI Financial has a Buy rating on MAG Silver.
| Want to be the first to know about interesting Silver and Gold investment ideas? Sign up to receive the FREE Streetwise Reports' newsletter. | Subscribe |
Disclosures:
1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: MAG Silver Corp. Click here for important disclosures about sponsor fees.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the decision to publish an article until three business days after the publication of the article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases.
Disclosures for PI Financial Corp., MAG Silver Corp., June 20, 2022
The affiliates of PI Financial Corp. are PI Financial (US) Corp., PI Financial Services Corp., and PI Capital Corp.
Analysts are compensated through a combined base salary and bonus payout system. The bonus payout is amongst other factors determined by revenue generated directly or indirectly from various departments including Investment Banking. Evaluation is largely on an activity-based system that includes some of the following criteria: reports generated, timeliness, performance of recommendations, knowledge of industry, quality of research and investment guidance, and client feedback. Analysts and all other Research staff are not directly compensated for specific Investment Banking transactions.
PI Financial Corp.’s policies and procedures regarding dissemination of research, stock rating and target price changes can be reviewed on our corporate website at www.pifinancial.com (Research: Research and Conflict Disclosure).
