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TICKERS: MAG

Silver Miner Set to Yield 'Robust Cash Flow,' Expert Says
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Despite the increase in cost assumptions for the company's joint venture project in Mexico, this mining company is positioned for "robust cash flow," noted a Stifel report.

After MAG Silver Corp. (MAG:TSX; MAG:NYSE American) reported its Q2/22 financials, Stifel lowered its target price on the miner by CA$1, to CA$28.75 from CA$29.75, reported analyst Stephen Soock in an August 18, 2022 research note.

This resulted from Stifel increasing future cost assumptions for MAG's Juanicipio joint venture (JV) project to reflect recent and expected inflation.

"Despite the increase in go-forward cost assumptions, we still see the company generating extremely robust cash flow," Soock of Stifel highlighted.

Despite the changes, Stifel still considers MAG, now trading around CA$15.92 per share, a Top Pick and a Buy.

"Despite the increase in go-forward cost assumptions, we still see the company generating extremely robust cash flow, a total attributable to MAG of US$735 million (US$735M) at current spot metal prices from 2023 to 2027 for an average yield of 11.4%," Soock highlighted.

This capital, the analyst added, should support "a robust dividend," exploration at Juanicipio and MAG's other properties, and internal funding of the Juanicipio mill construction, now estimated by Stifel at US$160M versus US$130M previously.

Soock noted MAG's financials for the quarter that ended June 30, 2022, were "positive," and he provided the highlights. MAG posted earnings per share of US$0.08 from its 44% interest in Juanicipio.

During the quarter, Soock relayed, the Juanicipio JV processed 154,000 tons of 781 grams per ton silver equivalent, which generated US$19.2M in revenue. This took the JV's total cash amount to US$37.5M.

Soock reviewed the revisions Stifel made to its MAG model. One on hand, Stifel increased various cost forecasts, wrote Soock. For instance, it raised mining cost projections related to Juanicipio in 2023 to US$46 per ton from US$35; processing costs to US$26.75 per ton from US$20.37; and general and administrative costs to US$4.40 per ton from US$3.35. For 2024, Stifel increased costs by another 6%.

On the other hand, Stifel boosted the estimated mineable resource base at Juanicipio to 25% from 20% to include results of drilling completed since 2017, he noted.

Upcoming catalysts for MAG, Soock pointed out, include initial drill results from its newly acquired Larder property and, at Juanicipio, final connection to the Mexican power grid and maiden results from the nearby Cesantoni target.


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Disclosures:

1) Doresa Banning wrote 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. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security. As of the date of this article, an affiliate of Streetwise Reports has a consulting relationship with: None. Please click here for more information.

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Disclosures For Stifel Research, MAG Silver Corp., August 18, 2022

I, Stephen Soock, certify that the views expressed in this research report accurately reflect my personal views about the subject securities or issuers; and I, Stephen Soock, certify that no part of my compensation was, is, or will be directly or indirectly related to the specific recommendations or views contained in this research report.

Our European Policy for Managing Research Conflicts of Interest is available at www.stifel.com/institutional/ImportandDisclosures. 

Within the last 12 months, Stifel or an affiliate has provided material services for 34%, 59%, 21%, 19% and 14% of the companies whose shares are rated Buy, Speculative Buy, Hold, Sell and Suspended respectively. The securities of the company or companies mentioned in this report may not be registered in certain states or other jurisdictions and as a result, the securities may not be eligible for sale in some states or jurisdictions. Additionally, the securities of non-U.S. issuers may not be registered with, nor be subject to the reporting requirements of, the U.S. Securities and Exchange Commission. The information contained herein is not an offer to sell or the solicitation of an offer to buy any security in any state or jurisdiction where such an offer or solicitation would be prohibited.

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