MAG Silver Corp. (MAG:TSX; MAG:NYSE American) continued to move record amounts of material through plants run by its partner Fresnillo Plc. in the third quarter while waiting for its large-scale Juanicipio mill to come online in Mexico.
The OK for the electricity hookup for the new plant could any moment, company officials have said. Meanwhile, MAG announced net income for the quarter was more than US$8.2 million or US$0.08 per share, versus a loss of US$2.3 million or US$0.02 per share during the same quarter in 2021.
“MAG reported nice profits and the mill will connect to electricity ‘in the coming weeks,’” asset manager Chen Lin wrote in his newsletter, “What Is Chen Buying? What Is Chen Selling?” on Nov. 14. “MAG has been (among) the best-performing silver stocks in the past weeks, jumping 50% from the low. I like MAG a lot and continue to hold.”
Chen Lin wrote in his newsletter on Nov. 22, “It is pretty obvious we are having a huge surge in silver demands as solar panels are the biggest usage of silver.”
Earlier this month, the Silver Institute predicted that global silver demand will reach a new high of 1.21 billion ounces this year, up 16% from last year.
Industrial demand, including for vehicle electrification and other green technologies, is on course to grow to 539 million ounces (Moz).
“This is what I have been predicting for a while,” Chen wrote in his newsletter on Nov. 22. “It is pretty obvious we are having a huge surge in silver demands as solar panels are the biggest usage of silver.”
More than 180,000 tonnes of mineralized materials were passed through the nearby Saucito and Fresnillo plants during the quarter for net sales of more than US$25 million, compared to 154,000 tonnes in Q2.
The two plants produced 2.4 million payable silver ounces, more than 4,900 payable gold ounces, more than 1,300 payable lead tonnes, and more than 2,000 payable zinc tonnes.
About 70% of the amount processed was through the Saucito plant, which more closely resembles the new Juanicipio plant, which should help give insight to the new operators.
The Catalyst
Using Fresnillo’s mills enabled MAG to keep the money flowing even with the new plant not open yet.
It was due to come online at the end of 2021, but the state-owned electrical utility Comisión Federal de Electricidad said it would not immediately approve the plant's connection to the electrical grid because of the need to install further equipment on the system.
Stifel GMP analyst Stephen Soock named the stock one of his “top picks”
Despite the delay, Stifel GMP analyst Stephen Soock named the stock one of his “top picks” for the third quarter and rated it a Buy but lowered the target to CA$28.25 from CA$28.75 this month.
“We believe that MAG is one of the better options for investors looking for exposure to silver,” analyst Brian MacArthur of Raymond James Ltd. wrote in an updated note on Nov. 14. “Given the quality of the asset, a strong partner, MAG's financial position, and excellent exploration potential, we rate the shares Outperform.”
MacArthur set a target price of CA$24.50.
“Mining operations are prepared for a start-up with a substantial stockpile ahead of the mill and will ramp up as the complex enters the commissioning phase to commercial production,” MAG President and Chief Executive Officer George Paspalas said. “Juanicipio remains well positioned to take its place as a significant and responsible producer of silver.”
Company Continues to Explore
MAG is mining the Bonanza zone of the Valdecañas vein in the Zacatecas state of Mexico. A preliminary economic assessment (PEA) in 2017 estimated a 19-year mine life with 4,000 tonnes per day.
The district is characterized by veins that appear to be fed by an ore fluid upwelling zone. Valdecañas is one of two such zones.
“We believe that MAG is one of the better options for investors looking for exposure to silver,” analyst Brian MacArthur of Raymond James Ltd. wrote.
Fresnillo owns the remaining 56% of the project.
The mine generated nearly 252,000 tonnes of mineralized material last year, including 3.2 million ounces of silver and 6,577 ounces of gold, MAG said. The company completed a CA$46 million equity financing last November, but the project has been able to fund itself this year with the amount of cash it has been taking in.
MAG continues to explore and develop the rest of the Juanicipio property, its Deer Trail project in Utah, and the Larder gold project, which it gained with the purchase of Gatling Exploration Inc. earlier this year.
And during the nine months that ended Sept. 30, MAG recorded a write-down of US$10,471 on its option earn-in project on a prospective land claim package in the Black Hills of South Dakota.
Five drill rigs are running at the new Los Tajos target at Juanicipio with continued underground definition and geotechnical drilling. It is also drilling at Larder and Deer Trail.
As of Sept. 30, MAG held more than US$39.5 million in cash, and the Juanicipio plant had US$18.2 million, the company said.
Ownership and Share Structure
Top shareholders include Juanicipio project operator Fresnillo with 10%, BlackRock Asset Management with 6.9%, Sprott Asset Management with 5.2%, Van Eck Associates with 4.7%, mining financier Eric Sprott with 4.6%, First Eagle Investment Management with 4.2%, and ETF Managers Group with 2.6%.
The company is covered by a plethora of analysts including Stephen Soock of Stifel, among others. Newsletter writers Peter Krauth of the Gold Resource Investor, Chen Lin of of . Click "See More Live Data" in the data box above to view them all.
MAG Silver has a market cap of US$1.55 billion and 98.8 million shares outstanding, 97.8 million of them floating. It trades in a 52-week range of US$19.58 to US$10.32.
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