Silver Co. Says 'Significant' Production Possible at Mexico Mine

MAG Silver Corp. (MAG:TSX; MAG:NYSE American) has announced preliminary 2024 guidance for its new high-grade Juanicipio mine in Mexico.

Project operator and joint mine owner Fresnillo Plc reported the silver head grade at the project is expected to range between 380 grams per tonne (g/t) and 420 g/t for the year, "translating to significant silver production potential," the company said in a release.

"Following a very successful start-up and ramp-up phase in 2023, the Juanicipio Mine is now operating at steady-state with robust silver grades and operations beginning to benefit from increasing efficiencies," MAG President and Chief Executive Officer George Paspalas said. "With the release of our updated technical report on the horizon, we're eager to paint an even clearer picture of the exciting future ahead for Juanicipio and MAG Silver."

MAG said it was on schedule to release the report by the end of Q1 2024, "providing more definitive guidance and solidifying our outlook for the Juanicipio mine," the company said.

Fresnillo owns 56% of Juanicipio and MAG owns 44%. Earlier this year, MAG released production totals from the fourth quarter for Juanicipio, which reached nameplate status during Q3.

Juanicipio processed 346,766 tonnes of mineralized material during the quarter, up from 322,249 the quarter before, and produced 4.5 million ounces silver (Moz Ag) ounces and more than 10,000 ounces gold (Au).

Analyst Chris Thompson of PI Financial wrote that he was "eagerly" awaiting the release of the company's year-end financial results and guidance, expected this month. Thompson maintained his Buy rating on the stock with a CA$17.50 per share target price.

"We remain impressed by Juanicipio's operating performance, which has delivered two consecutive quarters of beating/meeting our Ag Eq (silver equivalent) production expectations," Thompson wrote. "Also, we note that higher than anticipated head grades across all metals (Ag, Au, Pb [lead] and Zn [zinc]) are comparable with our head grade expectations for this year."

The Catalyst: Bullish Silver Market Coming?

The most conductive element in nature, silver coats electrical contacts in computers, phones, cars, and appliances. It's also an important element in solar and fuel cell technology. 

The precious metal opened the year at US$23.08 per ounce and was at US$23.96 on Tuesday afternoon. However, some analysts are still very bullish on its future this year. Investinghaven.com predicted a target price of US$34.70 and said the price could go as high as US$48 in mid-2024 or mid-2025.

"We reiterate our bullish stance about the silver market," noted the site, which identified silver as the strongest precious metal going into 2024-2026.

"In one of those years, silver will be touching US$50," the site noted. "We are convinced that silver will exceed US$50before the end of 2026."

The World Silver Survey 2023, published by the Silver Institute, said there was a 237.7 Moz deficit between supply and demand for the precious metal in 2022, a deficit that likely repeated in 2023.

MAG is mining the Bonanza zone of the Valdecañas vein system in the Zacatecas state of Mexico. A preliminary economic assessment (PEA) in 2017 estimated a 19-year mine life.

Plant Turns to Optimization

Juanicipio processed a total of 1,268,756 tonnes of mineralized material and produced 16.8 Moz Ag and 36,732 gold ounces in 2023. The average silver head grade for the year was 472 g/t, "demonstrating the notable consistency of the Juanicipio deposit and solidifying its position as one of the highest-grade silver mines in the world," the company said at the time.

Joe Reagor of Roth Capital Partners has rated MAG a Buy with a (US)$19 per share price target. Roth believes the Fed will cut interest rates by midyear but noted that precious metal prices started 2024 higher than anticipated.

"As such, we increased our 2024 gold price forecast from US$1,856 per ounce to US$2,075 per ounce and our silver price forecast from US$23.13 per ounce to US$25.19 per ounce," Reagor wrote. " Additionally, we increased our long-term gold price forecast from US$1,900 to US$1,950 per ounce."

"We also believe MAG is poised for a rerating as the Juanicipio JV begins to distribute cash in the coming quarters," Reagor wrote.

Analyst Kevin O'Halloran with BMO Capital Markets was among several industry analysts who visited the plant in Mexico last year. He rated the stock Outperform with a CA$24 per share price target.

"After reaching nameplate production in Q3, the focus at Juanicipio has turned to optimization, which was underway during our site visit in November," he wrote.

Ownership and Share Structure

Institutions own 70% of MAG, and 30% is retail, according to the company.

Top institutional shareholders include Juanicipio project operator Fresnillo Plc. with 9.1%, BlackRock Asset Management at 9.9%, ETF Managers Group LLC at 5.3%, Sprott Asset Management at 5.1%, and First Eagle Investment Management at 5.6%, the company said.

MAG Silver has a market cap of US$907.49 million. It has 102.97 million shares outstanding, according to Reuters said. It trades in a 52-week range of US$14.42 and US$8.20.

Important Disclosures:

1. MAG Silver Corp. is a billboard sponsor of Streetwise Reports and pays SWR a monthly sponsorship fee between US$4,000 and US$5,000.
2. Steve Sobek wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee.
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