Overall Q1/24 production at MAG Silver Corp.'s (MAG:TSX; MAG:NYSE American) joint venture (JV) Juanicipio project in Mexico was 7% higher than BMO Capital Markets' estimate, driven by better-than-expected silver grades, reported analyst Kevin O'Halloran in an April 24 research note.
44% return implied
On the news, BMO maintained its target price on the Canadian silver producer of CA$24 per share, compared to its share price now of about CA$16.62 per share, noted O'Halloran. The difference between the current and target prices reflects a 44% return for investors.
MAG remains Outperform rated.
Operations looking good
O'Halloran presented four key takeaways from MAG's Q1/24 production results:
1) Production a beat. Total production surpassed BMO's forecast by 7%. Specifically, Juanicipio produced 6,400,000 ounces of silver equivalent (6.4 Moz of Ag eq) compared to BMO's 6 Moz projection. Of the total, 1.96 Moz of silver, 4,400 ounces (4.4 Koz) of gold, 3,830,000 pounds (3.83 Mlb) of lead and 6.45 Mlb of zinc were attributable to MAG (44%).
Total silver production was 4.45 Moz, higher than BMO's 3.77 Moz estimate. This equates to 30% of the midpoint of silver production guidance of 15.05 Moz. Overall gold production during the quarter, however, was lower than BMO's projection, at 9.9 Koz versus 13 Koz. The grade of gold produced was 1.32 grams per ton (1.32 g/t), below BMO's forecast of 1.45 g/t.
2) Silver grade higher. The grade of silver produced at Juanicipio in Q1/24 was 476 g/t. This exceeded both BMO's estimate of 410 g/t and the JV's 2024 guidance of 380–420 g/t.
"We forecast 400 g/t for the remainder of the year," O'Halloran wrote.
3) Throughput in line. Despite four days of halted production in March, throughput was generally as expected, at 326,000 tons. BMO's estimate was 333,000 tons.
Throughput on days of operation averaged 3,980 tons per day (3,980 tpd), and throughput guidance, in comparison, is 4,000 tpd.
4) Recoveries better. The recovery rates at Juanicipio for all metals in Q1/24 were improved over those in Q4/23. For example, recoveries of silver and gold in Q1/24 were 89.2% and 71.8%, respectively, versus 86.5% and 69.3% in Q4/23.
Catalysts to watch for
MAG will announce its Q1/24 financial results on May 14.
Further, two potential stock-moving events for the mining company on an ongoing basis, O'Halloran pointed out, are exploration results from Juanicipio and its other projects as well as continued cash flows from the Juanicipio JV.
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