MAG Silver Corp.'s (MAG:TSX; MAG:NYSE American) joint venture Juanicipio project in Mexico delivered strong production and other improvements in Q2/24 for "an impressive quarter," reported BMO Capital Markets analyst Kevin O'Halloran in a July 24 research note.
31% potential gain
The analyst reiterated BMO's CA$24 per share target price on the Canadian silver explorer-producer, now trading at about CA$18.81 per share. From here, the return to target is 31%.
MAG remains rated Outperform.
Overall production a beat
Q2/24 production at Juanicipio on a silver equivalent basis exceeded BMO's forecast by 21%. It came in at 6,820,000 ounces (6.82 Moz), and BMO's estimate was 5.62 Moz, O'Halloran reported. Commercial production of pyrite concentrate commenced at Juanicipio during the quarter, which boosted silver and gold recoveries, an effect expected to be ongoing.
Broken down by metal, Q2/24 production figures show silver did the best, zinc and lead were in line and gold fell short.
During the quarter, silver production was 35% higher than BMO's estimate, at 4.98 Moz versus 3.68 Moz. It also exceeded Q1/24 production of 4.45 Moz. Lead production was 9,960,000 pounds (9.96 Mlb), zinc production was 18.85 Mlb.
Q2/24 gold production was 9,300 ounces (9.3 Koz), less than BMO's expected 13 Koz. Lower grades were to blame.
Total Q2/24 production attributable to MAG, given its 44% stake in Juanicipio, was 2.19 Moz of silver, 4.1 Koz of gold, 4.38 Mlb of lead and 8.29 Mlb of zinc.
Silver grade guidance raised
Silver head grades outperformed in Q2/24, noted O'Halloran. The grade was 498 grams per ton (498 g/t), surpassing the joint venture's grade guidance of 380–420 g/t as well as BMO's forecast of 400 g/t. Further, the Q2/24 silver grade was higher than in Q1/24 when it was 476 g/t.
Consequently, the Juanicipio JV increased its silver grade guidance for 2024 to 420–460 g/t.
Improvements at Juanicipio
O'Halloran pointed out operational elements that improved quarter over quarter. Throughput was one, increasing in Q2/24 to 337,000 (337 Kt) from 326 Kt in Q1/24 and exceeding BMO's 330 Kt estimate.
The silver recovery rate is another, coming in at 92.5%, compared to 89.1% in the quarter before.
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