Silver Producer Announces Inaugural Dividend From Mexican Operation

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Top-tier silver producer MAG Silver Corp. (MAG:TSX; MAG:NYSE American) has reported its financial results for 2024 and declared an inaugural dividend of a total of US$0.18 per share.

The payment is a fixed dividend of US$0.02 per share and an additional cash flow-linked dividend of US$0.16 per share, or about 30% of the cash the company received from its 44% Juanicipio joint venture (JV) with Fresnillo Plc.

"We expect a positive reaction from MAG shares following Q4 financial results, which were ahead of consensus," a Flash Note from research firm TD Cowen noted on March 24. "More importantly, lower operating costs continued to showcase impressive margins at Juanicipio, and the company declared its widely-anticipated inaugural dividend of US$0.18/share. The implied annualized dividend yield of 4.6% is the highest in our precious metals universe."

The firm held a Buy rating on the stock with a price target of US$27.

"The announcement of our dividend policy and inaugural dividend is a major milestone for MAG and validates our confidence in the overall strength and sustainability of our business,” President and Chief Executive Officer George Paspalas said. “This inaugural dividend, with both fixed and cash flow linked components, demonstrates our dedication to delivering consistent value while sharing Juanicipio's operational and financial success with our shareholders."

MAG said the declaration, timing, amount, and payment of future dividends will be subject to the discretion and approval of the Board of Directors and it will review the dividend program "on an ongoing basis and may amend it at any time."

Juancipio Continues to Improve

For the year 2024, the company reported a net income of US$77.78 million, or US$0.75 per share, driven by income from Juanicipio of US$92.88 million and adjusted EBITDA of US$186.73 million.

"We expect a positive reaction from MAG shares following Q4 financial results, which were ahead of consensus," a Flash Note from research firm TD Cowen noted on March 24. 

In addition to paying an inaugural dividend of US$26.4 million to MAG, Juanicipio returned a total of US$97.38 million in interest and loan principal repayments to MAG for a total capital return in 2024 of US$123.78 million, further augmenting MAG's cash position to US$162.35 million at the end of the year, the company said.

A total of 1,328,178 tonnes of ore at a silver head grade of 468 grams per tonne (g/t) (equivalent silver head grade of 712 g/t) was processed at Juanicipio, which achieved silver production and equivalent silver production of 18.6 and 26.8 million ounces (Moz), respectively.

Silver recovery at Juanicipio improved to 93% from 87% in 2023, reflecting the commencement of commercial pyrite and gravimetric concentrate production during the second quarter of 2024, delivering incremental silver and gold recovery, paired with ongoing optimizations in the processing plant, MAG noted.

Forecast for 2025

For 2025, Fresnillo reports silver production at Juanicipio is forecasted to range between 14.7 Moz 16.7 Moz, yielding between 13.1 million and 14.9 million payable ounces. This guidance is based on a throughput rate of 4,000 tonnes per operating day at a head grade range of 380 g/t to 430 g/t silver (Ag). The gold head grade is expected to range between 1.2 g/t to 1.4 g/t. 

In an updated research note reacting to the financial results and dividend on March 24, National Bank of Canada Analyst Don DeMarco maintained his Outperform rating on the stock with a CA$30.50 price target.

"Our thesis considers production growth at Juanicipio (44%), diversified metal production, a re-rate to producer multiples, exploration upside and M&A appeal tempered by Juanicipio JV terms, which limit profit sharing to once per year," DeMarco wrote.

Paspalas said he expects performance at the project to continue to improve in 2025.

The Catalyst: Precious Metal Has Big Industrial Uses

The silver market rallied Monday but showed signs of hesitation near the crucial US$33.33 level, Christopher Lewis reported for FX Empire.

"All things being equal, the markets do look as if they are trying to break higher, but there is quite a bit of resistance at that US$33.33 level as well," he wrote. "So, I think what we need to do is practice a little bit of patience and certainly a lot of position sizing and money management at this point."

Lewis continued, "Silver does tend to be very noisy under the best conditions and these aren't the best of conditions, so it's going to be even more noisy than usual."

Lewis did note that it was "only a matter of time before we break higher."

Silver's industrial utility comes in clearer when contrasting it to the current gold market, which is setting multiple record highs as a safe haven in times of financial and geopolitical uncertainty.

According to James Hyerczyk of FX Empire on February 23, silver has gained at least 14% so far this year, following a robust 21% rise in 2024, reflecting strong demand across both precious and industrial markets​.

"Silver's outlook remains positive, driven by both monetary and industrial demand," Hyerczyk wrote. "As inflation fears persist and geopolitical risks grow, silver's dual role as a precious metal and an industrial commodity provides a robust foundation for further gains. While the potential for new tariffs adds uncertainty to industrial demand, silver's safe-haven appeal should continue to attract investors looking for stability."

It's the industrial role that comes into play to help create the deficit for silver, which is the best conductor of electricity among the metals.

"Underpinning silver's fundamentals is robust demand from industrial applications," The Silver Institute said in its World Silver Survey 2024 report. "These continued to push higher last year, reaching a new all-time record, fueled by the remarkable rise in solar demand and in spite of stagnation in some other sectors. Sluggish silver supply, owing to the slight decline in global mine production, was another factor contributing to silver's deficit conditions last year."

Mordor Intelligence noted that silver is expected to register a compound annual growth rate (CAGR) of more than 5% between 2024 and 2029.

Ownership and Share Structure

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

Top institutional shareholders include Juanicipio operator Fresnillo Plc. with 9%, BlackRock Investment Management (UK) Ltd. with 10.8%, Van Eck Associates Corp. with 9%, First Eagle Investment Management LLC with 6.2%, and Sprott Asset Management LP with 3%, the company said.

MAG Silver has a market cap of US$2.35 billion. It has 103.36 million shares outstanding, according to Reuters. It trades in a 52-week range of CA$12.24 and CA$18.27.