MAG Silver Corp. (MAG:TSX; MAG:NYSE American) released its new "best-in-class silver dividend" policy and its Q4/24 financial results, reported Don DeMarco, National Bank of Canada (NBC) analyst, in a March 24 research note.
"[The] inaugural dividend with cash flow-linked feature allows investors [to] get paid with a yield that's among the top for silver names while maintaining upside to silver prices," DeMarco wrote.
30% Implied Uplift
The analyst reported that on the news, NBC reiterated its CA$30.50 per share (CA$30.50/share) target price on the Canadian silver producer.
"Our thesis considers production growth at Juanicipio (44%), diversified metal production, a rerate to producer multiples, exploration upside, and mergers and acquisitions appeal tempered by Juanicipio joint venture (JV) terms, which limit profit sharing to once per year," wrote DeMarco. Juanicipio is MAG's joint venture project in Mexico with Fresnillo Plc (FRES:LSE).
MAG's current share price is about CA$23.43, noted DeMarco. The suggested potential return is 30%.
The rating on the company remains Outperform.
Two-Part Dividend
DeMarco reviewed the details of MAG's new dividend. Its first one, payable in Q2/25, will be US$0.18/share. This will consist of a US$0.02/share fixed dividend and a US$0.16/share variable dividend linked to 30% cash flow from Juanicipio.
This dividend, according to management, represents an annualized yield of about 3.2%, which is among the top yields for silver names and comes from a long-life asset with exploration upside.
The cash distribution and dividend the JV pays to MAG will enable the latter to start and continue issuing a dividend to shareholders, wrote DeMarco. At the end of Q4/24, the JV had US$53.2M in cash and cash equivalents, about $43.6M less than $96.8M in Q3/24.
Corporate Financials
DeMarco presented Q4/24 financial and operational results for MAG and Juanicipio.
MAG's Q4/24 earnings per share was $0.18, which was $0.05 and $0.03 lower than NBC and consensus' estimates, respectively. This was due to nonoperating items and higher JV taxes, which led to lower equity income for the company.
Silver production attributable to MAG was 4,300,000 ounces (4.3 Moz). Sales were down quarter over quarter, totaling 3.9 Moz versus 4.5 Moz.
MAG, at the end of Q4/24, had $162.3M in cash and cash equivalents. Free cash flow was $48.8M versus ($19.1M). During the quarter, the producer's 44% of the Juanicipio shareholder loans was reduced to $4.7M from $29.2M in Q3/24.
Total cash costs net of byproducts was $0.05/oz silver, lower than NBC's estimate but higher QOQ. All-in sustaining cost was $8.71/oz silver, higher than NBC's forecast and higher quarter over quarter (QOQ).
Juanicipio Results Only
In Q4/24, free cash flow was $78.9M, down $17.9M from $95.5M in Q3/24.
Free cash flow was lower QOQ due to higher capex QOQ, offsetting cash flow from operating activities (CFO) that is still elevated despite higher costs QOQ. Q4/24 CFO was $111.6M versus $109.8M in Q3/24.
What to Watch For
MAG is finishing its analysis of data from its 2024 exploration work, from which it will identify new targets. The company is to resume drilling in H2/25.
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