Silver Miner Achieves Record-Breaking Recovery at Mexico Operation

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After announcing its inaugural divided last month, MAG Silver Corp. (MAG:TSX; MAG:NYSE American) has released production results from its Juanicipio joint venture (JV) in Mexico for the first quarter of 2025.

The company said Juanicipio, 44% owned by MAG and 56% owned by Fresnillo Plc, "delivered exceptional operational performance, record-breaking silver recovery and robust output across all metals, cementing its status as a world-class silver operation."

Building upon metallurgical enhancements implemented in 2024, Juanicipio achieved a record-breaking record silver recovery rate of 96% in the quarter, the company said.

"We are very pleased with Juanicipio's blockbuster start to 2025," said MAG President and Chief Executive Officer George Paspalas. "Consistently strong grades and record recovery have laid the foundation for a strong 2025. Looking ahead, we remain focused on optimizing production and advancing our key capital investments, including the tailings dam expansion and underground infrastructure development, to sustain and enhance our output. We are well positioned to meet 2025 production guidance and continue delivering strong returns for our shareholders."

In a research note update on April 23, Scotiabank Analyst Ovais Habib noted that MAG's silver production was above the firm's expectations.

"We view the results as positive for MAG shares as overall silver production exceeded our expectations with full-year guidance maintained," wrote Habib. "We continue to look forward to further ongoing optimizations as the company advances on major capital investments including the tailings dam expansion and underground infrastructure development. Following model updates, MAG shares are rated SO (Sector Outperform) with a US$18.50 PT."

In a research note update on April 23, Scotiabank Analyst Ovais Habib noted that MAG's silver production was above the firm's expectations.

Canaccord Genuity's Dalton Baretto also issued an updated note on April 23 after MAG's release.

"While production guidance was above our forecasts, we note that this was again driven by higher grades than anticipated and implies that Q1 could be the high-water mark for production based on average grade guidance for the year," Baretto noted. "That said, we note that Ag recoveries have stabilized at a world-class level of at or above 95%. The mill average run rate was also the highest level in five quarters. We are surprised by the elevated level of sustaining capex guidance, as these are ~2x the level indicated in the March 2024 technical report."

Preliminary Production, Guidance for 2025

MAG said Juanicipio saw steady milling performance during Q1, with 337,000 tonnes of ore processed, which is consistent with 2024 levels.

The silver head grade averaged 430 grams per tonne (g/t) during the quarter, achieving the top end of 2025 grade guidance.

Preliminary Q1 production included 4.5 million ounces (Moz) silver (Ag) and 10,198 ounces gold (Au), the company said. Comprehensive financial and operational results are expected to be released on May 12.

For 2025 guidance, silver production at Juanicipio is forecast to range between 14.7 and 16.7 Moz, with payable silver production expected between 13.1 and 14.9 Moz, Fresnillo reported.

That's based on a throughput rate of 4,000 tonnes per operating day at a silver head grade 1range of 380 g/t to 430 g/t, the company said. The gold (Au) head grade is expected to range between 1.2 g/t to 1.4 g/t.

Continuing optimization efforts and sustaining capital investments mean cost guidance is expected to range between negative US$1 to US$1 and US$6 to US$8 per silver ounce sold, respectively. Sustaining capital expenditures for 2025 are estimated between US$70 million and US$80 million, MAG said.

Some key investments include "expansion of the tailings dam to provide approximately six years of deposition capacity; (and) development of underground workshops, electrical and pumping infrastructure, and ventilation systems to support continued mine development and operations," the company said in a release.

Expansionary capital expenditures for 2025 are estimated between US$22 million and US$28 million and are related to the installation of an underground conveyor system expected to be commissioned in late 2026 to support expanded mining rates and deliver enhanced efficiencies and mining cost reductions.

Expert: Market 'Liked' Dividend Announcement

In March, MAG announced a fixed dividend of US$0.02 per share and an additional cash flow-linked dividend of US$0.16 per share for a total dividend of US$0.18 per share.

"MAG shares were up 5.9% on the news, showing that the market liked it," Peter Krauth wrote for The Gold Advisor on March 26. "The company has serious ongoing discovery potential at Juanicipio, Deer Trail, and Larder. Shares are up 24% just since the start of this year. Attractive to add on weakness."

An April 23 Research Flash by National Bank of Canada's Don DeMarco noted that Juanicipio is "starting to show consistent, elevated production reflective of a world-class mine."

An April 23 Research Flash by National Bank of Canada's Don DeMarco noted that Juanicipio is "starting to show consistent, elevated production reflective of a world-class mine."

DeMarco maintained his Outperform rating and CA$32.75 per share price target for the stock.

"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," the analyst wrote.

Roth Capital Partners LLC Analyst Joe Reagor said MAG's inaugural dividend is a boost for shareholders.

"We believe this dividend policy could broaden MAG's investor base and thus, we view it as a positive," Reagor wrote.

"[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," wrote DeMarco, who maintained an Outperform rating on the stock with a CA$30.50 per share target price.

The Catalyst: Silver Mirrors Strength of Safe-Haven Gold

According to a report Wednesday by FX Empire's Arslan Ali, silver has recently mirrored the strength of safe-haven gold, hovering around US$32.70 and hitting an intraday high of US$32.86.

"A falling U.S. Dollar Index, now near a three-year low, has made dollar-denominated metals more appealing to global investors," Ali said. "Despite a more positive global equity tone, silver continues to find support from both safe-haven flows and solid industrial demand."

The material's industrial utility that helps create a 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$1.56 billion. It has 103.36 million shares outstanding, according to Reuters. It trades in a 52-week range of CA$11.29 and CA$18.27.