Report Endorses Silver Producer's Deal With Pan American

1. MAG Silver Corp. is a billboard sponsor of Streetwise Reports and pays SWR a monthly sponsorship fee between US$4,000 and US$5,000.
2. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Pan American Silver Corp.
3. Steve Sobek wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee.
4. This article does not constitute investment advice and is not a solicitation for any investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Each reader is encouraged to consult with his or her personal financial adviser and perform their own comprehensive investment research. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company. 

For additional disclosures, please click here.

Leading independent proxy advisory firm Institutional Shareholder Services Inc. (ISS) has issued a report advising MAG Silver Corp. (MAG:TSX; MAG:NYSE American) shareholders to support a special resolution endorsing the previously announced arrangement with Pan American Silver Corp. (PAAS:TSX; PAAS:NASDAQ) at the upcoming special shareholder meeting, MAG announced Friday.

As part of this arrangement, Pan American will acquire all issued and outstanding shares of the company, offering shareholders a total consideration of approximately US$2.1 billion, equating to US$20.54 per MAG share, based on the closing price of Pan American's common shares on the New York Stock Exchange as of May 9.

Shareholders may elect to receive their consideration in one of two ways: US$20.54 in cash for each MAG share, or a combination of 0.0001 cent in cash and 0.755 Pan American shares per Mag share (default election), with proration ensuring that the overall payment includes US$500 million in cash, with the remainder provided in Pan American shares. The resolution will be put to vote at a meeting scheduled for July 10.

ISS, as a leading authority proxy advisory firm, may impact the voting decisions of certain pension funds, investment managers, mutual funds, and other institutional shareholders.

In its endorsement of the resolution, ISS commented that the arrangement offers shareholders "premium value to the unaffected date and an attractive blend of cash (subject to proration) and/or equity consideration." ISS also highlighted that "the consideration represents the highest price for Mag shares going back to 2021" and asserted that the newly combined entity will possess a larger, more diversified asset portfolio, providing shareholders with greater liquidity, scale, and market visibility.

The acquisition significantly de-risks MAG shareholders' exposure by converting a concentrated interest in the Juanicipio mine into equity ownership of Pan American. Also, shareholders get equity participation in a large-cap, value-driven silver producer that has returned more than US$1 billion to shareholders since 2010. Other benefits to MAG are improved trading liquidity in U.S. and Canadian markets and the potential for shareholders to receive a partial or full tax deferred rollover for Canadian income tax purposes.

A Top-Tier Silver Producer in Mexico

Based in Vancouver, British Columbia, MAG Silver Corp. is a mining and exploration company focused on growth, dedicated to advancing high-grade, district-scale precious metals projects across the Americas. MAG has established itself as a top-tier silver producer through its 44% stake in the Juanicipio project, which produces 4,000 tons per day and is operated by Fresnillo Plc (FNLPF:OTCMKTS; FRES:LSE), which holds a 56% interest. Located in Mexico’s Fresnillo Silver Trend, the Juanicipio site is undergoing an expanded exploration program, aimed at multiple highly promising targets, with only 10% of the property explored to date.

"From a qualitative point of view, Juanicipio is one of the highest-quality primary silver mines globally," stated Bujon Capital in a May 24 article on Seeking Alpha. "It has a long economic life, significant exploration potential, and low production costs."

MAG is also developing two additional exploration-stage projects, each featuring a multiphase drill program. One of these is Larder, covering 3,370 hectares in Canada’s Abitibi Greenstone Belt. Larder is strategically positioned between the massive Kirkland Lake/Macassa gold system, which has over 70 million ounces, and the past-producing Kerr-Addison mine, which yielded over 11 million ounces. Drilling at Larder began in 2020, and results have confirmed the potential both on and off the primary Cadillac Larder Break. Last year, MAG completed drilling totaling 41,000 meters.

The second project, Deer Trail, is rich in silver and located in Utah's Piute County, where it holds the potential for substantial porphyry and carbonate replacement deposits across 7,250 hectares. Geological analysis has pinpointed eight significant targets for the upcoming 2025-2026 drilling program, with phase four drilling currently in progress.

Regarding its financial status, as of March 31, MAG reported having US$156 million in cash, steady cash returns from Juanicipio, a CA$40 million revolving credit facility, and no outstanding debt.

Analysts Like Deal

CIBC Analyst Cosmos Chiu pointed out in a research report on May 21 that Pan American’s acquisition of MAG presents substantial value and offers numerous advantages for MAG shareholders. They will gain exposure to Pan American’s diverse portfolio of 10 silver and gold mining operations, including potential growth prospects from the La Colorado skarn project. Shareholders will retain their interests in Juanicipio and receive equity in Pan American. Management also stated that dividends will continue to be distributed until the finalization of the acquisition.

“We anticipate approximately US$0.194 per share and about US$0.197 per share in dividends to be declared in the next two periods,” Chiu noted.

Following the announcement of the acquisition agreement, Chiu updated his rating on MAG to Tender and raised his target price to US$28 per share from US$26, suggesting a 32% upside based on MAG’s current share price.

Peter Krauth, writing for Silver Stock Investor on May 14, expressed his support for the Pan American-MAG agreement, noting that it would provide MAG shareholders with 14% of Pan American’s shares.

“MAG shareholders will benefit from an immediate increase in share value, instant diversification of assets, and reduced risk through Pan American’s holdings, along with ongoing exposure to the Juanicipio mine, potential growth from the reopening of the Escobal mine, and improved liquidity and market access,” Krauth added.

In response to the news of MAG’s agreement to be acquired by Pan American, Joe Reagor, managing director and senior research analyst at ROTH Capital Partners, increased his target price for MAG to US$18 per share from US$16, as noted in a May 12 research report. He maintained his Neutral rating of the company.

The Catalyst: Silver Jumps Into the Spotlight

Although gold often captures the limelight, silver prices have also experienced a remarkable increase this year, rising 27% to their highest levels in over a decade, Roshan Fernandez reported for the Wall Street Journal on June 19.

Similar to gold, anxious investors are acquiring this precious metal, but silver is further propelled by robust industrial demand, particularly from manufacturers of solar panels, Fernandez noted.

In contrast to gold, which is primarily viewed as a store of value and utilized in jewelry, around 80% of silver demand stems from industrial uses. Initially, this was expected to negatively impact silver prices this year, as analysts anticipated a decline in demand due to President Trump’s trade conflicts and the rollback of renewable energy incentives.

That prediction seemed accurate in April when Trump initiated his series of tariffs, the article said. Silver prices fell alongside stocks and other commodities like oil, while investors turned to gold.

However, prices have made a strong comeback this month, encouraging an influx of silver sellers who are visiting coin shops, metal dealers, and jewelers to liquidate their coins, silverware, and bars, according to the report.

Silver futures for June delivery closed on Wednesday at US$36.866 per troy ounce, reflecting a 12% increase thus far in June. Meanwhile, gold settled at US$3,389.80, marking a 29% rise for the year and a 3.1% increase for the month.

Industrial demand remains robust, with silver usage for cutlery and electronics being steady, and the appetite from solar panel manufacturers continuing to grow, according to Michael Widmer, head of metals research at Bank of America, Fernandez reported.

There is a possibility that demand from the solar industry, particularly in China, was accelerated ahead of potential trade limitations and shifts in U.S. energy policies, leading to a possible slowdown in the latter half of the year, Greg Shearer, JPMorgan’s head of metals research said. Analysts also point to risks that manufacturers might substitute silver with less expensive metals or decrease their usage if prices escalate too high, Fernandez noted.

Even if prices maintain their upward trajectory this year, they are likely to fall short of the record high of US$48.70 established in 1980, when brothers Herbert and Bunker Hunt endeavored to monopolize the market by borrowing funds to gain control of as much silver as possible.

Prices soared from around US$11 an ounce before collapsing. Subsequently, the brothers faced charges of manipulating silver bullion prices and futures contracts, accepted a trading ban in commodities, and filed for personal bankruptcy. Adjusted for inflation, the January 1980 peak would exceed US$200 today.

In 2011, silver prices surged again during a speculative frenzy, hitting US$47.99, which would be roughly US$69 today, Fernandez reported. Similar to the events of 1980, they plummeted almost as swiftly as they had risen.

Ownership and Share Structure

According to Refinitiv, 14 strategic entities own 3.11% of MAG. The Top strategic shareholder is Industrias Penoles SAB de CV with 2.3%.

Numerous institutional investors hold 54.95%. The Top 3 are Van Eck Associates Corp. with 8.09%, First Eagle Investment Management LLC with 7.53% and Sprott Asset Management LP with 2.59%. The rest is in retail.

MAG Silver has 103.46 million (103.46M) outstanding shares and 100.23M free float traded shares. Its market cap is CA$3.01B. Its 52-week range is CA$15.64–29.83 per share.