MAG Silver Corp. (MAG:TSX; MAG:NYSE American) released Q4/23 operating results from Juanicipio, its joint venture (JV) project with Fresnillo in Mexico, which were in line with PI Financial's estimates, analyst Chris Thompson reported in a January 24 research note.
"We remain impressed by Juanicipio's operating performance, which has delivered two consecutive quarters of beating/meeting our silver equivalent (Ag eq) production expectations," Thompson wrote. "Higher than anticipated head grades across all metals (silver, gold, lead, and zinc) are comparable with our head grade expectations for this year."
Stock Offering Attractive Return
PI Financial reiterated its Buy recommendation and CA$17.50 per share target price on the Canadian mining company, noted Thompson. Given its current share price is about CA$12.54, the potential return for investors, the analyst noted, is 40%.
For MAG's share price to rise, Thompson purported, the Juanicipio JV must lower unit costs.
"Whilst inflationary pressures remain undoubtedly a factor, we need to see unit costs track lower, towards about US$100 per ton, this and next year in order to unlock the cash-flow potential that we see offered at Juanicipio," Thompson wrote.
Operational Results as Forecasted
Thompson presented the production numbers out of Juanicipio for Q4/23 and full-year 2023 (FY23).
Specifically, in Q4/23, the mining operation produced 4,505,000 ounces (4.505 Moz) of silver and 6.383 Moz of Ag eq. These figures were below PI Financial's estimates for the quarter of 5.047 Moz oz of Ag and 6.882 Moz of Ag eq, respectively.
However, significantly higher head grades, of both precious and base metals, made up for the shortfall. The grade of silver that was milled beat the forecast, coming in at 467 g/t versus 450 g/t.
"Since commercial production was announced in Q2/23, Juanicipio has milled close to nameplate capacity (4,000 tons per day), something that we hope will continue to be achieved this year," wrote Thompson.
As for FY23, Thompson reported that Juanicipio's production was generally in line with PI Financial's expectations. Silver production was 16.563 Moz compared to 17.105 Moz. Silver equivalent production was 22.415 Moz versus 22.914 Moz.
What To Watch For
Thompson noted that MAG's financial results from Q4/23 and FY23 are due out on March 19, 2024. Also to come this quarter is the mining company's guidance for this year.
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Disclosures for PI Financial, Mag Silver Corp., January 24, 2024
Analyst Certification I, Chris Thompson, hereby certify that all of the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly related to the specific recommendations or views expressed in this report. I am the research analyst primarily responsible for preparing this report.
Research Disclosures PI Financial Corp. and/or its affiliates expect to receive or intend to seek compensation for investment banking services from the subject company.
General Disclosure The affiliates of PI Financial Corp. are PI Financial (US) Corp., PI Financial Services Corp., and PI Capital Corp. Analysts are compensated through a combined base salary and bonus payout system. The bonus payout is amongst other factors determined by revenue generated directly or indirectly from various departments including Investment Banking. Evaluation is largely on an activity-based system that includes some of the following criteria: reports generated, timeliness, performance of recommendations, knowledge of industry, quality of research and investment guidance, and client feedback. Analysts and all other Research staff are not directly compensated for specific Investment Banking transactions. None of the material, nor its content, nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other party, without the prior express written permission of PI Financial Corp.
PI Financial Corp.’s policies and procedures regarding dissemination of research, stock rating and target price changes can be reviewed on our corporate website at www.pifinancial.com (Research: Research and Conflict Disclosure).
