Silver Producer's Q3 Results Match Forecasts, Analyst Says

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. Steve Sobek wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee.
3. 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.

MAG Silver Corp. (MAG:TSX; MAG:NYSE American) reported net income of US$22.29 million, or US$0.22 per share, for the three months ending September 30. That's compared to a net income of US$8.86 million, or US$0.09 per share, during the same three months in 2023.

Analyst Kevin O'Halloran of BMO Capital Markets noted that the top-tier silver producer's EPS matched its forecast and exceeded consensus at US$0.18 per share.

The analyst also wrote in an updated research note on November 12 that the company's Juanicipio silver plant in Mexico "generated strong operating cash flow and FCF of US$110 million and US$97 million, exceeding our forecast."

"With ongoing operational strength from Juanicipio, we continue to forecast 2024 production above the top of guidance," wrote O'Halloran, who rated the stock Outperform with a target price of CA$26.

The company said its net income was driven by equity accounted income Juanicipio of US$25.55 million and adjusted EBITDA of US$55.72 million. Juanicipio is a joint venture (JV) with Fresnillo Plc., which owns 56%. MAG owns 44%.

Analyst Says Production Beat Forecast By 20%

MAG said a total of 332,290 tonnes of ore at a silver head grade of 481 grams per tonne (g/t) with an equivalent silver head grade of 735 g/t was processed at Juanicipio during the three months. The plant achieved silver production of 4.9 million ounces (Moz) and equivalent silver production of 7.1 Moz.

O'Halloran noted that the production beat his firm's forecast by 20% on higher grades.

"Gold production of 10.8 koz (thousand ounces) also beat expectations on higher grades," he wrote. "Through nine months, the company has produced 14.3Moz Ag (silver), or 85% of the midpoint of its 16.3-17.3 Moz 2024 guidance. We forecast full-year silver production of 18 Moz exceeding the range."

MAG also noted that Juanicipio "generated strong operating cash flow of (US$109.84 million) and free cash flow of (US$96.95 million) during the quarter."

"Building on the robust cost performance of the first half of 2024, Juanicipio continued to improve, delivering negative cash cost of US$0.12 per silver ounce sold (US$8.38 per equivalent silver ounce sold) and all-in sustaining cost of US$3.28 per silver ounce sold (US$10.83 per equivalent silver ounce sold)," the company said in a release.

Analyst Joe Reagor of Roth MKM wrote in an updated note on November 12 that he felt the results were "mixed compared to our estimates."

"Mainly due to lower cash distribution expectations and higher taxes at the Juanicipio JV, we are cutting our price target from US$17.50 to US$16.50," he wrote. "We also note that gold and silver prices have fallen sharply in recent weeks, marking a shift in investor sentiment, in our opinion. Therefore, we are maintaining our Neutral rating."

The Catalyst: Patience Required

After chasing record highs set by gold this year, silver recently broke through US$35 per ounce, reflecting a year-to-date gain of about 47%. However, it has since settled and was about US$31.20 on Monday, hovering "near a three-week low set last Wednesday," Arslan Ali reported for FX Empire.

"The price decline reflects a broader bearish trend from a recent 12-year high, largely driven by the strengthening U.S. dollar and waning demand for silver in key sectors," Ali wrote. "The dollar's resilience, supported by optimism around President-elect Donald Trump's tax policy proposals, has made silver more expensive for international buyers, pushing prices lower."

The most conductive element in nature, silver is used to coat electrical contacts in computers, phones, cars, and appliances. It's also an important element in solar technology.

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

Newsletter editor Brien Lundin encouraged investors not to get discouraged, as any price drop-off is temporary, he said.

Based on silver's charts, Ron Struthers of Struthers Resource Stock Report also predicted a major run-up in the silver price.

"Back in April or early May, I highlighted the breakout from a cup and handle formation and [that] that would lead to a major upside move. This is now confirmed," he wrote on Oct. 23.

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$1.57 billion. It has 103.14 million shares outstanding, according to Reuters. It trades in a 52-week range of US$8.29 and US$18.27.