In an April 28 research note, BMO Capital Markets analyst Ryan Thompson reported Q1/21 operational results from MAG Silver Corp. (MAG:TSX; MAG:NYSE A) and Fresnillo Plc's (FRES:LSE) Juanicipio project.
The analyst highlighted that commissioning of the new Juanicipio plant is still on track for Q4/21. According to MAG Silver, Thompson wrote, construction of the new plant is progressing well.
Until the plant is done, Juanicipio development ore will continue to be processed at the Fresnillo plant, at a targeted rate of 16,000 tons (16 Kt) a month, Thompson wrote. The joint venture just missed this monthly goal in Q1/21 by processing 36 Kt total versus the expected 48 Kt. However, the number achieved does represent a 20% increase over Q4/20.
Q1/21 Juanicipio production, Thompson relayed, came in lower than BMO's estimate of 695,000 ounces (695 Koz). Actual production was 462 Koz of silver and 697 ounces (697 oz) of gold (203.4 Koz and 307 oz attributable to MAG). MAG will report Q1/21 lead and zinc production later.
Regarding finances, Thompson indicated that MAG's "balance sheet should be OK, assuming no issues." At year-end 2020, MAG had $94 million in cash plus $23 million of attributable cash within the joint venture, for a total of $117 million. Subtracting the estimated $93 million of capex still needed for Juanicipio, this leaves $24 million. Added to that will be MAG's share of revenue from three quarters (Q1/21, Q2/21 and Q3/21) of ore processing at the Fresnillo plant, an estimated $13 million, "resulting in a total buffer of $37 million before modest corporate overhead (typically ~$1 million/quarter)," Thompson noted.
BMO has a Market Perform rating and a CA$23.50 per share price target on MAG Silver. The miner's current share price is about CA$23.34 per share.
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Disclosures from BMO Capital Markets, MAG Silver, April 28, 2021
I, Ryan Thompson, hereby certify that 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.
Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and their affiliates, which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generating new ideas and in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service to clients.
Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets Limited are not registered as research analysts with FINRA. These analysts may not be associated persons of BMO Capital Markets Corp. and therefore may not be subject to the FINRA Rule 2241 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.
Company Specific Disclosures
Disclosure 1: BMO Capital Markets has undertaken an underwriting liability with respect to MAG Silver within the past 12 months.
Disclosure 2: BMO Capital Markets has provided investment banking services with respect to MAG Silver within the past 12 months.
Disclosure 3: BMO Capital Markets has managed or co-managed a public offering of securities with respect to MAG Silver within the past12 months.
Disclosure 4: BMO Capital Markets or an affiliate has received compensation for investment banking services from MAG Silver within the past 12 months.
Disclosure 6A: MAG Silver is a client (or was a client) of BMO Nesbitt Burns Inc., BMO Capital Markets Corp., BMO Capital Markets Limited or an affiliate within the past 12 months: A) Investment Banking Services
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