June 24, 2024

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Mag Silver, A Mid-Tier Waiting to Happen

Mag Silver, A Mid-Tier Waiting to Happen

When we spoke to Mag Silver CEO, George Paspalas at the Precious Metals Summit in Zurich this time last year, the company was still waiting for approvals to turn the power on. Now, Juanicipio has entered nameplate production and is one of the lowest cost operating silver mines on the planet with an AISC of $9.19 per silver ounce.

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The Juanicipio Jewel

The high-grade Juanicipio project, developed in partnership with Fresnillo processed a remarkable 322,249 tonnes in Q3 2023 alone, with silver recoveries consistently above 88%​​. Average head grade in Q3 was 523 grams per tonne, yielding silver production of 4.78 million ounces.

Financial Fortitude

Mag Silver’s financial health is robust. As of September 30, 2023, the company boasted a working capital of $55.1 million, cash reserves of $58.5 million, and notably, no long-term debt​​. This financial resilience, highlighted by a net income of $8.9 million for Q3 2023. Furthermore, Juanicipio returned a total of $11.3 million in loan principal and interest during Q3.

A notable aspect of Mag Silver’s financial strategy includes the recent signing of a $40 million credit facility with BMO. The facility has a maturity date of December 31, 2024 and will be available for working capital and general corporate purposes, and provides MAG with additional liquidity and financial flexibility for its 44% share of the Juanicipio development and exploration costs should it be needed. 

Expanding Exploration Frontiers

With Fresnillo as the operator of Juanicipio, Mag Silver’s focus now shifts back to exploration. Paspalas believes the best place to start is within the current licence as only 5% of the property has been explored to date, “there is very compelling technical justification to say that there’s potentially another one, two, up to three of these upwelling zones on the joint venture ground”. Finding more Juanicipios next to an established mining operation and smooth processing facility would be very value accretive. Even increasing the tonnes per day from 4,000 to 4,500 although incremental will add considerable additional cash flow. Paspalas also hinted that should more discoveries be made, the current processing plant footprint was designed in a way whereby one of the same size could be bolted on, essentially providing a pathway to doubling throughput.

Beyond Mexico, Mag Silver’s exploration ventures in Utah’s Deer Trail Project and Ontario’s Larder Project provide potential diversification and future growth. In Utah, Phase 2 drilling results have reinforced the company’s exploration model, while Phase 3 drilling is focused on three porphyry “hub” targets thought to be the source of the manto, skarn and epithermal mineralization and extensive alteration throughout the project area including that at Deer Trail and Carissa. In Q3, 1,994 metres were drilled at high elevation with results pending.

The Larder Project in Ontario, positioned along the world class Cadillac larder lake fault which hosts multiple gold mines including Agnico Eagle’s Canadian Malartic, Canada’s largest open pit and soon to be largest underground gold mine. George seemed excited by Larder, especially now that multiple well-defined high-priority drill targets are currently being tested by multiple rigs which are expected be turning over the next eighteen months.

Future Outlook: Dividends and Strategic Partnerships

Looking ahead, Mag Silver plans to build significant cash reserves, continue optimizing Juanicipio, and consider future dividends, reflecting its commitment to growth and shareholder value. The strategic partnership with Fresnillo has been instrumental in Juanicipio’s success, exemplifying Mag Silver’s collaborative approach. An approach they believe may suit Deer Trail and Larder before long.

Beyond Mexico, Mag Silver’s exploration ventures in Utah’s Deer Trail Project and Ontario’s Larder Project provide potential diversification and future growth. In Utah, Phase 2 drilling results have reinforced the company’s exploration model, while Phase 3 drilling is focused on three porphyry “hub” targets thought to be the source of the manto, skarn and epithermal mineralization and extensive alteration throughout the project area including that at Deer Trail and Carissa. In Q3, 1,994 metres were drilled at high elevation with results pending.

The Larder Project in Ontario, positioned along the world class Cadillac larder lake fault which hosts multiple gold mines including Agnico Eagle’s Canadian Malartic, Canada’s largest open pit and soon to be largest underground gold mine. George seemed excited by Larder, especially now that multiple well-defined high-priority drill targets are currently being tested by multiple rigs which are expected be turning over the next eighteen months.