In an April 4 research note, Macquarie Research analyst Michael Gray relayed the highlights from MAG Silver Corp.'s (MAG:TSX; MAG:NYSE.MKT) recent update on Juanicipio, its joint venture (JV) project with Fresnillo.
One major factor is MAG has enough capital to fund its share of the Bonanza zone upper mine. The company had $130.2 million in cash and cash equivalents at year-end 2018. "We think an extra working capital cushion will be secured by year-end 2019," Gray noted.
Another takeaway is the Juanicipio mine construction is "progressing well," wrote Gray, with more than 18.5 kilometers (18.5 km) of underground development, including 1 km of the conveyor ramp, having been finished to date. What is being worked on now are excavation for and construction of the underground crushing chamber and detailed engineering for the internal shaft.
Regarding agreements made to date, the JV has made $23.1 million worth with process equipment suppliers and $69.5 million worth with development contractors, according to Fresnillo. The entity still needs to secure agreements for engineering, procurement and construction management, operating services, and lead and zinc offtake.
The next major catalyst for MAG is the Juanicipio JV's technical committee approving the independent feasibility study, after which a construction decision by its board and Fresnillo's board is expected. Fresnillo has guided to commercial production starting in H2/20.
Also noteworthy about Juanicipio, Gray indicated, is exploration there continues, now with five rigs on site testing targets near the mine and on the broader property.
Gray concluded the report with this: "We continue to have a high conviction that the Juanicipio JV mine (essentially being built now) will be one of the highest margin precious metal projects globally."
Macquarie has an Outperform rating and a CA$23 per share, 12-month price target on MAG Silver, whose stock is currently trading at around CA$13.37 per share.
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Disclosures from Macquarie, MAG Silver Corp., April 4, 2019
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