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TICKERS: MAG

Silver Miner Set to Yield 'Robust Cash Flow,' Expert Says
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Despite the increase in cost assumptions for the company's joint venture project in Mexico, this mining company is positioned for "robust cash flow," noted a Stifel report.

After MAG Silver Corp. (MAG:TSX; MAG:NYSE American) reported its Q2/22 financials, Stifel lowered its target price on the miner by CA$1, to CA$28.75 from CA$29.75, reported analyst Stephen Soock in an August 18, 2022 research note.

This resulted from Stifel increasing future cost assumptions for MAG's Juanicipio joint venture (JV) project to reflect recent and expected inflation.

"Despite the increase in go-forward cost assumptions, we still see the company generating extremely robust cash flow," Soock of Stifel highlighted.

 

 

 

 

Despite the changes, Stifel still considers MAG, now trading around CA$15.92 per share, a Top Pick and a Buy.

"Despite the increase in go-forward cost assumptions, we still see the company generating extremely robust cash flow, a total attributable to MAG of US$735 million (US$735M) at current spot metal prices from 2023 to 2027 for an average yield of 11.4%," Soock highlighted.

This capital, the analyst added, should support "a robust dividend," exploration at Juanicipio and MAG's other properties, and internal funding of the Juanicipio mill construction, now estimated by Stifel at US$160M versus US$130M previously.

Soock noted MAG's financials for the quarter that ended June 30, 2022, were "positive," and he provided the highlights. MAG posted earnings per share of US$0.08 from its 44% interest in Juanicipio.

During the quarter, Soock relayed, the Juanicipio JV processed 154,000 tons of 781 grams per ton silver equivalent, which generated US$19.2M in revenue. This took the JV's total cash amount to US$37.5M.

Soock reviewed the revisions Stifel made to its MAG model. One on hand, Stifel increased various cost forecasts, wrote Soock. For instance, it raised mining cost projections related to Juanicipio in 2023 to US$46 per ton from US$35; processing costs to US$26.75 per ton from US$20.37; and general and administrative costs to US$4.40 per ton from US$3.35. For 2024, Stifel increased costs by another 6%.

On the other hand, Stifel boosted the estimated mineable resource base at Juanicipio to 25% from 20% to include results of drilling completed since 2017, he noted.

Upcoming catalysts for MAG, Soock pointed out, include initial drill results from its newly acquired Larder property and, at Juanicipio, final connection to the Mexican power grid and maiden results from the nearby Cesantoni target.


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Disclosures:

1) Doresa Banning wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.

2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: MAG Silver Corp. Click here for important disclosures about sponsor fees. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security. As of the date of this article, an affiliate of Streetwise Reports has a consulting relationship with: None. Please click here for more information.

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Disclosures For Stifel Research, MAG Silver Corp., August 18, 2022

I, Stephen Soock, certify that the views expressed in this research report accurately reflect my personal views about the subject securities or issuers; and I, Stephen Soock, certify that no part of my compensation was, is, or will be directly or indirectly related to the specific recommendations or views contained in this research report.

Our European Policy for Managing Research Conflicts of Interest is available at www.stifel.com/institutional/ImportandDisclosures. 

Within the last 12 months, Stifel or an affiliate has provided material services for 34%, 59%, 21%, 19% and 14% of the companies whose shares are rated Buy, Speculative Buy, Hold, Sell and Suspended respectively. The securities of the company or companies mentioned in this report may not be registered in certain states or other jurisdictions and as a result, the securities may not be eligible for sale in some states or jurisdictions. Additionally, the securities of non-U.S. issuers may not be registered with, nor be subject to the reporting requirements of, the U.S. Securities and Exchange Commission. The information contained herein is not an offer to sell or the solicitation of an offer to buy any security in any state or jurisdiction where such an offer or solicitation would be prohibited.

Additional Disclosures:  Please visit the Research Page at www.stifel.com for the current research disclosures and respective target price methodology applicable to the companies mentioned in this publication that are within the Stifel coverage universe. For a discussion of risks and changes to target price including basis of valuation or methodology please see our stand-alone company reports and notes for all stocks. The information contained herein has been prepared from sources believed to be reliable but is not guaranteed by us and is not a complete summary or statement of all available data, nor is it considered an offer to buy or sell any securities referred to herein. Opinions expressed are as of the date of this publication and are subject to change without notice. These opinions do not constitute a personal recommendation and do not take into account the particular investment objectives, financial situation or needs of individual investors. Employees of Stifel, or its affiliates may, at times, release written or oral commentary, technical analysis or trading strategies that differ from the opinions expressed within. Stifel or any of its affiliates may have positions in the securities mentioned and may make purchases or sales of such securities from time to time in the open market or otherwise and may sell to or buy from customers such securities on a principal basis; such transactions may be contrary to recommendations in this report. Past performance should not and cannot be viewed as an indicator of future performance.

Unless otherwise noted, the financial instruments mentioned in this report are priced as of market close on the previous trading day and presumed performance is calculated always over the next 12 months. As a multi-disciplined financial services firm, Stifel regularly seeks investment banking assignments and compensation from issuers for services including, but not limited to, acting as an underwriter in an offering or financial advisor in a merger or acquisition, or serving as a placement agent in private transactions.

Affiliate Disclosures:  References to “Stifel” (collectively ”Stifel”) refer to SFC and other associated affiliated subsidiaries including (i) Stifel, Nicolaus & Company, Incorporated (“SNC”); (ii) Keefe, Bruyette & Woods, Incorporated (“KBWI’’), which are both U.S. broker-dealers registered with the United States Securities and Exchange Commission (“SEC”) and members of the Financial Industry National Regulatory Authority (“FINRA”), respectively; (iii) Stifel Nicolaus Canada, Incorporated. (“Stifel Canada”), which is authorised and regulated by Investment Industry Regulatory Organization of Canada (“IIROC”), and also trades under the names “Stifel GMP” and/or “Stifel FirstEnergy”; (iv) Stifel Nicolaus Europe Limited (“SNEL”), which is authorised and regulated by the Financial Conduct Authority (“FCA”) (FRN 190412) and is a member of the London Stock Exchange and also trades under the name Keefe, Bruyette & Woods Europe (“KBW Europe”); (v) Stifel Europe Bank AG (“SEBA”), which is regulated by the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht; “BaFin”) and is a member of Deutsche Boerse and SIX Swiss Exchange and (vi) Stifel Schweiz AG (“STSA”), which is representative of SEBA in Switzerland and regulated by the Eidgenössische Finanzmarktaufsicht (“FINMA”). SNEL, SEBA and STSA are collectively referred to as Stifel Europe.




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