MAG Silver Corp.'s (MAG:TSX; MAG:NYSE American) 2024 production guidance increased following H1's outperformance, noted a BMO Capital Markets research note.
BMO Capital Markets analyst Kevin O'Halloran, in a research report published on August 2, 2024, provided an update on MAG Silver Corp. (MAG:TSX; MAG:NYSE American) following the company's second quarter 2024 financial results.
The analyst maintained an Outperform rating and a target price of CA$24.00 on the stock.
MAG Silver reported Q2 EPS of US$0.21, aligning with BMO/consensus estimates of US$0.22/$0.21.
O'Halloran highlighted the strong performance of the Juanicipio mine, stating, "Juanicipio continued to display its ability to generate strong cashflow, with operating cashflow of US$93M facilitating FCF of US$89M, an increase from US$28M in Q1."
Key points from the report include:
1. Juanicipio generated US$167M in revenue, beating BMO's US$160M expectation.
2. Q2's operating cash flow (100%) of US$93M compared with BMO's US$106M estimate, increasing from US$43M in Q1.
3. By-product costs improved quarter-over-quarter, with cash costs of US$1.15/oz Ag and AISC of US$4.49/oz, declining from US$2.50/oz and US$6.11/oz in Q1.
4. 2024 production guidance increased following H1's outperformance, with silver production guidance now at 16.3-17.3Moz (previously 14.3-15.8Moz).
O'Halloran emphasized the impressive cash flow generation, noting, "Juanicipio continues to display its ability to generate impressive cash flows quarter over quarter, which we forecast at US$235M in 2024."
The analyst also highlighted the improvement in costs, stating, "AISC guidance has now been revised lower from US$9.50-10.50/oz Ag to US$8.50-9.25/oz."
MAG Silver's strategic focus on maximizing the potential of the Juanicipio mine is evident in the strong production results and improved cost metrics. The company ended the quarter with a cash balance of US$97M, with an additional US$51M at the JV level (44% attributable to MAG), demonstrating a solid financial position.
BMO Capital Markets' target price of CA$24.00 represents a potential return of 31% from the price at the time of the report of CA$18.28.
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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. 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.
Disclosures for BMO Capital Markets, MAG Silver Corp., August 2, 2024
Analyst's Certification I, Kevin O'Halloran, 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 for remuneration 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 past 12 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 5: BMO Capital Markets or an affiliate received compensation for products or services other than investment banking services within the past 12 months from MAG Silver. 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 Disclosure 6C: 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: C) Non-Securities Related Services. Disclosure 16: A research analyst has extensively viewed the material operations of MAG Silver. Disclosure 17: MAG Silver has provided at its expense some or all of the itinerant travel for the research analyst related to facilitating a material site visit.
Methodology and Risks to Target Price/Valuation for MAG Silver (MAG-TSX) Methodology: Our target price is derived from a 100% weighting assigned to a 1.8x P/NPV multiple. Risks: Risks to our valuation include: operational risks at Juanicipio particularly as the ramp-up to full production is completed; financing risk in the case of further capital calls from the JV, although we view this scenario as relatively unlikely; and exploration risk, which we view as high for the company's secondary assets given their early-stage nature.
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