MAG Silver Reports Solid 2Q22 Financial Results

MAG Silver reported its 2Q22 financial results, showing the company's strong position to continue developing its Juanicipio project. In addition, MAG Silver announced that issues such as the labor reform and a tie-in to the national power grid could increase the cost of the project. However, the company is financially well-positioned to cover theses additional expenses.

The Juanicipio project is located in Zacatecas and is owned for 56 percent by Fresnillo and 44 percent by MAG Silver. It consists of two main vein systems: Valdecañas and Juanicipio, which are prolific epithermal silver and gold structures. Both companies expect the project to produce 11.7Moz/y of silver and 43,500oz/y of gold.

In a press release, the company highlighted that as of June 30, the company had US$44,655 in cash, while Juanicipio held US$37,504 in cash. Fresnillo and MAG Silver estimate that the construction of the Juanicipio project will be delivered within the US$440,000 budget. However, the company highlighted that due to the increase in production from the underground mine and the 2021 labor reform, it has had to consider additional costs.

MAG Silver explained that both the costs of underground production and the impact of the labor reform are included in Juanicipio's costs, but are not contemplated in the US$440,000 budget. Nevertheless, these costs are expected to decrease future sustaining capital costs. Additionally, MAG Silver highlighted that it expects to fund the remaining CAPEX of the budget through cash flow from ongoing processing, as well as the working capital of US$47,673 held by Juanicipio in 2Q22.

In addition, the company highlighted that despite the challenges in completing the connection to the national electrical grid, caused by delays from the Federal Electricity Commission (CFE), it expects the 4,000t/d processing plant to reach around 90 percent of nameplate capacity in 4Q22. MAG Silver also noted that there could be additional financing requirements due to delays or additional sustaining capital.

MAG Silver reported that the Juanicipio 2022 exploration program is progressing well with five surface drill rigs, one of which is testing the Cesantoni target in the northwest zone of the mining concession. In addition, the company is conducting underground definition and geotechnical drilling.

MAG Silver previously stressed that since only 5 percent of Juanicipio has been explored, it is confident that the exploration program will lead to new discoveries, which would expand the project's resources and could even lead to a mill expansion. The areas with significant exploration potential in the Juanicipio project are the Valdecarias Vein Growth, Cesantoni and Venada, as well as potential upwelling fluid zones.