Promising Future for the Juanicipio JV

Q: How do you plan to invest the capital generated by the Juanicipio project, and where do you see the company in 10 years’ time?

A: Right now, we are in a strong financial and developmental position as the 44 percent junior partner on the Juanicipio project, and our focus is on bringing the Juanicipio project into production and cash flow. As we near cash flow, MAG Silver will evaluate the reinvestment and shareholder distribution alternatives. In 10 years’ time, we will be generating substantial cash flow from the Juanicipio project, and MAG will be generating additional shareholder value through additional discoveries within the Juanicipio JV, and its other properties.

Q: What are the main concerns that your investors have at this moment?

A: Five years ago, one of the main concerns was whether or not the Juanicipio project would shape out enough to support development. Once that was addressed, the next issue was raising the necessary funds to maintain our 44 percent stake in the project, which we were fortunate enough to also accomplish. Currently, our investors are concerned with more general themes regarding Mexico, such as the tax regime in the country, the impact of the royalty tax that was put in place, and security issues. Our shareholders are also concerned about how we are going to continue to add value to their investment beyond the cash flows we anticipate. We believe the answer is in the geological potential of the Juanicipio JV property below the Bonanza zone, as well as the other prospective opportunities on the JV property where potential value can be realized. We therefore have two drilling programs in progress, one finishing in August and one anticipated to be complete at the end of the year. In addition, we are focusing on the anticipated cash flows once in production and the shareholder distribution alternatives that production will represent.

Q: How has the company managed to continue growing despite the ongoing industry downturn?

A: MAG Silver has always been built on grade and size. We put the company together in 2002 with the idea that there were sizeable deposits in Mexico with high enough grades to make a profit even at the US$4/oz silver price at the time. We are able to ride out market downturns primarily because we and our shareholders believe the quality of the ounce is more important than the quantity, and this, coupled with our strict financial discipline, gives us a firm foundation for sustained growth. We focus on internal rate of return because at the end of the day our job is to increase shareholder value.