UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 40-F
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ANNUAL REPORT PURSUANT TO SECTION 13(a) OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended
December 31, 2018
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Commission File Number
001-33574
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MAG SILVER CORP.
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(Exact name of Registrant as specified in its charter)
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BRITISH COLUMBIA
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(Province or other jurisdiction of incorporation or organization)
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1040
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(Primary Standard Industrial Classification Code Number (if applicable))
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Not Applicable
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(I.R.S. Employer Identification Number (if applicable))
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Suite 770 – 800 West Pender Street, Vancouver, British Columbia
V6C 2V6 Tel: 604-630-1399
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(Address and telephone number of Registrant's principal executive offices)
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Puglisi & Associates
850 Library Avenue, Suite 204
Newark, DE 19711
Tel: (302) 738-6680
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(Name, address (including zip code) and telephone number (including
area code)
Of agent for service in the United States)
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Securities registered or to be registered
pursuant to Section 12(b) of the Act.
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Title of each class
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Name of each exchange on which registered
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Common Shares, without par value
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NYSE American
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Securities registered or to be registered pursuant to Section 12(g)
of the Act: None.
Securities for which there is a reporting obligation pursuant to
Section 15(d) of the Act: None.
For annual reports, indicate by check mark the information filed
with this Form:
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X
Annual information form
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X
Audited annual consolidated financial statements
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Indicate the number of outstanding shares of each of the Registrant’s
classes of capital or common stock as of the close of the period covered by the annual report.
85,539,476
outstanding shares of the Registrant’s
common stock as of the fiscal year ended December 31, 2018.
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d)
of the Exchange Act during the preceding 12 months (or for such
shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for
the past 90 days.
Indicate by check mark whether the Registrant has submitted electronically
and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant
was required to submit and post such files).
Indicate by check mark whether the registrant is an emerging growth company as defined
in Rule 12b-2 of the Exchange Act.
Emerging growth company ☐
If an emerging growth company that prepares its financial statements
in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
EXPLANATORY COMMENT
MAG Silver Corp. (the “Company” or the “Registrant”)
is a British Columbia corporation and a “foreign private issuer” as defined in Rule 3b-4 promulgated under the U.S.
Securities Exchange Act of 1934, as amended (the “Exchange Act”) by the U.S. Securities and Exchange Commission (the
“SEC”). Under the SEC’s rules, the Company is eligible to prepare and file this annual report on Form 40-F,
and to present the disclosures herein primarily in accordance with Canadian disclosure requirements, which differ in certain material
respects from those which the SEC requires of United States companies.
For example, the Company has prepared its financial statements,
which are included as Exhibit 99.2 to this annual report on Form 40-F, in accordance with International Financial Reporting Standards
(“IFRS”) as issued by the International Accounting Standards Board (“IASB”), and such statements are not
in many respects directly comparable to financial statements of United States companies.
Similarly, and as discussed in greater detail below in “ESTIMATES
OF RESOURCES AND RESERVES,” the resource and reserve estimates included in the accompanying Annual Information Form (including
the Schedules thereto), found at Exhibit 99.1 of this Form 40-F Annual Report, and management’s discussion and analysis for
the fiscal year ended December 31, 2018 filed as Exhibit 99.2 to this Annual Report on Form 40-F, have been prepared in accordance
with the requirements of National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”),
which differ from the practices used to estimate resources and reserves in reports and other materials filed with the SEC by United
States companies.
As a “foreign private issuer” the Company is exempt
from certain proxy-related requirements found in Sections 14(a), 14(b), 14(c), and 14(f) of the Exchange Act, and the insider
reporting, “short swing profit” and short sale provisions found in Section 16 thereof are not applicable to the Company’s
common shares.
PRINCIPAL DOCUMENTS
The following documents have been filed by the Company with this
Annual Report on Form 40-F, and are incorporated herein by reference:
A. Annual Information Form
The Company’s Annual Information Form (“AIF”)
for the fiscal year ended December 31, 2018: see Exhibit 99.1 of this Annual Report on Form 40-F.
B. Audited Annual Consolidated Financial Statements and accompanying
Management’s Discussion and Analysis
The Company’s Audited Annual Consolidated Financial Statements
including the reports of the Independent Registered Public Accounting Firm with respect thereto and accompanying Management’s
Discussion and Analysis for fiscal year ended December 31, 2018: see Exhibit 99.2 of this Annual Report on Form 40-F. The Company’s
Audited Annual Consolidated Financial Statements have been prepared in accordance with IFRS.
CAUTIONARY COMMENT ON FORWARD-LOOKING STATEMENTS AND ADJACENT
PROPERTY DISCLOSURES
Forward Looking Statements
Certain information contained in this Annual Report on Form 40-F,
including any information relating to the Company’s future oriented financial information are forward-looking statements
within the meaning of the US Private Securities Litigation Reform Act of 1995 and applicable Canadian securities laws (collectively
“forward-looking statements”). All statements in this Annual Report on Form 40-F, other than statements of historical
facts are forward-looking statements, including statements regarding the anticipated time and capital schedule to production;
expectations on the approval of the development of the project; estimated project economics, including but not limited to, mill
recoveries, payable metals produced, production rates, payback time, capital and operating and other costs, Internal Rate of Return
(“IRR”), anticipated life of mine, and mine plan; expected upside from additional exploration; expected capital requirements
and adequacy of current working capital for the next year; and other future events or developments. Forward-looking
statements are often, but not always, identified by the use of words such as “seek”, “anticipate”, “plan”,
“continue”, “estimate”, “expect”, “may”, “will”, “project”,
“predict”, “potential”, “targeting”, “intend”, “could”, “might”,
“should”, “believe” and similar expressions. These forward-looking statements involve known and
unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from results projected
in such forward-looking statements. Although MAG believes the expectations expressed in such forward-looking statements are
based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may
differ materially from those in the forward-looking statements. Factors that could cause actual results to differ materially from
those in forward-looking statements including, but not limited to, commodities prices; changes in expected mineral
production performance; unexpected increases in capital costs; exploitation and exploration results; continued availability
of capital and financing; differing results and recommendations in the feasibility study commissioned by Minera Juanicipio; whether
or not there is a production decision by Minera Juanicipio; risks related to holding a minority investment interest in the Juanicipio
Property; and general economic, market or business conditions. In addition, forward-looking statements are subject to various
risks, including but not limited to operational risk; environmental risk; political risk; currency risk; capital cost inflation
risk; that data is incomplete or inaccurate; the limitations and assumptions within drilling, engineering and socio-economic studies
relied upon in preparing the 2017 PEA (as defined herein); and market risks. The reader is referred to the Company’s
filings with the SEC and Canadian securities regulators for disclosure regarding these and other risk factors. There is no certainty
that any forward-looking statement will come to pass and investors should not place undue reliance upon forward-looking statements.
The Company does not undertake to provide updates to any of the forward-looking statements in this Annual Report on Form 40-F,
except as required by law.
Assumptions have been made including, but not limited to, the Company’s ability to carry on its
various exploration and development activities including project development timelines, the timely receipt of required approvals
and permits, the price of the minerals produced, the costs of operating, exploration and development expenditures, the impact on
operations of the Mexican Tax Regime, and the Company’s ability to obtain adequate financing. The Company cannot assure
you that actual events, performance or results will be consistent with these forward-looking statements, and management’s
assumptions may prove to be incorrect. The forward-looking statements in this Annual Report on Form 40-F speak only as of
the date hereof and we do not assume any obligation to update forward-looking statements if circumstances or management’s
beliefs, expectations or opinions should change other than as required by applicable law. There is no certainty that any
forward-looking statement will come to pass and investors should not place undue reliance upon forward-looking statements.
Adjacent Property Disclosure
The staff of the SEC takes the position that mining companies,
in their filings with the SEC, should describe only those mineral deposits that the companies themselves can economically
and legally extract or produce. The AIF filed as Exhibit 99.1 to this Annual Report on Form 40-F contains information regarding
adjacent properties on which we have no right to explore or mine, and is considered by management to be of material importance
to the Company and its land holdings in the area. Investors are cautioned that mineral deposits on adjacent properties are
not necessarily probative of the existence, nature or extent of mineral deposits on our properties.
ESTIMATES OF RESOURCES AND RESERVES
The Company’s AIF filed as Exhibit 99.1 to this Annual Report
on Form 40-F and management’s discussion and analysis for the fiscal year ended December 31, 2018 filed as Exhibit 99.2 to
this Annual Report on Form 40-F have been prepared in accordance with the requirements of Canadian National Instrument 43-101 –
Standards of Disclosure for Mineral Projects (“NI 43-101”) and the Canadian Institute of Mining, Metallurgy and Petroleum
(the “CIM”) —
CIM Definition Standards on Mineral Resources and Mineral Reserves
, adopted by the
CIM Council, as amended. NI 43-101 is a rule developed by the Canadian Securities Administrators, which establishes
standards for disclosure a Canadian public company makes of scientific and technical information concerning its mineral projects,
differs from the requirements of SEC Industry Guide 7 (“SEC Industry Guide 7”) under the United States Securities Act
of 1933, as amended (the “Securities Act”).
For example, the terms “mineral reserve”, “proven
mineral reserve” and “probable mineral reserve” are Canadian mining terms as defined in accordance with NI 43-101
and the CIM standards. These definitions differ from the definitions in SEC Industry Guide 7.
In addition, the terms “mineral resource”, “measured
mineral resource”, “indicated mineral resource” and “inferred mineral resource” are defined in and
required to be disclosed by NI 43-101; however, these terms are not defined under SEC Industry Guide 7 and are normally not permitted
to be used in reports and registration statements filed with the SEC. It should not be assumed that any part or all of mineral
deposits in these categories will ever be converted into reserves. “Inferred mineral resources” have a great amount
of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. It cannot be assumed that
all or any part of an inferred mineral resource will ever be upgraded to a higher category.
Under Canadian rules, estimates of inferred mineral resources may
not form the basis of feasibility or pre-feasibility studies, except in rare cases. Investors are cautioned not to assume that
all or any part of an inferred mineral resource exists or is economically or legally mineable. Disclosure of “contained ounces”
in a resource is permitted disclosure under Canadian regulations; however, the SEC normally only permits issuers to report mineralization
that does not constitute “reserves” by SEC Industry Guide 7 standards as in place tonnage and grade without reference
to unit measures.
Accordingly, information contained in this Annual Report and the
documents incorporated by reference herein contains descriptions of mineral deposits that may not be comparable to similar information
made public by U.S. companies subject to the reporting and disclosure requirements under the United States federal securities laws.
DISCLOSURE CONTROLS AND PROCEDURES
After evaluating the effectiveness of the Company’s disclosure
controls and procedures as required by paragraph (b) of Exchange Act Rule 13a-15, the Chief Executive Officer and Chief Financial
Officer of the Company have concluded that, as of the end of the period covered by this Annual Report on Form 40-F, the Company’s
disclosure controls and procedures were effective to ensure that material information required to be disclosed by the Company in
the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods
specified in the SEC’s rules and forms, and accumulated and communicated to the Company’s management, including its
principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely
decisions regarding required disclosure.
MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL
REPORTING
Management is responsible for establishing and maintaining adequate
internal control over financial reporting as defined in Exchange Act Rule 13a-15(f).
Management recognizes that effective internal control over financial
reporting may nonetheless not prevent or detect all possible misstatements or frauds. Also, projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree
of compliance with policies or procedures may deteriorate.
Management has evaluated the effectiveness of the Company's internal
control over financial reporting as of the end of the Company’s fiscal year ended December 31, 2018 using the framework
Internal
Control – Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO). Based on this evaluation, management concluded that, as of December 31, 2018, the Company maintained effective
internal control over financial reporting.
ATTESTATION REPORT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
The Registrant’s internal control over financial
reporting as of December 31, 2018 has been audited by Deloitte LLP, Independent Registered Public Accounting Firm, who also
audited the Registrant’s Consolidated Financial Statements for the years ended December 31, 2018 and 2017. Deloitte LLP
expressed an unqualified opinion on the effectiveness of the Registrant’s internal control over financial reporting.
The
reports of Deloitte LLP are found under the heading “Report of Independent Registered Public Accounting Firm” in
the Registrant’s Audited Annual Consolidated Financial Statements for fiscal year ended December 31, 2018, included as
Exhibit 99.2 to this Annual Report on Form 40-F.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
During the period covered by this Annual Report on Form 40-F, no
changes occurred in the Company’s internal control over financial reporting that were identified in connection with the evaluation
required by paragraph (e) of Exchange Act Rule 13a-15 that materially affected, or are reasonably likely to materially affect,
the Company’s internal control over financial reporting.
NOTICES PURSUANT TO REGULATION BTR
Not applicable.
AUDIT COMMITTEE FINANCIAL EXPERT
The Company’s Board of Directors has determined that each
of Peter Barnes, Richard Clark and Jill Leversage is an “audit committee financial expert” as that term is defined
in paragraph (8) of General Instruction B of Form 40-F, and each is an “independent director” as that term is defined
under the listing standards applicable to the Company contained in Section 803A of the NYSE American Company Guide. A description
of the relevant experience of each of such director can be found in the AIF. The SEC has indicated that the designation of
a director as an audit committee financial expert does not make that director an “expert” for any purpose, impose any
duties, obligations or liability on him or her that are greater than those imposed on members of the Audit Committee and Board
of Directors who do not carry this designation, or affect the duties, obligations or liability of any other member of the Audit
Committee or Board of Directors.
CODE OF ETHICS FOR CHIEF EXECUTIVE OFFICER, CHIEF FINANCIAL OFFICER,
AND OFFICERS AND DIRECTORS
The Company has adopted a Code of Business Conduct and Ethics
(the “Code”) for its Chief Executive Officer, Chief Financial Officer, directors and officers.
The
Company previously furnished the latest version of the Code with the SEC on March 30, 2017 as Exhibit 99.1 to its Form
6-K.
Individuals may obtain a copy upon request, addressed to The Secretary, MAG Silver Corp., #770-800 West Pender
Street, Vancouver, British Columbia, V6C 2V6. The Company has also posted the Code on its internet website at
www.magsilver.com. The Code is reviewed annually, most recently on March 25, 2019. No waivers were granted from the Code
during the fiscal year ended December 31, 2018.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
The aggregate fees billed by the Company’s current external
auditor, Deloitte LLP, in each of the last two fiscal years are as follows:
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Presented in Canadian$
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Year ended
December 31, 2018
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Year ended
December 31, 2017
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Audit Fees
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298,000
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284,800
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Audit-Related Fees
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23,043
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19,600
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Tax Fees
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152,517
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63,065
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All Other Fees
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0
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0
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Total
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$
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473,560
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$
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367,465
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The nature of the services provided by Deloitte LLP under each of
the categories indicated in the table is described below.
Audit Fees
Audit fees are those incurred for professional services rendered by Deloitte LLP for the audit of the Company’s
annual consolidated financial statements, for the quarterly interim reviews of the Company’s unaudited consolidated financial
statements, and for professional services in relation to the short form prospectus.
Audit-Related Fees
Audit-related fees are those incurred for professional fees related to the Mexican statutory audits of the Company’s
wholly-owned subsidiaries.
Tax Fees
Tax fees are those incurred for professional services rendered by Deloitte LLP for tax compliance,
including the review of tax returns, tax planning and advisory services relating to common forms of domestic and international
taxation, continued tax planning and advisory services on potential restructuring and spin-out projects, and services related to
the Company’s transfer pricing report.
All Other Fees
There are no other fees to report under this category for professional
services rendered by Deloitte LLP for the Company.
PRE-APPROVAL POLICIES AND PROCEDURES
It is within the mandate of the Company’s Audit Committee
to pre-approve all audit and non-audit related fees. The Audit Committee is informed routinely as to the non-audit services actually
provided by the auditor pursuant to this pre-approval process. The auditors also present the estimate for the annual audit
related services to the Audit Committee for approval prior to undertaking the annual audit of the financial statements. No audit-related
services or other services were approved by the Audit Committee pursuant to the
de minimis
exception provided by Section
(c)(7)(i)(C) of Rule 2-01 or Regulation S-X.
OFF-BALANCE SHEET ARRANGEMENTS
None.
TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2018
Presented in thousands of US$ (unless noted otherwise)
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Less than
1 year
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1-3 Years
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3-5 Years
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More than
5 years
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Total
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2019
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2020 - 2021
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2022-2023
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2024 and over
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Committed Exploration Expenditures
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1,250
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1,250
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-
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-
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Minera Juanicipio
(1)
(2)
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-
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-
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-
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-
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-
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Office and other commitments
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353
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217
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136
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-
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-
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Total Obligations
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1,603
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1,467
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136
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-
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-
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1)
Although the
Company makes cash advances to Minera Juanicipio as cash called by the operator Fresnillo (based on approved Minera Juanicipio
budgets), they are not contractual obligations. The Company intends, however, to continue to fund its share of cash calls and
avoid dilution of its ownership interest in Minera Juanicipio.
2)
According to the
operator, Fresnillo, contractual commitments for processing equipment of $23.1 million and for development contractors of $69.5
million with respect to the Juanicipio Project have been committed to as at December 31, 2018.
The Company also has optional commitments for property option
payments and exploration expenditures as outlined in Exploration and Evaluation Assets, Note 7 of the Company’s consolidated
financial statements for the year ended December 31, 2018: see Exhibit 99.2 of this Annual Report on Form 40-F. There is no obligation
to make any of those payments or to conduct any work on its optioned properties. As the Company advances them, it evaluates exploration
results and determines at its own discretion which option payments to make and which additional exploration work to undertake
in order to comply with the funding requirements.
IDENTIFICATION OF THE AUDIT COMMITTEE
The Company has a separately designated standing Audit Committee
established in accordance with section 3(a)(58)(A) of the Exchange Act. The members of the Audit Committee are:
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Chair:
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Peter Barnes
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Members:
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Richard Clark
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Jill Leversage
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MINE SAFETY DISCLOSURE
Not applicable.
UNDERTAKING
The Registrant undertakes to make available, in person or by telephone,
representatives to respond to inquiries made by the SEC staff, and to furnish promptly, when requested to do so by the SEC staff,
information relating to: the securities registered pursuant to Form 40-F; the securities in relation to which the obligation to
file an annual report on Form 40-F arises; or transactions in said securities.
CONSENT TO SERVICE OF PROCESS
The Company has filed an Appointment of Agent for Service of Process
and Undertaking on Form F-X with respect to the class of securities in relation to which the obligation to file this Form 40-F
arises.
SIGNATURES
Pursuant to the requirements of the Exchange Act, the Registrant
certifies that it meets all of the requirements for filing on Form 40-F and has duly caused this Annual Report on Form 40-F to
be signed on its behalf by the undersigned, thereto duly authorized.
Registrant:
MAG
SILVER CORP.
By:
/s/ “
George Paspalas”
Name: George Paspalas
Title: President and Chief Executive Officer
Dated: March 29, 2019
EXHIBITS
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