UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
under the Securities Exchange Act of 1934
For: May 14, 2024
MAG Silver Corp.
(SEC File Number: 001-33574)
#770 – 800 West Pender Street, Vancouver
BC, V6C 2V6, CANADA
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual
reports under cover of Form 20-F or Form 40-F.
Form 20-F [ ] Form 40-F [ X ]
|
|
|
Date: May 14, 2024 |
MAG Silver Corp. |
|
|
|
|
|
"George Paspalas" |
|
|
George Paspalas |
|
|
President &
CEO |
|
Exhibit 99.1
![](https://www.sec.gov/Archives/edgar/data/1230992/000117184324002823/logo.jpg) |
|
MAG Silver
Corp.
Unaudited Condensed
Interim Consolidated Financial Statements
(expressed in thousands
of US dollars)
For the three months ended March 31, 2024
Dated: May 13, 2024 |
VANCOUVER OFFICE
Suite 770
800 W. Pender Street
Vancouver, BC V6C
2V6 |
604 630 1399 phone
866 630 1399 toll
free
604 681 0894 fax |
|
|
TSX:
MAG
NYSE American:
MAG
info@magsilver.com
|
MAG SILVER CORP. | |
| |
| |
|
Condensed Interim Consolidated Statements of Income and Comprehensive Income |
For the three months ended March 31, 2024 and 2023 | |
| |
| |
|
(In thousands of US dollars, except for shares and per share amounts - Unaudited) |
| |
| |
|
For the three months ended |
|
| |
| |
|
March 31, 2024 |
| |
|
March 31, 2023 |
|
| |
Note | |
|
$ |
| |
|
$ |
|
| |
| |
| |
|
Income from equity accounted investment in Juanicipio | |
| 5 | | |
| 19,244 | | |
| 7,919 | |
General and administrative expenses | |
| 3 | | |
| (4,109 | ) | |
| (3,272 | ) |
General exploration and business development | |
| | | |
| (357 | ) | |
| (102 | ) |
Operating income | |
| | | |
| 14,778 | | |
| 4,545 | |
| |
| | | |
| | | |
| | |
Interest income | |
| | | |
| 827 | | |
| 564 | |
Other income | |
| 8 | | |
| 537 | | |
| 127 | |
Foreign exchange loss | |
| | | |
| (163 | ) | |
| (180 | ) |
Income before income tax | |
| | | |
| 15,979 | | |
| 5,056 | |
| |
| | | |
| | | |
| | |
Deferred income tax expense | |
| | | |
| (1,084 | ) | |
| (343 | ) |
Net income | |
| | | |
| 14,895 | | |
| 4,713 | |
| |
| | | |
| | | |
| | |
Other comprehensive income | |
| | | |
| | | |
| | |
Items that will not be reclassified subsequently to profit or loss: | |
| | | |
| | | |
| | |
Unrealized loss on equity securities | |
| | | |
| (2 | ) | |
| (1 | ) |
Total comprehensive income | |
| | | |
| 14,893 | | |
| 4,712 | |
| |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | |
Basic earnings per share | |
| | | |
| 0.14 | | |
| 0.05 | |
Diluted earnings per share | |
| | | |
| 0.14 | | |
| 0.05 | |
| |
| | | |
| | | |
| | |
Weighted average number of shares outstanding | |
| 7 | | |
| | | |
| | |
Basic | |
| | | |
| 102,979,176 | | |
| 101,117,919 | |
Diluted | |
| | | |
| 103,111,227 | | |
| 101,319,086 | |
See accompanying notes to the condensed interim consolidated financial
statements
MAG SILVER CORP. | |
| |
| |
|
Condensed Interim Consolidated Statements of Financial Position | |
|
As at March 31, 2024 and December 31, 2023 | |
| |
|
(In thousands of US dollars, unless otherwise stated - Unaudited) |
| |
|
Note |
| |
|
March 31, 2024 |
| |
|
December 31, 2023 |
|
| |
| | | |
| $ | | |
| $ | |
Assets | |
| | | |
| | | |
| | |
Current assets | |
| | | |
| | | |
| | |
Cash | |
| | | |
| 74,683 | | |
| 68,707 | |
Accounts receivable | |
| 4 | | |
| 1,032 | | |
| 1,559 | |
Prepaid expenses | |
| | | |
| 2,450 | | |
| 1,787 | |
| |
| | | |
| 78,165 | | |
| 72,053 | |
Non-current assets | |
| | | |
| | | |
| | |
Investment in Juanicipio | |
| 5 | | |
| 397,012 | | |
| 394,622 | |
Exploration and evaluation assets | |
| 6 | | |
| 61,820 | | |
| 52,637 | |
Deferred financing fees | |
| 9 | | |
| 823 | | |
| 909 | |
Property and equipment | |
| | | |
| 279 | | |
| 301 | |
Investments | |
| | | |
| 6 | | |
| 8 | |
| |
| | | |
| 459,940 | | |
| 448,477 | |
Total assets | |
| | | |
| 538,105 | | |
| 520,530 | |
Liabilities | |
| | | |
| | | |
| | |
Current liabilities | |
| | | |
| | | |
| | |
Trade and other payables | |
| | | |
| 3,785 | | |
| 2,668 | |
Lease obligation | |
| | | |
| 115 | | |
| 154 | |
Flow-through share premium liability | |
| 8 | | |
| 1,432 | | |
| 1,969 | |
| |
| | | |
| 5,332 | | |
| 4,791 | |
Non-current liabilities | |
| | | |
| | | |
| | |
Deferred income taxes | |
| | | |
| 9,582 | | |
| 8,498 | |
Provision for reclamation | |
| | | |
| 484 | | |
| 484 | |
Total liabilities | |
| | | |
| 15,398 | | |
| 13,773 | |
| |
| | | |
| | | |
| | |
Equity | |
| | | |
| | | |
| | |
Share capital | |
| | | |
| 614,480 | | |
| 614,364 | |
Equity reserve | |
| | | |
| 21,705 | | |
| 20,764 | |
Accumulated other comprehensive income | |
| | | |
| 779 | | |
| 781 | |
Deficit | |
| | | |
| (114,257 | ) | |
| (129,152 | ) |
Total equity | |
| | | |
| 522,707 | | |
| 506,757 | |
Total liabilities and equity | |
| | | |
| 538,105 | | |
| 520,530 | |
See accompanying notes to the condensed interim consolidated financial
statements
MAG SILVER CORP. | |
| |
| |
|
Condensed Interim Consolidated Statements of Cash Flows | |
| |
| |
|
For the three months ended March 31, 2024 and 2023 | |
| |
| |
|
(In thousands of US dollars, unless otherwise stated - Unaudited) |
| |
| For the three months ended |
|
| |
| |
|
March 31, 2024 |
| |
|
March 31, 2023 |
|
| |
Note | |
|
$ |
| |
|
$ |
|
| |
| |
| |
|
OPERATING ACTIVITIES | |
| | | |
| | | |
| | |
Net income | |
| | | |
| 14,895 | | |
| 4,713 | |
Items not involving cash: | |
| | | |
| | | |
| | |
Amortization of flow-through premium liability | |
| 8 | | |
| (537 | ) | |
| (127 | ) |
Depreciation and amortization | |
| 3 | | |
| 145 | | |
| 10 | |
Deferred income tax expense | |
| | | |
| 1,084 | | |
| 343 | |
Amortization of deferred financing fees | |
| 9 | | |
| 86 | | |
| - | |
Income from equity accounted investment in Juanicipio | |
| 5 | | |
| (19,244 | ) | |
| (7,919 | ) |
Share-based compensation expense | |
| 3,7 | | |
| 966 | | |
| 763 | |
Unrealized foreign exchange loss (gain) | |
| | | |
| (52 | ) | |
| 175 | |
| |
| | | |
| | | |
| | |
Movements in non-cash working capital | |
| | | |
| | | |
| | |
Accounts receivable | |
| | | |
| (206 | ) | |
| (205 | ) |
Prepaid expenses | |
| | | |
| (663 | ) | |
| (728 | ) |
Trade and other payables | |
| | | |
| 836 | | |
| (131 | ) |
Net cash used in operating activities | |
| | | |
| (2,690 | ) | |
| (3,106 | ) |
| |
| | | |
| | | |
| | |
INVESTMENT ACTIVITIES | |
| | | |
| | | |
| | |
Exploration and evaluation expenditures | |
| 6 | | |
| (5,054 | ) | |
| (2,979 | ) |
Acquisition of Goldstake property | |
| 6 | | |
| (3,752 | ) | |
| - | |
Investment in Juanicipio | |
| 5 | | |
| - | | |
| (25,159 | ) |
Receipt of principal on loans to Juanicpio | |
| 5 | | |
| 14,975 | | |
| - | |
Receipt of interest on loans to Juanicipio | |
| 5 | | |
| 2,484 | | |
| 149 | |
Net cash from / (used in) investing activities | |
| | | |
| 8,653 | | |
| (27,989 | ) |
| |
| | | |
| | | |
| | |
FINANCING ACTIVITIES | |
| | | |
| | | |
| | |
Issuance of common shares upon exercise of stock options | |
| 7 | | |
| - | | |
| 225 | |
Issuance of common shares, net of share issue costs | |
| 7 | | |
| - | | |
| 39,472 | |
Issuance of flow-through shares, net of share issue costs | |
| 7 | | |
| - | | |
| 16,208 | |
Payment of lease obligation (principal) | |
| | | |
| (39 | ) | |
| (30 | ) |
Net cash (used in) / from financing activities | |
| | | |
| (39 | ) | |
| 55,875 | |
| |
| | | |
| | | |
| | |
Effect of exchange rate changes on cash | |
| | | |
| 52 | | |
| (122 | ) |
| |
| | | |
| | | |
| | |
Increase in cash during the period | |
| | | |
| 5,976 | | |
| 24,658 | |
Cash, beginning of period | |
| | | |
| 68,707 | | |
| 29,955 | |
Cash, end of period | |
| | | |
| 74,683 | | |
| 54,613 | |
See accompanying notes to the condensed interim consolidated financial
statements
MAG SILVER CORP. | |
| |
| |
| |
| |
| |
| |
|
Condensed Interim Consolidated Statements of Changes in Equity |
| |
| |
| |
|
For the three months ended March 31, 2024 and 2023 | |
| |
| |
| |
|
(In thousands of US dollars, except shares - Unaudited) |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| Common shares without
par value | | |
| | | |
| Accumulated | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| other | | |
| | | |
| | |
| |
| | | |
| Number of | | |
| | | |
| Equity | | |
| comprehensive | | |
| | | |
| | |
| |
| Notes | | |
| Shares | | |
| Amount | | |
| Reserve | | |
| income (loss) | | |
| Deficit | | |
| Total Equity | |
| |
| | | |
| # | | |
| $ | | |
| $ | | |
| $ | | |
| $ | | |
| $ | |
Balance, January 1, 2023 | |
| | | |
| 98,956,808 | | |
| 559,933 | | |
| 18,790 | | |
| 784 | | |
| (177,811 | ) | |
| 401,696 | |
Stock options exercised | |
| | | |
| 28,787 | | |
| 397 | | |
| (90 | ) | |
| - | | |
| - | | |
| 307 | |
Restricted and performance share units converted | |
| | | |
| 112,605 | | |
| 1,215 | | |
| (1,215 | ) | |
| - | | |
| - | | |
| - | |
Shares issued for cash, net of flow-through share premium liability | |
| | | |
| 3,874,450 | | |
| 56,761 | | |
| - | | |
| - | | |
| - | | |
| 56,761 | |
Share issue costs | |
| | | |
| - | | |
| (3,942 | ) | |
| - | | |
| - | | |
| - | | |
| (3,942 | ) |
Share-based compensation | |
| | | |
| - | | |
| - | | |
| 3,279 | | |
| - | | |
| - | | |
| 3,279 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Other comprehensive loss | |
| | | |
| - | | |
| - | | |
| - | | |
| (3 | ) | |
| - | | |
| (3 | ) |
Net income | |
| | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 48,659 | | |
| 48,659 | |
Balance, December 31, 2023 | |
| | | |
| 102,972,650 | | |
| 614,364 | | |
| 20,764 | | |
| 781 | | |
| (129,152 | ) | |
| 506,757 | |
Restricted and performance share units converted | |
| 7 | | |
| 6,905 | | |
| 116 | | |
| (116 | ) | |
| - | | |
| - | | |
| - | |
Share-based compensation | |
| 7 | | |
| - | | |
| - | | |
| 1,057 | | |
| - | | |
| - | | |
| 1,057 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Other comprehensive loss | |
| | | |
| - | | |
| - | | |
| - | | |
| (2 | ) | |
| - | | |
| (2 | ) |
Net income | |
| | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 14,895 | | |
| 14,895 | |
Balance, March 31, 2024 | |
| | | |
| 102,979,555 | | |
| 614,480 | | |
| 21,705 | | |
| 779 | | |
| (114,257 | ) | |
| 522,707 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance, January 1, 2023 | |
| | | |
| 98,956,808 | | |
| 559,933 | | |
| 18,790 | | |
| 784 | | |
| (177,811 | ) | |
| 401,696 | |
Stock options exercised | |
| | | |
| 21,346 | | |
| 292 | | |
| (67 | ) | |
| - | | |
| - | | |
| 225 | |
Shares issued for cash, net of flow-through share premium liability | |
| | | |
| 3,874,450 | | |
| 56,761 | | |
| - | | |
| - | | |
| - | | |
| 56,761 | |
Share issue costs | |
| | | |
| - | | |
| (4,011 | ) | |
| - | | |
| - | | |
| - | | |
| (4,011 | ) |
Share-based compensation | |
| | | |
| - | | |
| - | | |
| 830 | | |
| - | | |
| - | | |
| 830 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Other comprehensive loss | |
| | | |
| - | | |
| - | | |
| - | | |
| (1 | ) | |
| - | | |
| (1 | ) |
Net income | |
| | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 4,713 | | |
| 4,713 | |
Balance, March 31, 2023 | |
| | | |
| 102,852,604 | | |
| 612,975 | | |
| 19,553 | | |
| 783 | | |
| (173,098 | ) | |
| 460,213 | |
See accompanying notes to the condensed interim consolidated financial
statements
MAG SILVER CORP.
Notes to the Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2024
(Expressed in thousands of US dollars unless otherwise stated - Unaudited)
MAG Silver Corp. (the “Company” or “MAG”)
is a growth-oriented Canadian exploration company focused on advancing high-grade, district scale precious metals projects in the Americas.
MAG is the ultimate parent company of its consolidated group, was incorporated on April 21, 1999, and is governed by the Business Corporations
Act of the Province of British Columbia (“BCABC"). MAG’s shares are listed on both the Toronto Stock Exchange in Canada
and the NYSE American, LLC in the United States of America.
The Company’s principal asset is a 44% interest in the Juanicipio
Mine (Note 5 “Investment in Juanicipio”) located in Zacatecas, Mexico, which achieved commercial production at its 4,000 tonnes
per day (“tpd”) processing facility on June 1, 2023.
Address of registered office of the Company:
3500 – 1133 Melville Street
Vancouver, British Columbia,
Canada V6E 4E5
Head office and principal place of business:
770 – 800 West Pender Street
Vancouver, British Columbia,
Canada V6C 2V6
| 2. | MATERIAL ACCOUNTING POLICY INFORMATION |
| (a) | Statement of compliance |
These condensed interim consolidated financial statements (“Interim
Financial Statements”) are prepared under International Accounting Standards 34 Interim Financial Reporting (“IAS 34”)
in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”).
They do not include all of the information required for full annual IFRS financial statements and therefore should be read in conjunction
with the audited consolidated financial statements for the year ended December 31, 2023.
The accounting policies applied in the preparation of the Interim
Financial Statements are consistent with those applied and disclosed in the Company’s audited consolidated financial statements
for the year ended December 31, 2023.
These Interim Financial Statements have been prepared on a historical
cost basis except for the revaluation of certain financial instruments, which are stated at their fair value.
These Interim Financial Statements were authorized for issuance by
the Board of Directors of the Company on May 13, 2024.
MAG SILVER CORP.
Notes to the Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2024
(Expressed in thousands of US dollars unless otherwise stated - Unaudited)
| (b) | Significant accounting judgments and estimates |
The Company makes certain significant judgments and estimates in
the process of applying the Company’s accounting policies. Management believes the judgments and estimates used in these condensed
interim consolidated financial statements are reasonable; however, actual results could differ from those estimates and could impact future
results of operations and cash flows. The areas involving significant judgments and estimates have been set out in Note 5 of the Company’s
audited consolidated financial statements for the year ended December 31, 2023.
| 3. | GENERAL AND ADMINISTRATIVE EXPENSES |
| |
| For the three months ended | |
| |
| March 31, | | |
| March 31, | |
| |
| 2024 | | |
| 2023 | |
| |
| $ | | |
| $ | |
Accounting and audit | |
| 277 | | |
| 128 | |
Compensation and consulting fees | |
| 1,174 | | |
| 1,135 | |
Depreciation and amortization | |
| 145 | | |
| 10 | |
Filing and transfer agent fees | |
| 198 | | |
| 267 | |
Amortization of deferred financing fees | |
| 86 | | |
| - | |
General office expenses | |
| 247 | | |
| 144 | |
Insurance | |
| 339 | | |
| 489 | |
Juanicipio oversight costs | |
| 266 | | |
| - | |
Legal | |
| 180 | | |
| 125 | |
Share-based compensation expense (see Note 7) | |
| 966 | | |
| 763 | |
Shareholder relations | |
| 127 | | |
| 116 | |
Travel | |
| 104 | | |
| 95 | |
| |
| 4,109 | | |
| 3,272 | |
| |
| March 31, | | |
| December 31, | |
| |
| 2024 | | |
| 2023 | |
| |
| $ | | |
| $ | |
Receivable from Minera Juanicipio (Notes 5 & 13) | |
| 87 | | |
| 855 | |
Value added tax (“IVA” and “GST”) | |
| 930 | | |
| 700 | |
Other receivables | |
| 15 | | |
| 4 | |
| |
| 1,032 | | |
| 1,559 | |
MAG SILVER CORP.
Notes to the Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2024
(Expressed in thousands of US dollars unless otherwise stated - Unaudited)
| 5. | INVESTMENT IN JUANICIPIO |
Minera Juanicipio was created for the purpose of holding the Juanicipio
property, and is held 56% by Fresnillo plc (“Fresnillo”) and 44% by the Company. On December 27, 2021, the Company and Fresnillo
created Equipos Chaparral in the same ownership proportions. Equipos Chaparral owns the processing facility and mining equipment which
is leased to Minera Juanicipio. Minera Juanicipio and Equipos Chaparral are collectively referred to herein as “Juanicipio,”
or, the “Juanicipio Mine.”
Juanicipio is governed by a shareholders’ agreement and by
corporate by-laws. All costs relating to Juanicipio are required to be shared by the Company and Fresnillo pro-rata based on their ownership
interests in Juanicipio, and if either party does not fund pro-rata, their ownership interest will be diluted in accordance with the shareholders’
agreement and by-laws.
Fresnillo is the operator of Juanicipio, and with its affiliates,
beneficially owns 9,314,877 common shares of the Company as at March 31, 2024, as publicly reported by Fresnillo.
The Company has recorded its Investment in Juanicipio using the equity
method of accounting. The recorded value of the investment includes the carrying value of the deferred exploration, mineral and surface
rights, Juanicipio costs incurred by the Company, the required net cash investments to establish and maintain its 44% interest in Juanicipio,
and the Company’s 44% share of income (loss) from Juanicipio.
Changes during the period of the Company’s investment relating
to its interest in Juanicipio are detailed as follows:
| |
| |
| |
March 31, | | |
December 31, | |
| |
2024 | | |
2023 | |
| |
$ | | |
$ | |
Balance, beginning of period | |
| 394,622 | | |
| 338,316 | |
Juanicipio oversight expenditures incurred 100% by MAG | |
| - | | |
| 384 | |
Amortization of Juanicipio's oversight expenditures incurred 100% by MAG | |
| (129 | ) | |
| (305 | ) |
Cash contributions and advances to Juanicipio (3) | |
| - | | |
| 24,992 | |
Loan repayments from Juanicipio (2) | |
| (14,975 | ) | |
| (25,714 | ) |
Total for the period | |
| (15,104 | ) | |
| (642 | ) |
Income from equity accounted Investment in Juanicipio | |
| 19,244 | | |
| 65,099 | |
Interest earned, reclassified to accounts receivable (1) | |
| (1,751 | ) | |
| (8,150 | ) |
Balance, end of period | |
| 397,012 | | |
| 394,622 | |
(1) A portion of the
Investment in Juanicipio is in the form of interest bearing shareholder loans. For the three months ended March 31, 2024, the Company
earned interest amounting to $1,751 (year ended December 31, 2023: $8,150) while $2,484 of interest payments were received from Juanicipio
(year ended December 31, 2023: $7,639).
MAG SILVER CORP.
Notes to the Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2024
(Expressed in thousands of US dollars unless otherwise stated - Unaudited)
(2) During the three months ended March 31,
2024, no loans to Juanicipio were converted into equity (December 31, 2023: $7,251). As at March 31, 2024, the Company has advanced $79,438
as shareholder loans to Juanicipio (December 31, 2023: $94,414).
(3) During the three
months ended March 31, 2024 no cash contributions and advances were made to Juanicipio (December 31, 2023: 24,992 cash contributions
and advances, with $22,726 in the form of loans and $2,276 in the form of equity).
A summary of financial information of Juanicipio (on a 100% basis
reflecting adjustments made by the Company, including adjustments for differences in accounting policies) is as follows:
Juanicipio Statements of Income
| |
For the three months ended | |
| |
March 31, | | |
March 31, | |
| |
2024 | | |
2023 | |
| |
| $ | | |
| $ | |
| |
| | | |
| | |
Sales | |
| 123,689 | | |
| 51,482 | |
Cost of sales: | |
| | | |
| | |
Production cost | |
| (36,787 | ) | |
| (27,378 | ) |
Depreciation and amortization | |
| (22,038 | ) | |
| (7,955 | ) |
Cost of sales | |
| (58,825 | ) | |
| (35,333 | ) |
Gross profit | |
| 64,864 | | |
| 16,149 | |
| |
| | | |
| | |
Consulting and administrative expenses | |
| (4,189 | ) | |
| (1,499 | ) |
Extraordinary mining and other duties | |
| (1,392 | ) | |
| (520 | ) |
| |
| 59,283 | | |
| 14,131 | |
| |
| | | |
| | |
Exchange losses and other | |
| (1,297 | ) | |
| (2,864 | ) |
Interest expense | |
| (3,979 | ) | |
| (3,816 | ) |
Income tax (expense) recovery | |
| (14,249 | ) | |
| 6,731 | |
| |
| | | |
| | |
Net income | |
| 39,758 | | |
| 14,182 | |
| |
| | | |
| | |
MAG's 44% portion of net income | |
| 17,494 | | |
| 6,240 | |
Interest on Juanicipio loans - MAG's 44% | |
| 1,751 | | |
| 1,679 | |
MAG's 44% equity income | |
| 19,244 | | |
| 7,919 | |
MAG SILVER CORP.
Notes to the Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2024
(Expressed in thousands of US dollars unless otherwise stated - Unaudited)
Juanicipio Statements of Financial Position
| |
March 31, | | |
December 31, | |
| |
2024 | | |
2023 | |
| |
$ | | |
$ | |
Assets | |
| | | |
| | |
| |
| | | |
| | |
Current assets | |
| | | |
| | |
Cash and cash equivalents | |
| 30,991 | | |
| 42,913 | |
Value added tax and other receivables | |
| 2,214 | | |
| 3,162 | |
Income tax receivable | |
| 10,324 | | |
| 3,758 | |
Concentrate sales receivable | |
| 60,009 | | |
| 56,532 | |
Inventories | |
| | | |
| | |
Stockpiles | |
| 2,248 | | |
| 2,417 | |
Metal concentrates | |
| 4,373 | | |
| 2,361 | |
Materials and supplies | |
| 18,684 | | |
| 18,414 | |
Prepaids and other assets | |
| 3,256 | | |
| 5,501 | |
| |
| 132,101 | | |
| 135,058 | |
Non-current assets | |
| | | |
| | |
Right-of-use assets | |
| 1,412 | | |
| 1,590 | |
Mineral interests, plant and equipment | |
| 782,691 | | |
| 794,512 | |
Deferred tax assets | |
| 16,433 | | |
| 24,336 | |
| |
| 800,537 | | |
| 820,438 | |
Total assets | |
| 932,638 | | |
| 955,496 | |
| |
| | | |
| | |
Liabilities | |
| | | |
| | |
| |
| | | |
| | |
Current liabilities | |
| | | |
| | |
Payables | |
| 14,205 | | |
| 22,167 | |
Interest and other payables to shareholders | |
| 5,577 | | |
| 12,160 | |
Taxes payable | |
| 5,230 | | |
| 14,395 | |
| |
| 25,013 | | |
| 48,722 | |
Non-current liabilities | |
| | | |
| | |
Lease obligation | |
| 1,523 | | |
| 1,597 | |
Provisions | |
| | | |
| | |
Reserves for retirement and pension | |
| 115 | | |
| 112 | |
Reclamation and closure | |
| 3,678 | | |
| 3,605 | |
Deferred tax liabilities | |
| 4,566 | | |
| 9,439 | |
| |
| 9,882 | | |
| 14,753 | |
Total liabilities | |
| 34,895 | | |
| 63,475 | |
| |
| | | |
| | |
Equity | |
| | | |
| | |
| |
| | | |
| | |
Shareholders' equity including shareholder advances | |
| 897,743 | | |
| 892,021 | |
Total equity | |
| 897,743 | | |
| 892,021 | |
Total liabilities and equity | |
| 932,638 | | |
| 955,496 | |
MAG SILVER CORP.
Notes to the Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2024
(Expressed in thousands of US dollars unless otherwise stated - Unaudited)
Juanicipio Statements of Cash Flows
| |
For the three months ended | |
| |
March 31, | | |
March 31, | |
| |
2024 | | |
2023 | |
| |
| $ | | |
| $ | |
Operating activities | |
| | | |
| | |
Net income | |
| 39,758 | | |
| 14,182 | |
Items not involving cash | |
| | | |
| | |
Depreciation and amortization | |
| 22,038 | | |
| 7,955 | |
Income tax expense (recovery) | |
| 14,249 | | |
| (6,731 | ) |
Interest incurred on loans | |
| 3,979 | | |
| 3,816 | |
Other | |
| 97 | | |
| 3,304 | |
Income tax payments | |
| (25,772 | ) | |
| (39,601 | ) |
Change in other operating working capital | |
| (11,829 | ) | |
| (12,835 | ) |
| |
| | | |
| | |
Net cash from operating activities | |
| 42,521 | | |
| (29,910 | ) |
| |
| | | |
| | |
Investing activities | |
| | | |
| | |
Capital expenditures including plant, mine development and exploration | |
| (15,370 | ) | |
| (19,073 | ) |
Other | |
| 878 | | |
| 69 | |
Net cash used in investing activities | |
| (14,492 | ) | |
| (19,004 | ) |
| |
| | | |
| | |
Financing activities | |
| | | |
| | |
Loans and other capital provided by shareholders | |
| - | | |
| 56,800 | |
Repayments of loans to shareholders | |
| (34,036 | ) | |
| - | |
Interest paid to shareholders | |
| (5,647 | ) | |
| (338 | ) |
Payment of lease obligations | |
| (208 | ) | |
| (179 | ) |
Net cash (used in) from financing activities | |
| (39,891 | ) | |
| 56,282 | |
| |
| | | |
| | |
Effect of exchange rate changes on cash and cash equivalents | |
| (59 | ) | |
| (17 | ) |
| |
| | | |
| | |
(Decrease) increase in cash and cash equivalents during the period | |
| (11,921 | ) | |
| 7,351 | |
| |
| | | |
| | |
Cash and cash equivalents, beginning of period | |
| 42,913 | | |
| 1,102 | |
| |
| | | |
| | |
Cash and cash equivalents, end of period | |
| 30,991 | | |
| 8,454 | |
MAG SILVER CORP.
Notes to the Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2024
(Expressed in thousands of US dollars unless otherwise stated - Unaudited)
| 6. | EXPLORATION AND EVALUATION ASSETS |
| (a) | In 2018, the Company entered into an option agreement with a private group, whereby the Company has the
right to earn 100% ownership interest in a company which owns the Deer Trail Project in Utah. The Company paid $150 upon signing the agreement,
$150 in each of 2020 and 2021, and $200 in each of 2022 and 2023. To earn 100% interest in the property, the Company must make remaining
cash payments totaling $1,150 over the next 5 years and fund a cumulative of $30,000 of eligible exploration expenditures by 2028 (as
of March 31, 2024, the Company has incurred $28,941 of eligible exploration expenditures on the property). As at March 31, 2024, the Company
has also bonded and recorded a $484 reclamation liability for the project. Other than the reclamation liability, the balance of cash payments
and exploration commitments are optional at the Company’s discretion. Upon the Company’s 100% earn-in, the vendors will retain
a 2% net smelter returns (“NSR”) royalty. |
| (b) | In 2022, through the acquisition of Gatling Exploration Inc. (“Gatling”) the Company acquired
100% of the Larder Project in Ontario. During the three months ended March 31, 2024, the Company incurred a total of $3,263 in exploration
and evaluation expenditures, as well as acquisition cost of $3,752 relating to the purchase of 100% ownership of the Goldstake property
(“Goldstake”), contiguous to Gatling’s current land holdings. |
MAG SILVER CORP.
Notes to the Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2024
(Expressed in thousands of US dollars unless otherwise stated - Unaudited)
During the three months ended March 31, 2024 and year ended December 31, 2023, the Company has
incurred the following exploration and evaluation expenditures on these projects:
| |
|
March 31, |
| |
|
December 31, |
|
| |
|
2024 |
| |
|
2023 |
|
| |
|
$ |
| |
|
$ |
|
Deer Trail Project | |
| | | |
| | |
Option and other payments | |
| - | | |
| 275 | |
Total acquisition costs | |
| - | | |
| 275 | |
Drilling and geotechnical | |
| 1,849 | | |
| 5,854 | |
Camp and site costs | |
| 205 | | |
| 875 | |
Land taxes and government fees | |
| 4 | | |
| 213 | |
Legal, community and other consultation costs | |
| 70 | | |
| 343 | |
Travel | |
| 40 | | |
| 190 | |
Total for the period | |
| 2,168 | | |
| 7,750 | |
Balance, beginning of period | |
| 27,315 | | |
| 19,565 | |
Total Deer Trail Project cost | |
| 29,483 | | |
| 27,315 | |
Larder Project | |
| | | |
| | |
Acquisition of Goldstake property | |
| 3,752 | | |
| - | |
Total acquisition costs | |
| 3,752 | | |
| - | |
Drilling and geotechnical | |
| 2,303 | | |
| 6,357 | |
Camp and site costs | |
| 802 | | |
| 772 | |
Land taxes and government fees | |
| 20 | | |
| 43 | |
Legal, community and other consultation costs | |
| 109 | | |
| 347 | |
Travel | |
| 29 | | |
| 109 | |
Total for the period | |
| 7,015 | | |
| 7,628 | |
Balance, beginning of period | |
| 25,322 | | |
| 17,694 | |
Total Larder Project cost | |
| 32,337 | | |
| 25,322 | |
Total Exploration and Evaluation Assets | |
| 61,820 | | |
| 52,637 | |
MAG SILVER CORP.
Notes to the Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2024
(Expressed in thousands of US dollars unless otherwise stated - Unaudited)
On February 7, 2023, the Company closed a $42,558 bought deal public
offering and issued 2,905,000 common shares, at a price of $14.65 per common share.
On February 16, 2023, the Company closed a $17,133 (C$23,024) bought
deal private placement and issued 969,450 common shares on a “flow-through” basis” (as defined in the Income Tax Act
(Canada)) (the Flow-Through Shares”), at a price of $17.67 (C$23.75) per Flow-Through Share. The premium paid by investors on the
flow-through shares was calculated as $3.08 per share. Accordingly, $2,986 was recorded as flow-through share premium liability (Note
8).
The aggregate gross proceeds from the combined bought deal public
offering and bought deal private placement amounted to $59,691. The Company paid commissions to underwriters of $3,010 and legal and filing
fees totalling $932 yielding net proceeds of $55,749.
The Company may enter into Incentive Stock Option Agreements in accordance
with the Company’s Stock Option Plan (the “Plan”). On June 26, 2023, the Shareholders re-approved the Plan. The maximum
number of common shares that may be issuable under the Plan is set at 5% of the number of issued and outstanding common shares on a non-diluted
basis at any time, provided that the number of common shares issued or issuable under the combined Plan and Share Unit Plan (Note 7(e))
shall not exceed 5% of the issued and outstanding common shares of the Company on a non-diluted basis. Options granted under the Plan
have a maximum term of 5 years.
MAG SILVER CORP.
Notes to the Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2024
(Expressed in thousands of US dollars unless otherwise stated - Unaudited)
The following table summarizes the Company’s stock options
activity, excluding the Gatling replacement options, for the period:
| |
Stock options
activity | |
Weighted average
exercise price
(C$/option) |
| |
| |
|
Outstanding, January 1, 2023 | |
| 1,012,794 | | |
| 17.56 | |
Granted | |
| 236,928 | | |
| 16.42 | |
Expired | |
| (20,000 | ) | |
| 19.41 | |
Forfeited | |
| (13,564 | ) | |
| 18.35 | |
Exercised for cash | |
| (28,787 | ) | |
| 14.34 | |
| |
| | | |
| | |
Outstanding, December 31, 2023 | |
| 1,187,371 | | |
| 17.37 | |
Granted | |
| - | | |
| - | |
Expired | |
| (7,791 | ) | |
| 21.36 | |
Forfeited | |
| - | | |
| - | |
Exercised for cash | |
| - | | |
| - | |
| |
| | | |
| | |
Outstanding, March 31, 2024 | |
| 1,179,580 | | |
| 17.35 | |
During the three months ended March 31, 2024, the Company recorded
a share-based compensation expense of $245 (March 31, 2023: $436) and capitalized $40 (March 31, 2023: $31) to exploration and evaluation
assets relating to stock options to employees and consultants.
MAG SILVER CORP.
Notes to the Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2024
(Expressed in thousands of US dollars unless otherwise stated - Unaudited)
The following table summarizes the Company’s stock options,
excluding the Gatling replacement options, outstanding and exercisable as at March 31, 2024.
Exercise price | |
|
Number | |
|
Number | |
|
Weighted avg. remaining |
(C$/option) | |
|
Outstanding | |
|
Exercisable | |
|
contractual life (years) |
| 13.46 | | |
| 209,432 | | |
| 209,432 | | |
| 0.03 | |
| 14.98 | | |
| 239,333 | | |
| 239,333 | | |
| 0.91 | |
| 16.09 | | |
| 6,021 | | |
| - | | |
| 4.00 | |
| 16.43 | | |
| 223,039 | | |
| 74,337 | | |
| 4.00 | |
| 17.02 | | |
| 100,000 | | |
| 33,333 | | |
| 3.13 | |
| 20.20 | | |
| 109,799 | | |
| 36,595 | | |
| 3.02 | |
| 21.26 | | |
| 50,000 | | |
| 33,333 | | |
| 2.67 | |
| 21.29 | | |
| 9,191 | | |
| 3,063 | | |
| 3.02 | |
| 21.57 | | |
| 182,765 | | |
| 182,765 | | |
| 1.69 | |
| 23.53 | | |
| 50,000 | | |
| 50,000 | | |
| 1.80 | |
| 13.46 - 23.53 | | |
| 1,179,580 | | |
| 862,191 | | |
| 1.99 | |
In 2022, the Company issued 43,675 replacement stock options pursuant
to the Gatling acquisition of which 31,983 replacement stock options expired unexercised. The following table summarizes the Gatling replacement
options that are outstanding and exercisable as at March 31, 2024:
Exercise price | |
Number | |
Number | |
Weighted average remaining |
(C$/option) | |
outstanding | |
exercisable | |
contractual life (years) |
| 21.40 | | |
| 1,706 | | |
| 1,706 | | |
| 0.30 | |
| 21.68 - 21.93 | | |
| 9,986 | | |
| 9,986 | | |
| 0.37 | |
| 21.40 - 21.93 | | |
| 11,692 | | |
| 11,692 | | |
| 0.36 | |
MAG SILVER CORP.
Notes to the Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2024
(Expressed in thousands of US dollars unless otherwise stated - Unaudited)
| (c) | Restricted and performance share units |
On June 26, 2023, the Shareholders re-approved a share unit plan
(the “Share Unit Plan”) for the benefit of the Company’s officers, employees and consultants. The Share Unit Plan provides
for the issuance of common shares from treasury, in the form of restricted share units (“RSUs”) and performance share units
(“PSUs”). The maximum number of common shares that may be issuable under the Share Unit Plan is set at 1.5% of the number
of issued and outstanding common shares on a non-diluted basis, provided that the number of common shares issued or issuable under the
combined Share Unit Plan and Stock Option Plan (Note 7(b)) shall not exceed 5% of the issued and outstanding common shares on a non-diluted
basis. RSUs and PSUs granted under the Share Unit Plan have a term of 5 years unless otherwise specified by the Board, and each unit entitles
the participant to receive one common share of the Company subject to vesting criteria, and in the case of PSUs, performance criteria
which may also impact the number of PSUs to vest between 0-200%. PSUs for which the performance targets are not achieved during the performance
period are automatically forfeited and cancelled.
The following table summarizes the Company’s RSUs activity
for the period:
| |
|
RSU activity |
| |
|
Weighted average
fair value (C$/RSU) |
|
| |
| |
|
Outstanding, January 1, 2023 | |
| 101,059 | | |
| 18.47 | |
Granted | |
| 56,425 | | |
| 16.42 | |
Forfeited | |
| (4,244 | ) | |
| 17.07 | |
Exercised | |
| (54,985 | ) | |
| 17.19 | |
| |
| | | |
| | |
Outstanding, December 31, 2023 | |
| 98,255 | | |
| 17.82 | |
Granted | |
| - | | |
| - | |
Forfeited | |
| - | | |
| - | |
Exercised | |
| - | | |
| - | |
| |
| | | |
| | |
Outstanding, March 31, 2024 | |
| 98,255 | | |
| 17.82 | |
During the three months ended March 31, 2024, the Company recorded
share-based compensation expense of $122 (March 31, 2023: $304) and capitalized $30 (March 31, 2023: $10) to exploration and evaluation
assets relating to RSUs to employees and consultants.
MAG SILVER CORP.
Notes to the Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2024
(Expressed in thousands of US dollars unless otherwise stated - Unaudited)
The following table summarizes the Company’s PSUs activity
for the period:
| |
| PSU activity | | |
| Weighted average
fair value (C$/PSU) | |
| |
| | | |
| | |
Outstanding, January 1, 2023 | |
| 231,255 | | |
| 17.91 | |
Granted | |
| 156,861 | | |
| 16.42 | |
Forfeited | |
| (43,047 | ) | |
| 19.71 | |
Exercised | |
| (57,620 | ) | |
| 13.17 | |
| |
| | | |
| | |
Outstanding, December 31, 2023 | |
| 287,449 | | |
| 17.78 | |
Granted | |
| - | | |
| - | |
Forfeited | |
| - | | |
| - | |
Exercised | |
| (6,905 | ) | |
| 21.57 | |
| |
| | | |
| | |
Outstanding, March 31, 2024 | |
| 280,544 | | |
| 17.68 | |
During the three months ended March 31, 2024, the Company recorded
share-based compensation expense of $252 (March 31, 2023: $244) and capitalized $21 (March 31, 2023: $27) to exploration and evaluation
assets relating to PSUs to employees and consultants.
On June 26, 2023, the Shareholders re-approved a Deferred Share Unit
Plan (the “DSU Plan”) for the benefit of the Company’s non-executive directors. The DSU Plan provides for the issuance
of common shares from treasury, on conversion of Deferred Share Units (“DSUs”) granted. Directors may also elect to receive
all or a portion of their annual retainer in the form of DSUs. DSUs may be settled in cash or in common shares issued from treasury, as
determined by the Board at the time of the grant. The maximum number of common shares that may be issuable under the DSU Plan is set at
1.0% of the number of issued and outstanding common shares on a non-diluted basis.
MAG SILVER CORP.
Notes to the Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2024
(Expressed in thousands of US dollars unless otherwise stated - Unaudited)
The following table summarizes the Company’s DSUs activity
for the period:
| |
| DSU activity | | |
| Weighted average
fair value (C$/DSU) | |
| |
| | | |
| | |
Outstanding, January 1, 2023 | |
| 420,115 | | |
| 14.80 | |
Granted | |
| 78,474 | | |
| 14.81 | |
Exercised | |
| - | | |
| - | |
| |
| | | |
| | |
Outstanding, December 31, 2023 | |
| 498,589 | | |
| 14.80 | |
Granted | |
| 32,517 | | |
| 14.36 | |
Exercised | |
| - | | |
| - | |
| |
| | | |
| | |
Outstanding, March 31, 2024 | |
| 531,106 | | |
| 14.77 | |
During the three months ended March 31, 2024, the Company recorded
share-based compensation expense of $347 (March 31, 2023: $214) relating to DSUs to directors. Furthermore, 31,365 DSUs were granted under
the plan and 1,112 DSUs were granted to directors who elected to receive a portion of their annual retainer in DSUs rather than in cash
(March 31, 2023: 15,365 and 1,646 respectively).
| (e) | Diluted earnings per share |
| |
| March 31, | | |
| March 31, | |
| |
| 2024 | | |
| 2023 | |
Net earnings | |
| 14,893 | | |
| 4,712 | |
Basic weighted average number of shares outstanding | |
| 102,979,176 | | |
| 101,117,919 | |
Effect of dilutive common share equivalents: | |
| | | |
| | |
Stock options | |
| - | | |
| 92,642 | |
Restricted and performance share units | |
| 132,051 | | |
| 108,525 | |
Diluted weighted average number of shares outstanding | |
| 103,111,227 | | |
| 101,319,086 | |
| |
| | | |
| | |
Diluted earnings per share | |
$ | 0.14 | | |
$ | 0.05 | |
As of March 31, 2024, there are 1,191,272 anti-dilutive stock options
(March 31, 2023: 761,149), 246,748 anti-dilutive restricted and performance share units (March 31, 2023: 418,363), and 531,106 anti-dilutive
deferred share units (March 31, 2023: 437,126).
MAG SILVER CORP.
Notes to the Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2024
(Expressed in thousands of US dollars unless otherwise stated - Unaudited)
| 8. | FLOW-THROUGH PREMIUM LIABILITY |
As at March 31, 2024, the Company has a flow-through share premium
liability of $1,432 (December 31, 2023: $1,969) in relation to the flow-through share financing completed on February 16, 2023 (see Note
7(a) for full details of the financing). Flow-through shares are issued at a premium, and in the Company’s case, considering the
separate offerings for flow-through shares and standard public offering for common shares both made on January 25, 2023, this premium
has been calculated as the difference between the pricing of a flow-through share and that of a common share from the public offering
made on the same date. Tax deductions generated by the eligible expenditures are passed through to the shareholders of the flow-through
shares once the eligible expenditures are incurred and renounced. Below is a summary of the flow-through financing and the related flow-through
share premium liability generated.
| |
|
Shares issued |
| |
|
Flow-through
share price |
| |
|
Premium per flow
through share price |
| |
|
Flow-through
premium liability |
|
| |
| |
|
$ |
| |
|
$ |
| |
|
$ |
|
February 2023 Financing | |
| 969,450 | | |
| 17.67 | | |
| 3.08 | | |
| 2,986 | |
The following table is a continuity of the flow-through share funding
and expenditures along with the corresponding impact on the flow-through share premium liability:
| |
|
Flow-through
funding and
expenditures |
| |
|
Flow-through
premium liability |
|
| |
| $ | | |
| $ | |
Balance at January 1, 2023 | |
| - | | |
| - | |
Flow-through funds raised | |
| 17,133 | | |
| 2,986 | |
Flow-through eligible expenditures | |
| (5,835 | ) | |
| (1,017 | ) |
| |
| | | |
| | |
Balance at December 31, 2023 | |
| 11,298 | | |
| 1,969 | |
| |
| | | |
| | |
Flow-through eligible expenditures | |
| (3,079 | ) | |
| (537 | ) |
| |
| | | |
| | |
Balance at March 31, 2024 | |
| 8,218 | | |
| 1,432 | |
The Company renounced the entirety
of tax deductions from incurred and not yet incurred eligible spend to its shareholders of flow-through shares as at December 31, 2023.
MAG SILVER CORP.
Notes to the Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2024
(Expressed in thousands of US dollars unless otherwise stated - Unaudited)
In October 2023 the Company entered into a $40,000 senior secured
revolving credit facility with the Bank of Montreal (the “Credit Facility”). There is a provision for an accordion feature
whereby, upon request, the facility may be increased to $75,000 any time prior to the maturity date, at the discretion of the lender.
The Credit Facility will bear interest on a sliding scale of SOFR or the Lender’s Base Rate on US Dollar commercial loans plus an
applicable margin on a sliding scale of between 200 and 400 basis points based on the Company’s leverage ratio. Interest incurred
on drawn amounts is to be paid quarterly. Commitment fees on the undrawn portion of the facility are calculated on a similar sliding scale
of between 50 and 75 basis points, and are also to be paid on a quarterly basis. The term of the facility is 34 months, maturing on August
4, 2026, at which date any drawn amount is required to be paid back in full. All debts, liabilities and obligations under the facility
are guaranteed by the Company's material subsidiaries and secured by assets of the Company including the pledge of a material subsidiary.
The facility includes a number of customary covenants (liquidity, leverage, tangible net worth) and conditions including limitations on
acquisitions and investments (excluding exploration and capital expenditures) funded using cash with no limitations when equity is used
as a funding source. As at March 31, 2024, the Company is in compliance with all applicable covenants.
As of March 31, 2024, the Company has not drawn down any funds from
its Credit Facility, and as a result expensed $49 of commitment fees for the three months ended March 31, 2024.
| 10. | CAPITAL RISK MANAGEMENT |
The Company’s objectives in managing its liquidity and capital
are to safeguard the Company’s ability to continue as a going concern and to provide financial capacity to meet its strategic objectives.
The capital structure of the Company consists of its equity (comprised of share capital, equity reserve, accumulated other comprehensive
income and deficit), its undrawn Credit Facility (see Note 9) and lease obligation, net of cash and investments in equity securities as
follows:
| |
| March 31, | | |
| December 31, | |
| |
| 2024 | | |
| 2023 | |
| |
| $ | | |
| $ | |
Equity | |
| 522,707 | | |
| 506,757 | |
Lease obligation | |
| 115 | | |
| 154 | |
Cash | |
| (74,683 | ) | |
| (68,707 | ) |
Investments | |
| (6 | ) | |
| (8 | ) |
Total | |
| 448,133 | | |
| 438,196 | |
The Company manages the capital structure and makes adjustments to
it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital
structure, the Company may attempt to issue new shares, issue debt and/or acquire or dispose of assets.
MAG SILVER CORP.
Notes to the Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2024
(Expressed in thousands of US dollars unless otherwise stated - Unaudited)
As at March 31, 2024, the Company does not have any long-term debt
outstanding, is in compliance with all applicable Credit Facility covenants, and is not subject to any other externally imposed capital
requirements.
| 11. | FINANCIAL RISK MANAGEMENT |
The Company’s operations consist of the acquisition, exploration
and advancement of mineral projects in the Americas. The Company examines the various financial risks to which it is exposed and assesses
the impact and likelihood of occurrence. These risks may include credit risk, liquidity risk, currency risk, interest rate risk and other
price risks. Where material, these risks are reviewed and monitored by the Board of Directors.
The Company
conducts the majority of its business through its equity interest in its associates, Juanicipio (Note 5). Juanicipio is exposed to commodity
price risk, specifically to the prices of silver, gold, and to a lesser extent, lead and zinc. Currently, Juanicipio produces and sells
concentrates containing these metals which are each subject to market price fluctuations which will affect its profitability and its ability
to generate cash flow. Juanicipio does not hedge any of the commodities produced and does not have any such positions outstanding at March
31, 2024.
Counterparty credit risk is the risk that the financial benefits
of contracts with a specific counterparty will be lost if a counterparty defaults on its obligations under the contract. This includes
any cash amounts owed to the Company by those counterparties, less any amounts owed to the counterparty by the Company where a legal right
of set-off exists and also includes the fair values of contracts with individual counterparties which are recorded in the financial statements.
Juanicipio, in which the Company has a 44% interest, has revenue
from its operations as described in Note 5. Juanicipio sells and receives payment for its concentrates at market terms, under an offtake
agreement with Met-Mex Peñoles, S.A. de C.V. (“Met-Mex”), a related party to Fresnillo. The Company believes Juanicipio
is not exposed to significant trade credit risk.
In order to manage credit and liquidity risk, the Company’s
practice is to invest only in highly rated investment grade instruments backed by Canadian commercial banks, and in the case of its Mexican
and US operations, the Company maintains minimal cash in its US and Mexican subsidiaries.
MAG SILVER CORP.
Notes to the Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2024
(Expressed in thousands of US dollars unless otherwise stated - Unaudited)
The Company’s maximum exposure to credit risk is the carrying
value of its cash, accounts receivable and loans receivable from Juanicipio which is classified as an Investment in Juanicipio in the
consolidated statements of financial position, as follows:
| |
| March 31, | | |
| December 31, | |
| |
| 2024 | | |
| 2023 | |
| |
| $ | | |
| $ | |
Cash | |
| 74,683 | | |
| 68,707 | |
Accounts receivable (Note 4) | |
| 1,032 | | |
| 1559 | |
Juanicipio loans (Notes 5 & 14) | |
| 79,438 | | |
| 94,414 | |
| |
| 155,153 | | |
| 164,680 | |
The Company has a planning and budgeting process in place to help
determine the funds required to support the Company's normal operating requirements, its exploration and mineral projects advancement
plans, and its various optional property and other commitments (Notes 5, 6, 8 and 14). The annual budget is approved by the Board of Directors.
The Company ensures that there are sufficient cash balances to meet its short-term business requirements.
To increase its flexibility with regards to access to capital, in
October 2023 the Company entered into a $40,000 Credit Facility (see Note 9 for full details of the debt facility).
The Company estimates it has the ability to fund the next 12 months
of corporate and exploration expenses with its liquidity position, and the Company 's overall liquidity risk has not changed significantly
from December 31, 2023. Future liquidity may therefore depend upon the Company’s ability to repatriate capital from Juanicipio,
arrange additional debt or additional equity financing.
The Company is exposed to the financial risks related to the fluctuation
of foreign exchange rates, both in the Mexican peso and C$, relative to the US$. The Company does not use any derivative instruments to
reduce its exposure to fluctuations in foreign exchange rates.
MAG SILVER CORP.
Notes to the Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2024
(Expressed in thousands of US dollars unless otherwise stated - Unaudited)
Exposure to currency risk
As at March 31, 2024, the Company is exposed to currency risk through
the following assets and liabilities denominated in currencies other than the functional currency of the applicable entity:
| |
| Mexican peso | | |
| Canadian dollar | |
(in US$ equivalent) | |
| $ | | |
| $ | |
Cash | |
| 5 | | |
| 5,005 | |
Accounts receivable | |
| 215 | | |
| 728 | |
Prepaid expenses | |
| 14 | | |
| 1,963 | |
Investments | |
| - | | |
| 6 | |
Accounts payable | |
| (246 | ) | |
| (3,367 | ) |
Lease obligations | |
| - | | |
| (115 | ) |
Net (liabilities) assets exposure | |
| (11 | ) | |
| 4,221 | |
Mexican peso relative to the US$
Although the majority of operating expenses in Mexico are both determined
and denominated in US$, an appreciation in the Mexican peso relative to the US$ will increase the Company’s cost of operations in
Mexico (reported in US$) related to those operating costs denominated and determined in Mexican pesos. Alternatively, a depreciation in
the Mexican peso relative to the US$ will decrease the Company’s cost of operations in Mexico (reported in US$) related to those
operating costs denominated and determined in Mexican pesos.
An appreciation/depreciation in the Mexican peso against the US$
will also result in a gain/loss before tax and deferred tax to the extent that the Company holds net monetary assets (liabilities) in
pesos. Specifically, the Company's foreign currency exposure is comprised of peso denominated cash, prepaids and value added taxes receivable,
net of trade and other payables. The carrying amount of the Company’s peso denominated net monetary liabilities at March 31, 2024
is 190 thousand pesos (March 31, 2023: 737 thousands pesos net monetary assets). A 10% appreciation or depreciation in the peso against
the US$ would have an immaterial effect on the Company’s income (loss) before tax.
Mexican peso relative to the US$ - Investment
in Juanicipio
The Company conducts the majority of its business through its equity
interest in its associates (Note 5). The Company accounts for this investment using the equity method and recognizes the Company's 44%
share of earnings and losses of Juanicipio. Juanicipio also has a US$ functional currency and is exposed to the same currency risks noted
above for the Company.
MAG SILVER CORP.
Notes to the Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2024
(Expressed in thousands of US dollars unless otherwise stated - Unaudited)
An appreciation/depreciation in the Mexican peso against the US$
will also result in a gain/loss after tax and deferred taxes (Note 5) in Juanicipio to the extent that it holds net monetary assets (liabilities)
in pesos, comprised of peso denominated cash, value added taxes receivable, net of trade and other payables. The carrying amount of Juanicipio’s
net peso denominated monetary liabilities at March 31, 2024 is 153 million pesos (March 31, 2023: 69.1 million). A 10% appreciation in
the peso against the US$ would result in a loss before tax at March 31, 2024 of $1,021 (March 31, 2023: $424) in Juanicipio, of which
the Company would record its 44% share being $449 loss from equity investment in Juanicipio (March 31, 2023: $187 loss), while a 10% depreciation
in the peso relative to the US$ would result in an equivalent gain.
C$ relative to the US$
The Company is exposed to gains and losses from fluctuations in the
C$ relative to the US$.
As general and administrative overheads in Canada are predominantly
denominated in C$, an appreciation in the C$ relative to the US$ will increase the Company’s overhead costs as reported in US$.
Alternatively, a depreciation in the C$ relative to the US$ will decrease the Company’s overhead costs as reported in US$.
An appreciation/depreciation in the C$ against the US$ will result
in a gain/loss to the extent that MAG, the parent entity, and the Larder Project holds net monetary assets (liabilities) in C$. The carrying
amount of the Company’s net Canadian denominated monetary assets at March 31, 2024 is C$5.7 million (March 31, 2023: C$17.1 million
net monetary assets). A 10% appreciation or depreciation in the C$ against the US$ would have a $572 effect on the Company’s income
(loss) before tax.
The Company’s interest income earned on cash
is exposed to interest rate risk. A decrease in interest rates would result in lower relative interest income and an increase in interest
rates would result in higher relative interest income.
The Company’s Credit Facility is based
on variable interest rate, where it will bear interest on a sliding scale of SOFR or the Lender’s Base Rate on US Dollar commercial
loans plus an applicable margin on a sliding scale of between 200 and 400 basis points based on the Company’s leverage ratio. As
of March 31, 2024, the Company has not drawn down any funds from its Credit Facility.
MAG SILVER CORP.
Notes to the Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2024
(Expressed in thousands of US dollars unless otherwise stated - Unaudited)
| 12. | FINANCIAL INSTRUMENTS AND FAIR VALUE DISCLOSURES |
The Company’s financial instruments include cash, accounts
receivable, investments, and trade and other payables. The carrying values of cash, accounts receivable, and trade and other payables
reported in the consolidated statement of financial position approximate their respective fair values due to the relatively short-term
nature of these instruments.
Fair value is defined as the price that would be received to sell
an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value
hierarchy establishes three levels to classify the inputs to valuation techniques used to measure fair value as described below:
Level 1: |
Unadjusted quoted prices in active
markets that are accessible at the measurement date for identical assets or liabilities. |
Level 2: |
Observable inputs other than quoted
prices in Level 1 such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets
and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. |
Level 3: |
Unobservable inputs which are supported by little or no
market activity. |
The Company’s financial assets or liabilities as measured in
accordance with the fair value hierarchy described above are:
As at March 31, 2024 | |
| Level 1 | | |
| Level 2 | | |
| Level 3 | | |
| Total | |
| |
| $ | | |
| $ | | |
| $ | | |
| $ | |
Investments | |
| 6 | | |
| - | | |
| - | | |
| 6 | |
| |
| | | |
| | | |
| | | |
| | |
As at December 31, 2023 | |
| Level 1 | | |
| Level 2 | | |
| Level 3 | | |
| Total | |
| |
| $ | | |
| $ | | |
| $ | | |
| $ | |
Investments | |
| 8 | | |
| - | | |
| - | | |
| 8 | |
There were no transfers between levels 1, 2 and 3 during the three
months ended March 31, 2024 or during the year ended December 31, 2023.
The Company operates in one operating segment, being the exploration
and advancement of mineral projects in North America. The Company’s principal asset, its 44% ownership in the Juanicipio Mine, is
located in Mexico, and the Company also has other exploration properties in North America. The Company’s executive and head office
is located in Canada.
MAG SILVER CORP.
Notes to the Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2024
(Expressed in thousands of US dollars unless otherwise stated - Unaudited)
| 14. | RELATED PARTY TRANSACTIONS |
The Company does not have offices or direct personnel in Mexico,
but rather is party to a Field Services Agreement, whereby it has contracted administrative and exploration services in Mexico with Minera
Cascabel, S.A. de C.V. (“Cascabel”) and IMDEX Inc. (“IMDEX”). Dr. Peter Megaw, the Company’s Chief Exploration
Officer, is a principal of both IMDEX and Cascabel, and is remunerated by the Company through fees to IMDEX. In addition to corporate
executive responsibilities with MAG, Dr. Megaw is responsible for the planning, execution and assessment of the Company’s exploration
programs.
During the quarter, the Company incurred expenses with
Cascabel and IMDEX as follows:
| |
| March 31, | | |
| March 31, | |
| |
| 2024 | | |
| 2023 | |
| |
| $ | | |
| $ | |
| |
| | | |
| | |
Fees related to Dr. Megaw: | |
| | | |
| | |
Exploration and marketing services | |
| 58 | | |
| 78 | |
Travel and expenses | |
| 11 | | |
| 13 | |
Other fees to Cascabel and IMDEX: | |
| | | |
| | |
Administration for Mexican subsidiaries | |
| 14 | | |
| 13 | |
Field exploration services | |
| 45 | | |
| 37 | |
Share-based payments (Note 7) | |
| 95 | | |
| 114 | |
| |
| 223 | | |
| 255 | |
All transactions are incurred in the normal course of business and
are negotiated on arm’s length terms between the parties for all services rendered. A portion of the expenditures are incurred on
the Company’s behalf and are charged to the Company on a “cost + 10%” basis. The services provided do not include drilling
and assay work which are contracted out independently from Cascabel and IMDEX.
Any amounts due to related parties arising from the above transactions
are unsecured, non-interest bearing and are due upon receipt of invoices.
The details of the Company’s significant subsidiary and controlling
ownership interests are as follows:
Name | |
Country of | |
Principal | |
| MAG's effective interest | |
| |
Incorporation | |
Project | |
| 2024(%) | | |
| 2023(%) | |
Minera Los Lagartos, S.A. de C.V. | |
Mexico | |
Juanicipio (44%) | |
| 100 | % | |
| 100 | % |
Balances and transactions between the Company and its subsidiaries
have been eliminated on consolidation and are not disclosed in this note.
MAG SILVER CORP.
Notes to the Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2024
(Expressed in thousands of US dollars unless otherwise stated - Unaudited)
As at March 31, 2024, Fresnillo and the Company have advanced
$180,550 as shareholder loans (MAG’s 44% share $79,438) to Juanicipio, bearing interest at 1 and 6 months SOFR + 2%. From January
2022, with the mine being brought into commercial production, a portion of the interest incurred by Juanicipio was expensed whereas the
remainder, pertaining to the processing facility, continued to be capitalized. From January 2023, with the commencement of commissioning
of the processing facility at Juanicipio, all of the interest is expensed. Interest recorded by the Company for the three months ended
March 31, 2024 totalling $1,751 (three months ended March 31, 2023: $1,679) has therefore been included in MAG’s income from equity
investment in Juanicipio.
During the three months ended March 31, 2024 and 2023, compensation
of key management personnel (including directors) was as follows:
| |
| For the three months ended | |
| |
| March 31, | | |
| March 31, | |
| |
| 2024 | | |
| 2023 | |
| |
| $ | | |
| $ | |
Salaries and other short term employee benefits | |
| 463 | | |
| 371 | |
Share-based compensation (non-cash) (Note 7) | |
| 740 | | |
| 654 | |
| |
| 1,203 | | |
| 1,025 | |
Key management personnel are those persons having authority
and responsibility for planning, directing and controlling the activities of the Company, directly or indirectly, and consists of its
directors, the Chief Executive Officer, the Chief Financial Officer, the Chief Sustainability Officer, and effective January 1, 2024 onwards,
the Chief Development Officer.
| 15. | COMMITMENTS AND CONTINGENCIES |
The following table discloses the contractual obligations of the
Company and its subsidiaries as at March 31, 2024 for committed exploration work and committed other obligations.
| |
Total | |
Less than 1 year | |
1-3 Years | |
3-5 Years | |
More than 5 years |
| |
$ | |
$ | |
$ | |
$ | |
$ |
Minera Juanicipio (1) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
Financing and consulting contractual commitments | |
| 802 | | |
| 256 | | |
| 546 | | |
| - | | |
| - | |
Office lease commitments | |
| 2,148 | | |
| 63 | | |
| 385 | | |
| 410 | | |
| 1,290 | |
Total Obligations and Commitments | |
| 2,950 | | |
| 319 | | |
| 931 | | |
| 410 | | |
| 1,290 | |
| (1) | According
to the operator, Fresnillo, contractual commitments including project development and for
continuing operations and purchase orders issued for project capital, sustaining capital,
and continuing operations total $6,880 (December 31, 2023: $13,779), with respect to Juanicipio
on a 100% basis as at March 31, 2024. |
The concessions associated with the Larder Project are all in good
standing with various underlying obligations or royalties ranging from nil-2% NSRs associated with various mineral claims, and various
payments upon a production announcement.
MAG SILVER CORP.
Notes to the Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2024
(Expressed in thousands of US dollars unless otherwise stated - Unaudited)
The Company is obligated to a 2.5% NSR royalty on the Cinco de Mayo
property.
The Company could be subject to various investigations, claims and
legal and tax proceedings covering matters that arise in the ordinary course of business activities. Each of these matters would be subject
to various uncertainties and it is possible that some matters may be resolved unfavourably to the Company. Certain conditions may exist
as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one
or more future events occur or fail to occur. The Company is not aware of any such claims or investigations, and as such has not recorded
any related provisions and does not expect such matters to result in a material impact on the results of operations, cash flows and financial
position.
29
Exhibit 99.2
![](https://www.sec.gov/Archives/edgar/data/1230992/000117184324002823/logo.jpg) |
|
MAG Silver
Corp.
Management’s Discussion & Analysis
For the three months ended March 31, 2024
Dated: May 13, 2024
|
VANCOUVER OFFICE
Suite 770
800 W. Pender Street
Vancouver, BC V6C
2V6 |
604 630 1399 phone
866 630 1399 toll
free
604 681 0894 fax |
|
|
TSX:
MAG
NYSE American:
MAG
info@magsilver.com
|
MAG SILVER CORP. |
Management’s Discussion & Analysis |
For the three months ended March 31, 2024 |
(expressed in thousands of US dollars except as otherwise noted) |
Table of Contents
1. | INTRODUCTION |
3 |
2. | DESCRIPTION OF BUSINESS |
4 |
3. | HIGHLIGHTS – MARCH 31, 2024 & SUBSEQUENT TO THE QUARTER END |
4 |
4. | RESULTS OF JUANICIPIO |
7 |
5. | DEER TRAIL PROJECT |
13 |
6. | LARDER PROJECT |
15 |
7. | OUTLOOK |
18 |
8. | SUMMARY OF QUARTERLY INFORMATION |
20 |
9. | REVIEW OF FINANCIAL RESULTS |
21 |
10. | FINANCIAL POSITION |
23 |
11. | CASH FLOWS |
25 |
12. | NON-IFRS MEASURES |
26 |
13. | LIQUIDITY AND CAPITAL RESOURCES |
32 |
14. | CONTRACTUAL OBLIGATIONS |
34 |
15. | SHARE CAPITAL INFORMATION |
35 |
16. | OTHER ITEMS |
35 |
17. | TREND INFORMATION |
37 |
18. | RISKS AND UNCERTAINTIES |
38 |
19. | OFF-BALANCE SHEET ARRANGEMENTS |
38 |
20. | RELATED PARTY TRANSACTIONS |
39 |
21. | CRITICAL ACCOUNTING JUDGMENTS, SIGNIFICANT ESTIMATES AND ASSUMPTIONS |
41 |
22. | CHANGES IN ACCOUNTING STANDARDS |
41 |
23. | CONTROLS AND PROCEDURES |
41 |
24. | ADDITIONAL INFORMATION |
42 |
25. | CAUTIONARY STATEMENTS |
43 |
MAG SILVER CORP. |
Management’s Discussion & Analysis |
For the three months ended March 31, 2024 |
(expressed in thousands of US dollars except as otherwise noted) |
The following Management’s Discussion and Analysis (“MD&A”)
focuses on the financial condition and results of operations of MAG Silver Corp. (“MAG”, “MAG Silver” or the “Company”)
for the three months ended March 31, 2024 (“Q1 2024”). It is prepared as of May 13, 2024 and should be read in conjunction
with the unaudited condensed interim consolidated financial statements of the Company for the three months ended March 31, 2024 (“Q1
2024 Financial Statements”) together with the notes thereto which are available on the Canadian Securities Administrator’s
System for Electronic Data Analysis and Retrieval + (“SEDAR+”) at www.sedarplus.ca and on the U.S. Securities and Exchange
Commission’s (“SEC”) website at www.sec.gov.
All dollar amounts referred to in this MD&A are expressed in thousands
of United States dollars (“US$”) unless otherwise stated; references to C$ refer to Canadian dollars. The functional currency
of the parent, its subsidiaries and its investment in Juanicipio (as defined herein), is the US$.
The common shares of the Company trade on the Toronto Stock Exchange and
on the NYSE American, LLC both under the ticker symbol MAG. MAG Silver is a reporting issuer in each of the provinces and territories
of Canada and is a reporting “foreign issuer” in the United States of America.
Cautionary Statements and Risk Factors
This MD&A contains forward-looking statements (as defined herein) which
should be read in conjunction with the risk factors described in section “Risks and Uncertainties” and the cautionary statements
provided in section “Cautionary Statements – Cautionary Note Regarding Forward-Looking Statements” at the end
of this MD&A.
Unless otherwise indicated, technical disclosure regarding the Company’s
properties included or incorporated by reference herein, including use of the capitalized terms “Mineral Resources” and “Mineral
Reserves”, has been prepared in accordance with the requirements of, and imports the meaning of such terms as defined in, 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 (the “CIM Definition Standards”), as applicable, and should be read in conjunction with the
cautionary statements provided in section “Cautionary Statements – Cautionary Note for United States Investors”
and “Cautionary Statements – Cautionary Note to Investors Concerning Estimates of Mineral Resources” at the end
of this MD&A.
Qualified Persons
Unless otherwise specifically noted herein, all scientific or technical
information in this MD&A, including assay results and Mineral Resource estimates, if applicable, is based upon information prepared
by or under the supervision of, or has been approved by Gary Methven, P.Eng., Vice President, Technical Services and Lyle Hansen, P.Geo,
Geotechnical Director; both are “Qualified Persons” for the purposes of NI 43-101, Standards of Disclosure for Mineral
Projects.
MAG SILVER CORP. |
Management’s Discussion & Analysis |
For the three months ended March 31, 2024 |
(expressed in thousands of US dollars except as otherwise noted) |
2. |
DESCRIPTION OF BUSINESS |
MAG Silver Corp. is a growth-oriented Canadian exploration company focused
on advancing high-grade, district scale precious metals projects in the Americas. MAG is emerging as a top-tier primary silver mining
company through its (44%) investment in the 4,000 tonnes per day (“tpd”) Juanicipio mine (the “Juanicipio Mine”
or “Juanicipio”), operated by Fresnillo plc (“Fresnillo”) (56%). The Juanicipio Mine is located in the Fresnillo
Silver Trend in Mexico, the world’s premier silver mining camp, where in addition to underground mine production and processing
of high-grade mineralized material, an expanded exploration program is in place targeting multiple highly prospective targets. MAG is
also executing multi-phase exploration programs at the 100% earn-in Deer Trail Project (as defined below) in Utah and the 100% owned Larder
Project (as defined below), located in the historically prolific Abitibi region of Canada.
3. |
HIGHLIGHTS
– MARCH 31, 2024 & SUBSEQUENT TO THE QUARTER END |
KEY HIGHLIGHTS (on a 100% basis unless otherwise noted)
| ü | MAG reported net income of $14,895 ($0.14 per share) driven by income
from Juanicipio (equity accounted) of $19,244, and adjusted EBITDA1 of
$32,447 for the three months ended March 31, 2024. |
| ü | A total of 325,683 tonnes of ore at a silver head grade of 476 grams
per tonne (“g/t”) (equivalent silver head grade2 713 g/t), was processed
at Juanicipio during Q1 2024. |
| ü | Juanicipio achieved silver production and equivalent silver production2
of 4.5 and 6.4 million ounces, respectively, during Q1 2024. |
| ü | Juanicipio delivered robust cost performance with cash cost1
of $2.50 per silver ounce sold ($8.66 per equivalent silver ounce sold3),
and all-in sustaining cost1 of $6.11 per silver ounce sold ($11.22 per equivalent
silver ounce sold3) in Q1 2024. |
| ü | Juanicipio generated strong operating cash flow of $42,521 and free
cash flow1 of $27,820 in the first quarter of 2024 after tax payments of $25,772.
|
| ü | Juanicipio returned a total of $17,459 in interest and loan principal
repayments to MAG during Q1 2024. |
1 Adjusted EBITDA, total cash costs, cash
cost per ounce, all-in sustaining costs, all-in sustaining cost per ounce and free cash flow are non-IFRS measures, please refer to “Non-IFRS
Measures” section of this MD&A for a detailed reconciliation of these measures to the Q1 2024 Financial Statements.
2 Equivalent silver head grade and equivalent silver production have been calculated
using the following price assumptions to translate gold, lead and zinc to “equivalent” silver head grade and “equivalent”
silver production: $23/oz silver, $1,950/oz gold, $0.95/lb lead and $1.15/lb zinc.
3 Equivalent silver ounces sold have been calculated using realized price assumptions
to translate gold, lead and zinc to “equivalent” silver ounces sold (metal quantity, multiplied by metal price, divided by
silver price). Q1 2024 realized prices of $23.73/oz silver, $2,112.27/oz gold, $0.92/lb lead and $1.08/lb zinc.
MAG SILVER CORP. |
Management’s Discussion & Analysis |
For the three months ended March 31, 2024 |
(expressed in thousands of US dollars except as otherwise noted) |
|
ü | MAG published its updated technical report on Juanicipio on March 27,
2024 outlining robust economics with an after tax NPV of $1.2 billion over an initial 13-year life of mine, generating annual average
free cash flow exceeding $130 million. Mineral Resources increased by 33% from the 2017 PEA, with substantial growth in Measured and Indicated
categories. Inferred resources also expanded, highlighting significant near-term, high-grade upside potential. An inaugural 15.4 million
tonnes Mineral Reserve Estimate at 628 g/t silver equivalent grade was declared enhancing economic
confidence. Extensive exploration upside remains, with only 5% of the property explored, indicating high potential for further discoveries. |
| ü | MAG announced 2024 production and cost guidance with Juanicipio expected
to produce between 14.3 million and 15.8 million silver ounces yielding between 13.2 million and 14.6 million payable silver ounces at
all-in sustaining costs of between $9.50 and $10.50 per silver ounce sold. Juanicipio remains on track to achieve 2024 guidance. |
| ü | On March 22, 2024 the Company, through its Gatling Exploration Inc.
subsidiary, acquired 100% ownership of the Goldstake property (contiguous to its current land holdings) from Goldstake Explorations Inc.
and Transpacific Resources Inc., for consideration of C$5,000. |
CORPORATE
| ü | The Company is well underway with the preparation of its 2023 sustainability report underscoring its continued
commitment to transparency with its stakeholders while providing a comprehensive overview of the Company’s environmental, social
and governance (“ESG”) commitments, practices and performance for 2023. A copy of MAG’s 2022 sustainability report and
MAG Silver 2022 ESG Data Table are available on the Company’s website at https://magsilver.com/esg/reports/1. |
EXPLORATION
| · | Infill drilling at Juanicipio continued in Q1 2024 from underground aimed at upgrading mineralization
in areas expected to be mined in the near to mid-term. During Q1 2024, 11,271 metres were drilled from underground. |
| · | Surface drilling focused on expanding and upgrading the deeper zones and broader regional exploration
started in April 2024. |
| · | During 2024, Juanicipio plans to drill a total of 50,000 metres, with 33,000 metres from underground and
17,000 metres from surface. |
| ü | Deer Trail Project, Utah: |
| · | On May 29, 2023 MAG started a Phase 3 drilling program focused on up to three porphyry “hub”
target areas thought to be the source of the manto, skarn, epithermal mineralization and extensive alteration throughout the project area
including that at the Deer Trail and Carissa zones. In late 2023 an early onset of winter snowfall impacted the commencement of the third
porphyry “hub” target, which is now expected to be drilled in 2024. The two completed “hub” holes to date total
2,738 metres. Both holes intercepted alteration and mineralization in line with what is expected on the edges of porphyry systems. Follow-up
drill targets are planned for summer 2024. |
1 Information contained in or otherwise accessible
through the Company’s website, including the 2022 sustainability report and MAG Silver 2022 ESG Data Table, do not form part of
this MD&A and are not
incorporated into this MD&A by reference.
MAG SILVER CORP. |
Management’s Discussion & Analysis |
For the three months ended March 31, 2024 |
(expressed in thousands of US dollars except as otherwise noted) |
| · | With the early onset of snowfall, Phase 4 drilling focussed on lower elevations commenced in the last
quarter of 2023 and continued through Q1 2024, aimed at offsetting the Carissa discovery and testing other high-potential targets in the
Deer Trail mine area. During Q1 2024, 1,208 metres were drilled at Carissa with results pending. |
| ü | Larder Project, Ontario: |
| · | Drilling targeting Cheminis and Bear totalled 5,391 metres in Q1 2024. Targets tested include down plunge
extension of the high-grade double knuckle at the Bear East zone and extending the Cheminis south mine sequence down plunge. |
| · | Cheminis
Update: Follow-up drilling of the Cheminis South Cadillac-Larder Break (“CLD”) mine sequence down plunge is planned to
test below the most recent intercepts. Hole GAT-24-026 intersected a new zone on the north side of the CLB within a fuchsite-silica-albite
altered komatiite grading 3.9 g/t gold over 16 metres with 2 higher grade shoots associated with albite dykes (see Table 1 below). |
| · | Bear Update:
Utilizing the updated model and incorporating the updated data from recent drilling,
the Bear East zone was successfully extended down plunge by up to 1,100 metres depth. Hole
GAT-24-024NB intersected gold mineralization on both sides of the CLB which confirms the
presence of either another structural trap at depth or the continuation of the “double
knuckle” zone at surface. Gold mineralization intersected on the north zone included
9.4 g/t gold over 2.2 metres within a strongly altered komatiite with syenite intrusions
and 1.6 g/t gold over 4.2 metres on the south zone within the south iron-rich volcanics (see
Table 1 below). Bear East remains open in all directions. |
MAG SILVER CORP. |
Management’s Discussion & Analysis |
For the three months ended March 31, 2024 |
(expressed in thousands of US dollars except as otherwise noted) |
Table 1: 2024 Larder Drillholes Highlights
Hole ID |
From (m) |
To (m) |
Length (m)1 |
Gold (g/t) |
Lithology |
Target/Zone |
GAT-24-024NB |
1233.7 |
1244.0 |
10.3 |
2.3 |
Komatiites with Syenite Intrusions |
North Bear Zone |
Including |
1234.1 |
1236.3 |
2.2 |
9.4 |
Syenite |
North Bear Zone |
|
|
|
|
|
|
|
and |
1415.5 |
1419.7 |
4.2 |
1.6 |
South Volcanics |
South Bear Zone |
|
|
|
|
|
|
|
GAT-24-026 |
1127.0 |
1143.0 |
16.0 |
3.9 |
Green Komatiites with Albite dykes |
North Cheminis Zone |
|
|
|
|
|
|
|
Including |
1134.3 |
1135.5 |
1.2 |
9.1 |
Green Komatiite with Albite dykes |
North Cheminis Zone |
Including |
1137.4 |
1139.0 |
1.6 |
8.1 |
Green Komatiite with Albite dykes |
North Cheminis Zone |
MAG owns 44% of Minera Juanicipio, S.A. de C.V. (“Minera Juanicipio”),
a company incorporated under the laws of Mexico, which owns Juanicipio. Fresnillo is the project operator and holds the remaining 56%.
On December 27, 2021, for various business reasons, the Company and Fresnillo incorporated Equipos Chaparral, S.A. de C.V. (“Equipos
Chaparral”) in the same ownership proportions as Minera Juanicipio for the purpose of holding the Juanicipio plant and mining equipment
to be leased to Minera Juanicipio. Minera Juanicipio and Equipos Chaparral, are collectively referred to herein as “Juanicipio”
or the “Juanicipio Mine”.
All results of Juanicipio in this section are on a 100% basis, unless otherwise
noted. The Company’s attributable equity interest in Juanicipio is 44%. As the third quarter of 2023 was the first quarter of full
commercial production, comparative information presented below together with associated per unit values, where applicable, are not directly
comparable.
MAG SILVER CORP. |
Management’s Discussion & Analysis |
For the three months ended March 31, 2024 |
(expressed in thousands of US dollars except as otherwise noted) |
Operating Performance
The following table and subsequent discussion provide a summary of the operating
performance of Juanicipio for the three months ended March 31, 2024 and 2023, unless otherwise noted.
| |
Three months ended |
| |
|
March 31, |
| |
|
March 31, |
|
Key mine performance data of Juanicipio (100% basis) | |
|
2024 |
| |
|
2023 |
|
| |
| | | |
| | |
Metres developed (m) | |
| 4,069 | | |
| 3,450 | |
| |
| | | |
| | |
Material mined (t) | |
| 325,081 | | |
| 223,632 | |
Material processed (t) | |
| 325,683 | | |
| 222,023 | |
| |
| | | |
| | |
Silver head grade (g/t) | |
| 476 | | |
| 363 | |
Gold head grade (g/t) | |
| 1.33 | | |
| 1.07 | |
Lead head grade (%) | |
| 1.35 | % | |
| 0.74 | % |
Zinc head grade (%) | |
| 2.50 | % | |
| 1.45 | % |
| |
| | | |
| | |
Equivalent silver head grade (g/t) (1) | |
| 713 | | |
| 530 | |
| |
| | | |
| | |
Silver payable ounces (koz) | |
| 3,995 | | |
| 2,001 | |
Gold payable ounces (koz) | |
| 8.90 | | |
| 5.29 | |
Lead payable pounds (klb) | |
| 7,747 | | |
| 2,825 | |
Zinc payable pounds (klb) | |
| 11,846 | | |
| 3,650 | |
| |
| | | |
| | |
Equivalent silver payable ounces (koz) (2) | |
| 5,627 | | |
| 2,796 | |
| (1) | Equivalent silver head grades have been calculated using the following price assumptions to translate gold, lead and zinc to “equivalent”
silver head grade: $23/oz silver, $1,950/oz gold, $0.95/lb lead and $1.15/lb zinc (Q1 2023: $21.85/oz silver, $1,775/oz gold, $0.915/lb
lead and $1.30/lb zinc). |
| (2) | Equivalent silver payable ounces have been calculated using realized price assumptions to translate gold, lead and zinc to “equivalent”
silver payable ounces (metal quantity, multiplied by metal price, divided by silver price). Q1 2024 realized prices of $23.73/oz silver,
$2,112.27/oz gold, $0.92/lb lead and $1.08/lb zinc (Q1 2023 realized prices of $22.93/oz silver, $1,959.50/oz gold, $0.94/lb lead and
$1.43/lb zinc). |
During the three months ended March 31, 2024 the Total Reportable
Injury Frequency Rate (which includes Lost Time Injury and medical treatment or first aid cases reported per 1,000,000 hours worked) was
5.7 (three months ended March 31, 2023: 14.3) and the Total Lost Time Injury Frequency Rate was 4.1 (three months ended March 31, 2023:
9.8).
MAG SILVER CORP. |
Management’s Discussion & Analysis |
For the three months ended March 31, 2024 |
(expressed in thousands of US dollars except as otherwise noted) |
On March 31, 2024 there were 2,032 employees and contractors working
at Juanicipio (523 employees and 1,509 contractors), for a total of 1,217,400 hours worked during Q1 2024.
| b) | Underground Development |
Total underground development to the end of Q1 2024 was approximately
78.93 km (49.04 miles), including 4.07 km (2.53 miles) completed during Q1 2024. Underground mine infrastructure is well advanced and
development continues to focus on:
| · | advancing the three internal spiral footwall ramps to be used to further access the Mineral Reserves over
the full strike length of the Valdecañas Vein System; |
| · | making additional cross-cuts through the vein system and establishing new mining stopes; and |
| · | integrating additional ventilation and other associated underground infrastructure. |
During the three months ended March 31, 2024 a total of 325,081
tonnes of ore were mined. This represents an increase of 45% over Q1 2023. Increases in mined tonnages at Juanicipio have been driven
by the operational ramp up of the mine towards steady state targets.
Due to the poor rock quality on parts of the western section of
the upper Valdecañas Vein, cut and fill is still being used as a mining method for the higher levels in this section. The majority
of production is currently coming from longhole stopes throughout all sections of the mine, and this is the preferred mining method for
the remainder of the Valdecañas Vein.
During the three months ended
March 31, 2024 a total of 325,683 tonnes of ore were processed through the Juanicipio plant; no ore was processed at the nearby Fresnillo
and Saucito processing plants (100% owned by Fresnillo). This represents an increase of 47% over Q1 2023. The increase in milled tonnage
has been driven by the Juanicipio mill commissioning and operational ramp up to nameplate capacity over the course of 2023.
The silver head grade and equivalent silver head grade for the
ore processed in the three months ended March 31, 2024 was 476 g/t and 713 g/t, respectively (three months ended March 31, 2023: 363 g/t
and 530 g/t, respectively). Head grades in Q1 2023 were lower as low-grade commissioning stockpiles were processed through the Juanicipio
plant. Silver metallurgical recovery during Q1 2024 was 89.1% (Q1 2023: 87.0%) reflecting ongoing optimizations in the processing plant.
MAG SILVER CORP. |
Management’s Discussion & Analysis |
For the three months ended March 31, 2024 |
(expressed in thousands of US dollars except as otherwise noted) |
| e) | Total cash costs and AISC |
The following table provides a summary of the total
cash costs1 and all-in sustaining costs1
(“AISC”) of Juanicipio for the three months ended March 31, 2024, and 2023.
| |
Three months ended | |
| |
March 31, | | |
March 31, | |
Key mine performance data of Juanicipio (100% basis) | |
2024 | | |
2023 | |
| |
| | |
| |
Total cash costs (1) | |
| 9,973 | | |
| 22,439 | |
Cash cost per silver ounce sold ($/oz) (1) | |
| 2.50 | | |
| 11.21 | |
Cash cost per equivalent silver ounce sold ($/oz) (1) | |
| 8.66 | | |
| 14.55 | |
| |
| | | |
| | |
All-in sustaining costs (1) | |
| 24,393 | | |
| 32,902 | |
All-in sustaining cost per silver ounce sold ($/oz) (1) | |
| 6.11 | | |
| 16.44 | |
All-in sustaining cost per equivalent silver ounce sold ($/oz) (1) | |
| 11.22 | | |
| 18.29 | |
The Q1 2024 Juanicipio exploration program expenditures totalled
$1,368 (Q1 2023: $2,133), for drilling designed to convert the Inferred Mineral Resources into Measured and Indicated Mineral Resources
and to explore other parts of the Juanicipio concession. During the quarter, 11,271 metres was drilled from underground and focused on
infilling the upper parts of the Valdecañas Vein System including the Valdecañas, Ramal 1, Anticipada and Venadas veins.
Surface drilling, which is designed to infill and expand Valdecañas Vein at depth and test regional targets, started in April 2024.
Drilling from both underground and surface are planned to continue throughout the year, totalling approximately 50,000 metres for 2024.
1 Total cash costs, cash cost per ounce, cash cost per equivalent
ounce, all-in sustaining costs, all-in sustaining cost per ounce, and all-in sustaining cost per equivalent ounce are non-IFRS measures,
please refer to “Non-IFRS Measures” section of this MD&A for a detailed reconciliation of these measures to the
Q1 2024 Financial Statements. Equivalent silver ounces sold have been calculated using realized price assumptions to translate gold,
lead and zinc to “equivalent” silver ounces sold (metal quantity, multiplied by metal price, divided by silver price). Q1
2024 realized prices of $23.73/oz silver, $2,112.27/oz gold, $0.92/lb lead and $1.08/lb zinc (Q1 2023: $22.93/oz silver, $1,959.50/oz
gold, $0.94/lb lead and $1.43/lb zinc).
MAG SILVER CORP. |
Management’s Discussion & Analysis |
For the three months ended March 31, 2024 |
(expressed in thousands of US dollars except as otherwise noted) |
Financial Results
The following table presents excerpts of the financial results of Juanicipio
for the three months ended March 31, 2024 and 2023.
| |
Three months ended | |
| |
March 31, | | |
March 31, | |
| |
2024 | | |
2023 | |
| |
| $ | | |
| $ | |
Sales | |
| 123,689 | | |
| 51,482 | |
Cost of sales: | |
| | | |
| | |
Production cost | |
| (36,787 | ) | |
| (27,378 | ) |
Depreciation and amortization | |
| (22,038 | ) | |
| (7,955 | ) |
Gross profit | |
| 64,864 | | |
| 16,149 | |
Consulting and administrative expenses | |
| (4,189 | ) | |
| (1,499 | ) |
Extraordinary mining and other duties | |
| (1,392 | ) | |
| (520 | ) |
Interest expense | |
| (3,979 | ) | |
| (3,816 | ) |
Exchange losses and other | |
| (1,297 | ) | |
| (2,864 | ) |
Net income before tax | |
| 54,007 | | |
| 7,451 | |
Income tax expense | |
| (14,249 | ) | |
| 6,731 | |
Net income (100% basis) | |
| 39,758 | | |
| 14,182 | |
MAG’s 44% portion of net income | |
| 17,494 | | |
| 6,240 | |
Interest on Juanicipio loans - MAG's 44% | |
| 1,751 | | |
| 1,679 | |
MAG’s 44% equity income | |
| 19,244 | | |
| 7,919 | |
Sales increased by $72,207 during the three months ended March 31, 2024,
mainly due to 179% higher metal volumes and 2% higher realized metal prices.
Offsetting higher sales was higher production cost ($9,409) which was driven
by higher sales and operational ramp-up in mining and processing, including $3,545 in inventory movements, and higher depreciation ($14,083)
as the Juanicipio mill achieved commercial production and commenced depreciating the processing facility and associated equipment in June
2023. Operating margin increased by 21% to 52%, mainly due to operational leverage and the lower reliance on the nearby Fresnillo and
Saucito processing facilities.
Other expenses increased by $2,159 mainly as a result of higher extraordinary
mining and other duties ($872) in relation to higher precious metal revenues from the sale of concentrates and higher consulting and administrative
expenses ($2,690) as an operator services agreement became effective upon initiation of commercial production (the “Operator Services
Agreement”), offset by lower exchange losses and other costs ($1,566).
Taxes increased by $20,980 impacted by higher taxable profits generated
during Q1 2024, and non-cash deferred tax credits related to the commencement of use of plant and equipment in Q1 2023.
MAG SILVER CORP. |
Management’s Discussion & Analysis |
For the three months ended March 31, 2024 |
(expressed in thousands of US dollars except as otherwise noted) |
Ore Processed at Juanicipio Plant (100% basis)
Three Months Ended March 31, 2024 (325,683 tonnes processed) | |
|
Three Months Ended March 31, 2023 |
|
Payable Metals | |
|
Quantity |
| |
|
Average Price $ |
| |
|
Amount $ |
| |
|
Amount $ |
|
Silver | |
| 3,994,614 ounces | | |
| 23.73 per oz | | |
| 94,810 | | |
| 45,875 | |
Gold | |
| 8,904 ounces | | |
| 2,112 per oz | | |
| 18,807 | | |
| 10,367 | |
Lead | |
| 3,514 tonnes | | |
| 0.92 per lb. | | |
| 7,100 | | |
| 2,661 | |
Zinc | |
| 5,373 tonnes | | |
| 1.08 per lb. | | |
| 12,836 | | |
| 5,208 | |
Treatment, refining, and other processing costs (2) | |
| | | |
| | | |
| (9,864 | ) | |
| (12,629 | ) |
Sales | |
| | | |
| | | |
| 123,689 | | |
| 51,482 | |
Production cost | |
| | | |
| | | |
| (36,787 | ) | |
| (27,378 | ) |
Depreciation and amortization (1) | |
| | | |
| | | |
| (22,038 | ) | |
| (7,955 | ) |
Gross Profit | |
| | | |
| | | |
| 64,864 | | |
| 16,149 | |
(1) The underground mine was considered readied for its intended
use on January 1, 2022, whereas the Juanicipio processing facility started commissioning and ramp-up activities in January 2023, achieving
commercial production status on June 1, 2023.
(2) Includes toll milling costs from processing mineralized
material at the Saucito and Fresnillo plants for Q1 2023.
Sales and treatment charges are recorded on a provisional basis and are
adjusted based on final assay and pricing adjustments in accordance with the offtake contracts.
Cash Flow Results
The following table provides a summary of cash flows for Juanicipio for the
three months ended March 31, 2024 and 2023:
| |
Three months ended | |
| |
March 31, | | |
March 31, | |
| |
2024 | | |
2023 | |
| |
| $ | | |
| $ | |
Cash provided by (used in): | |
| | | |
| | |
Operating activities | |
| 42,521 | | |
| (29,910 | ) |
Investing activities | |
| (14,492 | ) | |
| (19,004 | ) |
Financing activities | |
| (39,891 | ) | |
| 56,282 | |
Impact of foreign exchange on cash and cash equivalents | |
| (59 | ) | |
| (17 | ) |
Increase (decrease) in cash and cash equivalents during the period | |
| (11,921 | ) | |
| 7,351 | |
Cash and cash equivalents, beginning of period | |
| 42,913 | | |
| 1,102 | |
Cash and cash equivalents, end of period | |
| 30,991 | | |
| 8,454 | |
MAG SILVER CORP. |
Management’s Discussion & Analysis |
For the three months ended March 31, 2024 |
(expressed in thousands of US dollars except as otherwise noted) |
| a) | Cash flows from operating activities |
During the three months ended March 31, 2024, cash flow from operating
activities increased by $72,430 mainly as a result of higher operating margins driven by higher throughput, and lower tax payments of
$13,829.
| b) | Cash used in investing activities |
During the three months ended March 31, 2024, the net cash used
in investing activities decreased by $4,512. This decrease was mainly driven by lower initial capital development expenditures of $11,537
offset by higher sustaining capital expenditures of $7,835, as the project progressed from commissioning and operational ramp-up phase
in Q1 2023 to steady operation phase in Q1 2024.
| c) | Cash from (used in) financing activities |
During the three months ended March 31, 2024, net cash used in
financing activities increased by $96,174 due to $39,683 (three months ended March 31, 2023: $338) of loan and interest repayments to
shareholders, offset by a nil (three months ended March 31, 2023: $56,800) cash injection from shareholders.
With commercial production declared on June 1, 2023 Juanicipio
is demonstrating its ability to sustain nameplate production levels. Going forward, cash flow from operations, along with the cash held
by Juanicipio at March 31, 2024 of $30,991 on a 100% basis, are expected to fund ongoing requirements.
BACKGROUND AND HISTORY
MAG executed an option agreement (the “Deer Trail Agreement”)
effective December 20, 2018 to acquire and consolidate 100% of the historic Deer Trail mine and surrounding Alunite Ridge area in Piute
County, Utah (the “Deer Trail Project”). The Deer Trail Project includes a mixture of patented and unpatented claims totaling
approximately 6,500 hectares (“ha”). The counterparties to the Deer Trail Agreement contributed their respective Deer Trail
claims and property rights to a newly formed company for a 99% interest in the company, with MAG holding the other 1% interest. MAG is
the project operator and has the right to earn a 100% interest in the company and the Deer Trail Project, with the counterparties retaining
a 2% net smelter returns royalty. In order to earn in 100%, MAG must make a total of $30,000 in escalating annual exploration expenditures
($28,941 expended to March 31, 2024) and $2,000 in advanced royalty payments ($850 paid to December 31, 2023), both over the 10-year term
of the Deer Trail Agreement, by December 2028. All minimum obligatory commitments under the Deer Trail Agreement have been satisfied.
MAG SILVER CORP. |
Management’s Discussion & Analysis |
For the three months ended March 31, 2024 |
(expressed in thousands of US dollars except as otherwise noted) |
The Company believes that the Deer Trail Project
is a silver-rich Carbonate Replacement Deposit (“CRD”) related to one or more porphyry intrusive centres. Consolidating
the property package allows MAG to apply its integrated district scale exploration model and apply new technologies to the search for
an entire suite of mineralization systems expected to occur on the property.
MAG’s exploration focus is to seek the source of the historically
mined high-grade silver-lead-zinc-copper-gold Deer Trail manto in the thick, high-potential Redwall Limestone host rock sequence that
lies just below the interlayered sedimentary and limestone section that hosts the historical Deer Trail mine mineralization. Based on
this concept, and the recognition of apparent “feeder” structures to mineralization in the Deer Trail mine, three surface
holes totaling 3,927 metres were drilled in 2021’s Phase 1 program (see Press Release September 7, 2021 under the Company’s
SEDAR+ profile at www.sedarplus.ca). These three holes successfully fulfilled all three initial objectives by:
| 1) | Confirming that the thick section of regionally known Redwall Limestone and other favorable carbonate host rocks continues below the
Deer Trail mine; |
| 2) | Confirming and projecting two suspected mineralization feeder structures to depth; and |
| 3) | Intercepting high-grade mineralization related to those structures in host rocks beneath the limits of historical drilling. |
A follow-up Phase 2 program was completed in Q1 2023, and included 12,157
metres in total, results were reported on January 17, 2023 and August 3, 2023 (see news releases dated January 17, 2023 and August 3,
2023 available under the Company’s SEDAR+ profile at www.sedarplus.ca).
| § | The overall results continue to reinforce MAG’s CRD exploration model and suggest multiple mineralization
channel-ways extend from the inferred Deer Trail Mountain porphyry center. Multiple fluid channel-ways are a characteristic of many major
CRD systems. The distinctly different mineralization styles of the separate zones are hallmark indicators of a significant, long-lived,
multi-stage CRD, potentially sourced from a productive Porphyry Copper-Molybdenum intrusive center. Results obtained provide strong support
for Phase 3 drilling, to seek that porphyry center. |
| § | Carissa Zone Discovery: by far the most widespread mineralization and strongest alteration drilled on
the property were cut by “Carissa Discovery” holes DT22-09 and 10. Both holes cut several hundred metres of progressively
increasing Argentiferous (silver- bearing) Manganese-Oxide Mineralization (“AMOM”), marble and skarn before entering zones
of distinctive silver-copper-zinc bearing sulfide “lacing”, in turn cut by zones of pervasively mineralized skarn. |
| § | A comprehensive data review was conducted in Q2 2023 following the completion of Phase 2 drilling which
included revisiting previous holes, relogging of historic holes and interpretation/target generation. The result of this review opened
a number of new targets and solidified the 3 targets of the Phase 3 drilling campaign. |
In May of 2023 MAG started the Phase 3 drilling program focused on up to
three porphyry “hub” target areas thought to be the source of the manto, skarn, epithermal mineralization and extensive alteration
throughout the project area including that at the Deer Trail and Carissa zones. An early onset of winter snowfall impacted the commencement
of the third porphyry “hub” target in late 2023, which is now expected to be drilled in 2024, and drilling then shifted to
offset the Carissa discovery and test other high-potential targets (see Phase 4 below). The two completed “hub” holes to date
total 2,738 metres. Both holes intercepted alteration and mineralization in line with what is expected on the edges of porphyry systems.
Follow-up drill targets are planned for summer 2024.
MAG SILVER CORP. |
Management’s Discussion & Analysis |
For the three months ended March 31, 2024 |
(expressed in thousands of US dollars except as otherwise noted) |
The current Phase 4 drilling program, which started in Q4 2023, follows
up on the Carissa Zone Discovery. The goal of the current drill program is to intercept mineralization closer to source with three strategically
planned holes. To date, two of these holes have been completed. During Q1 2024, 1,208 metres were drilled at Carissa and results are pending.
During the three months ended March 31, 2024, and year ended December 31,
2023, the Company has incurred the following exploration and evaluation expenditures on the Deer Trail Project:
| |
|
March 31, |
| |
|
December 31, |
|
| |
|
2024 |
| |
|
2023 |
|
| |
|
$ |
| |
|
$ |
|
Deer Trail Project | |
| | | |
| | |
Option and other payments | |
| — | | |
| 275 | |
Total acquisition costs | |
| — | | |
| 275 | |
Drilling and geotechnical | |
| 1,849 | | |
| 5,854 | |
Camp and site costs | |
| 205 | | |
| 875 | |
Land taxes and government fees | |
| 4 | | |
| 213 | |
Legal, community and other consultation costs | |
| 70 | | |
| 343 | |
Travel | |
| 40 | | |
| 190 | |
Total for the period | |
| 2,168 | | |
| 7,750 | |
Balance, beginning of period | |
| 27,315 | | |
| 19,565 | |
Total Deer Trail Project cost | |
| 29,483 | | |
| 27,315 | |
BACKGROUND AND HISTORY
On May 20, 2022, the Company completed the acquisition of Gatling Exploration
Inc. (“Gatling”) by way of a court-approved plan of arrangement under the Business Corporations Act (British Columbia) (the
“Gatling Transaction”), pursuant to which Gatling became a wholly-owned subsidiary of the Company and the Company thereby
acquired a 100% interest in the Larder project located in the historically prolific Abitibi greenstone belt in Northern Ontario, Canada
(the “Larder Project”).
MAG SILVER CORP. |
Management’s Discussion & Analysis |
For the three months ended March 31, 2024 |
(expressed in thousands of US dollars except as otherwise noted) |
Through the acquisition of Gatling in 2022, the Company acquired 100% of
the Larder Project in Ontario, for which the Company recognized $15,187 in exploration and evaluation assets.
The Larder Project hosts three gold zones along the Cadillac-Larder Break,
35 km east of Kirkland Lake and is comprised of patented and unpatented claims, leases and mining licenses of occupation within the McVittie
and McGarry townships. The concessions associated with the Larder Project are all in good standing with various underlying obligations
or royalties associated with individual mineral claims and varying payments upon a production announcement. MAG retained the Larder Project
exploration team and has since added to it.
The Larder Project includes several known shear-hosted (“orogenic”)
gold mineralization centres located along approximately 8.7 km of strike length on the Cadillac-Larder Break, a historically highly productive
regional first-order shear structure. MAG is applying an integrated district-scale exploration model and modern technology to the search
for large-volume, high-grade gold mineralization of the style known to occur throughout the Abitibi region and along neighboring segments
of the Cadillac-Larder Break. MAG’s technical team believe that a combination of systematic surface-based exploration combined with
geophysics should uncover numerous targets in this highly gold mineralized region.
Unlike in many other shear-hosted gold deposits, where mineralization occurs
principally along second or third-order structures splaying off a first-order structure, the Larder Project segment of the Break also
has concentrated ore shoots along the first-order structure. This relationship appears similar to that in well-known neighbouring and
nearby gold camps along the Break such as the Kerr-Addison mine (approximately 5 km to the east) and the Kirkland Lake district (approximately
35 km to the west). The Larder Project segment lacks systematic exploration, especially to depths below 500 metres on the main Break,
so MAG will be focusing initial efforts along the Break proper. Subsequent focus will include exploration of the many known and geophysically
indicated, 2nd and 3rd order structures that occur throughout the balance of the sparsely explored claim package. The Kir Vit prospect
within the Larder Project claim package is the most advanced of these and appears hosted by the same structure as the Upper Beaver mine
owned by Agnico Eagle Mines Limited currently awaiting a construction decision a few kilometres to the west.
The Larder Project has numerous non-technical advantages. It lies in a
mining-friendly jurisdiction with a very long history of mining. There are First Nation agreements in place, with positive ongoing dialogue.
No significant environmental legacies are known. Infrastructure (electrical, gas, highway, water) and access are excellent; exploration
costs are relatively low; experienced labour is readily available in the area; and permitting is streamlined, predictable and timely.
Importantly, many initial targets can be drilled from existing permitted pads.
MAG anticipates that the mineralization style and characteristics of this
property may be similar to neighbouring major camps. No assurance of this can be made however, and readers are cautioned that, as the
Company’s exploration and drilling programs at the Larder Project advance, results may prove to be materially different from those
characterizing adjacent properties.
MAG initiated a comprehensive data review and initial drilling campaign
in the second half of 2022. The drilling program was focused below and lateral to previously identified mineralization. During Q1 2023,
MAG drilled 7 holes (4,562 metres total) at Swansea over a strike length of 700 metres to test geophysical targets and ultimately assess
the potential for a major gold discovery in this otherwise underexplored region of the property. All holes drilled at Swansea intercepted
multiple geological and structural zones associated with gold mineralization with 6 of 7 holes having intercepts over 1 g/t gold, proving
the high potential for a discovery in this area.
MAG SILVER CORP. |
Management’s Discussion & Analysis |
For the three months ended March 31, 2024 |
(expressed in thousands of US dollars except as otherwise noted) |
Following the Swansea drill testing, the Larder Project team paused drilling
and commenced a property-wide re-examination of all existing technical data which included review of all historical drilling, selective
relogging, re-assaying of all available pulps with 4-acid digestion, additional geophysics, field mapping and sampling. These datasets
are now undergoing systematic reinterpretation to build a unified project model for developing a pipeline of well-defined drill targets.
Drill targets were derived by incorporating new geophysical, geological and geochemical data with a property-wide re-examination of all
existing technical data and concepts. This produced new models resulting in the identification of numerous structural and lithological
targets associated with known gold mineralization on the property. The team has amassed a large inventory of identified targets to drill.
On July 12, 2023, drilling resumed at the Larder Project to test identified
targets on the Cheminis and Bear zones by end of the year. During Q1 2024, 3,183 metres were drilled at Cheminis and 2,208 metres at Bear
for a total of 5,391 metres. Current results have extended the Bear East zone at depth to 1,100 metres and further defined the Cheminis
mine sequence to 700 metres below surface including a new intersection of a gold zone on the north side of the CLB that has never been
tested before. (see ‘Table 1 from Highlights – Exploration’ section above for associated results).
On March 22, 2024 the Company, through its Gatling Exploration Inc. subsidiary,
acquired 100% ownership of the Goldstake property, contiguous to its Larder Project, from Goldstake Explorations Inc. and Transpacific
Resources Inc., for consideration of C$5,000. The Goldstake property has seen minimal exploration activity, however displays hallmark
features, common in large orogenic gold camps in the region including identified 2nd & 3rd order structures with shallow historical
high-grade intercepts of 29.46 g/t gold over 10 metres and 28.65 g/t gold over 3 metres which are open at depth.
MAG SILVER CORP. |
Management’s Discussion & Analysis |
For the three months ended March 31, 2024 |
(expressed in thousands of US dollars except as otherwise noted) |
During the three months ended March 31, 2024, and year ended December 31,
2023, the Company has incurred the following exploration and evaluation expenditures on the Larder Project:
| |
|
March 31, |
| |
|
December 31, |
|
| |
|
2024 |
| |
|
2023 |
|
| |
|
$ |
| |
|
$ |
|
Larder Project | |
| | | |
| | |
Acquisition of Goldstake Property | |
| 3,752 | | |
| — | |
Total acquisition costs | |
| 3,752 | | |
| — | |
Drilling and geotechnical | |
| 2,303 | | |
| 6,357 | |
Camp and site costs | |
| 802 | | |
| 772 | |
Land taxes and government fees | |
| 20 | | |
| 43 | |
Legal, community and other consultation costs | |
| 109 | | |
| 347 | |
Travel | |
| 29 | | |
| 109 | |
Total for the period | |
| 7,015 | | |
| 7,628 | |
Balance, beginning of period | |
| 25,322 | | |
| 17,694 | |
Total Larder Project cost | |
| 32,337 | | |
| 25,322 | |
Juanicipio Outlook
Substantially all material mined at Juanicipio is now being processed through
the Juanicipio processing facility, with the resulting lead (silver-rich) and zinc concentrates treated at market terms under offtake
agreements with Met-Mex Peñoles, S.A. de C.V. (an affiliate of Fresnillo). The Operator Services Agreement became effective upon
the declaration of commercial production, whereby Fresnillo and its affiliates will continue to operate the mine for a fee of $13,000
per annum. With the plant operating at nameplate capacity, the focus is now on ongoing cost and operational optimization.
As reported by Fresnillo, Juanicipio’s operator, silver head grade
at Juanicipio is expected to range between 380 g/t and 420 g/t for 2024. In 2024 the processing facility is expected to operate at an
average of 4,000 tonnes per operating day at a planned availability of 91%.
MAG published its updated technical report on Juanicipio on March 27, 2024,
providing more definitive guidance and solidifying the outlook for the Juanicipio Mine. Concurrent with the filing of the technical report,
MAG announced 2024 production and cost guidance for Juanicipio which is expected to produce between 14.3 million and 15.8 million silver
ounces yielding between 13.2 million and 14.6 million payable silver ounces at all-in sustaining costs of between $9.50 and $10.50 per
silver ounce sold.
MAG SILVER CORP. |
Management’s Discussion & Analysis |
For the three months ended March 31, 2024 |
(expressed in thousands of US dollars except as otherwise noted) |
Deer Trail Outlook
An early onset of winter snowfall impacted the commencement of the third
porphyry “hub” target in late 2023, which is now expected to be drilled in 2024. The planned 2024 exploration program at the
Deer Trail Project includes a total of 7,500 metres of drilling to test around the Carissa Discovery as well as other targets near the
historic Deer Trail mine with drilling shifting to the higher elevation “hub” targets in the late spring after the snowpack
melt.
Larder Project Outlook
The planned 2024 exploration program at the Larder Project includes drilling
a minimum of 35,000 metres with multiple rigs. Targets include 2nd and 3rd order structures that have been identified
from the 2023 target generation program (geophysical, geochemical, and geological) as well as continuing to expand known zones at the
Fernland, Cheminis and Bear zones. Additional geophysical surveys and field programs are expected to be completed in 2024 to add additional
targets to the already rich pipeline portfolio. With the completion of the Goldstake property acquisition in March 2024, the geological
team at the Larder Project expects to conduct a large comprehensive field program in the summer of 2024 with subsequent supplementary
surveys to follow. MAG expects this to generate a new pipeline of drill targets in 2025 to add to the existing targets along the CLB main
break and 2nd, and 3rd order structures.
MAG SILVER CORP. |
Management’s Discussion & Analysis |
For the three months ended March 31, 2024 |
(expressed in thousands of US dollars except as otherwise noted) |
8. |
SUMMARY OF QUARTERLY
INFORMATION |
Selected Quarterly Information
The following table summarizes selected financial data for the Company’s
eight most recently completed financial quarters. The information set forth below should be read in conjunction with the consolidated
financial statements and related notes thereto. All figures are reported in accordance with IFRS.
| |
2024 | |
2023 | |
2022 |
| |
Q1 | |
Q4 | |
Q3 | |
Q2 | |
Q1 | |
Q4 | |
Q3 | |
Q2 |
| |
$ | |
$ | |
$ | |
$ | |
$ | |
$ | |
$ | |
$ |
Income from equity accounted investment in Juanicipio (3) | |
| 19,244 | | |
| 21,069 | | |
| 13,692 | | |
| 22,419 | | |
| 7,919 | | |
| 2,877 | | |
| 11,781 | | |
| 12,347 | |
Interest income (1) | |
| 827 | | |
| 726 | | |
| 663 | | |
| 641 | | |
| 564 | | |
| 295 | | |
| 216 | | |
| 18 | |
Other income (4) | |
| 537 | | |
| 388 | | |
| 269 | | |
| 233 | | |
| 127 | | |
| — | | |
| — | | |
| — | |
General and administrative expenses | |
| 4,109 | | |
| 2,995 | | |
| 4,094 | | |
| 3,233 | | |
| 3,272 | | |
| 3,797 | | |
| 3,003 | | |
| 3,282 | |
Net income (loss) (2) | |
| 14,895 | | |
| 15,694 | | |
| 8,862 | | |
| 19,390 | | |
| 4,713 | | |
| (825 | ) | |
| 8,227 | | |
| 7,562 | |
Net income (loss) per share | |
| 0.14 | | |
| 0.14 | | |
| 0.09 | | |
| 0.19 | | |
| 0.05 | | |
| (0.01 | ) | |
| 0.08 | | |
| 0.08 | |
Diluted net income (loss) per share | |
| 0.14 | | |
| 0.14 | | |
| 0.09 | | |
| 0.19 | | |
| 0.05 | | |
| (0.01 | ) | |
| 0.08 | | |
| 0.08 | |
Notes:
| (1) | The Company’s only source of interest income during the quarters listed above was interest earned
on cash, cash equivalents and term deposits. The amount of interest earned correlates directly to the amount of cash, cash equivalents
and term deposits on hand during the period referenced and prevailing interest rates at the time. Interest from the Juanicipio loans,
where MAG owns a 44% interest, is recognized through MAG’s income from equity accounted investment in Juanicipio (see ‘Results
of the Juanicipio’ above) as applicable. |
| (2) | Net income (loss) by quarter is often materially affected by the timing and recognition of large non-cash
expenses (specifically share-based payments, exploration and evaluation property impairments, and deferred tax changes) as discussed above
when applicable in “Review of Financial Results”. |
| (3) | Income from equity accounted investment in Juanicipio is often materially affected by changes
in volatile metal prices, start-up and ramp-up activities associated with mining and processing, non-cash deferred tax movements related
to assets being brought into use as well as fluctuating feed grades as the operations approached steady state. Q4 2022 lower income from
equity accounted investment in Juanicipio versus Q2-Q3 2022 is mainly due to a lower silver grade from tonnes processed, ranging between
19% and 27% against comparative period. Q2 2023 through Q1 2024 higher incomes from equity accounted investment in Juanicipio is mainly
due to processing of more ore than in prior periods as Juanicipio transitioned through mill commissioning, operational ramp-up, and ultimately
achieved nameplate production levels during September 2023 (see ‘Results of Juanicipio’ above). |
| (4) | On February 16, 2023, the Company closed a $17,133 (C$23,024) bought deal private placement of common
shares in the capital of the Company issued on a “flow-through” basis within the meaning of the Income Tax Act (Canada)
(the “Flow-Through Shares”), for which the Company recorded a $2,986 flow-through share premium liability. As eligible expenditures
are incurred, the Company records associated amortization of flow-through share premium liability in other income. |
MAG SILVER CORP. |
Management’s Discussion & Analysis |
For the three months ended March 31, 2024 |
(expressed in thousands of US dollars except as otherwise noted) |
9. |
REVIEW OF FINANCIAL
RESULTS |
Three months ended March 31, 2024 vs. Three months ended March 31, 2023
| |
For the three months ended |
| |
|
March 31, |
| |
|
March 31, |
|
| |
|
2024 |
| |
|
2023 |
|
| |
|
$ |
| |
|
$ |
|
| |
| |
|
Income from equity accounted investment in Juanicipio | |
| 19,244 | | |
| 7,919 | |
General and administrative expenses | |
| (4,109 | ) | |
| (3,272 | ) |
General exploration and business development | |
| (357 | ) | |
| (102 | ) |
Operating Income | |
| 14,778 | | |
| 4,545 | |
| |
| | | |
| | |
Interest income | |
| 827 | | |
| 564 | |
Other income | |
| 537 | | |
| 127 | |
Foreign exchange loss | |
| (163 | ) | |
| (180 | ) |
Income before income tax | |
| 15,979 | | |
| 5,056 | |
| |
| | | |
| | |
Deferred income tax expense | |
| (1,084 | ) | |
| (343 | ) |
| |
| | | |
| | |
Net income | |
| 14,895 | | |
| 4,713 | |
Income from equity accounted investment in Juanicipio increased
to $19,244 for the three months ended March 31, 2024 (March 31, 2023: $7,919), representing the Company’s 44% equity interest in
the Juanicipio Mine and is discussed above on a 100% basis in ‘Results of Juanicipio’.
General and administrative expenses increased to $4,109 during the
three months ended March 31, 2024 (March 31, 2023: $3,272) due to:
| · | Juanicipio oversight costs now being expensed through profit and loss subsequent to the declaration of
commercial production at Juanicipio in June 2023 ($266); |
| · | increase in share-based compensation to $966 (March 31, 2023: $763) mainly due to the appointment of an
independent director in January 2024; |
| · | increase in depreciation and amortization expense to $145 (March 31, 2023: $10) mainly due to Juanicipio
achieving commercial production in June 2023, resulting in recording amortization of accumulated capitalized Juanicipio oversight expenditures;
and |
| · | increase in general office expenses to $247 (March 31, 2023: $144) mainly due to regulatory charges incurred
in relation to the Company’s Flow-Through Shares financing. |
General exploration and business development expenses increased
to $357 during the three months ended March 31, 2024 (March 31, 2023: $102) due to property holding costs consisting mainly of legal,
licence renewal, and storage fees at Cinco de Mayo.
MAG SILVER CORP. |
Management’s Discussion & Analysis |
For the three months ended March 31, 2024 |
(expressed in thousands of US dollars except as otherwise noted) |
Interest income increased to $827 during the three months ended
March 31, 2024 (March 31, 2023: $564) as a result of higher cash balances and interest rates compared to the comparative period.
Other income of $537 during the three months ended March 31, 2024
(March 31, 2023: $127) is attributable to the amortization of the flow-through share premium liability.
Deferred income tax expense of $1,084 during the three months ended
March 31, 2024 (March 31, 2023: $343) is primarily driven by the income from the equity accounted investment in Juanicipio recognized
by the Company.
Other Comprehensive Income (Loss):
| |
For the three months ended |
| |
|
March 31, |
| |
|
March 31, |
|
| |
|
2024 |
| |
|
2023 |
|
| |
|
$ |
| |
|
$ |
|
| |
| |
|
Net income | |
| 14,895 | | |
| 4,713 | |
| |
| | | |
| | |
Other comprehensive income (loss) | |
| | | |
| | |
Items that will not be reclassified subsequently to profit or loss: | |
| | | |
| | |
Unrealized loss on equity securities | |
| (2 | ) | |
| (1 | ) |
Other comprehensive loss | |
| (2 | ) | |
| (1 | ) |
Total comprehensive income | |
| 14,893 | | |
| 4,712 | |
In other comprehensive (loss) income during the three months ended March 31, 2024, MAG recorded
an unrealized mark-to-market loss of $2 (March 31, 2023: $1 mark-to-market loss) on equity securities.
MAG SILVER CORP. |
Management’s Discussion & Analysis |
For the three months ended March 31, 2024 |
(expressed in thousands of US dollars except as otherwise noted) |
The following table summarizes MAG’s financial position as at March
31, 2024 and December 31, 2023:
| |
|
March 31, |
| |
|
December 31, |
|
| |
|
2024 |
| |
|
2023 |
|
| |
|
$ |
| |
|
$ |
|
Assets | |
| | | |
| | |
Current assets | |
| | | |
| | |
Cash | |
| 74,683 | | |
| 68,707 | |
Other current assets | |
| 3,482 | | |
| 3,346 | |
Total current assets | |
| 78,165 | | |
| 72,053 | |
Non-current assets | |
| | | |
| | |
Investment in Juanicipio | |
| 397,012 | | |
| 394,622 | |
Exploration and evaluation assets | |
| 61,820 | | |
| 52,637 | |
Deferred financing fees | |
| 823 | | |
| 909 | |
Property and equipment | |
| 279 | | |
| 301 | |
Investments | |
| 6 | | |
| 8 | |
| |
| 459,940 | | |
| 448,477 | |
Total assets | |
| 538,105 | | |
| 520,530 | |
Liabilities | |
| | | |
| | |
Current liabilities | |
| 5,332 | | |
| 4,791 | |
Non-current liabilities | |
| 10,066 | | |
| 8,982 | |
Total liabilities | |
| 15,398 | | |
| 13,773 | |
Total equity | |
| 522,707 | | |
| 506,757 | |
Total liabilities and equity | |
| 538,105 | | |
| 520,530 | |
Cash totalled $74,683 as at March 31, 2024 compared to $68,707 at December
31, 2023, with the increase primarily attributable to $17,459 of Juanicipio loan principal repayments and interest received (see below
‘Company’s investment in Juanicipio’ section), offset by $5,054 in Exploration and Evaluation expenditures and
$3,752 attributable to the acquisition of the Goldstake property (see below ‘Cash Flows - Investing Activities’ section).
Other current assets as at March 31, 2024 include accounts receivable of
$1,032 (December 31, 2023: $1,559) and prepaid expenses of $2,450 (March 31, 2023: $1,787).
The equity accounted investment in Juanicipio balance increased from $394,622
at December 31, 2023 to $397,012 at March 31, 2024 and reflects MAG’s share of earnings from Juanicipio and its ongoing equity accounted
investment in Juanicipio, as discussed below in ‘Company’s investment in Juanicipio’.
MAG SILVER CORP. |
Management’s Discussion & Analysis |
For the three months ended March 31, 2024 |
(expressed in thousands of US dollars except as otherwise noted) |
Exploration and evaluation assets as at March 31, 2024 increased to $61,820
(December 31, 2023: $52,637) reflecting exploration expenditures incurred on the Deer Trail Project ($2,168) and the Larder Project ($3,263
as well as $3,752 for the acquisition of the Goldstake property) during the three months ended
March 31, 2024.
Current liabilities as at March 31, 2024 increased to $5,332 (December
31, 2023: $4,791) driven primarily by an increase in trade and other payables as a result of payroll and director fee accruals.
Non-current liabilities of $10,066 as at March 31, 2024 (December 31, 2023:
$8,982) includes a $484 reclamation provision (December 31, 2023: $484), and a deferred income tax liability of $9,582 (December 31, 2022:
$8,498). The latter is primarily driven by the income from the equity accounted investment in Juanicipio recognized by the Company.
Company’s investment in Juanicipio
The following table provides a summary of
the Company’s investment relating to its interest in Juanicipio as at March 31, 2024 and December 31, 2023:
| |
|
March 31, |
| |
|
December 31, |
|
| |
|
2024 |
| |
|
2023 |
|
| |
|
$ |
| |
|
$ |
|
Balance, beginning of period | |
| 394,622 | | |
| 338,316 | |
Juanicipio oversight expenditures incurred 100% by MAG | |
| — | | |
| 384 | |
Amortization of Juanicipio's oversight expenditures incurred 100% by MAG | |
| (129 | ) | |
| (305 | ) |
Loan repayment from Juanicipio | |
| (14,975 | ) | |
| (25,714 | ) |
Cash contributions and advances to Juanicipio | |
| — | | |
| 24,992 | |
Total for the period | |
| (15,104 | ) | |
| (642 | ) |
Income from equity accounted Investment in Juanicipio | |
| 19,244 | | |
| 65,099 | |
Interest earned, net of recontributions, reclassified to accounts receivable | |
| (1,751 | ) | |
| (8,150 | ) |
Balance, end of period | |
| 397,012 | | |
| 394,622 | |
During the three months ended March 31, 2024 the Company did not capitalize
any Juanicipio oversight expenditures, as following the declaration of commercial production in June 2023, the Company started expensing
Juanicipio oversight expenditures and recording amortization of accumulated capitalized Juanicipio oversight expenditures.
MAG SILVER CORP. |
Management’s Discussion & Analysis |
For the three months ended March 31, 2024 |
(expressed in thousands of US dollars except as otherwise noted) |
The following table summarizes MAG Silver’s cash flow activities
for the three months ended March 31, 2024 and March 31, 2023:
| |
For the three months ended, |
| |
|
March 31, |
| |
|
March 31, |
|
| |
|
2024 |
| |
|
2023 |
|
| |
|
$ |
| |
|
$ |
|
Operating activities before movements in non-cash | |
| | | |
| | |
working capital | |
| (2,657 | ) | |
| (2,042 | ) |
Movements in non-cash working capital | |
| (33 | ) | |
| (1,064 | ) |
Operating activities | |
| (2,690 | ) | |
| (3,106 | ) |
Investing activities | |
| 8,653 | | |
| (27,989 | ) |
Financing activities | |
| (39 | ) | |
| 55,875 | |
| |
| | | |
| | |
Effect of exchange rate changes on cash | |
| 52 | | |
| (122 | ) |
Decrease in cash during the period | |
| 5,976 | | |
| 24,658 | |
Cash, beginning of period | |
| 68,707 | | |
| 29,955 | |
Cash, end of period | |
| 74,683 | | |
| 54,613 | |
Operating Activities
During the three months ended March 31, 2024, MAG used $2,690 in cash for
operations (March 31, 2023: $3,106) due to the payment of corporate office expenses. The decrease in cash used for operations was largely
driven by changes in working capital items mainly in trade and other payables.
Investing Activities
During the three months ended March 31, 2024 cash from investing activities
amounted to $8,653 (March 31, 2023: cash used $27,989). The decrease in cash used in investing activities was driven by loan and interest
repayments from Juanicipio of $17,459 (March 31, 2023: cash used $149) offset by cash contributions to Juanicipio of nil (March 31, 2023:
$25,159). Additionally, $8,806 (including $3,752 for the acquisition of the Goldstake property) was used in exploration and evaluation
expenditures across the Deer Trail and Larder Projects (March 31, 2023: $2,979).
Financing Activities
During the three months ended March 31, 2024 cash used in financing activities,
mainly consisting of payments on the Company’s office lease, amounted to $39 (March 31, 2023: cash received $55,875). The increase
in cash used in financing activities was driven by equity financings completed in Q1 2023. On February 7, 2023, the Company closed a $42,558
bought deal public offering and issued 2,905,000 common shares at a price of $14.65 per common share. On February 16, 2023, the Company
closed a $17,133 (C$23,024) bought deal private placement and issued 969,450 Flow-Through Shares at a price of $17.67 (C$23.75) per Flow-Through
Share. Share issuance costs for both equity financings amounted to $3,942 yielding net proceeds of $55,749.
MAG SILVER CORP. |
Management’s Discussion & Analysis |
For the three months ended March 31, 2024 |
(expressed in thousands of US dollars except as otherwise noted) |
The Company has included certain
non-IFRS performance measures throughout this MD&A. These performance measures are employed by management to assess the Company’s
operating and financial performance and to assist in business decision-making. The Company believes that, in addition to conventional
measures prepared in accordance with IFRS, certain investors and other stakeholders use this information to evaluate the Company’s
operating and financial performance; however, as explained elsewhere herein, these non-IFRS performance measures do not have any standardized
meaning and therefore may not be comparable to similar measures presented by other issuers. Accordingly, these performance measures are
intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared
in accordance with IFRS.
Juanicipio does not calculate this
information for use by both shareholders (Fresnillo 56%, and MAG 44%), rather it is calculated by the Company solely for the Company’s
own disclosure purposes and may differ from the non-IFRS measures calculated and presented by Fresnillo.
Cash cost per ounce
The Company has included the non-IFRS performance measure cash cost per
ounce on a by-product basis throughout this MD&A. In the gold and silver mining industry, this is a common performance measure
but does not have any standardized meaning. The Company follows the recommendations of the Gold Institute Production Cost Standard. The
Gold Institute, which ceased operations in 2002, was a non-regulatory body and represented a global group of suppliers of gold and
gold products. The production cost standard developed by the Gold Institute remains the generally accepted standard of reporting cash
costs of production by many gold and silver mining companies. Management uses cash cost per ounce to monitor the operating performance
of Juanicipio. The Company believes that, in addition to conventional measures prepared in accordance with IFRS, some investors use this
information to evaluate the Company’s performance and ability to generate cash flow. Accordingly, it is intended to provide additional
information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.
Other companies may calculate cash cost per ounce differently.
MAG SILVER CORP. |
Management’s Discussion & Analysis |
For the three months ended March 31, 2024 |
(expressed in thousands of US dollars except as otherwise noted) |
The following table provides a reconciliation of cash cost per silver ounce
of Juanicipio to production cost of Juanicipio on a 100% basis (the nearest IFRS measure) as presented in the notes to the Q1 2024 Financial
Statements.
| |
Three months ended March 31, | |
(in thousands of US$, except per ounce amounts) | |
2024 | | |
2023 | |
Production cost as reported | |
| 36,787 | | |
| 27,378 | |
Depreciation on inventory movements | |
| 673 | | |
| 149 | |
Adjusted production cost | |
| 37,460 | | |
| 27,527 | |
Treatment, refining, and other processing costs | |
| 9,864 | | |
| 12,629 | |
By-product revenues (2) | |
| (38,743 | ) | |
| (18,236 | ) |
Extraordinary mining and other duties | |
| 1,392 | | |
| 520 | |
Total cash costs (1) | |
| 9,973 | | |
| 22,439 | |
Silver ounces sold | |
| 3,994,614 | | |
| 2,000,974 | |
Equivalent silver ounces sold (3) | |
| 5,626,959 | | |
| 2,796,391 | |
Cash cost per silver ounce sold ($/ounce) | |
| 2.50 | | |
| 11.21 | |
Cash cost per equivalent silver ounce sold ($/ounce) | |
| 8.66 | | |
| 14.55 | |
| (1) | As Q3 2023 represented the first full quarter of commercial production, information presented for total
cash costs together with their associated per unit values are not directly comparable. |
| (2) | By-product revenues relates to the sale of other metals namely gold, lead, and zinc. |
| (3) | Equivalent silver payable ounces have been calculated using realized prices to translate gold, lead and zinc to “equivalent”
silver payable ounces (metal quantity, multiplied by metal price, divided by silver price). Q1 2024 realized prices: $23.73/oz silver,
$2,112.27/oz gold, $0.92/lb lead and $1.08/lb zinc (Q1 2023: $22.93/oz silver, $1,959.50/oz gold, $0.94/lb lead and $1.43/lb zinc). |
All-in sustaining cost per ounce
In June 2013, the World Gold Council, a non-regulatory association
of many of the world’s leading gold mining companies was established to promote the use of gold to industry, provided guidance for
the calculation of “all-in sustaining cost per gold ounce” in an effort to encourage improved understanding and comparability
of the total costs associated with mining and producing an ounce of gold. The Company, in applying the same methodology for its silver
production, has adopted the reporting of “all-in sustaining cost per silver ounce”, which is a non-IFRS performance
measure. The Company believes that the all-in sustaining cost per silver ounce measure provides additional insight into the costs
of producing silver by capturing all of the expenditures required for the discovery, development and sustaining of silver production and
allows the Company to assess Juanicipio’s ability to support capital expenditures to sustain future production from the generation
of operating cash flows. The Company believes that, in addition to conventional measures prepared in accordance with IFRS, some investors
use this information to evaluate Juanicipio’s performance and ability to generate cash flow, distribution of which is subject to
the terms of the Juanicipio shareholders’ agreement. Other companies may calculate all-in sustaining cost per ounce differently.
Accordingly, it is intended to provide additional information and should not be considered in isolation or as a substitute for measures
of performance prepared in accordance with IFRS.
MAG SILVER CORP. |
Management’s Discussion & Analysis |
For the three months ended March 31, 2024 |
(expressed in thousands of US dollars except as otherwise noted) |
All-in sustaining costs adjust “Total cash costs” for general
and administrative expenses (“G&A expenses”), exploration expenditures (sustaining in nature), sustaining capital expenditures,
sustaining lease payments and interest expense, and accretion on closure and reclamation costs. Exploration expenditures (sustaining in
nature), sustaining capital expenditures, sustaining lease payments and interest expense, and accretion on closure and reclamation costs
are not line items on Juanicipio’s financial statements. Sustaining capital expenditures are defined as those capital expenditures
which do not materially benefit annual or life of mine silver ounce production at a mine site.
A material benefit to a mine site is considered to be at least a 10% increase
in annual or life of mine production, net present value, or reserves compared to the remaining life of mine of the operation. As such,
sustaining capital expenditures exclude all expenditures at Juanicipio which are deemed expansionary in nature, see reconciliation below.
Accretion on reclamation and closure costs represents the growth in Juanicipio’s decommissioning provision due to the passage of
time. This amount does not reflect cash outflows, but it is considered to be representative of the periodic costs of closure and reclamation.
Lease payments on mining and service lease agreements represent cash outflows while interest expense represents the financing component
inherent in the lease. Reclamation cost accretion and lease interest are included in finance expense in the Juanicipio’s results
as disclosed in the notes to the Q1 2024 Financial Statements.
The following table provides a reconciliation of AISC of Juanicipio to
production cost and various operating expenses of Juanicipio on a 100% basis (the nearest IFRS measure), as presented in the notes to
the Q1 2024 Financial Statements.
| |
Three months ended March 31, | |
(in thousands of US$, except per ounce amounts) | |
2024 | | |
2023 | |
Total cash costs | |
| 9,973 | | |
| 22,439 | |
General and administrative expenses | |
| 4,189 | | |
| 1,499 | |
Exploration | |
| 1,368 | | |
| 2,133 | |
Sustaining capital expenditures | |
| 8,598 | | |
| 6,598 | |
Sustaining lease payments | |
| 208 | | |
| 179 | |
Interest on lease liabilities | |
| (16 | ) | |
| (6 | ) |
Accretion on closure and reclamation costs | |
| 72 | | |
| 59 | |
All-in sustaining costs (1) | |
| 24,393 | | |
| 32,902 | |
Silver ounces sold | |
| 3,994,614 | | |
| 2,000,974 | |
Equivalent silver ounces sold (2) | |
| 5,626,959 | | |
| 2,796,391 | |
All-in sustaining cost per silver ounce sold ($/ounce) | |
| 6.11 | | |
| 16.44 | |
All-in sustaining cost per equivalent silver ounce sold ($/ounce) | |
| 11.22 | | |
| 18.29 | |
Average realized price per silver ounce sold ($/ounce) | |
| 23.73 | | |
| 22.93 | |
All-in sustaining margin ($/ounce) | |
| 17.63 | | |
| 6.48 | |
All-in sustaining margin ($/equivalent ounce) | |
| 12.51 | | |
| 4.64 | |
All-in sustaining margin | |
| 70,417 | | |
| 12,973 | |
MAG SILVER CORP. |
Management’s Discussion & Analysis |
For the three months ended March 31, 2024 |
(expressed in thousands of US dollars except as otherwise noted) |
| (1) | As Q3 2023 represented the first full quarter of commercial production, information presented for all-in
sustaining costs and all-in sustaining margin together with their associated per unit values are not directly comparable. |
| (2) | Equivalent silver payable ounces have been calculated using realized prices to translate gold, lead and zinc to “equivalent”
silver payable ounces (metal quantity, multiplied by metal price, divided by silver price). Q1 2024 realized prices: $23.73/oz silver,
$2,112.27/oz gold, $0.92/lb lead and $1.08/lb zinc, (Q1 2023 realized prices: $22.93/oz silver, $1,959.50/oz gold, $0.94/lb lead and $1.43/lb
zinc). |
For the three months ended March 31, 2024 the Company incurred
corporate G&A expenses of $3,964 (three months ended March 31, 2023: $3,262), which exclude depreciation expense.
The Company’s attributable silver ounces sold and equivalent
silver ounces sold for the three months ended March 31, 2024 were 1,757,630 and 2,475,862 respectively (three months ended March 31, 2023:
880,429 and 1,230,412 respectively), resulting in additional all-in sustaining cost for the Company of $2.26/oz and $1.60/oz respectively
(three months ended March 31, 2023: $3.71/oz and $2.65/oz respectively), in addition to Juanicipio’s all-in-sustaining costs presented
in the above table.
The following table reconciles sustaining capital expenditures
(including exploration expenditures) to cash flow used in investing activities of Juanicipio on a 100% basis (the nearest IFRS measure),
as presented in the notes to the Q1 2024 Financial Statements.
| |
Three months ended March 31, | |
(in thousands of US$) | |
2024 | | |
2023 | |
Cash used in investing activities - Juanicipio | |
| 14,492 | | |
| 19,004 | |
Less: | |
| | | |
| | |
Development expenditures (1) | |
| (19 | ) | |
| (11,557 | ) |
Change in accounts payable and deposits related to capital expenditures not included in AISC | |
| (4,507 | ) | |
| 1,284 | |
Total sustaining capital expenditures (including exploration) (1) | |
| 9,966 | | |
| 8,731 | |
Less capitalized exploration expenditures | |
| (1,368 | ) | |
| (2,133 | ) |
Total sustaining capital expenditures (1) | |
| 8,598 | | |
| 6,598 | |
| (1) | As Q3 2023 represents the first full quarter of commercial production, information presented for sustaining
and development capital expenditures are not directly comparable. |
MAG SILVER CORP. |
Management’s Discussion & Analysis |
For the three months ended March 31, 2024 |
(expressed in thousands of US dollars except as otherwise noted) |
EBITDA and Adjusted EBITDA
Earnings before interest, tax, depreciation and amortization
(“EBITDA”) provides an indication of the Company’s continuing capacity to generate income from operations before considering
the Company’s financing decisions and costs of amortizing capital assets. Accordingly, EBITDA comprises net income excluding interest
expense, interest income, amortization and depletion, and income taxes. Adjusted EBITDA adjusts EBITDA to exclude non-recurring items
and non-cash items and includes the calculated Adjusted EBITDA of Juanicipio. Other companies may calculate EBITDA and Adjusted EBITDA
differently.
The following table provides a reconciliation of EBITDA and Adjusted
EBITDA attributable to the Company based on its economic interest in Juanicipio to net income (the nearest IFRS measure) of the Company
per the Q1 2024 Financial Statements. All adjustments are shown net of estimated income tax.
| |
Three months ended March 31, | |
(in thousands of US$) | |
2024 | | |
2023 | |
Net income after tax | |
| 14,895 | | |
| 4,713 | |
Add back (deduct): | |
| | | |
| | |
Taxes | |
| 1,084 | | |
| 343 | |
Depreciation and depletion | |
| 145 | | |
| 10 | |
Finance costs (income and expenses) | |
| (1,201 | ) | |
| (511 | ) |
EBITDA (1) | |
| 14,923 | | |
| 4,555 | |
Add back (deduct): | |
| | | |
| | |
Adjustment for non-cash share-based compensation | |
| 966 | | |
| 763 | |
Share of net earnings related to Juanicipio | |
| (19,244 | ) | |
| (7,919 | ) |
MAG attributable interest in Junicipio Adjusted EBITDA | |
| 35,802 | | |
| 9,718 | |
Adjusted EBITDA (1) | |
| 32,447 | | |
| 7,117 | |
| (1) | As Q3 2023 represents the first full quarter of commercial production, information presented for EBITDA
and Adjusted EBITDA is not directly comparable. |
MAG SILVER CORP. |
Management’s Discussion & Analysis |
For the three months ended March 31, 2024 |
(expressed in thousands of US dollars except as otherwise noted) |
The following table reconciles Juanicipio’s EBITDA and
Adjusted EBITDA for the three months ended March 31, 2024 and 2023 to the results of Juanicipio as disclosed in Note 5 to the Q1 2024
Financial Statements.
| |
Three months ended March 31, | |
(in thousands of US$) | |
2024 | | |
2023 | |
Juanicipio net income after tax | |
| 39,758 | | |
| 14,182 | |
Add back (deduct): | |
| | | |
| | |
Juanicipio taxes | |
| 14,249 | | |
| (6,731 | ) |
Juanicipio depreciation and depletion | |
| 22,038 | | |
| 7,955 | |
Juanicipio finance costs (income and expenses) | |
| 5,276 | | |
| 6,680 | |
Juanicipio EBITDA (1) | |
| 81,321 | | |
| 22,086 | |
Add back (deduct): | |
| | | |
| | |
Fixed asset write-down | |
| 47 | | |
| - | |
Juanicipio adjusted EBITDA (1) | |
| 81,368 | | |
| 22,086 | |
MAG's attributable interest in Juanicipio adjusted EBITDA | |
| 35,802 | | |
| 9,718 | |
| (1) | As Q3 2023 represents the first full quarter of commercial production, information presented for EBITDA
and Adjusted EBITDA is not directly comparable. |
While the above figures reflect an estimate of the Company’s “attributable
interest” in adjusted EBITDA generated from Juanicipio, cash and cash equivalents held by Juanicipio are not within the Company’s
exclusive control as the distribution of cash from Juanicipio is at the discretion of Fresnillo subject to the provisions in the Juanicipio
shareholders’ agreement.
Free Cash Flow
The Company uses the financial measure free cash flow, which
is a non-IFRS financial measure, to supplement information in its consolidated financial statements. Free cash flow does not have any
standardized meaning prescribed under IFRS, and therefore it may not be comparable to similar measures employed by other companies. The
Company believes that in addition to conventional measures prepared in accordance with IFRS, the Company and certain investors and analysts
use this information to evaluate Juanicipio’s performance with respect to its operating cash flow capacity to meet non-discretionary
outflows of cash. The presentation of free cash flow is not meant to be a substitute for the cash flow information presented in accordance
with IFRS, but rather should be evaluated in conjunction with such IFRS measures. Free cash flow is calculated as cash flow from operating
activities of Juanicipio adjusted for cash flows associated with sustaining and non-sustaining capital expenditures and payments made
to mining contractors for leases capitalized under IFRS 16.
MAG SILVER CORP. |
Management’s Discussion & Analysis |
For the three months ended March 31, 2024 |
(expressed in thousands of US dollars except as otherwise noted) |
The following table provides a reconciliation of free cash flow
of Juanicipio to its cash flow from operating activities on a 100% basis (the nearest IFRS measure), as presented in Note 5 of the Q1
2024 Financial Statements.
| |
Three months ended March 31, | |
(in thousands of US$) | |
2024 | | |
2023 | |
Cash flow from operating activities | |
| 42,521 | | |
| (29,910 | ) |
Less: | |
| | | |
| | |
Cash flow used in investing activities | |
| (14,492 | ) | |
| (19,004 | ) |
Sustaining lease payments | |
| (208 | ) | |
| (179 | ) |
Juanicipio free cash flow (1) | |
| 27,820 | | |
| (49,093 | ) |
| (1) | As Q3 2023 represents the first full quarter of commercial production, comparative information presented
for free cash flow of Juanicipio is not directly comparable. |
While the above figures reflect free cash flow generated at Juanicipio,
cash and cash equivalents held by Juanicipio are not within the Company’s exclusive control as the distribution of cash from Juanicipio
is at the discretion of Fresnillo subject to the provisions in the Juanicipio shareholders’ agreement.
13. |
LIQUIDITY AND
CAPITAL RESOURCES |
As at March 31, 2024, MAG had working capital (current assets less current
liabilities) of $72,833 (December 31, 2023: $67,262) including cash of $74,683 (December 31, 2023: $68,707) and no long-term debt. At
March 31, 2024, Juanicipio had working capital of $107,088 (December 31, 2023: working capital $86,336) including cash of $30,991 (December
31, 2023: $42,913) (MAG’s attributable share is 44%). Future liquidity may depend upon the Company’s ability to repatriate
capital from Juanicipio, arrange debt or additional equity financing.
Revolving Credit Facility
In October 2023 the Company entered into a $40,000 senior secured revolving
credit facility with the Bank of Montreal (the “Credit Facility”). There is a provision for an accordion feature whereby,
upon request, the facility may be increased to $75,000 any time prior to the maturity date, at the discretion of the lender. The Credit
Facility bears interest on a sliding scale of SOFR or the lenders Base Rate on US Dollar commercial loans plus an applicable margin on
a sliding scale of between 200 and 400 basis points based on the Company’s leverage ratio. Interest incurred on drawn amounts is
to be paid quarterly. Commitment fees on the undrawn portion of the facility are calculated on a similar sliding scale of between 50 and
75 basis points, and are also to be paid on a quarterly basis. The term of the facility is 34 months, maturing on August 4, 2026, at which
date any drawn amount is required to be paid back in full. All debts, liabilities and obligations under the facility are guaranteed by
the Company's material subsidiaries and secured by assets of the Company including the pledge of a material subsidiary. The facility includes
a number of customary covenants (liquidity, leverage, tangible net worth) and conditions including limitations on acquisitions and investments
(excluding exploration and capital expenditures) funded using cash with no limitations when equity is used as a funding source. As at
March 31, 2024, the Company is in compliance with all applicable covenants.
MAG SILVER CORP. |
Management’s Discussion & Analysis |
For the three months ended March 31, 2024 |
(expressed in thousands of US dollars except as otherwise noted) |
As of March 31, 2024, the Company has not drawn down any funds from its
revolving credit facility, and as a result expensed $49 of commitment fees.
Miscellaneous Expenditures
Aside from its investment in Juanicipio, the Company maintains a corporate
office and undertakes other exploration activities, for which the Company estimates it has the ability to fund the next 12 months of expenditures.
The Company may, in the future, need to raise additional capital in order to meet these funding requirements. Accordingly, future liquidity
may depend upon the Company’s ability to arrange additional debt or additional equity financings.
Expected Use of Proceeds and Financings
The Company closed a $42,558 bought deal public offering on February 7,
2023 and issued 2,905,000 common shares, including 170,000 common shares issued upon the partial exercise of the over-allotment option,
at a price of $14.65 per common share. A reconciliation of the expected use of net proceeds disclosed in the Company’s short form
prospectus dated February 2, 2023 against the actual use of net proceeds as at March 31, 2024 is as follows:
Description | |
|
Estimated Amount ($) |
| |
|
Expended Amount ($) |
|
Exploration expenditures related to Juanicipio, the Deer Trail Project and other projects | |
| 17,600 | | |
| 14,506 | (1) |
Development and sustaining capital expenditures not included in the estimated initial project capital related to Juanicipio (3) | |
| 14,200 | | |
| — | |
Working capital and general corporate purposes (3) | |
| 11,700 | | |
| 9,468 | (2) |
Variance in previously disclosed expected use of proceeds (3) | |
| — | | |
| 16,432 | |
Total | |
| 43,500 | | |
| 40,401 | |
| (1) | The Company anticipates $3,094 of the remaining proceeds from the offering will be allocated to exploration
expenditures, aligned with previously disclosed expectations. |
| (2) | The Company has now spent the full $9,468 proceeds from the offering allocated to working capital and
general corporate purposes, future spending from this category is expected to be funded by cash flows from its investment in Juanicipio. |
| (3) | All proceeds from the offering previously expected to be applied to development and sustaining capital
expenditures not included in the estimated initial project capital related to Juanicipio, and $2,232 expected to be applied to working
capital and general corporate purposes, were subsequently re-allocated to contribute to the extinguishment of substantial tax and mining
duty obligations of Juanicipio in Mexico. |
MAG SILVER CORP. |
Management’s Discussion & Analysis |
For the three months ended March 31, 2024 |
(expressed in thousands of US dollars except as otherwise noted) |
As noted above in ‘Cash Flows’, MAG expended $5,054,
net of $3,079 flow-through eligible expenditures at the Larder Project (year ended December 31, 2023: $15,862), on its exploration and
evaluation properties (excluding Juanicipio’s exploration expenditures as directly funded by Juanicipio) in the three months ended
March 31, 2024, corresponding to the exploration expenditures in the first category in the table above ($3,094 remaining). Furthermore,
during the three months ended March 31, 2024, out of $2,685 total cash spend, MAG used the remainder $1,478 proceeds (year ended December
31, 2023: $8,272) for operations corresponding to working capital and general corporate purposes, corresponding to the third category
in the table above (nil remaining). Future spending to working capital and general corporate purposes is expected to be funded by cash
flows from MAG’s investment in Juanicipio.
In March 2023, MAG advanced $24,992 to Juanicipio and estimates that the
full amount was used to extinguish substantial tax and mining duty obligations not included in the initial project capital, constituting
a re-allocation in the initially anticipated use of funds of $14,200 and $2,232 previously disclosed in the second category (nil remaining)
and third category (nil remaining) respectively, of the foregoing table. Given the variances mentioned above, the Company does not expect
any adverse impact on its ability to achieve business objectives and milestones.
Additionally, the Company closed a $17,133 (C$23,024) bought deal private
placement on February 16, 2023 and issued 969,450 Flow-Through Shares, including 126,450 Flow-Through Shares issued upon the full exercise
of a 15% over-allotment option at a price of $17.67 (C$23.75) per Flow-Through Share. Total proceeds are intended for the Larder Project,
whereby plans were finalized for exploration programs in 2023 and 2024 and are now being executed. For the three months ended March 31,
2024, the Company incurred $3,079 of eligible spend at the Larder Project ($8,218 remaining). Other than as set forth above, it is expected
that the full use of proceeds from each of the above noted offerings, once expended, will align with the above estimates, and the actuals
will be reported in future MD&A, however, there can be no assurances that the above objectives will be completed as circumstances
may change and a reallocation of the funds may be necessary in order for the Company to achieve its stated business objectives.
14. |
CONTRACTUAL
OBLIGATIONS |
The following table discloses the contractual obligations of MAG and its
subsidiaries as at March 31, 2024 for committed exploration work and other committed obligations.
| |
|
Total |
| |
|
Less than 1 year |
| |
|
1-3 Years |
| |
|
3-5 Years |
| |
|
More than 5 years |
|
| |
|
$ |
| |
|
$ |
| |
|
$ |
| |
|
$ |
| |
|
$ |
|
Minera Juanicipio (1) | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Financing and consulting contractual commitments | |
| 802 | | |
| 256 | | |
| 546 | | |
| — | | |
| — | |
Office lease commitments | |
| 2,148 | | |
| 63 | | |
| 385 | | |
| 410 | | |
| 1,290 | |
Total Obligations and Commitments (2) | |
| 2,950 | | |
| 319 | | |
| 931 | | |
| 410 | | |
| 1,290 | |
| 1) | According to the operator, Fresnillo, as at March 31, 2024, contractual commitments including project
development and for continuing operations and purchase orders issued for project capital, sustaining capital, and continuing operations
total $6,880 (December 31, 2023: $13,779) with respect to Juanicipio, both on a 100% basis. |
MAG SILVER CORP. |
Management’s Discussion & Analysis |
For the three months ended March 31, 2024 |
(expressed in thousands of US dollars except as otherwise noted) |
| 2) | The Company also has discretionary commitments for property option payments and exploration expenditures
as outlined in Note 16 of the Q1 2024 Financial Statements. 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. |
Other than as disclosed above, there were no material changes in the specified
contractual obligations of the Company during the year ended March 31, 2024.
15. |
SHARE CAPITAL
INFORMATION |
MAG Silver’s authorized capital consists of an unlimited number of
common shares without par value. As at May 13, 2024, the following common shares, stock options, replacement stock options and warrants,
restricted share units, PSUs, and deferred share units were outstanding:
| |
Number of shares | |
Exercise Price (in Canadian dollars) or Conversion Ratio | |
Remaining Life |
Common shares | |
| 103,143,078 | | |
| n/a | | |
n/a |
Stock options | |
| 1,226,214 | | |
| C$13.46 – C$23.53 | | |
0.03 to 4.00 years |
Replacement stock options | |
| 183,885 | | |
| C$21.40 – C$21.93 | | |
0.30 to 0.37 years |
Performance Share Units (“PSUs”) (1) | |
| 413,903 | | |
| 1:1
(1) | | |
0.91 to 4.00 years |
Restricted Share Units(“RSUs”) | |
| 531,106 | | |
| 1:1 | | |
0.03 to 4.00 years |
Deferred Share Units (“DSUs”) (2) | |
| 11,692 | | |
| 1:1 | | |
n/a (2) |
Fully Diluted | |
| 105,509,878 | | |
| | | |
|
(1) Includes 60,297 PSU grants
where vesting is subject to a market price performance factor, each measured over a three-year performance period which will result in
a PSU vesting range from 10,541 PSUs to 110,052 PSUs.
(2) To be share settled, but
no common shares are to be issued in respect of a participant in MAG’s deferred share unit plan prior to such eligible participant’s
termination date.
The Company is not aware of any undisclosed liabilities or legal actions
against MAG and MAG has no legal actions or cause against any third party at this time other than the claims of the Company with respect
to its purchase of 41 land rights within the Cinco de Mayo property boundaries, and the associated efforts to regain surface access with
the local community, or “local ejido”.
MAG SILVER CORP. |
Management’s Discussion & Analysis |
For the three months ended March 31, 2024 |
(expressed in thousands of US dollars except as otherwise noted) |
The Company is not aware of any condition of default under any debt, regulatory,
exchange related or other contractual obligation.
Cyber Security
The Company’s operations depend, in part, on the efficient operation
and management of the Company’s information technology and operational systems in a secure manner that minimizes cyber risks.
A breach of the Company’s systems could have a material adverse impact on the Company, its operations and reputation.
There has been an increase in cyber security incidents globally over the
past several years and this trend is expected to continue and intensify as global reliance on technology continues to increase. The Company
has programs and strategies in place that are designed to mitigate the risk of cyber-attacks and to allow the Company to recover from
cyber security incidents as rapidly as possible should one occur. The Company monitors, assesses and works to improve the effectiveness
of its technology programs and strategies, taking into account best industry practices. The Company has not experienced any material information
security breach in the last three years, nor has it experienced any known material losses relating to cyber-attacks or other data/information
security since its inception.
The Company has policies and programs in place to manage cyber risks. Such
programs focus primarily on the following:
| · | protecting the Company’s assets from cyber-attacks and safeguarding sensitive information; |
| · | improving cyber security protection, detection, incident response and recovery capabilities to minimize
impact of adverse cyber events; |
| · | adopting practices to reduce third-party cyber security risks; |
| · | ongoing cyber security awareness in the workforce and the annual distribution of an information technology
security policy; |
| · | quarterly briefings by senior management of the Company to the Audit Committee on information security
matters; and |
| · | embedding security by design across the Company to proactively assess and manage cyber risk. |
The above policies and programs are subject to oversight by the Company’s
management team and Board. The Audit Committee, which is comprised entirely of independent directors, has been tasked with assisting the
Board in fulfilling its oversight responsibilities with regard to information security.
There is no assurance that the Company’s policies and programs will
be sufficient to eliminate the risk of cyber-attack nor to protect the Company’s assets or operations.
MAG SILVER CORP. |
Management’s Discussion & Analysis |
For the three months ended March 31, 2024 |
(expressed in thousands of US dollars except as otherwise noted) |
As both the price and market for silver are volatile and difficult to predict,
a significant decrease in the silver price and to a lesser extent gold, zinc and lead prices, could have a material adverse impact on
the Company’s operations and market value.
The Company is exposed to global and localized inflation which continues
to be impacted by the ongoing Russia-Ukraine and Israel-Hamas conflicts, supply chain disruptions and rising interest rates.
The nature of MAG’s business is demanding of capital for property
acquisition costs, exploration commitments, development and holding costs. MAG’s liquidity is affected by the results of its own
acquisition, exploration and advancement of mineral projects activities. The acquisition or discovery of an economic mineral deposit on
one of its mineral property interests may have a favourable effect on the Company’s liquidity, and conversely, the failure to acquire
or find one may have a negative effect. In addition, access to capital to fund exploration and development companies is at times challenging
in public markets, which could limit the Company’s ability to meet its objectives.
Obtaining exploration permits in all the jurisdictions in which the Company
operates, often encounters First Nations, and other forms of community resistance. Likewise, surface rights in Mexico are often owned
by local communities or “ejidos” and there has been a trend in Mexico of increasing ejido challenges to existing surface right
usage agreements. The Company has already been impacted by this trend at its Cinco de Mayo project. Any further challenge to the access
or exploration of any of the properties in which MAG has an interest may have a negative impact on the Company, as the Company may incur
delays and expenses in defending such challenges and, if a challenge is successful, the Company’s interest in a property could be
materially adversely affected.
On March 28, 2023, a legislative initiative aimed at amending multiple
legal codes, inclusive of the Mexican Federal Mining Law (the “Federal Mining Law”), was presented to the Mexican Congress
by the President of Mexico. The proposed amendments pertain to, among other matters, granting of future mining permits and transfer of
permits, shortening concession life, granting of future water permits, mine reclamation, profit-sharing requirements to distribute at
least 7% of profits to local indigenous communities and management of mine waste. This initiative underwent a series of reviews and modifications,
culminating in preliminary approval by the lower house of Congress, the Chamber of Deputies, on April 20, 2023. On April 29, 2023, the
Mexican Senate approved the legislation. The amendments were approved by Mexico’s Federal Executive Branch and published in the
Official Gazette of the Mexican Federation on May 8, 2023 bringing the amendments into law on May 9, 2023. The Company is conducting a
thorough review and evaluation of potential implications specifically concerning our 44% interest in Juanicipio, including the treatment
of concessions issued under previous legislation. Numerous legal challenges to the legality and constitutionality of several aspects of
these changes have been filed with various Mexican courts and are pending adjudication. Juanicipio is committed to monitoring these judicial
proceedings with the utmost attention.
MAG SILVER CORP. |
Management’s Discussion & Analysis |
For the three months ended March 31, 2024 |
(expressed in thousands of US dollars except as otherwise noted) |
Apart from these and the risks referenced below in “Risks and
Uncertainties,” management is not aware of any other trends, demands, commitments, events or uncertainties that would have a
material effect on the Company’s business, financial condition or results of operations.
18. |
RISKS AND UNCERTAINTIES |
The Company’s securities should be considered a highly speculative
investment and investors are directed to carefully consider all of the information disclosed in the Company’s Canadian and U.S.
regulatory filings prior to making an investment in the Company, including the risk factors discussed under the heading “Risk Factors”
in the Company’s most recent Annual Information Form available on SEDAR+ at www.sedarplus.ca and incorporated by reference herein.
The Credit Facility includes certain customary restrictive covenants.
The Company does not currently anticipate any significant risk in complying with the financial ratios or financial covenants contained
in the Credit Facility. However, if the current facts and circumstances faced by the Company were to change due to unexpected operational
issues or due to other factors beyond the Company’s control, such changes could result in the Company being subject to certain
restrictions under, or being found in default of, the Credit Facility. Future exploration work and development of the properties in which
the Company has an interest may depend upon the Company’s ability to repatriate capital from its interest in the Juanicipio Mine,
obtain financing through joint venturing of projects, raise additional debt or equity finance, maintain the Credit Facility or raise
financing though other means. Failure to obtain access to such financing on a timely basis may have an adverse impact on the business
of the Company.
In addition, the Company is exposed to a variety of financial instrument-related risks in the normal course of operations.
The Company’s financial instruments include cash, accounts receivable, investments, trade and other payables and a lease obligation.
A discussion with respect to the fair value of such instruments is included in Note 12 of the Q1 2024 Financial Statements. The Company
examines the various financial instrument related risks to which it is exposed and assesses the impact and likelihood of those risks.
These risks may include market risk, credit risk, liquidity risk, currency risk and interest rate risk. Management’s objectives,
policies and procedures for managing these risks are disclosed in Note 11 of the Q1 2024 Financial Statements.
19. |
OFF-BALANCE
SHEET ARRANGEMENTS |
MAG has no off-balance sheet arrangements.
MAG SILVER CORP. |
Management’s Discussion & Analysis |
For the three months ended March 31, 2024 |
(expressed in thousands of US dollars except as otherwise noted) |
20. |
RELATED PARTY
TRANSACTIONS |
The Company does not have offices or direct personnel in Mexico, but rather
is party to a field services agreement, whereby it has contracted administrative and exploration services in Mexico with Minera Cascabel,
S.A. de C.V. (“Cascabel”) and International Mineral Development and Exploration Inc. (“IMDEX”). Dr. Peter Megaw,
the Company’s Chief Exploration Officer, is a principal of both IMDEX and Cascabel, and is remunerated by the Company through fees
to IMDEX. In addition to corporate executive responsibilities with MAG, Dr. Megaw is responsible for the planning, execution and assessment
of the Company’s exploration programs, and he and his team developed the geologic concepts and directed the acquisition and discovery
of the Juanicipio property.
During the three months ended March 31, 2024 and 2023, the Company incurred
expenses with Cascabel and IMDEX as follows:
| |
For the three months ended |
| |
|
March 31, |
| |
|
March 31, |
|
| |
|
2024 |
| |
|
2023 |
|
| |
|
$ |
| |
|
$ |
|
Fees related to Dr. Megaw: | |
| | | |
| | |
Exploration and marketing services | |
| 58 | | |
| 78 | |
Travel and expenses | |
| 11 | | |
| 13 | |
Other fees to Cascabel and IMDEX: | |
| | | |
| — | |
Administration for Mexican subsidiaries | |
| 14 | | |
| 13 | |
Field exploration services | |
| 45 | | |
| 37 | |
Share-based payments (non-cash) | |
| 95 | | |
| 114 | |
| |
| 223 | | |
| 255 | |
All transactions are incurred in the normal course of business and are
negotiated on arm’s length terms between the parties for all services rendered. A portion of the expenditures are incurred on the
Company’s behalf and are charged to the Company on a “cost + 10%” basis. The services provided do not include drilling
and assay work which are contracted out independently from Cascabel and IMDEX.
Any amounts due to related parties arising from the above transactions
are unsecured, non-interest bearing and are due upon receipt of invoices.
MAG SILVER CORP. |
Management’s Discussion & Analysis |
For the three months ended March 31, 2024 |
(expressed in thousands of US dollars except as otherwise noted) |
The details of the Company’s significant subsidiary and controlling ownership interests
are as follows:
Name |
Country of Incorporation |
Principal Asset |
MAG’s effective interest |
|
|
|
2024 (%) |
2023 (%) |
Minera Los Lagartos, S.A. de C.V. |
Mexico |
Juanicipio (44%) |
100% |
100% |
Balances and transactions between the Company and its subsidiaries, which
are related parties of the Company, have been eliminated on consolidation and are not disclosed in this section.
As at March 31, 2024, Fresnillo and the Company have advanced $180,451 as shareholder loans
(MAG’s 44% share $79,438) to Juanicipio, bearing interest at 1 and 6 month SOFR + 2%. From January 2022, with the mine being brought
into commercial production, a portion of the interest incurred by Juanicipio was expensed whereas the remainder, pertaining to the processing
facility, continued to be capitalized. From January 2023 with the commencement of commissioning of the processing facility at Juanicipio,
all of the interest is expensed. Interest recorded by Juanicipio for the three months ended March 31, 2024 totalling $1,751 (year ended
December 31, 2023: $8,150) has therefore been included in MAG’s income from its equity accounted investment in Juanicipio.
During the three months ended March 31, 2024 and 2023, compensation of
key management personnel (including directors) was as follows:
| |
For the three months ended |
| |
|
March 31, |
| |
|
March 31, |
|
| |
|
2024 |
| |
|
2023 |
|
| |
|
$ |
| |
|
$ |
|
Salaries and other short term employee benefits | |
| 463 | | |
| 371 | |
Share-based payments (non-cash) | |
| 740 | | |
| 654 | |
| |
| 1,203 | | |
| 1,025 | |
Key management personnel are those persons having authority and
responsibility for planning, directing and controlling the activities of the Company, directly or indirectly, and consists of its directors,
the Chief Executive Officer, the Chief Financial Officer, the Chief Sustainability Officer, and effective January 1, 2024, onwards, the
Chief Development Officer.
MAG SILVER CORP. |
Management’s Discussion & Analysis |
For the three months ended March 31, 2024 |
(expressed in thousands of US dollars except as otherwise noted) |
21. |
CRITICAL
ACCOUNTING JUDGMENTS, SIGNIFICANT ESTIMATES AND ASSUMPTIONS |
| (a) | Significant judgements |
In preparing the unaudited condensed interim consolidated financial statements of the
Company as at March 31, 2024, the Company makes judgments when applying its accounting policies. The judgments that have the most significant
effect on the amounts recognized in the Q1 2024 Financial Statements have been set out in Note 5 of the audited consolidated financial
statements for the year ended December 31, 2023.
The preparation of consolidated financial statements in conformity with IFRS requires
management to make estimates and assumptions that affect the amounts reported and disclosed. These estimates are based on management’s
knowledge of the relevant facts and circumstances, having regard to previous experience, but actual results may differ materially from
the amounts included in the consolidated financial statements. Information about assumptions and other sources of estimating uncertainty
that have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities within the next 12
months have been set out in Note 5 of the audited consolidated financial statements for the year ended December 31, 2023.
22. |
CHANGES IN
ACCOUNTING STANDARDS |
The accounting policies applied in the preparation of the Q1 2024 Financial
Statements are consistent with those applied and disclosed in the Company’s audited consolidated financial statements for the year
ended December 31, 2023.
23. |
CONTROLS AND
PROCEDURES |
The Company has filed certificates signed by the CEO and the CFO that,
among other things, report on the design of disclosure controls and procedures and the design of internal controls over financial reporting
as at March 31, 2024.
Disclosure Controls and Procedures
Disclosure controls and procedures have been designed to provide reasonable
assurance that all relevant information required to be disclosed by the Company is accumulated and communicated to senior management as
appropriate and recorded, processed, summarized and reported to allow timely decisions with respect to required disclosure, including
in its annual filings, interim filings or other reports filed or submitted by it under securities legislation.
MAG SILVER CORP. |
Management’s Discussion & Analysis |
For the three months ended March 31, 2024 |
(expressed in thousands of US dollars except as otherwise noted) |
Internal Control Over Financial Reporting
MAG Silver also maintains a system of internal controls over financial
reporting, as defined by National Instrument 52-109 - Certification of Disclosure in Issuers’ Annual and Interim Filings
in order to provide reasonable assurance that assets are safeguarded and financial information is accurate and reliable and in accordance
with IFRS. The Company retains a third-party specialist annually to assist in the assessment of its internal control procedures. The board
of directors (the “Board”) approves the financial statements and MD&A before they are publicly filed and ensures that
management discharges its financial responsibilities. The unaudited condensed interim consolidated financial statements and MD&A for
the three months ended March 31, 2024 were approved by the Board on May 13, 2024. The Board’s review is accomplished principally
through the Audit Committee, which is composed of independent non-executive directors. The Audit Committee meets periodically with management
and auditors to review financial reporting and control matters.
The Company’s management, including the CEO and CFO, believe that
any internal controls over financial reporting and disclosure controls and procedures, no matter how well designed, can have inherent
limitations. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls
must be considered relative to their costs. Therefore, even those systems determined to be effective can provide only reasonable (not
absolute) assurance that the objectives of the control system are met and as such, misstatements due to error or fraud may occur and not
be detected. The CEO and CFO have designed the Company’s internal control over financial reporting as of March 31, 2024 based on
the criteria set forth in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations
of the Treadway Commission to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with IFRS.
There have been no changes in internal controls over financial reporting
during the three months ended March 31, 2024 that have materially affected, or are reasonably likely to materially affect, MAG’s
internal control over financial reporting.
24. |
ADDITIONAL
INFORMATION |
Additional information on the Company, including the Company’s most
recent Annual Information Form is available for viewing under MAG’s profile on the SEDAR+ at www.sedarplus.ca and on SEC’s
EDGAR website at www.sec.gov.
MAG SILVER CORP. |
Management’s Discussion & Analysis |
For the three months ended March 31, 2024 |
(expressed in thousands of US dollars except as otherwise noted) |
25. |
CAUTIONARY
STATEMENTS |
Cautionary Note Regarding Forward-Looking Statements
Certain information contained in this MD&A, including any information
relating to MAG’s future oriented financial information, are “forward-looking information” and “forward-looking
statements” within the meaning of applicable Canadian and United States securities legislation (collectively herein referred as
“forward-looking statements”), including the “safe harbour” provisions of provincial securities legislation, the
U.S. Private Securities Litigation Reform Act of 1995, Section 21E of the U.S. Securities Exchange Act of 1934, as amended and Section
27A of the U.S. Securities Act. Such forward-looking statements include, but are not limited to:
| · | statements that address maintaining the nameplate 4,000 tpd milling rate at Juanicipio; |
| · | statements that address our expectations regarding exploration and drilling; |
| · | statements regarding production expectations and nameplate; |
| · | statements regarding the expected use of the Credit Facility; |
| · | statements regarding additional information from future drill programs; |
| · | statements regarding the expected benefits of publishing a new technical report on the Juanicipio Mine; |
| · | estimated project economics, including but not limited to, plant or mill recoveries, payable metals produced,
underground mining rates; |
| · | the estimation of Mineral Resources; |
| · | estimated future exploration and development operations and corresponding expenditures and other expenses
for specific operations; |
| · | the anticipated impact on the Company’s business and operations from the re-allocation of proceeds
received from the Company’s recent public offerings; |
| · | expectations and estimates regarding use of proceeds; |
| · | the expected capital, sustaining capital and working capital requirements at Juanicipio, including the
potential for additional cash calls; |
| · | production rates, payback time, capital and operating and other costs, internal rate of return, anticipated
life of mine, and mine plan; |
| · | the effects on the Company as a result of shifts in the price and market of silver; |
| · | mining methodology expectations; |
| · | distinctly different mineralization styles expectations; |
| · | expected upside from additional exploration; |
| · | expected results from Deer Trail Project drilling; |
| · | expected results from Larder Project at the Fernland, Cheminis and Bear zones; |
| · | expected capital requirements and sources of funding; |
| · | the effects of First Nations and other forms of community resistance on mining operations; |
| · | the Company’s ability to repatriate capital form the Juanicipio Mine, obtain financing through the
joint venturing of projects and raise additional debt, equity or other sources of financing; |
| · | the Company’s participation in equity investments; |
| · | statements regarding legal challenges to the amended Federal Mining Law; |
| · | statements regarding the Company’s ability to meet business objectives and milestones; |
| · | statements regarding the 2022 sustainability report, including the contents therein; and |
| · | other future events or developments. |
MAG SILVER CORP. |
Management’s Discussion & Analysis |
For the three months ended March 31, 2024 |
(expressed in thousands of US dollars except as otherwise noted) |
When used in this MD&A, any statements that express or involve discussions
with respect to predictions, beliefs, plans, projections, objectives, assumptions or future events of performance (often but not always
using words or phrases such as “anticipate”, “believe”, “estimate”, “expect”, “intend”,
“plan”, “strategy”, “goals”, “objectives”, “project”, “potential”
or variations thereof or stating that certain actions, events, or results “may”, “could”, “would”,
“might” or “will” be taken, occur or be achieved, or the negative of any of these terms and similar expressions),
as they relate to the Company or management, are intended to identify forward-looking statements. Such statements reflect the Company’s
current views with respect to future events and are subject to certain known and unknown risks, uncertainties and assumptions.
Forward-looking statements are necessarily based upon estimates and assumptions,
which are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond
the Company’s control and many of which, regarding future business decisions, are subject to change. Assumptions underlying the
Company’s expectations regarding forward-looking statements contained in this MD&A include, among others: MAG’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 proposed amendments to applicable Mexican legislation, including the Federal Mining Law, MAG’s
ability to obtain adequate financing, and outbreaks or threat of an outbreak of a virus or other contagions or epidemic disease will be
adequately responded to locally, nationally, regionally and internationally.
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. These forward-looking statements involve known and unknown risks,
uncertainties and many factors could cause actual results, performance or achievements to be materially different from any future results,
performance or achievements that may be expressed or implied by such forward-looking statements including amongst others: commodities prices; changes
in expected mineral production performance; unexpected increases in capital costs or cost overruns; exploitation and exploration
results; continued availability of capital and financing; general economic, market or business conditions; risks relating to the Company’s
business operations; risks relating to the financing of the Company’s business operations; risks related to the Company’s
ability to comply with restrictive covenants and maintain financial covenants pursuant to the terms of the Credit Facility; the expected
use of the Credit Facility; risks relating to the development of Juanicipio and the minority interest investment in the same; risks relating
to the Company’s property titles; risks related to receipt of required regulatory approvals; pandemic risks; supply chain constraints
and general costs escalation in the current inflationary environment heightened by the invasion of Ukraine by Russia and the events relating
to the Israel-Hamas war; risks relating to the Company’s financial and other instruments; operational risk; environmental risk;
political risk; currency risk; market risk; capital cost inflation risk; risk relating to construction delays; the risk that data is incomplete
or inaccurate; the risks relating to the limitations and assumptions within drilling, engineering and socio-economic studies relied upon
in preparing economic assessments and estimates, including the 2017 PEA; as well as those risks more particularly described under the
heading “Risk Factors” in the Company’s Annual Information Form available under the Company’s profile on SEDAR+
at www.sedarplus.ca.
MAG SILVER CORP. |
Management’s Discussion & Analysis |
For the three months ended March 31, 2024 |
(expressed in thousands of US dollars except as otherwise noted) |
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from those described herein. This list is not exhaustive of
the factors that may affect any of the Company’s forward-looking statements. The Company’s forward-looking statements are
based on the beliefs, expectations and opinions of management on the date the statements are made and, other than as required by applicable
securities laws, the Company does not assume any obligation to update forward-looking statements if circumstances or management’s
beliefs, expectations or opinions should change. For the reasons set forth above, investors should not attribute undue certainty to or
place undue reliance on forward-looking statements.
Cautionary Note for United States Investors
Unless otherwise indicated, technical disclosure regarding the Company’s
properties included or incorporated by reference herein, including all Mineral Resource estimates contained in such technical disclosure
has been prepared in accordance with the requirements of NI 43-101 and the CIM Definition Standards. NI 43-101 is an instrument developed
by the Canadian Securities Administrators that establishes standards for all public disclosure an issuer makes of scientific and technical
information concerning mineral projects.
Canadian standards, including NI 43-101, differ significantly from the
disclosure requirements of the SEC under subpart 1300 of Regulation S-K (the “SEC Modernization Rules”). The Company is not
required to provide disclosure on its mineral properties under the SEC Modernization Rules and provides disclosure under NI 43-101 and
the CIM Definition Standards. Accordingly, information contained in this MD&A, or the documents incorporated by reference herein,
may differ significantly from the information that would be disclosed had the Company prepared the Mineral Resource estimates under the
standards adopted under the SEC Modernization Rules.
Cautionary Note to Investors Concerning Estimates of
Mineral Resources
“Inferred Mineral Resources” are Mineral Resources for which
quantity and grade or quality are estimated based on limited geological evidence and sampling. Geological evidence is sufficient to imply
but not verify geological and grade or quality continuity. “Inferred Mineral Resources” are based on limited information and
have a great amount of uncertainty as to their existence and great uncertainty as to their economic and legal feasibility, although it
is reasonably expected that the majority of “Inferred Mineral Resources” could be upgraded to “Indicated Mineral Resources”
with continued exploration.
Under Canadian rules, estimates of Inferred Mineral Resources are considered too speculative
geologically to have the economic considerations applied to them to enable them to be categorized as Mineral Resources and, accordingly,
may not form the basis of feasibility or pre-feasibility studies, or economic studies except for a Preliminary Economic Assessment as
defined under NI 43-101. Indicated and Inferred Mineral Resources that are not Mineral Resources do not have demonstrated economic viability.
45
Exhibit 99.3
Form 52-109F2
Certification of Interim Filings
Full Certificate
I, George Paspalas, President and Chief Executive Officer of MAG
Silver Corp., certify the following:
| 1. | Review: I have reviewed the interim financial report and interim MD&A (together, the
“interim filings”) of MAG Silver Corp. (the “issuer”) for the interim period ended March 31, 2024. |
| 2. | No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the
interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that
is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered
by the interim filings. |
| 3. | Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim
financial report together with the other financial information included in the interim filings fairly present in all material respects
the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim
filings. |
| 4. | Responsibility: The issuer’s other certifying officer(s) and I are responsible
for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as
those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings,
for the issuer. |
| 5. | Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3,
the issuer’s other certifying officer(s) and I have, as at the end of the period covered by the interim filings: |
| (a) | designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance
that: |
| (i) | material information relating to the issuer is made known to us by others, particularly during the period
in which the interim filings are being prepared; and |
| (ii) | information required to be disclosed by the issuer in its annual filings, interim filings or other reports
filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified
in securities legislation; and |
| (b) | designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s
GAAP. |
| 5.1 | Control framework: The control framework the issuer’s other certifying officer(s)
and I used to design the issuer’s ICFR is Internal Control-Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission. |
| 5.2 | ICFR – material weakness relating to design: N/A |
| 5.3 | Limitation on scope of design: N/A |
| 6. | Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change
in the issuer’s ICFR that occurred during the period beginning on January 1, 2024 and ended on March 31, 2024 that has materially
affected, or is reasonably likely to materially affect, the issuer’s ICFR. |
Date: May 14, 2024
/s/ George Paspalas
George Paspalas
President and Chief Executive Officer
Exhibit 99.4
Form 52-109F2
Certification of Interim Filings
Full Certificate
I, Fausto Di Trapani, Chief Financial Officer of MAG Silver Corp.,
certify the following:
| 1. | Review: I have reviewed the interim financial report and interim MD&A (together, the
“interim filings”) of MAG Silver Corp. (the “issuer”) for the interim period ended March 31, 2024. |
| 2. | No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the
interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that
is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered
by the interim filings. |
| 3. | Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim
financial report together with the other financial information included in the interim filings fairly present in all material respects
the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim
filings. |
| 4. | Responsibility: The issuer’s other certifying officer(s) and I are responsible
for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as
those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings,
for the issuer. |
| 5. | Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3,
the issuer’s other certifying officer(s) and I have, as at the end of the period covered by the interim filings: |
| (a) | designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance
that: |
| (i) | material information relating to the issuer is made known to us by others, particularly during the period
in which the interim filings are being prepared; and |
| (ii) | information required to be disclosed by the issuer in its annual filings, interim filings or other reports
filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified
in securities legislation; and |
| (b) | designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s
GAAP. |
| 5.1 | Control framework: The control framework the issuer’s other certifying officer(s)
and I used to design the issuer’s ICFR is Internal Control-Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission. |
| 5.2 | ICFR – material weakness relating to design: N/A |
| 5.3 | Limitation on scope of design: N/A |
| 6. | Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change
in the issuer’s ICFR that occurred during the period beginning on January 1, 2024 and ended on March 31, 2024 that has materially
affected, or is reasonably likely to materially affect, the issuer’s ICFR. |
Date: May 14, 2024
/s/ Fausto Di Trapani
Fausto Di Trapani
Chief Financial Officer
MAG Silver (AMEX:MAG)
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