MAG Silver Corp. (TSX / NYSE American: MAG) (“MAG”
or the
“Company”) announces the Company’s
unaudited financial results for the three and six months ended June
30, 2020. For details of the unaudited condensed interim
consolidated financial statements and Management's Discussion and
Analysis for the three and six months ended June 30, 2020, please
see the Company’s filings on SEDAR (www.sedar.com) or on EDGAR
(www.sec.gov).
All amounts herein are reported in $000s
of United States dollars (“US$”) unless otherwise
specified.
HIGHLIGHTS – JUNE 30, 2020 & EVENTS
SUBSEQUENT TO THE QUARTER END
- Mexican Government national COVID-19 Order announced in April
resulting in a temporary suspension through May 30, 2020 of surface
exploration and construction work at the Juanicipio Project and
reduced underground operations.
- Phased Juanicipio Project restart
commenced June 1, 2020 with the overall development timetable
unchanged, according to the operator Fresnillo plc (“Fresnillo”):
- Underground mine production expected to commence soon, ahead of
schedule with anticipated processing of 16,000 tonnes per month of
mineralized material through the Fresnillo plant until the
Juanicipio plant is commissioned;
- 8,858 tonnes of mineralized material successfully processed at
the Fresnillo plant on a test basis in early August 2020;
- Juanicipio plant expected to commence commissioning in mid-2021
and reach 85% of its 4,000 tonnes per day(“tpd”) nameplate capacity
by year end 2021.
- Production ramp-up anticipated to be sooner than previous
guidance, due to the de-risking of Juanicipio’s metallurgical
performance by virtue of campaign processing the mineralized
material through the Fresnillo plant; and,
- Estimated initial capital of $440,000 (on a 100% basis) as of
January 1, 2018, will be reduced by:
- Development expenditures incurred since then to June 30, 2020
of approximately $172,695 (the Company therefore estimates
approximately $267,305 of remaining initial capital on a 100% basis
as at June 30, 2020);
- Existing cash held in Minera Juanicipio as at June 30, 2020
($35,337); and,
- Expected cashflow generated from mineralized material being
processed through the Fresnillo plant up until the Juanicipio plan
is commissioned in mid-2021.
- Detailed engineering is near
completion and earthmoving and foundation construction for the
4,000 tpd beneficiation plant is advancing well.
- Underground development at
Juanicipio now approaching 30 kilometres (“km”) (or 18.75 miles)
and is focused on both the three sub-vertical ramps that descend
alongside the mineralization and the conveyor ramp that ascends to
the surface at plant site.
- Assays from a 33,864 metre, 28-hole 2019 exploration program
were released March 3, 2020 (see Press Release of same date), with
the following highlights:
- Confirms and expands the continuous
wide, high-grade mineralization in the Valdecañas Deep Zone;
- Confirms and expands the wide,
high-grade zones in the Anticipada Vein;
- Confirms and expands the Venadas
vein to the south with strong silver and gold grades; and
- Discovers the new northeast-trending Valentina and Venadas II
veins through drilling and development.
- On April 30, 2020, the Company
closed a non-brokered private placement offering and issued
4,528,302 common shares at C$13.25 for gross proceeds of
C$60,000,002 ($43,134) to Mr. Eric Sprott, through 2176423 Ontario
Ltd., a corporation beneficially controlled by him.
- MAG held cash and cash equivalents
as at June 30, 2020 (before the below noted ATM Program) of $87,108
while Minera Juanicipio had cash on a 100% basis of $35,337 as at
June 30, 2020.
- On June 29, 2020, the Company
established an at-the-market equity program (the “ATM Program”) and
subsequent to June 30, 2020 and as at August 10, 2020, the Company
has sold and issued 2,305,463 common shares under the ATM Program
at an average price of $16.16 per share, for gross and net proceeds
of $37,264 and $36,239 respectively.
“We continue to work carefully at the Juanicipio
Project, respecting social distancing and maintaining very high
levels of hygiene” said George Paspalas, President and CEO.
“Construction of the flotation plant at Juanicipio is back to 100%,
and we are making good progress. We processed approximately 8,800
tonnes of Juanicipio mineralized material through the Fresnillo
plant in early August as an initial test, and are expecting
processing of 2 days per month, representing a major milestone for
the project and early cash flow to the Joint Venture.”
COVID-19 – Juanicipio
Project
In April 2020 in response to the COVID-19 virus
outbreak, the Mexican Government ordered a temporary suspension of
all “non-essential” operations nationwide in Mexico, including
mining operations, until May 30, 2020. Fresnillo, the Juanicipio
Project operator, was in regular consultation with Mexican
Government officials to ensure Minera Juanicipio’s compliance with
the Order. Fresnillo advised the Company that while the Order was
in effect, underground development continued under government
mandated hygiene protocols, and surface construction work and
surface-based drilling were both temporarily halted. All work has
since resumed with a phased restart having commenced on June 1,
2020, and according to Fresnillo, the overall development timetable
remains unchanged.
JUANICIPIO PROJECT UPDATE
In the quarter ended June 30, 2020, surface
construction progress at Juanicipio was limited due to COVID-19
restrictions noted above. Nonetheless, as noted above Fresnillo,
the Juanicipio Project operator has advised that the anticipated
development timetable currently remains unchanged with the
Juanicipio processing plant expected to be commissioned in
mid-2021. Once work resumed in June, earthmoving and foundation
pouring continued for the construction of the processing plant. A
large portion of the concrete works, structural steel sections and
process pipe spools are being fabricated off-site in controlled
workshop conditions. These are now arriving on site and are being
placed directly into position. As well, a number of
specialized consulting firms have been engaged to conduct all
aspects of the detailed design of the tailings dam.
Total underground development to date is now
approaching 30 km (18.75 miles), including 4.4 km completed in the
first half of 2020. The first cross-cuts through the vein
have been made from the easternmost footwall ramp, exposing
well-mineralized vein. Initial development indicates that the
grade and width of the mineralization are in line with previous
estimates. Mineralized material from underground development
workings has been stockpiled during the past year and is now
available for processing through the Fresnillo processing facility
until the Juanicipio plant is commissioned in mid-2021. In early
August 2020, 8,858 tonnes of mineralized stockpiled material was
successfully processed at the Fresnillo plant on a test
basis. The mineralized material is expected to be processed
at an average rate of 16,000 tonnes per month at the Fresnillo
plant, which has spare capacity. In addition to this
mineralized material from development, the first production stope
is expected to be ready for mining in Q3-2020. As such, by
bringing forward the start-up of the underground mine and
processing the mineralized material, MAG and Fresnillo are looking
to secure several positive outcomes for the Juanicipio Project:
- generating some cash-flow from production to offset some of the
cash requirements of the initial project capital;
- de-risking the metallurgical process through a better
understanding of the mineralization;
- increased certainty around the geological block model prior to
start-up of the processing plant; and,
- allowing a quicker and more certain ramp-up to the nameplate
4,000 tonnes per day plant design.
The Juanicipio plant is now expected to reach
85% name plate capacity by the end of 2021 and 90-95% in 2022. In
the 2017 PEA, ramp-up to full production was originally envisioned
over 3 years after commissioning of processing plant, the
equivalent of 2024.
With detailed engineering almost complete, major
equipment purchases completed and delivered to site, and several
significant construction contracts awarded or under review,
Fresnillo and MAG announced an update to the initial capex required
for the project in the previous quarter (see Press Release dated
February 24, 2020). The capex or pre-operative capital cost
on a 100% basis of $395,000 from January 1, 2018 was revised
to $440,000 from January 1, 2018, to reflect additional
expenditures incurred by Minera Juanicipio on the underground
development and bringing forward the full construction costs for
two large life-of-mine ventilation shafts, as well as some
sustaining capital to facilitate the early underground mine
start.
The capex expended from January 1, 2018 to June
30, 2020 is approximately $172,695 leaving an estimated $267,305 of
remaining initial capital (MAG’s 44% estimated remaining share is
$117,614 as at June 30, 2020). This funding requirement would
be reduced by both: existing cash held in Minera Juanicipio as at
June 30, 2020 ($35,337); and, expected cash flows generated from
mineralized rock sold and processed through the Fresnillo
processing plant referenced above.
On the exploration front, MAG and Fresnillo, as
shareholders of Minera Juanicipio, both acknowledge that there is
considerable further exploration opportunity in the concession
license area as most of it remains unexplored. Exploration
drilling in recent years has been primarily designed to both
convert the Inferred Mineral Resources included in the Deep Zone
into Indicated Mineral Resources, and to further trace the Deep
Zone laterally and to depth. The 2019 exploration program also
targeted the newly discovered north-south trending Venadas Vein
family, and additional prospective targets are expected to be
drilled this year.
There are currently 5 drill rigs turning on the
property, all designed to further expand and infill the Deep
Zone.
FINANCING AND THE ATM
PROGRAM
On April 30, 2020, the Company closed a
non-brokered private placement offering and issued 4,528,302 common
shares at C$13.25 for gross proceeds of C$60,000,002 ($43,134) to
Mr. Eric Sprott, through 2176423 Ontario Ltd., a corporation
beneficially controlled by him.
On June 29, 2020, the Company established an
at-the-market equity program (the “ATM Program”) whereby the
Company is permitted to issue up to an aggregate of $50 million
worth of common shares from treasury at prevailing market prices to
the public through the NYSE American or any other marketplace on
which the common shares are listed, quoted or otherwise traded in
the United States. The volume and timing of distributions under the
ATM Program is determined at the Company’s sole discretion, subject
to applicable regulatory limitations. The ATM Program is
effective until June 2022, unless terminated prior to such date by
the Company. Subsequent to June 30, 2020 and as at August 10, 2020,
the Company has sold and issued 2,305,463 common shares under the
ATM Program at an average price of $16.16 per share, for gross and
net proceeds of $37,264 and $36,239 respectively. The remaining
availability under the ATM Program is now $12,736, which MAG may
utilize at its sole discretion.
FINANCIAL RESULTS – THREE AND SIX MONTHS
ENDED JUNE 30, 2020
As at June 30, 2020, MAG had working capital of
$87,682 (June 30, 2019: $114,326) including cash and cash
equivalents of $87,108 (June 30, 2019: $113,833) and MAG has no
long-term debt. As well, as at June 30, 2020 Minera
Juanicipio had a cash balance of $35,337 (MAG’s attributable 44%
share $15,548). The Company makes capital contributions
through cash advances to Minera Juanicipio as ‘cash called’ by the
operator Fresnillo, based on approved joint venture budgets. In the
three and six months ended June 30, 2020, the Company funded
advances to Minera Juanicipio, which combined with MAG’s Juanicipio
expenditures on its own account, totaled $23,284 and $23,456
respectively (June 30, 2019: $15,375 and $15,456 respectively).
The Company’s net income for the three months
ended June 30, 2020 amounted to $1,297 and net loss for the six
months ended June 30, 2020 amounted to $13,601 or $0.01/share and
$(0.15)/share respectively (June 30, 2019: $961 and $1,403 net loss
respectively or $(0.01)/share and $(0.02)/share respectively). The
Company recorded a deferred income tax benefit of $2,516 for the
three months ended June 30, 2020 and a deferred income tax expense
of $6,178 for the six months ended June 30, 2020 (June 30,
2019: $249 and $568 deferred income tax benefit respectively), the
latter driven primarily by the non-cash devaluation of certain tax
assets denominated in Mexican Pesos, as the Mexican Peso devalued
significantly against the US dollar in the first six months of the
year (from 18.87 Pesos/US$ on December 31, 2019 to 23.13 on June
30, 2020).
Share based payment expense (a non-cash item)
recorded in the three and six months ended June 30, 2020 amounted
to $1,230 and $1,708 respectively (June 30, 2019: $1,284 and $1,508
respectively) and is determined based on the fair value of equity
incentives granted and vesting in the period. In the three and six
months ended June 30, 2020, the Company earned interest income on
its cash and cash equivalents of $110 and $384 respectively (June
30, 2019: $782 and $1,626 respectively). The Company recorded a 44%
equity income pick up of $1,189 and equity loss pick up of $3,498
respectively in the three and six months ended June 30, 2020 from
Minera Juanicipio (June 30, 2019: $480 and $762 equity income pick
up respectively). The equity loss pick-up from Minera Juanicipio
relates to the Company’s 44% share of a foreign exchange loss and a
deferred income tax expense, which was partially offset by interest
income earned within Minera Juanicipio.
About MAG Silver Corp.
MAG Silver Corp. is a Canadian advanced stage
development and exploration company focused on becoming a top-tier
primary silver mining company, by exploring and advancing
high-grade, district scale, silver-dominant projects in the
Americas. Its principal focus and asset is the Juanicipio Project
(44%), being developed in a joint venture with Fresnillo (56%). The
Juanicipio Project is located in the Fresnillo Silver Trend in
Mexico, the world's premier silver mining camp. The
Juanicipio Joint Venture is currently constructing and developing
the surface and underground infrastructure on the property to
support a 4,000 tonnes per day mining operation, with the
operational expertise of Fresnillo, the project operator. As
well, an expanded exploration program is in place at Juanicipio
with multiple highly prospective targets across the property.
For further
information on behalf of MAG Silver Corp. |
Contact Michael J. Curlook, VP
Investor Relations and Communications |
|
|
|
|
Phone: |
(604) 630-1399 |
Website: |
www.magsilver.com |
Toll Free: |
(866) 630-1399 |
Email: |
info@magsilver.com |
Neither the Toronto Stock Exchange nor the NYSE
American has reviewed or accepted responsibility for the accuracy
or adequacy of this press release, which has been prepared by
management.
This release includes certain statements that
may be deemed to be “forward-looking statements” within the meaning
of the US Private Securities Litigation Reform Act of 1995. All
statements in this release, other than statements of historical
facts are forward looking statements, including statements that
address future mineral production, reserve potential,
exploration drilling, exploitation activities and events or
developments. Forward-looking statements are often, but not always,
identified by the use of words such as "seek", "anticipate",
"plan", "continue", "estimate", "expect", "may", "will", "project",
"predict", "potential", "targeting", "intend", "could", "might",
"should", "believe" and similar expressions. These statements
involve known and unknown risks, uncertainties and other factors
that may cause actual results or events to differ materially from
those anticipated in such forward-looking statements.
Although MAG believes the expectations expressed in such
forward-looking statements are based on reasonable assumptions,
such statements are not guarantees of future performance and actual
results or developments may differ materially from those in the
forward-looking statements. Factors that could cause actual results
to differ materially from those in forward-looking statements
include, but are not limited to, changes in
commodities prices, changes in mineral
production performance, exploitation and exploration
successes, continued availability of capital and financing, and
general economic, market or business conditions; the use of the net
proceeds from the private placement is subject to change; political
risk, currency risk and capital cost inflation. In addition,
forward-looking statements are subject to various risks, including
that data is incomplete and considerable additional work will be
required to complete further evaluation, including but not limited
to drilling, engineering and socio-economic studies and
investment. The reader is referred to the Company’s filings
with the SEC and Canadian securities regulators for disclosure
regarding these and other risk factors. There is no certainty that
any forward-looking statement will come to pass and investors
should not place undue reliance upon forward-looking
statements.
Please Note: Investors are urged to consider
closely the disclosures in MAG's annual and
quarterly reports and other public filings, accessible through
the Internet at www.sedar.com and www.sec.gov LEI:
254900LGL904N7F3EL14
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