MAG Silver Corp. (TSX / NYSE American: MAG) (“MAG”
or the
“Company”) announces the Company’s
unaudited financial results for the three months ended March 31,
2021. For details of the unaudited condensed interim consolidated
financial statements and Management's Discussion and Analysis for
the three months ended March 31, 2021, 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 – MARCH 31, 2021 AND EVENTS
SUBSEQUENT TO THE QUARTER END
OPERATIONAL
-
Batch processing of mineralized material from development headings
through the nearby Fresnillo plant continues at a targeted average
nominal rate of 16,000 tonnes per month.
- Since August 2020, 108,254 tonnes
have been processed, expected to:
- contribute cash-flow to offset some
of the initial project capital; and
- significantly speed up project
ramp-up due to the de-risking of Juanicipio’s metallurgical
performance.
-
As reported by the operator Fresnillo, the Juanicipio plant is
expected to commence commissioning in Q4 2021, reaching 40 to 50%
of its 4,000 tonnes per day (“tpd”) nameplate
capacity by the end of 2021 and reaching 90 to 95% of its nameplate
capacity in 2022.
-
During Q1 2021, on a 100% basis:
- 36,395 tonnes of
mineralized material processed through the Fresnillo plant;
- 40% higher
silver head grade (458 grams per tonne (“g/t”))
than the material processed in 2020 (328 g/t); and
- 431,188 payable
silver ounces, 631 payable gold ounces, 137 tonnes of lead and 199
tonnes of zinc sold.
-
Pre-commercial production sales of $10,085 (net of treatment and
processing costs) on a 100% basis less $1,886 in mining and
transportation costs, netting $8,199 that was recorded as gross
profit by the Juanicipio Joint Venture in Q1 2021.
-
Positive progress was achieved during the quarter on the
construction of the 4,000 tpd Juanicipio processing plant and civil
works. Mechanical installation of the major processing equipment is
nearly complete, and the construction is focused on completing the
building envelope along with pipework and
electrical/instrumentation installation.
-
Mechanical completion of the SAG and ball mills expected in Q2
2021.
- A regularly updated photo gallery
of construction progress at Juanicipio is available at
https://magsilver.com/projects/photo-gallery/#photo-gallery.
-
Underground development at Juanicipio is now over 37 km (23 miles)
with preparation of the first production stope complete.
-
Juanicipio capex is estimated at $440,000 (100% basis) as of
January 1, 2018, less approximately $272,000 in development
expenditures incurred from then to March 31, 2021 leaving
approximately $168,000 of remaining initial capital on a 100% basis
(MAG’s 44% estimated at $73,920) as at March 31, 2021. The cash
required will be reduced by:
- Existing cash held in Minera
Juanicipio as at March 31, 2021 ($3,067 on a 100% basis); and
- Expected cashflow generated from
mineralized material being processed through the Fresnillo plant up
until the Juanicipio plant commences commissioning in Q4 2021.
-
A further 16,771 tonnes of development material were processed in
April 2021.
EXPLORATION
-
In spite of temporary COVID-19 restrictions established by the
Mexican Government in 2020, the full Juanicipio 2020 exploration
program was completed as planned in 2020, drilling 33 holes and
27,900 metres. Full assays expected in Q2 2021.
- The 2021 Exploration program for
Juanicipio is budgeted at $6 million on a 100% basis, to be evenly
allocated between continued step-out and infill drilling of the
Valdecañas Vein System (including independent targeting of the
Venadas Vein family and the Anticipada Vein) and three principal
target areas elsewhere in the Joint Venture ground.
-
Deer Trail Project in Utah - Phase I drilling commenced in
November, 2020 and is expected to be completed in Q2 2021 (assays
and interpretations pending).
COVID-19
-
Juanicipio operator, Fresnillo, has implemented a range of safety
measures and monitoring procedures, consistent with World Health
Organization and Mexican Government COVID-19 directives.
-
In Q1 2021, Fresnillo, as operator, reported that commissioning of
the Juanicipio processing plant is presently expected to commence
in Q4 2021, a few months later than previously reported as some
infrastructure contracts were delayed due to COVID-19 and
COVID-19-related preventive measures implemented at site.
LIQUIDITY AND CAPITAL
RESOURCES
-
As at March 31, 2021, MAG held cash and cash equivalents of $92,844
while Minera Juanicipio had cash on hand on a 100% basis of
$3,067.
CORPORATE
-
Company continues to refresh its board, with the appointment of two
new directors in Q1 2021:
-
Appointed Susan Mathieu on January 13, 2021. Ms. Mathieu has more
than twenty-five years of international mining experience
encompassing due diligence, exploration, project development,
permitting, construction and operational positions. Her mining
experience covers the full spectrum from mine-site to corporate
leadership roles in governance, environment, sustainability,
community, health and safety, compliance and risk management
programs and strategies. Prior to joining the MAG board, Ms.
Mathieu was the Vice President, Environment and Sustainability with
NexGen Energy, and previously held senior positions with Placer
Dome, Falconbridge, Centerra Gold and Golder Associates.
- Appointed Tim Baker on March 31,
2021. Mr. Baker has substantial experience in operating
international mines and projects. He was Executive Vice President
and Chief Operating Officer of Kinross Gold Corporation prior to
retiring in 2010. Prior to joining Kinross, he was with Placer
Dome, where he held several key roles including Executive General
Manager of Placer Dome Chile, Executive General Manager of Placer
Dome Tanzania and Senior Vice President of the copper producing
Compañia Minera Zaldivar. Mr. Baker is currently Chair of Golden
Star Resources, a director of Sherritt International Corp. and
serves on the Triple Flag Precious Metals Corp. Advisory Board. Mr.
Baker has previously been a director on the boards of Augusta
Resources Corp., Antofagasta PLC, Eldorado Gold Corp., Rye Patch
Gold (later Alio Gold) and Pacific Rim Mining Corp.
- At the time Tim Baker was
appointed, Richard Clark resigned from the board to focus on other
professional responsibilities.
JUANICIPIO PROJECT UPDATE
Underground Mine Production
Mineralized material from development is being
batch processed, refined and sold on commercial terms at a targeted
rate of 16,000 tonnes per month at the nearby Fresnillo plant 14
kilometres away. The resulting concentrate is treated in Torreon,
Coahuila. This preproduction toll processing is expected to
continue until the Juanicipio plant commences commissioning in Q4
2021. The actual amount of material processed on a monthly basis
may vary due to the variability of mineralization encountered in
the development headings from month to month.
In the quarter ended March 31, 2021, 36,395
tonnes were batch processed, with an average silver head grade of
458 g/t (a 40% increase in silver head grade compared to the 328
g/t for development material processed in 2020). Total sales from
the tonnes processed in Q1 2021, on a 100% basis, were 431,188
payable silver ounces, 631 payable gold ounces, 137 tonnes of lead
and 199 tonnes of zinc. Provisional sales, net of processing and
treatment costs totaled $10,085, and further costs incurred
(including an applied mining cost and transportation costs) totaled
$1,886 for a gross profit of $8,199 (see Table 1
below). The sales and treatment charges for tonnes processed in Q1
2021 were recorded on a provisional basis and will be adjusted
based on final assay and pricing adjustments in accordance with the
offtake contracts. Processing details are summarized in
Table 1 below.
Table 1: Q1 2021 Development Material
Processed at Fresnillo’s Processing Plant (100% basis)
|
Quantity |
Average Per Unit |
Amount |
Q1 2020 (1) |
Silver (oz)(per oz) |
431,188 ounces |
$25.87 |
$11,157 |
|
- |
Gold (oz)(per oz) |
631 ounces |
$1,728.59 |
$1,090 |
|
- |
Lead (tonnes)(per lb) |
137 tonnes |
$0.88 |
$267 |
|
- |
Zinc (tonnes)(per lb) |
199 tonnes |
$1.27 |
$555 |
|
- |
Treatment and refining charges (“TCRCs”) and other
processing costs |
$(1,838) |
|
- |
Provisional sales adjustment related to 2020 sales (2) |
$(1,146) |
|
- |
Net Sales |
$10,085 |
|
- |
Mining and transportation costs |
$(1,886) |
|
- |
Gross Profit |
$8,199 |
|
- |
(1)
Underground mine production of development material commenced in
August of 2020, so there are no comparable Q1 2020
results. (2)
Provisional sales for 2020 were finalized in Q1 2021 resulting in
negative adjustment to net sales revenue of $1,146.
Since August 2020, a total of 108,254 tonnes of
mineralized development material have been processed at the
Fresnillo plant in advance of commissioning the Juanicipio plant.
MAG and Fresnillo expect to secure several positive outcomes from
this processing for the Juanicipio Project:
- generating cash-flow from
production to offset some of the cash requirements of the initial
project capital;
- de-risking the flotation process
through a better understanding of the metallurgical characteristics
and response of the Juanicipio mineralization;
- increased certainty around the
geological block model prior to start-up of the processing plant;
and
- allowing a faster and more certain
ramp-up to the nameplate 4,000 tpd plant design.
Processing Plant Construction and
Commissioning
In the quarter ended March 31, 2021, further
positive progress was achieved on the construction of the
Juanicipio processing plant and civil works. The plant foundations
were completed, with plant fabrication continuing. The SAG and ball
mills are now installed, and their mechanical completion is
expected in Q2 2021. The lead and zinc flotation cell lines have
been installed and are being connected to the hydraulic circuit.
Construction of the initial tailings storage facility has also
begun.
Fresnillo, as operator, recently reported that
commissioning of the Juanicipio processing plant is expected to
commence in Q4 2021. The Juanicipio plant is expected to reach 40
to 50% of the nameplate 4,000 tpd capacity by the end of 2021 and
90-95% in 2022. In contrast, the 2017 PEA originally envisioned
ramp-up to full production over 3 years after commissioning of the
processing plant.
The capex or pre-operative project capital cost
on a 100% basis, as estimated from January 1, 2018 is $440,000. The
initial capital already expended from January 1, 2018 to March 31,
2021 is approximately $272,000 leaving an estimated $168,000 of
remaining initial capital (MAG’s 44% estimated remaining share is
$73,920 as at March 31, 2021). This remaining funding requirement
will be reduced by both: existing cash held in Minera Juanicipio as
at March 31, 2021 ($3,067 on a 100% basis); and expected cash flows
generated from mineralized development material processed at an
average nominal rate of 16,000 tonnes per month through the
Fresnillo processing plant until the Juanicipio plant is
commissioned.
Juanicipio Exploration Update
On the exploration front, the Juanicipio 2020
exploration program was completed as planned in 2020, comprising a
total of 33 drill holes and 27,900 metres drilled. Full assays
are expected in Q2 2021.
The 2021 Exploration program for Juanicipio is
budgeted at $6 million, to be evenly allocated between continued
step-out and infill drilling of the Valdecañas Vein System
(including independent targeting of the Venadas Vein family and the
Anticipada Vein) and three principal target areas elsewhere in the
Joint Venture ground. Drilling of the Valdecañas Vein System began
in January 2021 with four drill rigs (all assays pending), with a
fifth expected mid-year depending on crew availability. Three of
the drill rigs remain dedicated to Devico directional
drilling. Permit applications for drilling the outlying
targets have been submitted or are in the process of being
generated pending surface access arrangements. Meanwhile, detailed
mapping and sampling of these targets is underway. All aspects of
the exploration work continue to be done under strict COVID-19
protocols (see COVID-19 below).
DEER TRAIL PROJECT UPDATE
Phase I surface-based core drilling program is
approximately 70% complete at March 31, 2021, and is expected to be
completed during Q2 2021 with assays and interpretations expected
shortly thereafter. Follow-up Phase II drill targeting is being
planned as interpretation of the incoming core and draft lab
results are incorporated into the district geological model.
COVID-19
Juanicipio Project
The Juanicipio Project operator, Fresnillo,
continues to closely monitor the spread of the virus and has
implemented a range of safety measures in accordance with the World
Health Organization and Mexican Government guidelines. These
include stringent monitoring & hygiene, temperature screening
and social distancing. Testing and contact tracing have been used
to identify potential cases and prevent the spread of the virus.
Fresnillo maintains an open dialogue with government officials at
both the Federal and local level.
Deer Trail Project
Safety is one of MAG’s key core values and MAG
has implemented strict COVID-19 protocols for the Deer Trail
Project in line with guidance from governmental public health
agencies. The Company established its COVID-19 response plan for
Deer Trail in June 2020 with safety measures that include mandatory
mask use, COVID-19 testing for contractors and employees prior to
returning to site, temperature screening, employee health surveys,
antibody rapid tests for team members to track exposure and social
distancing. The Company continues to monitor the Utah Center for
Disease Control and World Health Organization recommendations,
updating the protocols in September 2020 and again in early January
2021. These updates include additional controls for positive result
cases and a safe return to the workplace plan (post COVID-19). Most
project employees and contractors have now been fully
vaccinated.
Qualified Person: Dr. Peter
Megaw, Ph.D., C.P.G., has acted as the Qualified Person as defined
in National Instrument 43-101 for this disclosure and supervised
the preparation of the technical information in this release. Dr.
Megaw has a Ph.D. in geology and more than 40 years of relevant
experience focused on ore deposit exploration worldwide. He is a
Certified Professional Geologist (CPG 10227) by the American
Institute of Professional Geologists and an Arizona Registered
Geologist (ARG 21613). Dr. Megaw is not independent as he is Chief
Exploration Officer and a Shareholder of MAG.
FINANCIAL RESULTS – THREE MONTHS ENDED
MARCH 31, 2021
As at March 31, 2021, the Company had working
capital of $94,923 (December 31, 2020: $94,513) including cash and
cash equivalents of $92,844 (December 31, 2020: $94,008) and no
long-term debt. As well, as at March 31, 2021, Minera Juanicipio
had cash of $3,067 (MAG’s attributable 44% share of $1,349). The
Company makes cash advances to Minera Juanicipio as ‘cash called’
by the operator Fresnillo, based on approved joint venture budgets.
Subsequent to March 31, 2021, the Company advanced $23,716 to
Minera Juanicipio representing 44% of a $53,900 cash call to fund
process plant construction and further underground development of
the Juanicipio property.
The Company’s net loss for three months ended
March 31, 2021 amounted to $3,662 or $(0.04)/share (March 31, 2020:
$14,898 or $(0.17)/share). The Company recorded a 44% equity income
pick-up of $632 (March 31, 2020: $4,687 equity loss pick-up) from
Minera Juanicipio which included MAG’s 44% share of net income from
the sale of pre-production development material (see Table
2 below). The Company recorded deferred income tax expense
of $1,647 for the three months ended March 31, 2021 (March 31,
2020: $8,694) driven primarily by the non-cash devaluation of
certain tax assets denominated in Mexican Pesos, as the Mexico
Pesos devalued against the US dollar in the quarter. Share based
payment expense (a non-cash item) recorded in the three months
ended March 31, 2021 amounted to $1,193 (March 31, 2020: $478).
Table 2: MAG’s Equity Pick-up from
Minera Juanicipio
|
March 31, 2021 |
March 31, 2020 |
Gross Profit from processing development material
(see Table 1 above) |
$8,199 |
|
Nil |
Administrative expenses |
$(368) |
|
Nil |
Interest and foreign exchange loss |
$(1,075) |
|
$(3,875) |
|
Net Income (Loss) before tax |
$6,756 |
|
$(3,875) |
|
Income tax expense (including deferred income tax) |
$(5,320) |
|
$(6,766) |
|
Net Income (Loss) for the period (100% basis) |
$ 1,436 |
|
$(10,651) |
|
MAG’s 44% equity pick-up |
$ 632 |
|
$(4,687) |
|
About MAG Silver Corp.
(www.magsilver.com )
MAG Silver Corp. (MAG: TSX / NYSE A) is a
Canadian 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 partnership with
Fresnillo Plc (56%), the Operator. Juanicipio is located in the
Fresnillo Silver Trend in Mexico, the world's premier silver mining
camp, and the Joint Venture is currently developing an underground
mine and constructing a 4,000 tonnes per day processing plant which
is expected to commence commissioning in Q4 2021. Underground mine
production of development material commenced in Q3 2020, and an
expanded exploration program is in place targeting multiple highly
prospective targets both at Juanicipio by the Joint Venture and by
MAG at the Deer Trail 100% earn-in project in Utah.
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, 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
For further information on behalf of MAG Silver Corp.
Contact Michael J. Curlook, VP Investor Relations and Communications
Phone: (604) 630-1399
Toll Free:(866) 630-1399
Website: www.magsilver.com
Email: info@magsilver.com
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