UPDATE: CIBC Starts MAG Silver (MAG) at Neutral
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CIBC analyst Cosmos Chiu initiates coverage on MAG Silver (NYSE: MAG) with a Neutral rating.
The analyst comments "
As of April 13, we initiate coverage of MAG Silver with a Neutral rating and C$27 price target. MAG Silver is an emerging silver producer, with a 44% interest in the high-grade Juanicipio mine in the prolific Fresnillo district in Mexico. At the asset, MAG Silver is partnered with the largest primary silver producer in the world, Fresnillo plc, which serves as the operator of the project. With development material already being toll milled at the nearby Fresnillo processing plant since August 2020 at a rate of 16,000 tonnes per month, the next key milestone will be the commissioning of the Juanicipio processing plant in Q4/21, which has a capacity of 4,000 tonnes per day (tpd). When the Juanicipio mill is up and running, MAG Silver’s 44% share of the asset should catapult it into a substantial producer with ~7.8 million ounces of silver production per year (for the first five years) at a lowest quartile AISC of ~$7.25/oz. At spot commodity prices, MAG is currently trading at 1.5x P/NAV and 12.8x P/2022E CFPS, already in line with the silver producer average of 1.5x P/NAV and 10.1x forward P/CF. With that said, we see substantial blue sky from both exploration and at the plant beyond the commissioning of the Juanicipio mill. The MAG Silver exploration team, integral in the discovery of both the Juanicipio (2003) and Valdecañas (2005) veins, sees potential in a number of other upwelling areas that could be host to high-grade mineralization. As for the mill, there is potential for expansion beyond the current nameplate capacity. With a scarcity of investible ideas to gain meaningful exposure to silver, MAG Silver needs to remain on investor radar screens as construction continues to undergo de-risking and management works to further mitigate ESG risk."
Shares of MAG Silver closed at $16.77 yesterday.
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