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,
2020. For details of the unaudited condensed interim
consolidated financial statements and Management's Discussion and
Analysis for the three months ended March 31, 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 – MARCH 31, 2020 &
SUBSEQUENT TO THE QUARTER END
- Joint Juanicipio Project update
issued during the quarter (see Press Release dated February 24,
2020):
- announced that production from the underground mine was
expected to commence ahead of schedule in mid-2020:
- Mineralized material from the underground mine expected to be
processed in the Fresnillo plant until the Juanicipio plant is
commissioned;
- Juanicipio plant expected to commence commissioning in mid-2021
and is expected to reach 85% of its 4,000 tonnes per day (“tpd”)
nameplate capacity in Q4-2021;
- Significantly faster ramp up expected than previously guided
due to the de-risking of Juanicipio’s metallurgical performance by
virtue of campaign processing the mineralized material through the
Fresnillo plant;
- Estimated pre-operative initial capital now estimated at
$440,000 (100% basis) as of January 1, 2018;
- Less development expenditures incurred since then to March 31,
2020 of approximately $153,416 (Company therefore estimates
approximately $286,584 of remaining initial capital on a 100% basis
as at March 31, 2020); and,
- Initial capital requirements to be reduced by both existing
cash and other working capital held in Minera Juanicipio as at
March 31, 2020 ($6,815 and $13,234 respectively), and by expected
cashflow generated from mineralized material being processed
through the Fresnillo plant commencing in mid-2020.
- Detailed engineering is near
completion and earthmoving and foundation preparation is well
advanced for the construction of the 4,000 tpd beneficiation
plant.
- SAG and Ball mills, flotation
cells, all associated vessels, thickeners and ancillary process
equipment are now secured on site.
- Progress made with the construction
of the flotation plant and infrastructure.
- Underground development at
Juanicipio has now approached 27 km (or 16.9 miles) and is focused
on three sub-vertical ramps that descend alongside the
mineralization and alongside the conveyor ramp to surface at plant
site.
- Assays from a 33,864 metre, 28-hole
2019 exploration program released March 3, 2020, 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.
- Appointed Selma Lussenburg a
Director of the Company on February 1, 2020. Ms. Lussenburg is a
business executive, former general counsel, corporate secretary and
current board director with over 35 years of business experience.
She has held various senior level positions encompassing a broad
range of legal, governance, compliance, pension, safety &
security and operational responsibilities.
- MAG held cash and cash equivalents
as at March 31, 2020 (before the below noted private placement) of
$70,327 while Minera Juanicipio had working capital on a 100% basis
of $20,043 as at March 31, 2020.
- Subsequent to the quarter end, the
Company announced that in response to a Mexican national COVID-19
order, surface construction work has been temporarily suspended,
and the underground operation has been temporarily reduced to a
minimum working level under rigid hygienic protocols:
- Temporary order is in effect until May 30, 2020; and,
- Fresnillo, the operator, has indicated there is no expected
change to the overall development timetable.
- Subsequent to the quarter end, the
Company announced a non-brokered private placement of 4,528,302
common shares of MAG to Mr. Eric Sprott, through 2176423 Ontario
Ltd., a corporation beneficially controlled by him, at a price of
C$13.25 per Common Share for gross proceeds of C$60,000,002
($42,974).
“We are very pleased with the progress at the
project, and look forward to commencing processing of Juanicipio
underground material through the Fresnillo plant in the coming
months,” said George Paspalas, President and CEO. “The private
placement by Eric Sprott has created significant financial
flexibility for MAG as we move through the next stage of
construction and completion of the Juanicipio flotation plant.”
COVID-19- Subsequent to the Quarter End
– Juanicipio Project
Subsequent to the quarter end, 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. The
Company understands that Fresnillo, the operator of Juanicipio, has
been in regular consultation with Mexican Government officials to
determine the most appropriate compliance approach while attempting
to minimize the overall impact on project development.
Fresnillo has advised the Company that to date, surface exploration
and construction work at Juanicipio has been temporarily stopped,
and the underground operation has been temporarily reduced to a
minimum working level under rigid hygienic protocols. Although
Fresnillo reported on April 29, 2020 that it does not expect a
change to the overall Juanicipio development timetable, the impact
of these changes to the costs and time to complete the development
at Juanicipio is currently undeterminable, and could have a
material adverse effect on MAG, its business, results from
operations and financial condition.
The Juanicipio Project update discussed below
reflects the ongoing activities on site through the first quarter
ended March 31, 2020 and prior to any temporary impact of the
COVID-19 virus outbreak.
JUANICIPIO PROJECT UPDATE
Under the terms of an Engineering, Procurement
and Construction Management agreement, Fresnillo is now finalizing
detailed engineering and is overseeing the construction of the
4,000 tpd process plant and associated surface infrastructure. In
the quarter ended March 31, 2020, further progress was made with
construction of the flotation plant and other infrastructure.
The majority of all major equipment for the plant, including both
SAG and ball mills is now secured on site. Flotation cells,
processing tanks and other process equipment has also arrived and
thickener tanks and drive and rakes fabrication are well advanced.
A large portion of the concrete works, structural steel sections
and process pipe spools are being fabricated off-site in controlled
workshop conditions. These will start arriving soon and be placed
directly into position. As well, during the first quarter, a
consulting firm was engaged to conceptually design the tailings
dam.
Underground development to date at Juanicipio
has now approached 27 kms, including 2.1 kms in the current
quarter, with access to the upper portion of the resource now
achieved. Initial development indicates that the grade and
width of the vein is in line with previous estimates. Mineralized
material from the vein will be crushed underground and the crushed
material conveyed directly from the underground crushing station
(already excavated) to the process plant area via a third ramp, the
underground conveyor ramp. The conveyor ramp is approaching
50% completion and is being driven both from the surface and from
the crushing chamber. This ramp will also provide access to the
entire Valdecañas underground mining infrastructure and serve as a
fresh air entry for the ventilation system. As well, the
sinking of the two main ventilation shafts is progressing well,
with one shaft at 20% completed and the other at 36% complete.
During the quarter, a project update was issued
jointly by Fresnillo and MAG announcing that production from the
underground mine was expected to commence ahead of schedule in
mid-2020, and mineralized material from the underground mine is
expected to be processed at the nearby Fresnillo plant (100% owned
by Fresnillo) until the Juanicipio plant is commissioned. The
Juanicipio plant will now commence commissioning in mid-2021 and is
expected to reach 85% of its 4,000 tpd nameplate capacity in
Q4-2021. The initial capital expenditure requirements for the
Juanicipio Project were revised and are estimated to be $440,000
(100% basis) as of January 1, 2018. This revised initial
capital expenditure estimate does not represent the remaining
initial capital expenditures, as it does not reflect the capital
expenditures incurred since January 1, 2018 which total
approximately $153,416 to March 31, 2020. MAG therefore
estimates the remaining initial capital expenditures on a 100%
basis to be approximately $286,584 (MAG’s 44% share being $126,097
as at March 31, 2020), and this would be reduced by both: existing
cash and other working capital held in Minera Juanicipio as at
March 31, 2020 ($6,815 and $13,234 respectively); and, by expected
cash flows generated from mineralized rock sold and processed
through the Fresnillo processing plant commencing in mid-2020
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. During the
quarter just ended, assays from a 33,864 metre, 28-hole 2019
exploration program were released (see Press Release dated March 4,
2020). The drill results extend and confirm continuity to depth of
high-grade mineralization in the East and West Valdecañas Vein Deep
Zones and in the Anticipada Vein. Although the drilling in
2019 was not designed to extend the Pre-Anticipada vein, it did
trace and confirm the northeast-trending Venadas vein some 800 m to
the south. Drilling and development also coincidentally
discovered two new northeast-trending cross veins, the Valentina
and Venadas II veins.
Subsequent to the quarter end 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 ($42,974) to Mr. Eric Sprott, through 2176423 Ontario
Ltd., a corporation beneficially controlled by him.
FINANCIAL RESULTS – THREE MONTHS ENDED
MARCH 31, 2020
As at March 31, 2020, the Company had working
capital of $70,443 (March 31, 2019: $128,011) including cash and
cash equivalents of $70,327 (March 31, 2019: $128,607). Other
than an office lease obligation under IFRS 16, the Company
currently has no debt. 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 months ended March 31, 2020, the
Company expended $172 on its own account on the Juanicipio joint
venture project (March 31, 2019: $81) and made no advances to
Minera Juanicipio (March 31, 2019: nil). Subsequent to the quarter
end however, the Company advanced $23,188 to Minera Juanicipio
representing its 44% share of a $52,700 cash call to fund the
process plant construction and further underground development on
the Juanicipio property.
The Company’s net loss for the three months
ended March 31, 2020 amounted to $14,898 or $(0.17)/share (March
31, 2019: $442 or $(0.01)/share). The Company recorded a
deferred income tax expense of $8,694 for the quarter ended March
31, 2020 (March 31, 2019: $319 deferred income tax benefit), driven
primarily by the non-cash devaluation of certain tax assets
denominated in Mexican Pesos, as the Mexican Peso devalued
significantly against the US dollar in the quarter (from 18.87
Pesos/US$ on December 31, 2019 to 24.29 on March 31, 2020).
Share based payment expense (a non-cash item)
recorded in the three months ended March 31, 2020 increased to $478
(March 31, 2019: $224) and is determined based on the fair value of
equity incentives granted and vesting in the period. In other
income and expenses, the Company earned interest income on its cash
and cash equivalents of $274 (March 31, 2019: $844) during the
quarter ended March 31, 2020, and recorded a 44% equity loss pick
up of $4,687 (March 31, 2019: $282 equity income pick up) from
Minera Juanicipio. 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. As in MAG, the Minera
Juanicipio deferred tax expense was driven by the non-cash
devaluation of certain tax assets as the Mexican Peso devalued
significantly against the US dollar in the quarter.
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. Fresnillo as
operator, is currently working with Mexican Government officials to
determine the most appropriate compliance approach to a temporary
suspension decree associated with the COVID-19 pandemic, while
minimizing the impact on the construction of the surface and
underground infrastructure on the property to support a 4,000
tonnes per day mining operation. As well, an expanded
exploration program is in place at Juanicipio with multiple highly
prospective targets across the property.
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
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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