MAG Silver Corp. (TSX / NYSE American: MAG) (“MAG”
or the
“Company”) announces the Company’s audited
consolidated financial results for the year ended December 31,
2019. For details of the audited consolidated financial
statements, Management's Discussion and Analysis, Annual
Information Form and Annual Report on Form 40-F for the year ended
December 31, 2019, 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 – DECEMBER 31, 2019 AND
SUBSEQUENT TO YEAR END
- Joint formal Juanicipio Project mine development approval by
Fresnillo plc (“Fresnillo”) and MAG was announced in the second
quarter of 2019 (see Press Release dated April 11, 2019), and an
Engineering, Procurement and Construction Management (“EPCM”)
contract finalized to conduct the mine development.
- Joint Juanicipio Project update was issued (see Press Release
dated February 24, 2020) that 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; and,
- Significantly faster ramp up expected than previously guided
due to the de-risking of the Juanicipio metallurgical performance
by virtue of campaign processing the mineralized material through
the Fresnillo plant.
- 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.
- Underground development is ongoing at Juanicipio and now
exceeds 26 km of development (or 16.2 miles). The underground
development focus areas are the three sub-vertical ramps that
descend alongside the mineralization and alongside the conveyor
ramp to surface at mill site.
- Updated estimated pre-operative initial capital was also
announced on February 24, 2020:
- Now estimated at $440,000 (100% basis) as of January 1,
2018;
- Less development expenditures incurred since then to December
31, 2019 of approximately $135,000 (Company therefore estimates
approximately $305,000 of remaining initial capital on a 100% basis
as at December 31, 2019); and,
- Initial capital to be reduced by both existing cash and other
working capital held in Minera Juanicipio as at December 31, 2019
($29,601 and $13,655 respectively), and expected cashflow generated
from mineralized material being processed through the Fresnillo
mill commencing in mid-2020.
- 2019 exploration program completed and assays for a 33,864
metre, 28-hole exploration program were announced subsequent to the
year end (see Press Release dated March 3, 2020).
- Exploration program highlights:
- Confirms and expands 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 northeast-trending new Valentina and Venadas II veins
through drilling and development.
MAG held cash and cash equivalents as at
December 31, 2019 of $72,360 while Minera Juanicipio had working
capital on a 100% basis of $43,256 as at December 31,
2019. “Construction
and exploration drilling continue at the Juanicipio Project. We are
fortunate that all the major process equipment has been delivered
to site,” said George Paspalas, President and CEO. “Corporately, we
are making appropriate changes to the way we are conducting
business to ensure continuity whilst considering the health and
well being of our people and business partners.”
JUANICIPIO PROJECT UPDATE
On April 11, 2019, Fresnillo and MAG as
shareholders of Minera Juanicipio, a Mexican incorporated joint
venture, jointly announced the formal approval of the Juanicipio
mine development plan. Under the terms of an EPCM agreement,
Fresnillo is now finalizing detailed engineering and is overseeing
the construction of the 4,000 tpd process plant and associated
surface infrastructure. In October 2019, earthmoving and foundation
preparation commenced for the construction of the Juanicipio
processing plant and is now well advanced along with the completion
of the haul road and main power supply transmission line. 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. Mill fabrication is progressing and all
major mill components have now arrived on site.
Underground and other development actively
continues with emphasis on: developing the three internal spiral
footwall ramps along the full strike length of the Valdecañas Vein
system; constructing the underground crushing chamber; advancing
the conveyor ramp from both ends to and from the planned mill site
(where the underground conveyor exit portal is complete);
integrating additional ventilation and other associated underground
infrastructure, starting of the internal shaft sinking (head
chamber for the shaft has been excavated, collar has been cemented
and winding equipment ordered); and, progressing the construction
of additional ancillary surface facilities.
Underground development to date at the
Juanicipio Project now exceeds 26 km with access to the upper
portion of the resource now achieved. Initial development
indicates that the grade and width of the mineralization is in line
with previous estimates.
A joint project update was issued by Fresnillo
and MAG as shareholders of Minera Juanicipio subsequent to the year
end (see Press Release dated February 24, 2020) announcing that
production from the underground mine is expected to commence ahead
of schedule in mid-2020. It is expected that by June of 2020,
mineralized material from the underground mine will commence to be
processed at the nearby Fresnillo plant (100% owned by Fresnillo)
until the Juanicipio plant is commissioned. By bringing
forward the start-up of the underground mine to mid-2020, the joint
venture shareholders are looking to secure several positive
outcomes for the project:
- generating some cash flow from production to offset some of the
project capital requirements;
- 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 mill design.
The Juanicipio plant is now expected to commence
commissioning in mid-2021 and is expected to reach 85% of its 4,000
tpd nameplate capacity in Q4-2021. An Operator Services
agreement between Minera Juanicipio, as owner, and Fresnillo, as
operator has been finalized which will become effective upon
initiation of commercial production. As well, both lead and zinc
concentrate off-take agreements were entered into by Minera
Juanicipio with Met-Mex Peñoles, S.A. De C.V., under which both
concentrates will be treated at market terms in Torreón,
Mexico.
With detailed engineering almost complete, major
equipment purchases completed, and several significant construction
contracts awarded or under review, the joint venture shareholders
also announced the updated capex required for the project.
The pre-operative capital cost on a 100% basis of $395,000 from
January 1, 2018 (see Press Release dated April 11, 2019) has been
revised to $440,000 on a 100% basis 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 pre-operative initial capital
already expended from January 1, 2018 to December 31, 2019 is
approximately $135,000 leaving an estimated $305,000 of remaining
initial capital (MAG’s 44% remaining share estimated $134,200 as at
December 31, 2019). This funding requirement would be reduced
by both: existing cash and other working capital held in Minera
Juanicipio as at December 31, 2019 ($29,601 and $13,655
respectively); and expected cash flows generated from mineralized
rock sold and processed through the Fresnillo processing plant
commencing in mid-2020.
The Company needs to raise additional capital in
the future in order to meet its full share of initial capital
required to develop the Juanicipio Project. MAG does not
generate operating cash flow at this time to fund such obligations,
and accordingly, future liquidity will depend upon its ability to
arrange debt or additional equity financings. The Company is
currently evaluating several proposals. The inability of MAG
to fund its 44% share of cash calls would result in dilution of its
ownership interest in Minera Juanicipio in accordance with the
shareholders’ agreement.
On the exploration front, both joint venture
shareholders, Fresnillo and MAG, acknowledge that there is
considerable further exploration opportunity in the Juanicipio
Project concession license area as most of it remains
unexplored. Exploration drilling in recent years has been
primarily designed to both convert the Inferred Resources included
in the Deep Zone into Indicated 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. Continued in-fill and exploration drilling on other
targets is ongoing in 2020, and currently there are four drill rigs
on site. With the recent NE trending discoveries, other much larger
NE structures with intense surface alteration are known farther
afield within the Juanicipio Project and are now priority
exploration targets that have not previously been drilled.
Impact of Epidemics
MAG’s operations and the operations it has an
interest in are subject to the risk of emerging infectious diseases
or the threat of outbreaks of viruses or other contagions or
epidemic diseases, including COVID-19. Such epidemics could
delay construction or interrupt the supplies of necessary materials
to the Juanicipio Project. In addition, the effect of
COVID-19 on the financial markets may impact the financing terms or
availability of funding to the Company. Accordingly, any outbreak
or threat of an outbreak of a virus or other contagions or epidemic
disease, could have a material adverse effect on MAG, its business,
results from operations and financial condition.
FINANCIAL RESULTS – YEAR ENDED DECEMBER
31, 2019
As at December 31, 2019, the Company had working
capital of $71,858 (December 31, 2018: $129,316) including cash and
cash equivalents of $72,360 (December 31, 2018: $130,180).
Other than an office lease obligation under IFRS 16, the Company
currently has no long-term debt. The Company makes capital
contributions through cash advances to Minera Juanicipio as ‘cash
called’ by operator Fresnillo, based on approved joint venture
budgets. In the year ended December 31, 2019, the Company funded
advances to Minera Juanicipio, which combined with MAG’s Juanicipio
expenditures on its own account, totaled $53,549 (December 31,
2018: $23,942).
The Company’s net loss for year the ended
December 31, 2019 amounted to $4,426 (December 31, 2018: $5,802 net
loss) or $(0.05)/share (December 31, 2018: $(0.07)/share).
Management compensation and consulting fees increased to $3,076
(December 31, 2018: $2,697) in the year ended December 31, 2019
primarily due to a retention payment arrangement with a consultant
and the cost of terminating her services contract. Mining
concession taxes and other property costs in the year ended
December 31, 2019 decreased to $577 (December 31, 2018: $1,121) due
to MAG’s divestiture of several non-core concessions in the prior
year. Share based payment expense, a non-cash item, recorded
in the year ended December 31, 2019 amounted to $2,572 (December
31, 2018: $2,109), and is determined based on the fair value of
equity incentives granted and vesting in the year. During the year
ended December 31, 2019, the Company earned interest income on its
cash and cash equivalents of $2,627 (December 31, 2018: $3,118).
The Company also recorded its 44% equity income pick up of $1,884
(December 31, 2018: $227) from Minera Juanicipio related primarily
to exchange rate changes and deferred taxes.
Shareholders may receive, upon request and free
of charge, a hard copy of the Company’s Audited Financial
Statements. The Company’s 40-F has also been filed with the United
States Securities and Exchange Commission.
About MAG Silver Corp.
(www.magsilver.com )
MAG Silver Corp. 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 Property (44%), being developed
in a Joint Venture with Fresnillo (56%). Juanicipio is located in
the Fresnillo Silver Trend in Mexico, the world's premier silver
mining camp. With Fresnillo as operator, we are 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. 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, 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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