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MAG Silver Reports 2023 Annual Financial Results

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MAG Silver Reports 2023 Annual Financial Results

 

 

 

 

 

MAG Silver Corp. (TSX:MAG) (NYSE American: MAG) announces the Company’s consolidated financial results for the year ended December 31, 2023. For details of the audited consolidated financial statements of the Company for the year ended December 31, 2023 and management’s discussion and analysis for the year ended December 31, 2023, please see the Company’s filings on the System for Electronic Document Analysis and Retrieval Plus (“SEDAR+”) at (www.sedarplus.ca) or on the Electronic Data Gathering, Analysis, and Retrieval (“EDGAR”) at (www.sec.gov).

 

All amounts herein are reported in $000s of United States dollars (“US$”) unless otherwise specified (C$ refers to Canadian dollars).

 

KEY HIGHLIGHTS (on a 100% basis unless otherwise noted)

  • MAG reported net income of $48,659 ($0.47 per share) driven by income from Juanicipio (equity accounted) of $65,099 and Adjusted EBITDA1 of $97,480 for the year ended December 31, 2023.
  • MAG reported net income of $15,694 ($0.15 per share) driven by income from Juanicipio (equity accounted) of $21,069 and Adjusted EBITDA1 of $29,787 for the three months ended December 31, 2023.
  • A total of 346,766 tonnes of mineralized material at a silver head grade of 467 grams per tonne was processed at Juanicipio during the fourth quarter. Milling performance for 2023 totalled 1,268,757 tonnes at a head grade of 472 g/t.
  • Juanicipio achieved silver production of 4.5 million ounces during the fourth quarter. Silver production for 2023 totalled 16.8 million ounces.
  • Juanicipio continued to capitalize on available milling capacity at the Saucito plant (100% Fresnillo owned) to maintain processing rates during periods of maintenance. Approximately 5% of the material processed during the fourth quarter was processed through the Saucito plant.
  • Juanicipio delivered robust cost performance with cash cost2 of $3.76 per silver ounce sold and all-in sustaining cost2 of $9.17 per silver ounce sold in the fourth quarter.
  • Juanicipio generated strong operating cash flow of $84,038 and free cash flow2 of $61,993 in the fourth quarter. Operating cash flow and free cash flow2 for 2023 totalled $145,064 and $60,814, respectively.
  • At the end of the year, Juanicipio held cash balances of $42,913, representing an increase of $41,811 over 2022, driven by strong operating cash flows.
  • Juanicipio returned a total of $18,765 in interest and loan principal repayments to MAG during the fourth quarter. Interest and loan principal repayments returned to MAG during 2023 totalled $33,354.
  • MAG concluded a $40,000 senior secured revolving credit facility (the “Credit Facility”) with the Bank of Montreal on October 4, 2023.
  • Effective June 20, 2023, MAG was included in the NYSE Arca Gold Miners Index which is tracked by the VanEck Vectors Gold Miners ETF.

 

CORPORATE

  • In September the Company published its second annual sustainability report underscoring its commitment to transparency with its stakeholders while providing a comprehensive overview of the Company’s environmental, social and governance (“ESG”) commitments, practices and performance for the 2022 year. The 2022 sustainability report is supported by the MAG Silver 2022 ESG Data Table which discloses MAG’s historical ESG performance data.
  • During early 2024, as part of the Company’s longer term succession planning, Dr. Lex Lambeck was promoted to the position of Vice President, Exploration. Lex has been the project manager for the Deer Trail Project in Utah since it was acquired by MAG in 2019, led by Dr. Peter Megaw. Lex’s leadership was instrumental in the application of the “Hub and Spoke” thesis at Deer Trail as well as the Carissa discovery demonstrating his strong skills in generative exploration in district scale settings which will be invaluable in overseeing the Company’s portfolio of exploration properties, including exploration at Juanicipio.
  • Marc Turcotte, with his almost 10 years experience at MAG as Vice President, Corporate Development, was promoted to the position of Chief Development Officer. In this broader executive role, Marc will leverage his proven track record in identifying unique situations to zero-in-on and assess inorganic growth opportunities aligned with the Company’s commitment to continued Tier-1 growth and expansion. Marc was the architect of the consolidation of the Deer Trail project in Utah as well as the catalyst behind the acquisition of Gatling Exploration which brought the Larder project into MAG’s portfolio of high quality, high impact exploration properties.
  • Tom Peregoodoff was appointed to the Board of Directors of MAG effective January 1, 2024. Mr. Peregoodoff will fill the vacancy to be created by the planned retirement in June 2024 of Dan MacInnis, who does not plan to seek re-election at the Company’s 2024 annual general meeting of shareholders. Tom brings with him over 30 years of industry knowledge and leadership and has extensive experience in all aspects and stages of the global mining business, specializing in mineral exploration.

 

EXPLORATION

  • Juanicipio:
    • Infill drilling at Juanicipio continued in 2023, with one rig on surface and one underground with the goal of upgrading and expanding the Valdecañas Vein System at depth and further defining areas to be mined in the near to mid-term.
    • During 2023, 13,273 metres (three months ended December 31, 2023: nil metres) and 22,015 metres (three months ended December 31, 2023: 6,686 metres), were drilled from surface and underground respectively. Drilling for the year, both surface and underground, was infill in nature and continues to confirm defined mineralization.
  • Deer Trail Project, Utah:
    • Results from the 12,157 metres in surface-based Phase 2 drilling on the Deer Trail Carbonate Replacement Deposit project were reported on January 17, 2023 and August 3, 2023 (see news releases dated January 17, 2023 and August 3, 2023 available under the Company’s SEDAR+ profile at www.sedarplus.ca).
    • On May 29, 2023 MAG started a Phase 3 drilling program focused on up to three porphyry “hub” targets thought to be the source of the manto, skarn and epithermal mineralization and extensive alteration throughout the project area including that at the Deer Trail and Carissa zones. An early onset of winter snowfall impacted the commencement of the third porphyry “hub” target which is expected to be drilled next season and drilling has shifted to offset the Carissa discovery and test other high-potential targets.
    • During 2023, 5,525 metres (three months ended December 31, 2023: 1,609 metres) were drilled at high elevation with final results and interpretation pending.
  • Larder Project, Ontario:
    • On July 12, 2023 drilling resumed at the Larder Project to test additional targets by the end of the year on the Cheminis and Bear areas. During 2023 17,504 metres were drilled at Swansea, Cheminis and Bear.
    • Cheminis Success: The magnetotellurics survey carried out in the summer of 2023 enabled modelling of the south volcanic gold zone at Cheminis and is proving to be applicable elsewhere across the property. Drilling in three successive Cheminis drillholes (GAT-23-019, 020A, and 021B, see Table 1 below) intersected grades of 1.1 to 20.3 g/t gold over core lengths of 0.6 – 11.1 metres demonstrating continuity. This also extended the gold-hosting mine sequence down to 700 metres below surface, more than 370 metres below the deepest workings in this portion of the Cadillac-Larder Break. Incorporating these results into the model should enhance predictability in follow-up drilling.
    • Bear Success: Increased predictability has led to continued success and further definition of the North Bear zone, especially in hole GAT-23-022NA (see Table 1 below) which cut 5.1 metres grading 4.6 g/t gold (including a high-grade zone of 1.4 metre grading 16.2 g/t gold). These intercepts extend gold mineralization to 650 metres below surface, and it remains open in all directions.

 

Table 1: 2023 Larder Drillholes Highlights

 

Hole ID From (m) To (m) Length (m)1 Gold (g/t) Lithology Target/Zone
GAT-23-019 767.00 776.50 9.50 2.1 Mafic Volcanics South Cheminis Mine Sequence Zone
Including 767.40 768.80 1.40 5.1 South Volcanics South Cheminis Mine Sequence Zone
Including 767.80 768.00 0.30 11.0 South Volcanics South Cheminis Mine Sequence Zone
and 945.00 955.00 10.00 1.1 Green Komatiites North Cheminis Zone
Including 946.00 949.50 3.50 2.1 Green Komatiites North Cheminis Zone
GAT-23-020A 605.30 605.90 0.60 9.4 Quartz Vein & South Volcanics South Cheminis Zone
and 672.90 678.80 5.90 3.5 Komatiite-Syenite Contact North Cheminis Zone
Including 676.30 678.80 2.50 6.3 Komatiite-Syenite Contact North Cheminis Zone
Including 678.30 678.80 0.50 20.3 Green Komatiite-Syenite Contact North Cheminis Zone
GAT-23-021B 757.40 768.50 11.10 3.2 Brecciated South Volcanics with Graphite South Cheminis Mine Sequence Zone
Including 766.00 768.00 2.00 10.2 South Volcanics South Cheminis Mine Sequence Zone
GAT-23-022NA 784.60 785.50 0.90 6.0 Green Komatiites North Bear Zone
and 789.50 794.60 5.10 4.6 Green Komatiite with Graphite North Bear Zone
Including 790.30 791.70 1.40 16.2 Quartz Vein with Graphite North Bear Zone
Including 791.20 793.70 0.50 33.8 Quartz Vein with Graphite North Bear Zone
and 939.50 940.20 0.70 5.7 South Volcanics South Bear Zone

 

 

JUANICIPIO RESULTS

 

All results of Juanicipio in this section are on a 100% basis, unless otherwise noted.

 

Operating Performance

 

The following table and subsequent discussion provide a summary of the operating performance of Juanicipio for the years ended December 31, 2023 and 2022, unless otherwise noted.

 

Key mine performance data of Juanicipio (100% basis) Year ended
December 31, December 31,
2023 2022
     
Metres developed (m) 14,864   12,999  
     
Material mined (t) 1,097,289   792,693  
Material processed (t) 1,268,757   646,148  
     
Silver head grade (g/t) 472   520  
Gold head grade (g/t) 1.27   1.39  
Lead head grade (%) 1.14 % 0.90 %
Zinc head grade (%) 2.05 % 1.72 %
     
Silver payable ounces (koz) 15,318   8,697  
Gold payable ounces (koz) 31.73   20.27  
Lead payable pounds (klb) 25,862   9,892  
Zinc payable pounds (klb) 36,881   14,898  
 

During the year ended December 31, 2023 a total of 1,097,289 tonnes of mineralized material were mined. This represents an increase of 38% over 2022. Increases in mined tonnages at Juanicipio have been driven by the operational ramp up of the milling facility.

 

During the year ended December 31, 2023 a total of 1,268,757 tonnes of mineralized material were processed through the Juanicipio, Saucito and Fresnillo plants. This represents an increase of 96% over 2022. The increase in milled tonnage has been driven by the Juanicipio mill commissioning and operational ramp up. As reported by the operator, Fresnillo, the Juanicipio processing facility achieved nameplate capacity of 4,000 tpd during September 2023 with silver recovery consistently above 88%. Juanicipio continued to capitalize on available milling capacity at the Saucito plant (100% Fresnillo owned) to maintain processing rates during periods of maintenance. Approximately 5% of the material processed during the fourth quarter of 2023 was processed through the Saucito plant.

 

The average silver head grade for the mineralized material processed in the year ended December 31, 2023 was 472 g/t (year ended December 31, 2022: 520 g/t).

 

The following table provides a summary of the total cash costs(1) and all-in-sustaining costs(1) of Juanicipio for the years ended December 31, 2023, and 2022.

 

Key mine performance data of Juanicipio (100% basis) Year ended
December 31, December 31,
2023 2022
     
Total operating cash costs (1) 88,080   40,522  
Operating cash cost per silver ounce sold ($/oz) (1) 5.75   4.66  
     
Total cash costs (1) 93,025   40,871  
Cash cost per silver ounce sold ($/oz) (1) 6.07   4.70  
     
All-in sustaining costs (1) 158,151   83,463  
All-in sustaining cost per silver ounce sold ($/oz) (1) 10.32   9.60  

(1) Total operating cash costs, operating cash cost per ounce, total cash costs, cash cost per ounce, all-in sustaining costs, and all-in sustaining cost per ounce are non-IFRS measures, please see below ‘Non-IFRS Measures’ section and section 12 of the 2023 MD&A dated March 18, 2024, available on SEDAR+ at www.sedarplus.ca for a detailed reconciliation of these measures to the 2023 Financial Statements.

Financial Results

 

The following table presents excerpts of the financial results of Juanicipio for the years ended December 31, 2023 and 2022 (MAG’s share of income from its equity accounted investment in Juanicipio).

 

  Year ended
  December 31, December 31,
  2023 2022
  $ $
Sales 442,288   215,736  
Cost of sales:    
Production cost (171,830 ) (61,985 )
Depreciation and amortization (68,475 ) (20,913 )
Gross profit 201,983   132,838  
Consulting and administrative expenses (18,768 ) (8,436 )
Extraordinary mining and other duties (4,945 ) (349 )
Interest expense (18,524 ) (2,298 )
Exchange losses and other (2,937 ) (5,160 )
Net income before tax 156,809   116,595  
Income tax expense (27,381 ) (26,348 )
Net income (100% basis) 129,428   90,247  
MAG’s 44% portion of net income 56,948   39,709  
Interest on Juanicipio loans – MAG’s 44% 8,150   1,058  
MAG’s 44% equity income 65,099   40,767  
         

Sales increased by $226,552 during the year ended December 31, 2023, mainly due to 84% higher metal volumes and 5% higher realized metal prices.

 

Offsetting higher sales was higher depreciation ($47,561) as the Juanicipio mill achieved commercial production and commenced depreciating the processing facility and associated equipment, and higher production cost ($109,845) which was driven by higher sales and operational ramp-up in mining and processing, including $44,027 in inventory movements as commissioning stockpiles were drawn down.

 

Other expenses increased by $28,932 mainly as a result of higher extraordinary mining and other duties ($4,596) related to higher precious metal revenues from the sale of concentrates, higher consulting and administrative expenses ($10,332) as an operator services agreement became effective upon initiation of commercial production whereby Fresnillo and its affiliates continue to operate the mine, and higher interest incurred on shareholder loans ($16,227) which were completely expensed during 2023, whereas being only partly expensed with the rest capitalized to construction in progress during 2022.

 

Taxes increased by $1,033 impacted by deferred tax charges associated with fixed assets as well as higher taxable profits generated during the period.

 

Mineralized Material Processed at Juanicipio, Saucito and Fresnillo Plants (100% basis)

 

Year Ended December 31, 2023 (1,268,757 tonnes processed) Year Ended
December 31, 2022
Amount

$
 
Payable Metals Quantity Average Price
$
Amount
$
 
Silver 15,317,765 ounces 23.66 per oz 362,457   188,722  
Gold 31,735 ounces 1,978.07 per oz 62,774   36,958  
Lead 11,731 tonnes 0.96 per lb. 24,746   9,380  
Zinc 16,729 tonnes 1.15 per lb. 42,496   23,398  
Treatment, refining, and other processing costs (2) (50,185 ) (42,722 )
Sales 442,288   215,736  
Production cost (171,830 ) (61,985 )
Depreciation and amortization (1) (68,475 ) (20,913 )
Gross Profit 201,983   132,838  

(1) The underground mine was considered readied for its intended use on January 1, 2022, whereas the Juanicipio processing facility started commissioning and ramp-up activities in January 2023, achieving commercial production status on June 1, 2023.
(2) Includes toll milling costs from processing mineralized material at the Saucito and Fresnillo plants.

 

Sales and treatment charges are recorded on a provisional basis and are adjusted based on final assay and pricing adjustments in accordance with the offtake contracts.

 

MAG FINANCIAL RESULTS – YEAR ENDED DECEMBER 31, 2023

 

As at December 31, 2023, MAG had working capital of $67,262 (December 31, 2022: $29,232) including cash of $68,707 (December 31, 2022: $29,955) and no long-term debt. As well, as at December 31, 2023, Juanicipio had working capital of $86,336 including cash of $42,913 (MAG’s attributable share is 44%).

 

The Company’s net income for the year ended December 31, 2023 amounted to $48,659 (December 31, 2022: $17,644) or $0.47/share (December 31, 2022: $0.18/share). MAG recorded its 44% income from equity accounted investment in Juanicipio of $65,099 (December 31, 2022: $40,767) which included MAG’s 44% share of net income from operations as well as loan interest earned on loans advanced to Juanicipio (see above for MAG’s share of income from its equity accounted investment in Juanicipio).

 

 

    December 31, December 31,
  2023 2022
  $ $
     
Income from equity accounted investment in Juanicipio 65,099   40,767  
General and administrative expenses (13,594 ) (12,352 )
General exploration and business development (736 ) (193 )
Exploration and evaluation assets written down   (10,471 )
Operating Income 50,769   17,751  
     
Interest income 2,594   630  
Other income 1,017    
Foreign exchange loss (144 ) (366 )
Income before income tax 54,236   18,015  
     
Deferred income tax expense (5,577 ) (371 )
     
Net income 48,659   17,644  
 

 

NON-IFRS MEASURES

 

The following table provides a reconciliation of operating cash cost and cash cost per silver ounce of Juanicipio to production cost of Juanicipio on a 100% basis (the nearest IFRS measure) as presented in the notes to the 2023 Financial Statements.

 

  Year ended December 31,
(in thousands of US$, except per ounce amounts) 2023 2022
Production cost as reported 171,830   61,985  
Depreciation on inventory movements (3,919 ) 5,551  
Adjusted production cost 167,911   67,536  
Treatment, refining, and other processing costs 50,185   42,722  
By-product revenues (2) (130,016 ) (69,736 )
Total operating cash costs (1) 88,080   40,522  
Extraordinary mining and other duties 4,945   349  
Total cash costs (1) 93,025   40,871  
Silver ounces sold 15,317,765   8,697,372  
Operating cash cost per silver ounce sold ($/ounce) 5.75   4.66  
Cash cost per silver ounce sold ($/ounce) 6.07   4.70  

(1)   As Q3 2023 represented the first full quarter of commercial production, information presented for total operating cash costs and total cash costs together with their associated per unit values are not directly comparable.
(2)   By-product revenues relates to the sale of other metals contained in the lead and zinc concentrates produced and delivered, namely gold, lead, and zinc.

 

The following table provides a reconciliation of AISC of Juanicipio to production cost and various operating expenses of Juanicipio on a 100% basis (the nearest IFRS measure), as presented in the notes to the 2023 Financial Statements.

 

 

  Year ended December 31,
(in thousands of US$, except per ounce amounts) 2023 2022
Total cash costs 93,025   40,871  
General and administrative expenses 18,768   8,436  
Exploration 7,575   7,824  
Sustaining capital expenditures 37,728   25,268  
Sustaining lease payments 856   854  
Interest on lease liabilities (48 ) (23 )
Accretion on closure and reclamation costs 247   232  
All-in sustaining costs (1) 158,151   83,463  
Silver ounces sold 15,317,765   8,697,372  
All-in sustaining cost per silver ounce sold ($/ounce) 10.32   9.60  
Average realized price per silver ounce sold ($/ounce) 23.66   21.70  
All-in sustaining margin ($/ounce) 13.34   12.10  
All-in sustaining margin 204,306   105,259  
  • As Q3 2023 represented the first full quarter of commercial production, information presented for all-in sustaining costs and all-in sustaining margin together with their associated per unit values are not directly comparable.

For the year ended December 31, 2023 the Company incurred corporate general and administrative expenses of $13,242 (year ended December 31, 2022: $12,216), which exclude depreciation expense.

 

The Company’s attributable silver ounces sold for the year ended December 31, 2023 were 6,739,817 (year ended December 31, 2022: 3,826,844), resulting in additional AISC for the Company of $1.96/oz (year ended December 31, 2022: $3.19/oz), in addition to Juanicipio’s AISC presented in the above table.

 

The following table provides a reconciliation of Earnings before interest, tax, depreciation and amortization and Adjusted EBITDA attributable to the Company based on its economic interest in Juanicipio to net income (the nearest IFRS measure) of the Company per the 2023 Financial Statements. All adjustments are shown net of estimated income tax.

 

  Year ended December 31,
(in thousands of US$) 2023 2022
Net income after tax 48,659   17,644  
Add back (deduct):    
Taxes 5,577   371  
Depreciation and depletion 352   136  
Finance costs (income and expenses) (3,467 ) (264 )
EBITDA (1) 51,121   17,887  
Add back (deduct):    
Adjustment for non-cash share-based compensation 2,894   3,250  
Exploration property write-down   10,471  
Share of net earnings related to Juanicipio (65,099 ) (40,767 )
MAG attributable interest in Junicipio Adjusted EBITDA 108,564   65,403  
Adjusted EBITDA (1) 97,480   56,244  

(1) As Q3 2023 represents the first full quarter of commercial production, information presented for EBITDA and Adjusted EBITDA is not directly comparable.

 

The following table provides a reconciliation of free cash flow of Juanicipio to its cash flow from operating activities on a 100% basis (the nearest IFRS measure), as presented in the notes to the 2023 Financial Statements.

 

  Year ended December 31,
(in thousands of US$) 2023 2022
Cash flow from operating activities 145,064   129,261  
Less:    
Cash flow used in investing activities (83,393 ) (155,758 )
Sustaining lease payments (856 ) (854 )
Juanicipio free cash flow (1) 60,814   (27,351 )

(1) As Q3 2023 represents the first full quarter of commercial production, comparative information presented for free cash flow of Juanicipio is not directly comparable.

Qualified Persons: All scientific or technical information in this press release including assay results referred to, and mineral resource estimates, if applicable, is based upon information prepared by or under the supervision of, or has been approved by Dr. Peter Megaw, Ph.D., CPG, MAG’s Chief Exploration Officer and Gary Methven, P.Eng., Vice President, Technical Services; both are “Qualified Persons” for purposes of National Instrument 43-101, Standards of Disclosure for Mineral Projects.

 

About MAG Silver Corp.

 

MAG Silver Corp. is a growth-oriented Canadian exploration company focused on advancing high-grade, district scale precious metals projects in the Americas. MAG is emerging as a top-tier primary silver mining company through its (44%) joint venture interest in the 4,000 tonnes per day Juanicipio Mine, operated by Fresnillo plc (56%). The mine is located in the Fresnillo Silver Trend in Mexico, the world’s premier silver mining camp, where in addition to underground mine production and processing of high-grade mineralised material, an expanded exploration program is in place targeting multiple highly prospective targets. MAG is also executing multi-phase exploration programs at the 100% earn-in Deer Trail Project in Utah and the 100% owned Larder Project, located in the historically prolific Abitibi region of Canada.

 

Posted March 19, 2024

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