All amounts herein are reported in $000s of
HIGHLIGHTS –
OPERATIONAL – Juanicipio owned 44% by
- During the first quarter of 2022 (“Q1 2022”), the 4,000 tonnes per day (“tpd”) Juanicipio processing plant was being readied for commissioning. Water commissioning commenced during the quarter and commissioning of the grinding mills will start upon connection to the national electrical power grid.
- As reported by the operator Fresnillo, the regulatory approval to tie into the national power grid remains on track for mid-2022, with the expectation to ramp up the Juanicipio processing plant to 85-90% of nameplate capacity by year end.
- Fresnillo is making available unused processing plant capacity at its Fresnillo and
Saucito operations. Campaign processing of mineralized material from development headings and stopes continues through these nearby facilities and is expected to continue until the Juanicipio plant is commissioned. - For the three months ended
March 31, 2022 , on a 100% basis:- 145,484 tonnes, or an average of 48,495 tonnes per month of mineralized development and stope material were campaign processed through the Fresnillo and
Saucito plants, with 2,238,810 payable silver ounces, 5,345 payable gold ounces, 1,066 tonnes of lead and 1,448 tonnes of zinc produced and sold; - Average silver head grade for the quarter was 597 grams per tonne (“g/t”) or 17.4 silver ounces/ton; and
- Pre-commercial production sales (net of treatment and processing costs) totaled
$64,916 for the quarter, less$18,695 in mining and transportation costs and depreciation and amortization, netting$46,221 in gross profit by Juanicipio in the quarter.
- 145,484 tonnes, or an average of 48,495 tonnes per month of mineralized development and stope material were campaign processed through the Fresnillo and
- Campaign processing benefits include the cashflow being used to offset some of the initial and sustaining capital, and the de-risking of Juanicipio’s metallurgical performance which is expected to significantly speed up project ramp-up.
- 54% of the tonnes in Q1 2022 were processed at Fresnillo’s
Saucito plant, where the flowsheet more closely resembles that of the Juanicipio plant. It is expected these results will provide further valuable metallurgical benefits when production commences at Juanicipio. - Metal recoveries and concentrate grades are in line with expectations from the initial metallurgical test work conducted on Valdecañas.
- A further 49,096 tonnes of mineralized development and stope material with a silver head grade of 668 g/t were campaign processed in
April 2022 through the Fresnillo andSaucito plants.
EXPLORATION
- The Juanicipio 2021 exploration program was completed in the fourth quarter of 2021 (“Q4 2021”) with
$6,296 spent on a 100% basis and was focused on continued step-out and infill drilling of the Valdecañas Vein System (including independent targeting of the Venadas Vein family and the Anticipada Vein). - Results of the Juanicipio 2021 exploration program (23 surface-based drill holes totaling 29,421 metres (“m”)) are referenced herein, and highlights include:
- 21 holes cut the Valdecañas Vein System, with most directed at the Valdecañas
Vein Deep Zone plus coincidental intercepts of the Anticipada (13), Pre-Anticipada (8) and various other hangingwall and footwall veins; - Most intercepts are comparable to previously drilled neighboring holes and confirm both grade and thickness expectations; and,
- Channel sampling of the advancing development headings and test stopes in the Valdecañas
Vein Bonanza Zone shows that the grade distribution in the vein is very close to that shown by both surface and underground drilling, which adds substantial confidence in the width and grade continuity indicated by the surface drilling for the balance of the vein.
- 21 holes cut the Valdecañas Vein System, with most directed at the Valdecañas
- With the completion of the 2021 exploration drill program, the intercept density on the Valdecañas
Vein Deep Zone is now approaching that on theBonanza Zone and confirms the continuity of mineralization in the Valdecañas Vein to depth. - The Juanicipio 2022 exploration program is currently in progress (
$1,589 expended on a 100% basis in Q1 2022) with five drill rigs on surface running concurrently with continued underground definition and geotechnical drilling, and one rig testing the new Cesantoni target in the northwest part of the Juanicipio concession. Deer Trail Project inUtah :- A 5 hole/5,000 metre Phase II drill program commenced in the third quarter of 2021 and is in progress with all assays pending.
- A 5 hole/5,000 metre Phase II drill program commenced in the third quarter of 2021 and is in progress with all assays pending.
- During the quarter, the Company entered into a Definitive Arrangement Agreement with Gatling Exploration Inc. (“Gatling”) pursuant to which the Company is expected to acquire all of the issued and outstanding common shares of Gatling by the issuance of common shares of the Company and the advancement of a Canadian dollar (“C$”)
$3 million convertible loan (the “Transaction”).- The Transaction was approved by the shareholders of Gatling on
May 13, 2022 . Upon closing of the Transaction later inMay 2022 , it is expected that Gatling shareholders will hold approximately 0.79% of the Company’s shares on an outstanding basis. - Gatling’s
Larder Lake Project lies in the highly prolificAbitibi Gold Province of northernOntario , and with good surrounding infrastructure and already permitted drill pads to test initial targets.
- The Transaction was approved by the shareholders of Gatling on
- During Q1 2022, the Company recorded a write down of
$10,471 on its option earn-in project on a prospective claim package in theBlack Hills ofSouth Dakota , as a growing negative sentiment towards resource extraction in the area, combined with a slow consultation process have resulted in significant challenges being encountered in permitting the property for exploration drilling.
LIQUIDITY AND CAPITAL RESOURCES
- As at
March 31, 2022 , MAG held cash of$52,248 while on a 100% basis Juanicipio had working capital of$36,011 which included cash on hand of$18,261 . - According to the operator Fresnillo, the
Juanicipio Project construction is expected to be delivered on budget at$440,000 . - With the current ramp up of underground mine production and given hiring restrictions on contractors arising from the 2021 labour reform legislation, the timing of various sustaining capital expenditures has been brought forward:
- These sustaining capital costs are included in current Juanicipio development costs but are not considered by the operator as part of the
$440,000 initial project capital; and - The costs incurred are expected to reduce future sustaining capital costs and totaled approximately
$4,712 on a 100% basis in the quarter endedMarch 31, 2022 .
- These sustaining capital costs are included in current Juanicipio development costs but are not considered by the operator as part of the
- The expected cash flow from the ongoing campaign processing until the Juanicipio plant is commissioned, along with the working capital held by Juanicipio at
March 31, 2022 are projected to substantially fund the remaining capital expenditures in the$440,000 initial capex (a cash call has not been needed sincemid-December 2021 which was$21,000 on a 100% basis). - Should there be additional funding requirements related to further commissioning delays or to additional sustaining capital that is being brought forward in excess of the cashflow generated prior to attaining commercial production, there may still be further cash calls required from Fresnillo and MAG.
CORPORATE
- On
March 28, 2022 , MAG announced the appointment ofFausto Di-Trapani as Chief Financial Officer (“CFO”) effectiveMay 20, 2022 .Mr. Di-Trapani is a finance executive with experience in the natural resources sector spanning two decades, most recently having served as the CFO at Galiano Gold Inc.Mr. Di-Trapani replaces Mr.Larry Taddei , who, after 12 years of service with the Company, will step down from the CFO role to pursue other opportunities.Mr. Taddei will assist in the orderly transition of his duties followingMr. Di-Trapani’s appointment.
JUANICIPIO PROJECT UPDATE
Underground Mine Production
In Q1 2022, a total of 145,484 tonnes of mineralized development and stope material were processed through the Fresnillo plants, realizing commercial and operational de-risking opportunities for the
Table 1: Q1 2022 Mineralized Material Processed at Fresnillo’s Processing Plants (100% basis)
Three Months Ended | Q1 2021 $Amount | ||||
Payable Metals | Quantity | Average Per Unit (1) | $Amount | ||
Silver | 2,238,810 ounces | ||||
Gold | 5,345 ounces | 10,291 | 1,090 | ||
Lead | 1,066 tonnes | 2,483 | 267 | ||
Zinc | 1,448 tonnes | 5,712 | 555 | ||
Treatment and refining charges (“TCRCs”) and other processing costs | (9,469) | (1,838) | |||
Provisional sales adjustment related to 2020 sales (2) | - | (1,146) | |||
64,916 | 10,085 | ||||
Mining and transportation costs | (15,264) | (1,886) | |||
Depreciation and amortization | (3,431) (3) | - | |||
Gross Profit | $46,221 | $8,199 |
(1) Ounces (“oz”) for silver and gold and, pounds (“lb”) for lead and zinc.
(2) Provisional sales for 2020 were finalized in Q1 2021 resulting in negative adjustment to net sales revenue of
(3) The underground mine is now in stopes with mineralized material being processed through Fresnillo’s plants and refined and sold, and effectively readied for its intended use.
The average silver head grade for the mineralized development and initial stope material processed in Q1 2022 was 597 g/t (Q1 2021 458 g/t). This increased grade reflects more stoped vein material being processed. Additionally, metal recoveries and concentrate grades are in line with expectations from the initial metallurgical test work conducted on Valdecañas. Originally planned at a targeted rate through Q3 2021 of 16,000 tonnes per month, the processing rate increased to an average of 37,983 tonnes per month in Q4 2021 and an average of 48,495 tonnes per month in Q1 2022. During the quarter ended
The Juanicipio project team delivered the 4,000 tpd processing plant for commissioning in the fourth quarter of 2021. However, according to the operator Fresnillo and as previously reported, the state-owned electrical company (Comision Federal de Electricidad “CFE”), notified Fresnillo late in
In the interim, stoping and mine development at Juanicipio continues. In order to minimize any potential adverse economic effect of the revised commissioning timeline, Fresnillo has indicated it will make available unused plant capacity at its
Juanicipio Exploration Update
The 2021 Juanicipio exploration program was completed with a spend of
Most of the holes in the 2021 exploration program were directed at the Valdecañas
The driving of development headings and test stopes in the Valdecañas
The planned expenditures for the 2022 exploration program total
Initial planning as laid out by project operator, Fresnillo, is to drill 5 core holes totaling 6,000 m. Depending on ground conditions in this new area, the drilling program should take between five and seven months to complete after which time assays will be released.
Qualified Person: 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.
Quality Assurance and Control: The samples (half core) are shipped directly in security-sealed bags to
DEER TRAIL PROJECT UPDATE
Phase II drilling commenced at the
GATLING ACQUISITION / LARDER LAKE PROJECT
On
Gatling is a Canadian gold exploration company focused on advancing the
Once the Transaction closes, MAG intends to apply an integrated district-scale exploration model and new technology to the search for large-volume, high-grade gold mineralization of the style known to occur throughout the Abitibi region. MAG’s technical team believe that a combination of systematic surface-based exploration combined with geophysics will likely uncover numerous targets in this highly gold mineralized region. This will focus efforts along not just the Break but also along the many known, and geophysically indicated 2nd and 3rd order structures throughout the balance of the sparsely tested mineral claim package.
FINANCIAL RESULTS – THREE MONTHS ENDED
As at
The Company’s net income for three months ended
Table 2: MAG’s share of income from its equity accounted Investment in Juanicipio
Gross profit from processing mineralized material(see Underground Mine Production – Juanicipio Project above) | $46,221 | $8,199 |
Administrative expenses | (1,532) | (321) |
Extraordinary mining duty | (103) | (47) |
Foreign exchange and other | (821) | (1,075) |
Income before tax | 43,765 | 6,756 |
Income tax expense (including deferred income tax) | (12,487) | (5,320) |
Income for the period (100% basis) | $31,278 | $1,436 |
MAG’s 44% share of income from equity accounted investment in Juanicipio | $13,762 | $632 |
In 2017, the Company entered into an option earn-in agreement with a private group whereby the Company can earn up to a 100% interest in a prospective land claim package in the
About
Neither the
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 regarding the anticipated time and capital schedule to production; anticipated electrical hook-up of the processing plant and impact on commissioning; statements that address our expectations with respect to the timing and success of plant commissioning activities; processing rates of mineralized materials, estimated project economics, including but not limited to, plant or mill recoveries, payable metals produced, underground mining rates; production rates, expected upside from additional exploration; expected capital requirements and adequacy of current working capital for the next year; and other future 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, impacts (both direct and indirect) of COVID-19, supply chain constraints and general costs escalation in the current inflationary environment heightened by the invasion of
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 andwww.sec.gov.
LEI: 254900LGL904N7F3EL14
For further information on behalf ofMAG Silver Corp. ContactMichael 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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