The silver price is range-bound at around $23 an ounce, but that doesn’t dissuade George Paspalas, president and CEO of MAG Silver (TSX:MAG).
In mid-November Paspalas spoke to Kitco at the 2023 Precious Metals Summit Zurich event.
He said the lack of price movement is puzzling given that demand is outpacing supply; last year there was a market deficit of 238 million ounces.
“You can't have increasing demand outstripping supply," said Paspalas. "Inventory is falling by 50%, and the price doesn't move. At some point in time silver will break out, and I think it will be quite significant,” he said.
MAG Silver’s primary asset is the Juanicipio mine in Mexico, which started concentrate production and shipped its first commercial lead and zinc concentrates in March 2023. The Juanicipio processing facility achieved nameplate capacity during September, with silver recovery consistently above 88%.
An important milestone was free cash flow, which Paspalas said helped grow the balance sheet to $55 million at the end of Q3. Short-term goals are to have success at Juanicipio, and to fund exploration programs at Deer Trail in Utah, and the Larder project in Ontario, located within the +200 million-ounce Abitibi gold province. Larder covers 7 km of the Cadillac/Larder Break between the Kirkland Lake (70Moz) and Kerr-Addison (12Moz) gold camps.
MAG Silver recently put in place a $40 million senior secured revolving credit facility, leading Kitco’s Paul Harris to ask about future plans.
“We want to continue to increase the number of cash-flowing assets that we have in MAG,” said Paspalas. “We've shown we're successful at exploration, but exploration has an embedded timeline and ultimately we're planning for success - another discovery at Juanicipio, a discovery at Deer Trail, a discovery at Larder. The best-case scenario is probably some success there over the next three to five years.”
“Now as we're starting to build up cash, we're starting to look: ‘are there any accretive opportunities out there where maybe there's another access to a cash-flowing stream, that gives us some political diversity from just Mexico?'” Paspalas asked.
“We're not in a rush, but we want to take the wonderful asset that Juanicipio is, and the cash that that's going to contribute, and build ourselves into a mid-tier robust precious metal-producing company.”
He noted MAG Silver has only explored 5% of the Juanicipio property, whose assets are within the MAG Silver-Fresnillo joint venture.
Paspalas said now that that Juanicipio is up and running, MAG Silver is looking to maximize margins and build up its balance sheet. The company has raised CAD$23 million in flow-through capital for its Larder project, funding exploration through 2024 including a 17,000-metre drill program. Roughly $10 million has been budgeted to drill Deer Trail in Utah.
“I hope 2024 is major discovery for MAG Silver, while also building cash on the balance sheet,” he concluded.
Special coverage of the 2023 Precious Metals Summit Zurich is brought to you by Vizsla Copper Corp. (TSXV:VCU).
0:00 - Silver price movements
1:30 - Silver price manipulation
2:18 - Fundamentals are good for precious metals
3:30 - Build a robust balance sheet at MAG Silver
5:48 - Growing MAG Silver
7:00 - MAG Silver wants to focus on silver
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