MAG Silver's Juanicipio silver project in Mexico, a joint-venture with silver giant Fresnillo. Zinc, lead and gold byproduct is expected to translate into negative silver production costs at the mine. Photo: MAG Silver

MAG Silver's Juanicipio silver project in Mexico, a joint-venture with silver giant Fresnillo. Zinc, lead and gold byproduct is expected to translate into negative silver production costs at the mine.
Photo: MAG Silver

Questioning MAG Silver's Production Timeline

Issue 96, September 2014

MAG Silver could be heading into production at its Juanicipio project in Mexico a full year ahead of guidance, Global Mining Observer has learned.

The company is currently sinking a 2.5km access decline into Juanicipio under a joint-venture with Fresnillo, the project operator and world’s largest silver miner by output. According to guidance published in 2012, construction is scheduled to take 42 months, implying first silver in early 2018.

One analyst working for a fund invested in Fresnillo however believes the group is planning to accelerate development to prop-up its production guidance. Fresnillo, which struck a $450m deal with Newmont over a mine portfolio in Mexico on Friday, recently surprised the market by announcing a $1bn cap-ex budget for 2015, up from $600m this year.

MAG meanwhile raised C$86m ($78m) last month in an over-subscribed share placement, whilst tunnelling was accelerated in March on the granting of an explosives permit.

“I’m not aware of any plans to accelerate development,” MAG’s president George Paspalas said by telephone this week. “I just know Fresnillo are going as good as they can to bring it in as quickly as they can. It depends on the rate of progress in the rock that we’re entering now.”

Paspalas says MAG would support any decision to bring forward production. “We’d be buying them cerveza for that,” he says. “That’s Spanish for beer. We would be very happy, because we believe we can fund this project and the quicker we get the cash flow, the better for our organisation.”

Macquarie analyst Michael Grey has called Juanicipio “the world’s best undeveloped silver asset.” Its bonanza grade zone hosts 208m silver ounces grading over 600 grams per tonne, with production guidance of 10m ounces per annum. Total cap-ex of $302m falls 44 per cent to MAG and 56 per cent to Fresnillo, in line with ownership.

Fresnillo, which made a hostile bid for MAG in 2009, declined to comment on Juanicipio. Shares in MAG last traded at C$9.71. 

“That’s Spanish for beer.”

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