In order to increase the stock value, MAG Silver Corp. announced its intention to launch a normal course issuer bid (NCIB) to potentially purchase for cancellation up to 10% of the public float. Find out why these analysts recommend the stock.
MAG Silver Corp. (MAG:TSX; MAG:NYSE American) announcement its intention to launch a normal course issuer bid potentially purchase for cancellation up to more than 8.6 million shares of the company's common stock, or approximately 10% of the float.
The silver producer said the Toronto Stock Exchange accepted the notice of NCIBin which a company can repurchase shares over a period of time when the stock price is favorable.
In the United States, MAG said repurchases would be subject to a limit of more than 5.1 million common shares, or 5% of the float as of May 8.
“MAG believes that when there is a mismatch between the stock price and the intrinsic value of the company, a CRPO can increase shareholder value and growth per share,” the company said in a statement. “In addition, the Company believes that current market conditions provide it with opportunities to acquire common shares at attractive prices.”
Having the option to repurchase common stock opportunistically could be an efficient use of its cash resources and in the best interest of the company and its shareholders, the company noted.
“This would both improve liquidity for shareholders seeking to sell and increase the proportion of interest of shareholders wishing to maintain their positions,” MAG said in the statement.
The catalyst: an emerging silver producer
MAG is an emerging silver producer with its Tier 1 Juanicipio mine in Mexico and announced its financial results for the first quarter of 2024 last week.
The Juanicipio joint venture (JV), in which the company holds a 44% stake, returned more than US$17.5 million in interest and loan principal repayment to MAG during the first quarter of 2024, the company said. Company.
“We believe cash distributions will likely increase in the coming quarters, allowing MAG to consider paying a dividend by the end of 2024,” continued Reagor, who reiterated his rating purchase on the stock and increased the price target from US$14 to US$14.50. per share.
“We view this as a significant development as it allowed the company to report an increase in its cash balance despite spending $5.1 million on exploration on other projects and acquiring the Goldstake project for 3 .8 million dollars,” wrote Roth analyst MKM. Joe Reagor in an updated research note.
“We believe cash distributions will likely increase in the coming quarters, allowing MAG to consider paying a dividend by the end of 2024,” continued Reagor, who reiterated his rating purchase on the stock and increased the price target from US$14 to US$14.50. per share.
For the quarter, the company reported net income of US$14.9 million, or US$0.14 per share, driven by Juanicipio's equity-accounted profit of US$19.24 million. and adjusted EBITDA of US$32.45 million.
“On a 100% basis, the Juanicipio JV reported revenue of $123.7 million (US), exceeding our estimate of $115.8 million (US),” Reagor wrote. “The increase in joint venture revenues is explained by higher remuneration on metal sales. As a result, we have increased our long-term payment assumptions. »
A productive first quarter
The mine had a first productive quarter, processing over 325,000 metric tons of ore, with a notable daily grinding rate of 4,387 tons despite a routine maintenance shutdown. The silver content of the head was 476 grams per tonne (g/t), with an equivalent silver content of 713 g/t.
Juanicipio achieved silver production and silver equivalent production of 4.5 million ounces (Moz) and 6.4 Moz, respectively, during the quarter, highlighting the mine's potential for sustained production at high content.
An updated National Instrument 43-101 report for the mine, released last month, revealed that mineral resources increased by 33% from the original PEA to 17 million tonnes (Mt) at grades of 310 g/t Ag, 1.86 g/t gold (Au), 2.89% lead (Pb) and 5.32% zinc (Zn), the company said. Inferred mineral resources increased by 16% to 14.1 Mt at grades of 236 g/t Ag, 1.06 g/t Au, 2.41% Pb and 6.12% Zn.
Almost as soon as MAG released the technical report, silver prices began to explode. Ron Struthers of Struthers Resource Stock Report Recommended MAG actions to take advantage of the sector's increases, saying Juanicipio “will be a real cash cow” for the company.
BMO Capital Markets analyst Kevin O'Halloran said he was encouraged by “the accelerated pace of cash distributions from the Juanicipio JV, and we expect the market to respond positively to the growing history of capital returns “.
O'Halloran rated the stock Outperform with a target price of CA$24 per share.
“We expect cash flow to be stable now that operations are at a steady state,” noted Stephen Soock, an analyst at Stifel, who rated the stock a buy with a target of $20.50 CA per share.
Preliminary base shelf prospectus filed
Also last week, MAG announced it has filed a preliminary short form base shelf prospectus with the securities commissions of all provinces and territories of Canada, and a corresponding registration statement will be filed with the United States Securities and Exchange Commission.
Upon issuance of the receipt for the final prospectus and filing with the SEC, the Company will be authorized to offer up to US$250 million of common stock, preferred stock, debt securities, receipts of subscription, units and warrants.
Shareholding and sharing structure
Institutions own 70% of MAG and 30% is retail, according to the company.
Major institutional shareholders include operator Juanicipio Fresnillo Plc. with 9%, BlackRock Investment Management (UK) Ltd. with 10.8%, Van Eck Associates Corp. with 9%, First Eagle Investment Management LLC with 6.2% and Sprott Asset Management LP with 3%, the company said.
MAG Silver has a market capitalization of US$1.43 billion. It has 102.97 million shares outstanding, according to Reuters. It trades in a 52-week range of US$13.47 to US$8.20.
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- MAG Silver Corp. is a billboard sponsor of Streetwise Reports and pays SWR a monthly sponsorship fee of between US$4,000 and US$5,000.
- Steve Sobek wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee.
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