Earnings call transcript: MAG Silver beats Q1 2025 earnings expectations

MAG Silver Corp (MAG) reported a strong performance for the first quarter of 2025, surpassing earnings expectations and achieving significant growth in key financial metrics. The company’s earnings per share (EPS) came in at $0.28, exceeding the forecast of $0.20, while revenue reached $175 million. Following the announcement, MAG Silver’s stock price rose by 3.61%, closing at $15.78. According to InvestingPro data, the company maintains excellent financial health with an overall score of 3.04 out of 4, labeled as "GREAT." Five analysts have recently revised their earnings estimates upward for the upcoming period, suggesting continued momentum.

Key Takeaways

• MAG Silver’s Q1 2025 EPS of $0.28 beat the forecast by 40%.
• Revenue for the quarter was $175 million, marking a 42% year-over-year increase.
• The stock price increased by 3.61% following the earnings announcement.
• Strong operational performance at the Juanicipio project contributed to robust financial results.
• The company declared a dividend of 20¢ per share.

Company Performance

MAG Silver’s performance in Q1 2025 demonstrated significant growth compared to the previous year. The company benefited from increased production and efficiency at its flagship Juanicipio project, which processed 337,000 tonnes of ore and produced 4.5 million ounces of silver. This operational success, combined with a strategic focus on cost efficiency, allowed MAG Silver to achieve a cash operating margin of 81%, up from 70% in the prior year.

Financial Highlights

• Revenue: $175 million (+42% YoY)
• Net income: $28.7 million (28¢ per share)
• Adjusted EBITDA: $55.8 million
• Gross profit: $121 million (nearly doubled from previous year)
• Free cash flow: $77 million (after $57 million in taxes)
• Dividend: 20¢ per share (2¢ fixed + 18¢ cash flow-linked)

Earnings vs. Forecast

MAG Silver’s actual EPS of $0.28 surpassed the forecast of $0.20, representing a 40% positive surprise. This beat is significant compared to previous quarters, reflecting the company’s enhanced production capabilities and cost management. The revenue, although reported at $175 million, was below the forecast of $206 million, which may have tempered enthusiasm despite the strong EPS performance.

Market Reaction

Following the earnings release, MAG Silver’s stock price rose by 3.61%, closing at $15.78. This movement reflects investor confidence in the company’s ability to deliver strong financial results and manage costs effectively. The stock’s performance is notable, especially given its proximity to the 52-week high of $18.27, indicating positive market sentiment.

Outlook & Guidance

MAG Silver has set ambitious targets for the remainder of 2025, with a production goal of 14.7-16.7 million silver ounces at the Juanicipio project. The company aims to maintain all-in sustaining costs between $6 and $8 per ounce. Additionally, MAG Silver plans to invest $70-$80 million in sustaining capital, with an extra $22-$28 million allocated for an underground conveyor system. Looking ahead, the company forecasts EPS of $0.82 for FY2025 and $0.73 for FY2026, with corresponding revenue projections of $50.5 million and $43.5 million, respectively.

Executive Commentary

George Bassballas, President and CEO of MAG Silver, highlighted the company’s strong quarterly performance, stating, "Q1 marked another strong quarter for MAG with record production, improved margins, and robust dividends." He also emphasized the strategic approach to dividends, noting, "We believe this dual component approach to the dividend aligns shareholders’ returns directly with underlying performance."

Risks and Challenges

• Commodity Price Volatility: Fluctuations in silver and gold prices could impact revenue and profitability.
• Operational Risks: Any disruptions at the Juanicipio project could affect production targets.
• Regulatory Changes: Changes in mining regulations or taxation could pose challenges.
• Market Competition: Increased competition in the mining sector may pressure margins.
• Economic Uncertainty: Broader economic conditions could influence market demand and investor sentiment.

MAG Silver’s Q1 2025 performance showcases its operational strength and strategic focus, positioning the company well for future growth. However, potential risks remain, necessitating continued vigilance and adaptability in a dynamic market environment.

Full transcript - MAG Silver Corp (MAG) Q1 2025:

George Bassballas, President and CEO, MagSilver: Hello, everyone, and welcome to MagSilver’s Q1 twenty twenty five results video cast. I’m George Bassballas, President and CEO, and I’m pleased to walk you through a quarter of record breaking results, meaningful shareholder returns and continued progress across our entire portfolio. All numbers are on a 100% basis unless otherwise stated. So let’s dive into the highlights, starting with Juan Osipio, where MAG holds a 44% interest alongside our partner and the operator Fresnillo. We saw robust production, record margins and standout cost performance.

In Q1, we processed 337,000 tonnes of ore grading four thirty grams per tonne silver or six sixty grams per tonne silver equivalent. That delivered 4,500,000 ounces of silver and 6,500,000 ounces silver equivalent. Recovery also hit a new high, 96% silver recovery, thanks to the continued plant optimization and ongoing commercial pyrite and gravimetric concentrate production. Q1 sales totaled $175,000,000 up 42% from Q1 twenty twenty four, driven by higher volumes and stronger realized prices. Silver averaged $33.60 per ounce, and gold averaged over $3,031 per ounce.

Zinc and lead also contributed positively. Treatment and refining charges were 8,700,000.0, down more than $1,100,000 from Q1 twenty twenty four, reflecting more favorable commercial terms negotiated last year. Production costs decreased by 3,100,000, mainly as a result of more efficient mining operations. These contributed to a higher cash operating margin of 81%, up from 70% last year. Gross profit for the quarter came in at $121,000,000 versus 65,000,000 a year ago.

That’s a near doubling. Wanosipio continues to deliver industry leading costs. Our cash costs were negative, 91¢ per ounce silver sold and $8.50 per silver equivalent ounce sold, driven by strong by product credits and disciplined site level performance. All in sustaining costs were two dollars and four cents per silver ounce sold and $10.64 per equivalent ounce, down significantly from the prior year. All in sustaining margins remained solid, like really solid.

Q1 delivered an all in sustaining margin of $126,000,000. Free cash flow was equally strong in Q one delivering 77,000,000 and that was after paying $57,000,000 in taxes during quarter. At the corporate level, MAG recorded net income of $28,700,000 or 28¢ per share and adjusted EBITDA of 55,800,000 driven by a 44% of Juanicipio. We received $61,500,000 in cash from Juanicipio in April. Juanicipio has now retired all intercompany debt.

Building on our inaugural dividend in April, MAG declared its second quarterly dividend, 2¢ per share fixed component and 18¢ per share cash flow linked component tied to our targeted 30% of cash received from one Osipio. That’s a total dividend of 20¢ per share, payable May 28 to shareholders of record as of May 19. We believe this dual component approach to the dividend aligns shareholders returns directly with underlying performance and reinforces our commitment to disciplined capital returns. So let’s turn to exploration where progress continues across all three of our key projects. At Juanicipio, we completed 6,992 metres of underground infill drilling in Q1, focused on the Val De Canes, Anticipata and Ramal veins.

Surface drilling will begin in q two targeting scan potential and targeting new vein systems like Magdalena. At Deer Trail, we drilled six reverse circulation pre collar holes totaling seventeen eighty three meters, testing cost effective and time saving ways to progress our targets through the tough initial 300 to 400 meters of drilling. Results are pending and geophysical surveys are underway to refine our drill targeting while we continue to review alternatives to reduce drill costs and discovery risk. At Lada, we finalized target selection and logistics for a 25,000 meter drill program at the Instant Pond Zone, where historical drilling and recent sampling delivered stunning gold grades. Looking ahead, Wanosipio remains on track to meet 2025 production guidance of 14.7 to 16,700,000 silver ounces and all in sustaining costs of $6 to $8 per ounce.

Sustaining capital of 70 to $80,000,000 is budgeted for tailings expansion, ventilation systems and electrical infrastructure. An additional 22 to 28,000,000 is allocated to installing the underground conveyor expected to come online in late twenty twenty six and delivering enhanced efficiencies, costs and production potential. We’ll also drill 50,500 meters this year across all underground and surface programs to continue expanding the resource base at Wanacepio. Q1 marked another strong quarter for MAG with record production, improved margins and robust dividends. We’re well positioned to build on this momentum through 2025.

So thank you for your support. We’ll see you next quarter and until then, take care.

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