Exhibit 99.1

MAG SILVER CORP. Unaudited Condensed Interim Consolidated Financial Statements (expressed in US$) For the three months ended March 31, 2013 Dated: May 15, 2013

A copy of this report will be provided to any shareholder who requests it.

VANCOUVER OFFICE Suite 770 800 W. Pender Street Vancouver, BC V6C 2V6   604 630 1399 phone 866 630 1399 toll free 604 681-0894 fax TSX: MAG NYSE MKT: MVG www.magsilver.com info@magsilver.com

MAG SILVER CORP.
Condensed Interim Consolidated Statements of Financial Position (Unaudited)
(expressed in US$ dollars unless otherwise stated)	March 31, 2013			December 31, 2012
ASSETS
CURRENT
Cash	$	37,790,974		$	40,621,158
Accounts receivable (Note 3)		752,732			572,295
Marketable securities (Note 4)		237,138			430,806
Prepaid expenses		359,252			183,907
TOTAL CURRENT ASSETS		39,140,096			41,808,166
EQUIPMENT (Note 5)		93,070			102,941
INVESTMENT IN ASSOCIATE (Note 6)		19,566,756			19,502,181
EXPLORATION AND EVALUATION ASSETS (Note 7)		70,628,970			69,137,552
TOTAL ASSETS	$	129,428,892		$	130,550,840
LIABILITIES
CURRENT
Trade and other payables	$	1,222,865		$	1,315,261
COMMITMENTS (Notes 7 and 14)
EQUITY
Share capital (Note 8)
Authorized - unlimited common shares,
without par value
Issued and outstanding common shares
at March 31, 2013 - 60,141,718 (Dec. 31, 2012 - 60,023,835)		179,579,878			178,387,343
Share option reserve		14,322,822			14,030,576
Accumulated other comprehensive income		2,533,326			3,389,586
Deficit		(68,229,999	)		(66,571,926	)
TOTAL EQUITY		128,206,027			129,235,579
TOTAL LIABILITIES AND EQUITY	$	129,428,892		$	130,550,840
SUBSEQUENT EVENTS (Note 16)

See accompanying notes to the consolidated financial statements.

MAG SILVER CORP.
Condensed Interim Consolidated Statements of Loss and Comprehensive Loss (Unaudited)
(expressed in US$ dollars unless otherwise stated)
	For the			For the
	three month			three month
	period ended			period ended
	March 31, 2013			March 31, 2012
EXPENSES
Accounting and audit	$	79,576		$	103,530
Amortization		7,801			10,941
Filing and transfer agent fees		163,301			125,002
Foreign exchange gain		(548,271	)		(53,582	)
General office expenses		236,718			178,909
Legal		115,567			244,144
Management and consulting fees		616,890			390,398
Share based payment expense (Note 8)		636,600			375,856
Shareholder relations		122,701			209,691
Travel		90,709			80,714
		1,521,592			1,665,603
INTEREST INCOME		39,463			71,180
IMPAIRMENT OF INVESTMENT
IN AVAILABLE-FOR-SALE SECURITIES (Note 4)		(175,944	)		-
LOSS FOR THE PERIOD BEFORE INCOME TAX	$	(1,658,073	)	$	(1,594,423	)
DEFERRED INCOME TAX RECOVERY (Note 15)		-			840,052
LOSS FOR THE PERIOD	$	(1,658,073	)	$	(754,371	)
OTHER COMPREHENSIVE INCOME (LOSS)
Items that may be reclassified subsequently to profit or loss:
CURRENCY TRANSLATION ADJUSTMENT		(843,063	)		486,753
UNREALIZED GAIN (LOSS) ON
MARKETABLE SECURITIES, NET OF TAXES (Note 4)		(13,197	)		163,719
		(856,260	)		650,472
TOTAL COMPREHENSIVE LOSS	$	(2,514,333	)	$	(103,899	)
BASIC AND DILUTED
LOSS PER SHARE	$	(0.03	)	$	(0.01	)
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING - BASIC AND DILUTED		60,103,602			55,667,139

See accompanying notes to the consolidated financial statements.

MAG SILVER CORP.
Condensed Interim Consolidated Statements of Changes in Equity (Unaudited)
(expressed in US$ unless otherwise stated)														Accumulated
											Unrealized			other
	Common shares				Share			Currency			gain (loss) on			comprehensive
	without par value				Option			translation			marketable			income (loss)						Total
	Shares		Amount		Reserve			adjustment			securities			("AOCI")			Deficit			equity
Balance, January 1, 2012		55,667,139	$	139,021,383	$	13,250,112		$	3,044,372		$	(115,128	)	$	2,929,244		$	(54,257,604	)	$	100,943,135
Stock options exercised (Note 8a & b)		830,486		8,079,607		(2,628,537	)		-			-			-			-			5,451,070
Share based payment																					-
expense (Note 8b)		-		-		3,409,001			-			-			-			-			3,409,001
Issued for cash		3,526,210		31,286,353																	31,286,353
Currency translation adjustment		-		-		-			321,340			-			321,340			-			321,340
Unrealized loss on marketable
securities (Note 4)		-		-		-			-			(65,559	)		(65,559	)		-			(65,559	)
Reclassification of
unrealized losses (Note 4)												204,561			204,561						204,561
Net loss		-		-		-			-			-			-			(12,314,322	)		(12,314,322	)
Total Comprehensive Loss		-		-		-			321,340			139,002			460,342			(12,314,322	)		(11,853,980	)
Balance, December 31, 2012		60,023,835	$	178,387,343	$	14,030,576		$	3,365,712		$	23,874		$	3,389,586		$	(66,571,926	)	$	129,235,579
Stock options exercised (Note 8a & b)		117,883		1,192,535		(344,354	)		-			-			-			-			848,181
Share based payment																					-
expense (Note 8b)		-		-		636,600			-			-			-			-			636,600
Issued for cash		-		-																	-
Currency translation adjustment		-		-		-			(843,063	)		-			(843,063	)		-			(843,063	)
Unrealized loss on marketable
securities (Note 4)		-		-		-			-			(13,197	)		(13,197	)		-			(13,197	)
Reclassification of
unrealized losses (Note 4)												-			-						-
Net loss		-		-		-			-			-			-			(1,658,073	)		(1,658,073	)
Total Comprehensive Loss		-		-		-			(843,063	)		(13,197	)		(856,260	)		(1,658,073	)		(2,514,333	)
Balance, March 31, 2013		60,141,718	$	179,579,878	$	14,322,822		$	2,522,649		$	10,677		$	2,533,326		$	(68,229,999	)	$	128,206,027
Three Month Comparative:
Balance, January 1, 2012		55,667,139	$	139,021,383	$	13,250,112		$	3,044,372		$	(115,128	)	$	2,929,244		$	(54,257,604	)	$	100,943,135
Share based payment
expense (Note 8b)		-		-		375,856			-			-			-			-			375,856
Currency translation adjustment		-		-		-			486,753			-			486,753			-			486,753
Unrealized gain on marketable
securities (Note 4)		-		-		-			-			163,719			163,719			-			163,719
Net loss		-		-		-			-			-			-			(754,371	)		(754,371	)
Total Comprehensive Loss		-		-		-			486,753			163,719			650,472			(754,371	)		(103,899	)
Balance, March 31, 2012	$	55,667,139	$	139,021,383	$	13,625,968		$	3,531,125		$	48,591		$	3,579,716		$	(55,011,975	)	$	101,215,092

See accompanying notes to the consolidated financial statements.

MAG SILVER CORP.
Condensed Interim Consolidated Statements of Cash Flows (Unaudited)
(expressed in US dollars unless otherwise stated)
	For the			For the
	three month			three month
	period ended			period ended
	March 31,			March 31,
	2013			2012
OPERATING ACTIVITIES
Loss for the period	$	(1,658,073	)	$	(754,371	)
Items not involving cash:
Amortization (Note 5)		7,801			10,941
Deferred income tax recovery (Note 15)		-			(840,052	)
Impairment of investment in available-for-sale securities (Note 4)		175,944			-
Share based payment expense (Note 8)		636,600			375,856
Changes in operating assets and liabilities
Accounts receivable		(180,437	)		(275,653	)
Prepaid expenses		(175,345	)		(208,810	)
Trade and other payables		(23,837	)		54,308
Net cash used in operating activities		(1,217,347	)		(1,637,781	)
INVESTING ACTIVITIES
Investment in associate (Note 6)		(77,536	)		(1,127,156	)
Exploration and evaluation expenditures		(1,559,977	)		(2,145,769	)
Purchase of equipment and leasehold improvements (Note 5)		-			(2,569	)
Net cash used in investing activities		(1,637,513	)		(3,275,494	)
FINANCING ACTIVITIES
Issuance of common shares upon exercise of stock options (Note 8)		848,181			-
Net cash from financing activities		848,181			-
EFFECTS OF EXCHANGE RATE CHANGES ON CASH		(823,505	)		472,092
DECREASE IN CASH		(2,830,184	)		(4,441,183	)
CASH, BEGINNING OF YEAR		40,621,158			26,217,409
CASH, END OF PERIOD	$	37,790,974		$	21,776,226

See accompanying notes to the consolidated financial statements.

MAG SILVER CORP.

Notes to the Condensed Interim Consolidated Financial Statements

As at March 31, 2013 (expressed in US dollars unless otherwise stated)

1.           NATURE OF OPERATIONS

MAG Silver Corp. (the “Company” or “MAG”) was incorporated on April 21, 1999 under the Company Act of the Province of British Columbia and its shares were listed on the TSX Venture Exchange on April 21, 2000 and subsequently moved to the TSX on October 5, 2007.

The Company is an exploration and predevelopment company working on mineral properties in Mexico that it has staked or acquired by way of option agreement.  The Company has not yet determined whether these mineral properties contain any economically recoverable ore reserves. The Company defers all acquisition, exploration and development costs related to the properties on which it is conducting exploration. The recoverability of these amounts is dependent upon the existence of economically recoverable reserves, the ability of the Company to obtain the necessary financing to complete the development of the interests, and future profitable production, or alternatively, upon the Company’s ability to dispose of its interests on a profitable basis.

Although the Company has taken steps to verify title to the properties on which it is conducting exploration and in which it has an interest, in accordance with industry standards for the current stage of exploration of such properties, these procedures do not guarantee the Company’s title. Property title may be subject to unregistered prior agreements and non-compliance with regulatory requirements.

Address of registered offices of the Company:

1600 – 925 West Georgia Street

Vancouver, British Columbia,

Canada V6C 3L2

Head office and principal place of business:

770 – 800 West Pender Street

Vancouver, British Columbia,

Canada V6C 2V6

2.           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Statement of compliance

These condensed interim consolidated financial statements are prepared under International Accounting Standard (“IAS”) 34 Interim Financial Reporting, in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”).  They do not include all of the information required for full annual IFRS financial statements and therefore should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2012.

The accounting policies set out below have been applied consistently by the Company and its subsidiaries to all periods presented herein, with the exception of newly adopted accounting pronouncements effective January 1, 2013 (Note 2(o)(i) below).

These consolidated financial statements have been prepared on a historical cost basis except for the revaluation of certain financial instruments, which are stated at their fair value.

 

MAG SILVER CORP.

Notes to the Condensed Interim Consolidated Financial Statements

As at March 31, 2013 (expressed in US dollars unless otherwise stated)

(a)           Basis of consolidation

These consolidated financial statements include the accounts of the Company and the entities controlled by the Company (its subsidiaries, including special purpose entities). Control exists when the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from the entity’s activities. Subsidiaries are included in the consolidated financial results of the Company from the effective date that control is obtained up to the effective date of disposal or loss of control. The principal wholly-owned subsidiaries as at December 31, 2012 are Minera Los Lagartos, S.A. de C.V., Minera Pozo Seco S.A. de C.V., and Minera Sierra Vieja S.A. de C.V.  All intercompany balances, transactions, revenues and expenses have been eliminated upon consolidation.

These consolidated financial statements also include the Company’s 44% interest in the Juanicipio Joint Venture (Note 6), an associate (Note 2(b)) accounted for using the equity method.

Where necessary, adjustments have been made to the financial statements of the Company’s subsidiaries and associates prior to consolidation, to conform the significant accounting policies used in their preparation to those used by the Company.

(b)           Investments in Associates

The Company conducts a portion of its business through an equity interest in associates. An associate is an entity over which the Company has significant influence, and is neither a subsidiary nor a joint venture. The Company has significant influence when it has the power to participate in the financial and operating policy decisions of the associate but does not have control or joint control over those policies.

The Company accounts for its investments in associates using the equity method. Under the equity method, the Company’s investment in an associate is initially recognized at cost and subsequently increased or decreased to recognize the Company's share of earnings and losses of the associate and for impairment losses after the initial recognition date. The Company's share of earnings and losses of associates are recognized in profit or loss during the period. Distributions received from an associate are accounted for as a reduction in the carrying amount of the Company’s investment.

At the end of each reporting period, the Company assesses whether there is any evidence that an investment in associate is impaired. This assessment is generally made with reference to the timing of exploration work, work programs proposed, exploration results achieved, and an assessment of the likely results to be achieved from performance of further exploration by the associate.  When there is evidence that an investment in associate is impaired, the carrying amount of such investment is compared to its recoverable amount. If the recoverable amount of an investment in associate is less than its carrying amount, the carrying amount is reduced to its recoverable amount and an impairment loss, being the excess of carrying amount over the recoverable amount, is recognized in the period of impairment. When an impairment loss reverses in a subsequent period, the carrying amount of the investment in associate is increased to the revised estimate of recoverable amount to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had an impairment loss not been previously recognized. A reversal of an impairment loss is recognized in net earnings in the period the reversal occurs.

MAG SILVER CORP.

Notes to the Condensed Interim Consolidated Financial Statements

As at March 31, 2013 (expressed in US dollars unless otherwise stated)

(c)           Significant Estimates

The preparation of consolidated financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenditures during the reported period. Significant estimates used in preparation of these financial statements include estimates of the net realizable value and any impairment of exploration and evaluation assets and of investment in associates, recoveries of receivable balances, provisions including closure and reclamation, share based payment expense, and income tax provisions. Actual results may differ from those estimated.

(d)           Critical judgments

The Company reviews and assesses the carrying amount of exploration and evaluation assets and of its investment in associates for impairment when facts or circumstances suggest that the carrying amount is not recoverable.  Assessing the recoverability of these amounts requires considerable professional technical judgement, and is made with reference to the timing of exploration work, work programs proposed, exploration results achieved by the Company and by others in the related area of interest, and an assessment of the likely results to be achieved from performance of further exploration (see notes 2 (b) and 2 (g)).

The Company has performed analysis of the functional currency for each subsidiary, and noted the majority of operating expenditures were either denominated in the United States dollar (“US$”) or determined by the US$.  Consequently, the Company concluded that the US$, with the exception of the parent entity which has a Canadian dollar (“C$”) functional currency, is the currency that mainly influences the cost of providing goods and services in each of the Mexican subsidiaries of the Company, and in its Mexican Associate.  The Company also considered secondary indicators including the currency in which funds from financing activities are denominated and the currency in which funds are retained.

(e)           Financial instruments

Financial assets and financial liabilities are recognized when the Company becomes a party to the contractual provisions of the financial instrument. The Company classifies financial instruments as either held-to-maturity, available-for-sale, fair value through profit or loss (“FVTPL”), loans and receivables, or other financial liabilities. Financial assets held to maturity, loans and receivables and other financial liabilities, are subsequently measured at amortized cost.  Available-for-sale instruments are measured at fair value with unrealized gains and losses recognized in other comprehensive income (“OCI”). Instruments classified as FVTPL are measured at fair value with unrealized gains and losses recognized in profit or loss.  

The Company has designated its cash as FVTPL, which is measured at fair value. Accounts receivable are classified as loans and receivables, which are measured at amortized cost. Trade and other payables are classified as other liabilities, which are measured at amortized cost.

MAG SILVER CORP.

Notes to the Condensed Interim Consolidated Financial Statements

As at March 31, 2013 (expressed in US dollars unless otherwise stated)

Marketable securities such as warrants, that meet the definition of a derivative are classified as FVTPL and are measured at fair value with unrealized gains and losses recognized in the statement of comprehensive loss. All of the Company’s other marketable securities have been designated as available-for-sale, and are reported at fair value. Other comprehensive income includes the gains and losses from available-for-sale securities which are not included in profit or loss until realized, and currency translation adjustments on its net investment in foreign operations.

Available-for-sale financial assets are assessed at each reporting date for objective evidence of significant or prolonged decline in fair value requiring impairment. The evaluation includes an analysis of the fact and circumstances of the financial assets, the market price of the actively traded securities and other financial assets, the severity of the loss, the financial position and near-term prospects of the investment, length of time the fair value has been below costs, evidence that the carrying amount is recoverable within a reasonable period of time, management’s intent and ability to hold the financial assets for a period of time sufficient to allow for any anticipated recovery of fair value and management’s market view and outlook.

(f)           Cash

Due to the low market interest rate on deposits and the need to maintain resources liquid for the Company’s ongoing exploration activities, management has maintained the Company’s cash in high interest savings accounts.

(g)           Exploration and evaluation assets

The Company is in the exploration stage with respect to its activities and accordingly follows the practice of capitalizing all costs relating to the acquisition, exploration and evaluation of its mining rights and crediting all revenues received against the cost of the related interests. At such time as commercial production commences, these costs will be depleted on a units-of-production method based on proven and probable reserves. If a mineable ore body is discovered, exploration and evaluation costs are reclassified to mining properties.  If no mineable ore body is discovered, such costs are expensed in the period in which it is determined the property has no future economic value.

Exploration and evaluation expenditures include acquisition costs of rights to explore; topographical, geological, geochemical and geophysical studies; exploratory drilling; trenching and sampling; and activities involved in evaluating the technical feasibility and commercial viability of extracting mineral resources. This includes the costs incurred in determining the most appropriate mining/processing methods and developing feasibility studies.

Management reviews the carrying amount of exploration and evaluation assets for impairment when facts or circumstances suggest that the carrying amount is not recoverable. This review is generally made with reference to the timing of exploration work, work programs proposed, exploration results achieved by the Company and by others in the related area of interest, and an assessment of the likely results to be achieved from performance of further exploration. When the results of this review indicate that indicators of impairment exist, the Company estimates the recoverable amount of the deferred exploration costs and related mining rights by reference to the potential for success of further exploration activity and/or the likely proceeds to be received from sale or assignment of the rights. When the carrying amounts of exploration and evaluation assets are estimated to exceed their recoverable amounts, an impairment loss is recorded in the statement of loss.  The cash-generating unit for assessing impairment is a geographic region and shall be no larger than the operating segment.  If conditions that gave rise to the impairment no longer exist, a reversal of impairment may be recognized in a subsequent period, with the carrying amount of the exploration and evaluation asset increased to the revised estimate of recoverable amount to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had an impairment loss not been previously recognized.  A reversal of an impairment loss is recognized in profit or loss in the period the reversal occurs.

MAG SILVER CORP.

Notes to the Condensed Interim Consolidated Financial Statements

As at March 31, 2013 (expressed in US dollars unless otherwise stated)

(h)           Equipment

Equipment is recorded at cost less accumulated amortization and impairment losses if any, and is amortized at the following annual rates:

Computer equipment Field equipment                                                                Leasehold improvements                                                       30% declining balance 30% declining balance straight line over lease term

When parts of an item of equipment have different useful lives, they are accounted for as separate items (major components) of equipment, and depreciated over their respective useful lives.

(i)           Income taxes

Deferred income taxes relate to the expected future tax consequences of unused tax losses and unused tax credits and differences between the carrying amount of statement of financial position items and their corresponding tax values.  Deferred tax assets, if any, are recognized only to the extent that, in the opinion of management, it is probable that sufficient future taxable profit will be available to recover the asset.  Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of substantive enactment.

(j)           Provisions

Provisions are liabilities that are uncertain in timing or amount. The Company records a provision when and only when:

(i) The Company has a present obligation (legal or constructive) as a result of a past event;

(ii) It is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and

(iii) A reliable estimate can be made of the amount of the obligation.

Constructive obligations are obligations that derive from the Company’s actions where:

MAG SILVER CORP.

Notes to the Condensed Interim Consolidated Financial Statements

As at March 31, 2013 (expressed in US dollars unless otherwise stated)

(i) By an established pattern of past practice, published policies or a sufficiently specific current statement, the Company has indicated to other parties that it will accept certain responsibilities; and

(ii) As a result, the Company has created a valid expectation on the part of those other parties that it will discharge those responsibilities.

Provisions are reviewed at the end of each reporting period and adjusted to reflect management’s current best estimate of the expenditure required to settle the present obligation at the end of the reporting period. If it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the provision is reversed. Provisions are reduced by actual expenditures for which the provision was originally recognized. Where discounting has been used, the carrying amount of a provision increases in each period to reflect the passage of time. This increase (accretion expense) is included in profit or loss for the period.

Closure and reclamation

The Company records a provision for the present value of the estimated closure obligations, including reclamation costs, when the obligation (legal or constructive) is incurred, with a corresponding increase in the carrying value of the related assets.  The carrying value is amortized over the life of the mining asset on a units-of-production basis commencing with initial commercialization of the asset.  The liability is accreted to the actual liability on settlement through charges each period to profit or loss.

The provision for closure and reclamation is reviewed at the end of each reporting period for changes in estimates and circumstances. There was no provision for closure and reclamation as at March 31, 2013 or December 31, 2012.

(k) Functional currency and presentation currency

The functional currency of the parent company MAG is the Canadian dollar (“C$”) and the functional currency of its Mexican subsidiaries and investment in associate is the United States dollar (“US$”).  Each entity in the Company determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency.

The Company’s reporting and presentation currency is the US$.

(l)           Foreign currency transactions

In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s functional currency (foreign currencies) are recorded at the rates of exchange prevailing at the dates of the transactions. At each statement of financial position date, monetary assets and liabilities are translated using the period end foreign exchange rate. Non-monetary assets and liabilities are translated using the historical rate on the date of the transaction. Non-monetary assets and liabilities that are stated at fair value are translated using the rate on the date that the fair value was determined. All gains and losses on translation of these foreign currency transactions are included in profit or loss.

MAG SILVER CORP.

Notes to the Condensed Interim Consolidated Financial Statements

As at March 31, 2013 (expressed in US dollars unless otherwise stated)

(m)           Loss per common share

Basic loss per share calculations is based on the weighted average number of common shares outstanding.

Diluted earnings per share are computed using the weighted average number of common and common equivalent shares outstanding during the year. Common equivalent shares consist of the incremental common shares upon the assumed exercise of stock options and warrants, but are excluded from the computation if their effect is anti-dilutive.

As at March 31, 2013, the Company had 3,654,793 (March 31, 2012: 4,108,618) common share equivalents consisting of the common shares issuable upon the exercise of outstanding exercisable stock options.  These common share equivalents were not included for the purpose of calculating diluted earnings per share as their effect would be anti-dilutive.

(n)           Share based payments

The fair value of all share-based payment expense and other share-based payments are estimated as of the date of the grant using the Black-Scholes-Merton option valuation model and are recorded in profit and loss over their vesting periods.  Stock options with graded vesting schedules are accounted for as separate grants with different vesting periods and fair values. Changes to the estimated number of awards that will eventually vest are accounted for prospectively.

(o)           Changes in Accounting Standards

(i) Adoption of new and amended IFRS Pronouncements

Certain pronouncements were issued by the IASB that are mandatory for accounting periods after December 31, 2012. Pronouncements that are not applicable to the Company have been excluded from those described below. The following new standards have been adopted with retrospective application (unless otherwise stated) effective January 1, 2013:

IAS 1, Presentation of Financial Statements. The amendments to IAS 1 require companies preparing financial statements under IFRS to group items within other comprehensive income that may be reclassified to profit or loss and those that will not be reclassified.

The Company has amended its consolidated statement of comprehensive loss for all periods presented in these condensed interim consolidated financial statements to reflect the presentation changes required under the amended IAS 1. Since these changes are reclassifications within the statement of comprehensive loss, there is no net impact on the Company’s comprehensive loss.

IFRS 10 Consolidated Financial Statements. IFRS 10 establishes principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entities. This IFRS defines the principle of control and establishes control as the basis for determining which entities are consolidated in an entity’s financial statements.  IFRS 10 supersedes IAS 27 Consolidated and Separate Financial Statements and SIC-12 Consolidation—Special Purpose Entities.

MAG SILVER CORP.

Notes to the Condensed Interim Consolidated Financial Statements

As at March 31, 2013 (expressed in US dollars unless otherwise stated)

IFRS 10 did not have an effect on the Company’s consolidated financial statements for the current period or prior periods presented as the adoption did not result in a change in the consolidation status of any subsidiaries or the associate.

IFRS 11 Joint Arrangements and IAS 28 Investments in Associates and Joint Ventures.If an arrangement results in joint control, IFRS 11 classifies joint arrangements as either joint operations or joint ventures, depending on the rights and obligations of the parties involved.  IAS 28 as amended in May 2011, provides detailed guidance on the application of the equity method to associates, subsidiaries and joint ventures (previously excluded from this standard).

The Company completed an analysis of its investment in Minera Juancipio to determine the appropriate accounting treatment under IFRS 11 and IAS 28, and to assess whether there would be any changes required from the previous equity method of accounting.  Based on the analysis, the Company has concluded that it has significant influence over Minera Juanicipio, but not joint control.  Accordingly, the accounting treatment as an “Investment in Associate” remains unaffected, and the adoption of IFRS 11 and IAS 28 do not have an effect on the Company’s consolidated financial statements for any of the periods presented.

IFRS 12 Disclosure of Involvement with Other Entities. IFRS 12 outlines the disclosure requirements for interests in subsidiaries and other entities to enable users to evaluate the risks associated with interests in other entities and the effects of those interests on an entity’s financial position, financial performance and cash flows.

The requirements of IFRS 12 relate to disclosures only and are applicable for the first annual period after adoption. IFRS 12 does not require the disclosures to be included for any period presented that precedes the first annual period for which IFRS 12 is applied. Accordingly, the Company will include additional disclosures about interests in other entities in its annual consolidated financial statements for the year ended December 31, 2013. This will include summarized financial information for significant associates.

IFRS 13 Fair Value Measurement. IFRS 13 defines fair value, sets out a single IFRS framework for measuring fair value and outlines disclosure requirements for fair value measurements. IFRS 13 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is a market-based measurement, not an entity-specific measurement, so assumptions that market participants would use should be applied in measuring fair value.

This standard has no significant accounting impact on the Company given its existing asset and liability mix to which fair value accounting applies.

IAS 27 Consolidated and Separate Financial Statements,as amended in May 2011, provides guidance on the accounting and disclosure requirements for subsidiaries, jointly controlled entities, and associates in separate, or unconsolidated, financial statements. This standard does not mandate which entities produce separate financial statements and it has no impact on the Company’s consolidated financial statements.

MAG SILVER CORP.

Notes to the Condensed Interim Consolidated Financial Statements

As at March 31, 2013 (expressed in US dollars unless otherwise stated)

(ii) Recent Accounting Pronouncements

The Company has reviewed new accounting pronouncements that have been issued but are not yet effective. These include:

The Company will be required to adopt IFRS 9 Financial Instruments, which replaces the current standard, IAS 39 Financial Instruments: Recognition and Measurement. The new standard replaces the current classification and measurement criteria for financial assets and liabilities with only two classification categories: amortized cost and fair value, and is effective for annual periods beginning on or after January 1, 2015, with early application permitted.

The Company has not early adopted this standard and is currently evaluating the impact, if any, that the standard might have on its consolidated financial statements.

3. ACCOUNTS RECEIVABLE

	March 31, 2013		Dec. 31, 2012
Harmonized sales tax ("HST") recoverable	$	141,308	$	73,965
Mexican value added tax ("IVA") recoverable		600,195		478,944
Interest receivable		11,229		19,386
	$	752,732	$	572,295

All amounts are current and expected to be recovered within a year.

4. MARKETABLE SECURITIES

     At March 31, 2013, the Company holds the following marketable securities:

							Dec. 31,
	March 31, 2013						2012
	Number
	of
	Shares		Cost		Fair Value		Fair Value
Available-for-sale securities
Fresnillo PLC		1,000	$	9,915	$	20,592	$	30,022
Canasil Resources Inc. Common Shares  (1)		2,750,000		605,345		216,546		400,784
				615,260		237,138		430,806

In 2008, the Company purchased 1,000 shares of Fresnillo plc, a company which holds a 56% interest in Minera Juanicipio, S.A. De C.V. (Note 6).  In 2010 and 2011, the Company acquired shares in Canasil Resources Inc. (“Canasil”) as part of the Esperanza property option agreement, which was subsequently abandoned.

During the quarter ended March 31, 2013, the Company recorded an unrealized loss, net of tax, of $13,197 (March 31, 2012: gain net of tax of $163,719) in other comprehensive income (loss) on the above marketable securities designated as available-for-sale instruments.

MAG SILVER CORP.

Notes to the Condensed Interim Consolidated Financial Statements

As at March 31, 2013 (expressed in US dollars unless otherwise stated)

(1)Available-for-sale financial assets are assessed at each reporting date for objective evidence of significant or prolonged decline in fair value requiring impairment. As at March 31, 2013, after management’s review and based on objective evidence, a further impairment of $175,944 (March 31, 2012: not impaired) was recognized on the Canasil investment, in the consolidated statement of loss which represents the difference between the carrying value and the fair market value at the measurement date.

5. EQUIPMENT

Cost	Computer equipment			Field equipment			Leasehold improvements			Total
Balance as at January 1, 2012	$	241,420		$	159,312		$	7,538		$	408,270
Additions		4,132			-			-			4,132
Translation adjustment		5,360			3,532			167			9,059
Balance as at December 31, 2012	$	250,912		$	162,844		$	7,705		$	421,461
Additions		-			-			-			-
Translation adjustment		(5,192	)		(3,370	)		(159	)		(8,721	)
Balance as at March 31, 2013	$	245,720		$	159,474		$	7,546		$	412,740
Accumulated depreciation	Computer equipment			Field equipment			Leasehold improvements			Total
Balance as at January 1, 2012	$	148,787		$	115,898		$	3,390		$	268,075
Additions		29,518			13,250			1,533			44,301
Translation adjustment		3,430			2,631			83			6,144
Balance as at December 31, 2012	$	181,735		$	131,779		$	5,006		$	318,520
Additions		5,121			2,300			380			7,801
Translation adjustment		(3,801	)		(2,745	)		(105	)		(6,651	)
Balance as at March 31, 2013	$	183,055		$	131,334		$	5,281		$	319,670
Carrying amounts	Computer equipment			Field equipment			Leasehold improvements			Total
At December 31, 2012	$	69,177		$	31,065		$	2,699		$	102,941
At March 31, 2013	$	62,665		$	28,140		$	2,265			93,070

6.           INVESTMENT IN ASSOCIATE (“MINERA JUANICIPIO S.A. DE C.V.”)

Pursuant to an original option agreement dated July 18, 2002 and subsequent corporate transactions to acquire 100% of the Vendor Corporation, the Company acquired a 100% interest in the Juanicipio property effective July 16, 2003.  Pursuant to a letter of intent dated March 17, 2005 and a formal agreement effective July 1, 2005 (the “Agreement”) with Industrias Peñoles, S.A. de C.V. (“Peñoles”), the Company granted Peñoles or any of its subsidiaries an option to earn a 56% interest in the Juanicipio Property in Mexico in consideration for Peñoles conducting $5,000,000 of exploration on the property over four years and Peñoles purchasing $1,000,000 of common shares of the Company in two tranches for $500,000 each.

MAG SILVER CORP.

Notes to the Condensed Interim Consolidated Financial Statements

As at March 31, 2013 (expressed in US dollars unless otherwise stated)

In mid 2007, Peñoles met all of the earn-in requirements of the Agreement.  In December 2007, the Company and Peñoles created an operating company named Minera Juanicipio, S.A. de C.V. (“Minera Juanicipio”) for the purpose of holding and operating the Juanicipio Property. In 2008, MAG was notified that Peñoles had transferred its 56% interest of Minera Juanicipio to Fresnillo plc (“Fresnillo”) pursuant to a statutory merger.  Minera Juanicipio is held 56% by Fresnillo and 44% by the Company.  In December 2007 all mineral rights and surface rights relating to the Juanicipio project held by the Company and Peñoles, respectively, were ceded into Minera Juanicipio.  Minera Juanicipio is currently governed by a shareholders agreement.  All costs relating to the project and Minera Juanicipio are required to be shared by the Company and Fresnillo pro-rata based on their ownership interests in Minera Juanicipio.

The Company has recorded its investment in Minera Juanicipio using the equity basis of accounting. The cost of the investment includes the carrying value of the deferred exploration and mineral and surface rights costs incurred by the Company on the Juanicipio Property and contributed to Minera Juanicipio plus the required net cash investment to establish and maintain its 44% interest.

The Company’s investment relating to its interest in the Juanicipio property and Minera Juanicipio is detailed as follows:

	March 31, 2013			Dec. 31, 2012
Joint venture oversight expenditures incurred 100% by MAG		77,536			879,851
Cash contributions to Minera Juanicipio (1)		-			3,697,760
Total for the current period		77,536			4,577,611
Balance, beginning of year (January 1, 2013 and 2012)		19,502,181			14,910,985
	$	19,579,717		$	19,488,596
Translation adjustment		(12,961	)		13,585
Balance, end of period	$	19,566,756		$	19,502,181
(1) Represents the Company's 44% share of Minera Juanicipio cash contributions for the period.

Subsequent to March 31, 2013, the Company advanced $1,188,000 to Minera Juanicipio representing its proportionate 44% share of a Juanicipio cash call for 2013 second quarter expenditures.

Summary of unaudited financial information of Minera Juanicipio:

Evaluation and exploration expenditures incurred directly by Minera Juanicipio for the period ended March 31, 2013 amounted to $1,542,301 (March 31, 2012: $1,632,953).

At March 31, 2013, the assets of Minera Juanicipio consisted of cash and short term investments in the amount of $949,000 (March 31, 2012 - $261,000), value added taxes recoverable and other receivables in the amount of $1,393,000 (March 31, 2012 - $988,000) and mineral, surface rights and exploration expenditures in the amount of $37.4 million (March 31, 2012 - $33 million). Payables to Peñoles and other vendors for exploration work amounted to $121,000 (March 31, 2012 - $108,000), deferred income taxes of Nil (March 31, 2012 - $540,000) and equity was $39.6 million (March 31, 2012 - $33.6 million). There are no significant expenses or income in Minera Juanicipio, as all mineral, surface rights and exploration expenditures are capitalized.

MAG SILVER CORP.

Notes to the Condensed Interim Consolidated Financial Statements

As at March 31, 2013 (expressed in US dollars unless otherwise stated)

7.           EXPLORATION AND EVALUATION ASSETS

The Company has the following exploration and evaluation assets:

	Three Months ended March 31, 2013
	Cinco de		Lagartos		(Batopilas)
	Mayo		Properties		Don Fippi		Mojina		Other		Total
Exploration and evaluation assets
Acquisition costs of mineral & surface rights	$	-	$	-	$	-	$	150,765	$	-	$	150,765
Camp costs		48,906		6,481		9,000		1,887		50		66,324
Drilling and preparation		53,544		-		-		-		-		53,544
Geochemical		27,162		-		-		-		-		27,162
Geological		321,439		17,865		41,153		8,575		7,525		396,557
Geophysical		-		-		-		-		-		-
Gov't fees and licenses		75,654		242,045		21,020		8,506		220,743		567,968
Metallurgical		-		-		-		-		-		-
Site administration		172,732		820		1,412		218		371		175,553
Transport and shipping		21,661		887		720		100		-		23,368
Travel		25,891		303		2,653		197		1,133		30,177
Total for the period		746,989		268,401		75,958		170,248		229,822		1,491,418
Balance January 1, 2013		43,932,956		12,148,613		6,189,294		1,424,871		5,441,818		69,137,552
Balance, Mar. 31, 2013	$	44,679,945	$	12,417,014	$	6,265,252	$	1,595,119	$	5,671,640	$	70,628,970

	Year ended December 31, 2012
	Cinco de		Lagartos			(Batopilas)
	Mayo		Properties			Don Fippi		Esperanza			Mojina		Other		Total
Exploration and evaluation assets
Acquisition costs of mineral & surface rights	$	20,000	$	-		$	-	$	175,739		$	81,132	$	-	$	276,871
Camp costs		388,230		27,416			4,093		56,078			54,786		2,183		532,786
Drilling and preparation		4,768,598		96,420			-		857,168			107,291		-		5,829,477
Geochemical		850,916		27,717			-		18,349			46,755		-		943,737
Geological		1,796,736		58,638			14,272		221,266			75,879		13,900		2,180,691
Geophysical		-		-			-		-			-		-		-
Gov't fees and licenses		96,615		806,107			24,524		109,675			21,846		238,467		1,297,234
Metallurgical		34,579		-			-		-			-		-		34,579
Site administration		155,732		2,983			2,497		18,140			8,646		1,670		189,668
Transport and shipping		103,623		5,576			4,203		8,228			7,511		100		129,241
Travel		114,850		2,371			4,198		7,092			3,191		3,705		135,407
Total for the year		8,329,879		1,027,228			53,787		1,471,735			407,037		260,025		11,549,691
Balance January 1, 2012		35,603,077		12,017,484			6,135,507		996,645			1,017,834		5,181,793		60,952,340
Less amounts written off		-		(896,099	)		-		(2,468,380	)		-		-		(3,364,479	)
Balance, Dec. 31, 2012	$	43,932,956	$	12,148,613		$	6,189,294	$	-		$	1,424,871	$	5,441,818	$	69,137,552

Included in exploration and evaluation assets at March 31, 2013 are trade and other payables of $492,406 (March 31, 2012: $2,680,791), a non-cash investing activity.

MAG SILVER CORP.

Notes to the Condensed Interim Consolidated Financial Statements

As at March 31, 2013 (expressed in US dollars unless otherwise stated)

(a)          Cinco de Mayo Property

Under the terms of an agreement dated February 26, 2004, the Company acquired a 100% interest in the Cinco de Mayo property (the “Cinco de Mayo Property”), subject to a 2.5% net smelter returns (“NSR”) royalty.  During the year ended December 31, 2008, the Company acquired a 100% interest in certain additional mining concessions internal to the Cinco de Mayo Property from two separate vendors. The Company made a one-time payment of $350,000 for these mining concessions.  During the year ended December 31, 2009, the Company acquired a 100% interest in certain additional mining concessions internal or adjacent to the Cinco de Mayo property from three separate vendors. The Company made a one-time payment of $362,000 for these mining concessions.

During the year ended December 31, 2010, the Company entered into two option agreements to earn a 100% interest in five additional mining concessions adjacent to the Cinco de Mayo property. The Company paid $40,000 upon executing the agreements, and further payments of $30,000 since then. In order to earn its 100% interest on these additional claims, the Company must pay an additional $150,000 in stages through 2015 (Note 14).

During the year ended December 31, 2009, the Company also purchased 41 surface rights in the Cinco de Mayo area for $660,000 from local Ejido members, who along with the Federal Agrarian Authority ratified the purchase. The Company is currently awaiting formal title to the surface rights as certain members of the Ejido have since challenged the purchase, and prevented the Company from obtaining surface access permission required as part of a new Federal Government exploration permit process.  The Company believes this is a temporary delay and is working to resolve the access issue with the Ejido, with the expectation of resuming drilling on the property late in 2013.

To March 31, 2013, the Company has incurred $44,679,945 on exploration and evaluation costs on the property.

(b)           Lagartos Properties

The Company has acquired a 100% interest in exploration concessions on various mining claims on the Fresnillo trend to the northwest (“Lagartos NW” and “Lagartos V”) and to the southeast (“Lagartos SE”) of the Juanicipio property, (collectively the “Lagartos Properties”).  To March 31, 2013, the Company has incurred $12,417,014 on exploration and evaluation expenditures on the Lagartos properties.

At December 31, 2012 the Company wrote-off expenditures related to a claim to the northeast (the ‘Lagartos X’ claim) for an amount of $896,099, as exploration results failed to meet the Company’s criteria for maintaining the property.

(c)            Don Fippi (Batopilas) Property

The Company has a 100% interest in the Don Fippi mining concessions located in the Batopilas, Chihuahua district of Mexico, subject to a royalty of 4.5% of the net smelter returns obtained from the property. To March 31, 2013, the Company has incurred $6,265,252 on exploration and evaluation costs on the property.

MAG SILVER CORP.

Notes to the Condensed Interim Consolidated Financial Statements

As at March 31, 2013 (expressed in US dollars unless otherwise stated)

 (d) Mojina Property

On March 30, 2010, the Company entered into an option agreement to earn a 100% interest in the Mojina Property, subject to a 2.5% NSR royalty, half of which can be purchased at any time for $1,250,000.  Under the terms of the agreement, the Company paid $35,000 upon signing the agreement and an additional $65,000 in 2010, $61,181 in 2011, $81,132 in January 2012 and $150,765 in January 2013.  To earn its 100% interest, the Company is required to make additional scheduled cash payments totalling C$660,000 through 2015, and incur cumulative qualifying exploration expenditures totalling $2,500,000 over five years to 2015 (Note 14), including expenditures of $800,000 by March 31, 2013 which have been completed.  To March 31, 2013, the Company had incurred $1,595,119 in exploration and evaluation costs, including $1,136,103 in qualifying expenditures under the agreement.

On June 25, 2010, the Company acquired by concession an additional claim adjacent to the optioned claims.

(e)           Other Properties

Other properties consist of the Lorena claims, the Nuevo Mundo claims, and the Guigui claim options, all in Mexico.  To March 31, 2013, the Company had incurred $5,671,640 in exploration and evaluation costs on these remaining other properties.

There were no exploration and evaluation assets written off in the quarter ended March 31, 2013 (March 31, 2012 – nil).  During the year ended December 31, 2012, the Company wrote down exploration and evaluation assets totalling $896,099 for the Lagartos X claim (see Note 7(b) above) as well as $2,468,380 relating to the Esperanza Property as exploration assay results failed to meet the Company’s criteria for maintaining the property.

8.           SHARE CAPITAL

(a)           Issued and outstanding

At March 31, 2013, there were 60,141,718 shares outstanding (December 31, 2012: 60,023,835).

During the period ended March 31, 2013, 117,883 stock options were exercised for cash proceeds of $848,181 (March 31, 2012 – nil).

On September 5, 2012, the Company closed a brokered private placement for 3,526,210 common shares of the Company at a price of C$9.40 per share for gross proceeds of $33,451,321. The Company paid a 5.25% commission of $1,756,194 to the underwriters on this placement, and legal and filing costs totaled an additional $408,774.

During the year ended December 31, 2012, 824,901 stock options were exercised for cash proceeds of $5,464,805. On June 18, 2012, 20,000 additional stock options were exercised under a cashless exercise provision of the plan, whereby the Company paid $13,735 in employee withholding taxes and issued 5,585 shares in settlement of the stock options.

MAG SILVER CORP.

Notes to the Condensed Interim Consolidated Financial Statements

As at March 31, 2013 (expressed in US dollars unless otherwise stated)

(b)           Stock options

The Company has entered into Incentive Stock Option Agreements (“Agreements”) with directors, officers, employees and consultants. At the Annual General and Special Meeting of the Shareholders held on September 15, 2011 the shareholders approved an amendment to the Company’s Stock Option Plan (the “Plan”) to convert it into a rolling stock option plan that sets the number of shares issuable thereunder at a maximum of 8% of the common shares of the Company issued and outstanding at the time of any grant.  As at March 31, 2013, 3,354,793 stock options are outstanding under the Plan, 1,456,544 stock options remain available for grant under the Plan, and 300,000 inducement options are outstanding outside of the Plan.

The following table summarizes the Company’s option activity:

				Weighted					Weighted
	Period ended			average		Year ended			average
	March 31			exercise price		December 31,			exercise price
	2013			(C$/option)		2012			(C$/option)
Balance outstanding,
beginning of year		3,963,717		$	9.57		4,123,618		$	9.25
Options granted  (1)		100,000			9.61		1,160,000			9.92
Options expired/forfeited		(291,041	)		12.63		(475,000	)		13.59
Options exercised (2)		(117,883	)		7.25		(844,901	)		6.43
Balance outstanding,
end of period		3,654,793		$	9.33		3,963,717		$	9.57

(1)  During the quarter ended March 31, 2013, 100,000 stock options were granted (March 31, 2012 - nil), with a weighted average exercise price of C$9.61 (March 31, 2012 - nil) and a fair value of $313,495 (March 31, 2012 - nil) or $3.13 (March 31, 2012 - nil) per option as of the grant date.  The fair value was determined for the quarter ended March 31, 2013 using an option pricing model assuming no dividends are to be paid, a weighted average historical volatility of the Company’s share price of 48% (March 31, 2012 – n/a), an annual risk free interest rate of 1.19% (March 31, 2012 – n/a) and expected lives of three years.

Stock option grants are approved, in accordance with the terms of the Plan, by the Compensation Committee consisting of three independent members of the Board of Directors.  At the time of a stock option grant, the exercise price of each option is set no lower than the market value of the common shares at the date of grant.

During the quarter ended March 31, 2013, the Company recorded share based payment expense of $636,600 (March 31, 2012: $375,856) relating to stock options vested to employees and consultants in the period.

(2) During the quarter ended March 31, 2013, 117,883 stock options were exercised (March 31, 2012: Nil), with a weighted average market share price at the time of exercise of C$10.84 per share (March 31, 2012 - nil).

MAG SILVER CORP.

Notes to the Condensed Interim Consolidated Financial Statements

As at March 31, 2013 (expressed in US dollars unless otherwise stated)

The following table summarizes the Company’s stock options outstanding and exercisable as at March 31, 2013:

		Number	Number	Weighted average	Weighted
	Exercise	outstanding at	exercisable at	remaining	average
	price ($C/	March 31	March 31	contractual life	exercise
	option)	2013	2013	(years)	price ($C)
	5.32	72,696	72,696	1.23
	5.54	98,594	98,594	1.06
	6.32	95,383	95,383	1.71
	6.95	185,000	185,000	2.40
	7.42	225,000	225,000	1.99
(1)	8.15	200,000	200,000	2.40
	8.95	100,000	66,667	4.21
	9.15	735,334	312,000	4.34
(1)	9.61	100,000	33,333	4.92
	9.92	589,285	589,285	2.73
	10.01	206,001	206,001	0.25
	10.44	732,500	546,500	3.42
	11.89	15,000	15,000	2.74
	12.19	300,000	100,000	4.51
		3,654,793	2,745,459	3.12	$    9.33
(1)	Inducement options issued outside the Company's Plan as an incentive to attact senior officers for employment.

9.           CAPITAL RISK MANAGEMENT

The Company’s objectives in managing its liquidity and capital are to safeguard the Company’s ability to continue as a going concern and to provide financial capacity to meet its strategic objectives. The capital structure of the Company consists of its equity comprising of share capital, share option reserve, accumulated other comprehensive income and deficit.

The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Company may attempt to issue new shares, issue new debt, acquire or dispose of assets.

In order to facilitate the management of its capital requirements, the Company prepares annual expenditure budgets that are updated as necessary depending on various factors, including successful capital deployment and general industry conditions. The annual and updated budgets are approved by the Board of Directors. The Company does not pay out dividends.

As March 31, 2013, the Company does not have any long-term debt and is not subject to any externally imposed capital requirements.

The Company currently has sufficient working capital ($37.9 million) to maintain all of its properties and currently planned programs for a period in excess of the next year.  In management’s opinion, the Company is able to meet its ongoing current obligations as they become due. However, the Company will likely require additional capital in the future to meet its project related expenditures (see Note 14), as it is unlikely that the Company will generate sufficient operating cash flow to meet all of its future expenditure requirements. Future liquidity will depend upon the Company’s ability to arrange additional debt or equity financing, as the Company relies on equity financings to fund its exploration and corporate activities.

MAG SILVER CORP.

Notes to the Condensed Interim Consolidated Financial Statements

As at March 31, 2013 (expressed in US dollars unless otherwise stated)

10.           FINANCIAL RISK MANAGEMENT

The Company’s operations consist of the acquisition, exploration and development of district scale projects in the Mexican silver belt. The Company examines the various financial risks to which it is exposed and assesses the impact and likelihood of occurrence. These risks may include credit risk, liquidity risk, currency risk, interest rate risk and other price risks. Where material, these risks are reviewed and monitored by the Board of Directors.

(a)           Credit risk

Counterparty credit risk is the risk that the financial benefits of contracts with a specific counterparty will be lost if a counterparty defaults on its obligations under the contract. This includes any cash amounts owed to the Company by those counterparties, less any amounts owed to the counterparty by the Company where a legal right of set-off exists and also includes the fair values of contracts with individual counterparties which are recorded in the financial statements.

(i)           Trade credit risk

The Company is in the exploration stage and has not yet commenced commercial production or sales. Therefore, the Company is not exposed to significant trade credit risk and overall the Company’s credit risk has not changed significantly from the prior year.

(ii)          Cash

In order to manage credit and liquidity risk the Company’s policy is to invest only in highly rated investment grade instruments that have maturities of three months or less. Limits are also established based on the type of investment, the counterparty and the credit rating.

(iii)         Mexican value added tax

As at March 31, 2013, the Company had a receivable of $600,195 from the Mexican government for value added tax (Note 3). The balance is all current and a full recovery is expected by management.

The Company’s maximum exposure to credit risk as at March 31, 2013 is the carrying value of its cash and accounts receivable (Note 3), as follows:

	March 31, 2013		Dec. 31, 2012
Cash	$	37,790,974	$	40,621,158
Accounts receivable		752,732		572,295
	$	38,543,706	$	41,193,453

(b)           Liquidity risk

The Company has a planning and budgeting process in place to help determine the funds required to support the Company's normal operating requirements, its exploration and development plans, and its various optional property and other commitments (see Notes 6, 7 and 14). The annual budget is approved by the Board of Directors. The Company ensures that there are sufficient cash balances to meet its short-term business requirements.

The Company's overall liquidity risk has not changed significantly from the prior year.

(c)           Currency risk

The Company is exposed to the financial risks related to the fluctuation of foreign exchange rates, both in the Mexican Peso relative to the US$, and in the US$ relative to the C$. The Company does not use any derivative instruments to reduce its exposure to fluctuations in foreign exchange rates.  The Company is also exposed to inflation risk in Mexico.

Mexican Peso relative to the US$

Although the majority of operating expenses in Mexico are both determined and denominated in US$, an appreciation in the Mexican peso relative to the US$ will slightly increase the Company’s cost of operations in Mexico related to those operating costs denominated and determined in Mexican pesos.

A depreciation in the Mexican peso against the US$ will result in a loss to the extent that the Company holds net monetary assets in pesos. Specifically, the Company's foreign currency exposure is comprised of peso denominated cash and value added taxes receivable, net of trade and other payables. The carrying amount of the Company’s net peso denominated monetary assets at March 31, 2013 is 4,042,660 Mexican pesos (March 31, 2012 is 7,661,554 pesos).  A 10% depreciation in the peso relative to the US$ would result in an additional loss as at March 31, 2013 of $32,722 (March 31, 2012 of $59,628).  A 10% appreciation in the peso against the US$ would result in an equivalent decrease in net loss.

US$ relative to the C$, the Cumulative Translation Adjustment and Exchange gains (losses)

Each entity in the Company determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency, and then translated to the US$ presentation currency. The functional currency of MAG, the parent entity, is the C$ which differs from the US$ presentation currency.  It therefore translates its results and financial position into the US$ presentation currency in accordance with IAS 21 The Effects of Changes in Foreign Exchange Rates, whereby assets and liabilities are translated to the reporting currency using the exchange rate at period end, and income, expenses and cash flow items are translated using the rate that approximates the exchange rates at the dates of the transactions (i.e. the average rate for the period), with the resulting exchange differences reported as a cumulative translation adjustment in other comprehensive income.

MAG SILVER CORP.

Notes to the Condensed Interim Consolidated Financial Statements

As at March 31, 2013 (expressed in US dollars unless otherwise stated)

The sensitivity of the Company's other comprehensive loss for the quarter ended March 31, 2013 due to changes in the C$ exchange rate in relation to the US$ is summarized as follows: a 10% appreciation in the Canadian dollar against the US$ would decrease the comprehensive loss for the period by $3,667,212 and increase the exchange loss in the statement of loss by $2,265,082.  A 10% depreciation in the Canadian dollar against the US$ would increase the comprehensive loss by an equivalent amount, and also decrease the exchange loss by an equivalent amount.

During the quarter ended March 31, 2013, the Company recognized a currency translation loss in other comprehensive income (loss) of $843,063 (March 31, 2012: translation gain of $486,753) resulting from the translation from C$ to US$ of the Company’s parent entity, which has a C$ functional currency. The C$ as measured against the US$ was 0.9843 at March 31, 2013, compared to 1.0051 US$/C$ at December 31, 2012.

(d)           Interest rate risk

The Company’s interest revenue earned on cash is exposed to interest rate risk. A decrease in interest rates would result in lower relative interest income and an increase in interest rates would result in higher relative interest income.

11.           FINANCIAL INSTRUMENTS AND FAIR VALUE DISCLOSURES

The Company’s financial instruments include cash, accounts receivable, marketable securities and trade and other payables.  The carrying values of cash, accounts receivable, interest receivable, and trade and other payables reported in the consolidated statement of financial position approximate their respective fair values due to the relatively short-term nature of these instruments.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy establishes three levels to classify the inputs to valuation techniques used to measure fair value. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices in markets that are not active, quoted prices for similar assets or liabilities in active markets, inputs other than quoted prices that are observable for the asset or liability (for example, interest rate and yield curves observable at commonly quoted intervals, forward pricing curves used to value currency and commodity contracts and volatility measurements used to value option contracts), or inputs that are derived principally from or corroborated by observable market data or other means. Level 3 inputs are unobservable (supported by little or no market activity). The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs.

The Company’s financial assets or liabilities as measured in accordance with the fair value hierarchy described above are:

MAG SILVER CORP.

Notes to the Condensed Interim Consolidated Financial Statements

As at March 31, 2013 (expressed in US dollars unless otherwise stated)

Fair Value Hierarchy	March 31, 2013		Dec. 31, 2012
Level 1 (1)	$	38,028,112	$	41,051,964
Level 2 (2)		-		-
Level 3 (3)		-		-
	$	38,028,112	$	41,051,964

(1) The fair value of available-for-sale marketable securities (Note 4) is determined based on a market approach reflecting the closing price of each particular security as at the statement of financial position date. The closing price is a quoted market price obtained from the exchange that is the principal active market for the particular security, and therefore available-for-sale securities are classified within Level 1 of the fair value hierarchy.

(2) There were no financial instruments fair valued within Level 2 of the fair value hierarchy as at March 31, 2013 or December 31, 2012.

(3) There were no financial instruments fair valued within Level 3 of the fair value hierarchy as at March 31, 2013 or December 31, 2012.

There were no transfers between levels 1, 2 and 3 during the quarter ended March 31, 2013 or year ended December 31, 2012.

12.           SEGMENTED INFORMATION

The Company operates in one operating segment, being the exploration of mineral properties in Mexico. Substantially all of the Company’s long term assets are located in Mexico and the Company’s executive and head office is located in Canada.

13.           RELATED PARTY TRANSACTIONS

The Company does not have offices or direct personnel in Mexico, but rather is party to a Field Services Agreement, whereby it has contracted administrative and exploration services in Mexico with MINERA CASCABEL S.A. de C.V. (“Cascabel”) and IMDEX Inc. (“IMDEX”).  These companies have a common director with the Company, however, all transactions are incurred in the normal course of business, and are measured at the exchange amount which was the consideration established and agreed to by the noted parties, and represents a fair market value for services rendered.  A significant portion of the expenditures are incurred on the Company’s behalf, and are charged to the Company on a “cost + 10%” basis typical of industry standards.

During the quarter ended March 31, 2013, the Company accrued or paid Cascabel and IMDEX consulting and administration fees and reimbursement of travel costs totaling $80,469 (March 31, 2012: $80,175) and exploration reimbursements and other field costs totaling $563,804 respectively (March 31, 2012: $503,246) under the Field Services Agreement.  Included in trade and other payables at March 31, 2013 is $487,984 related to these services (March 31, 2012: $414,694).

The Company is obligated to a 2.5% NSR royalty to Cascabel under the terms of an option agreement dated February 26, 2004, whereby the Company acquired a 100% interest in the Cinco de Mayo property from Cascabel.

MAG SILVER CORP.

Notes to the Condensed Interim Consolidated Financial Statements

As at March 31, 2013 (expressed in US dollars unless otherwise stated)

Any amounts due to related parties arising from the above transactions are unsecured, non-interest bearing and are due upon receipt of invoices.

The immediate parent and ultimate controlling party of the consolidated group is MAG Silver Corp. (incorporated in British Columbia, Canada).

The details of the Company’s subsidiaries and ownership interests are as follows:

Significant subsidiaries of the Company are as follows:
			MAG' effective interest
Name	Country of Incorporation	Principal Activity	2013		(%)	2012		(%)
Minera Los Lagartos, S.A. de C.V.	Mexico	Exploration		100	%		100	%
Minera Pozo Seco S.A. de C.V.	Mexico	Exploration		100	%		100	%
Minera Sierra Vieja S.A. de C.V.	Mexico	Exploration		100	%		100	%

Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note.

Minera Juanicipio, S.A. de C.V. (“Minera Juanicipio”), created for the purpose of holding and operating the Juanicipio Property, is held 56% by Fresnillo plc (“Fresnillo”) and 44% by the Company.  Minera Juanicipio is currently governed by a shareholders agreement.  All costs relating to the project and Minera Juanicipio are required to be shared by the Company and Fresnillo pro-rata based on their ownership interests in Minera Juanicipio (see Note 6).

Compensation of Key Management Personnel including Directors

During the period, compensation of key management personnel was as follows:
	Three months ended March 31
	2013		2012
Salaries and other short term employee benefits	$	228,036	$	204,320
Share based payments		473,670		343,384
	$	701,706	$	547,704

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Company, directly or indirectly, and consists of its Directors, the Chief Executive Officer, the Chief Financial Officer and the Vice President of Operations.

14.           COMMITMENTS

As at March 31, 2013, the Company’s minimum lease payments under its office lease agreement and its contractual obligations for optional mineral property acquisition payments and optional exploration work are as follows:

MAG SILVER CORP.

Notes to the Condensed Interim Consolidated Financial Statements

As at March 31, 2013 (expressed in US dollars unless otherwise stated)

			Property		Exploration
	Office Lease		Option Payments		Commitments		Total
			(Note 7)		(Note 7)
2013	$	122,996	$	20,000	$	-	$	142,996
2014		163,995		216,860		363,897		744,752
2015		-		562,778		1,000,000		1,562,778
	$	286,991	$	799,638	$	1,363,897	$	2,450,526

As these consolidated financial statements have been prepared using the accrual basis of accounting (except for cash flow information), these commitments are not recorded as liabilities until incurred or until due under the terms of the option agreement.

The Company could be subject to various investigations, claims and legal and tax proceedings covering matters that arise in the ordinary course of business activities. Each of these matters would be subject to various uncertainties and it is possible that some matters may be resolved unfavourably to the Company.  Certain conditions may exist as of the date of the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur.  The Company is not aware of any such claims or investigations, and as such has not recorded any related provisions and does not expect such matters to result in a material impact on the results of operations, cash flows and financial position.

Other contractual obligations include a 2.5% NSR royalty under the terms of an agreement dated February 26, 2004, whereby the Company acquired a 100% interest in the Cinco de Mayo property, a 2.5% NSR royalty on the interest in the Guigui mining concessions, a 4.5% NSR royalty on the interest in the Don Fippi mining concessions located in the Batopilas, and a 2.5% NSR royalty under the terms an agreement dated March 30, 2010, whereby the Company entered into an option agreement to earn a 100% interest in the Mojina Property (Note 7).

The Company makes cash deposits to Minera Juanicipio from time to time as cash called by operator Fresnillo (Note 6). The scale and scope of the Juanicipio project could require development capital in the years ahead exceeding the Company’s on hand cash resources.  It is unlikely that the Company will generate sufficient operating cash flow to meet these ongoing obligations in the foreseeable future.  Accordingly the Company may need to raise additional capital by issuance of equity in the future.

15.           INCOME TAXES

The income tax recognized in profit or loss is as follows:

	For the		For the
	three month		three month
	period ended		period ended
	March 31, 2013		March 31, 2012
Current tax expense	$	-	$	-
Deferred tax recovery		-		840,052
Total income tax recovery for the period	$	-	$	840,052

MAG SILVER CORP.

Notes to the Condensed Interim Consolidated Financial Statements

As at March 31, 2013 (expressed in US dollars unless otherwise stated)

The Company incurred a loss before tax for the quarter ended March 31, 2013 of $1,594,423 (March 31, 2012 of $1,594,423).  As insufficient evidence exists to support current or future realization of the tax benefits associated with this loss, the benefit of certain tax assets have not been recognized in the three months ended March 31, 2013 and 2012.

There was no current or deferred tax for the quarter ended March 31, 2013 (March 31, 2012 – $840,052 deferred tax recovery).  The tax base of the Company’s Mexican non-monetary assets are determined in a different currency (Mexican Peso) than the functional currency (US$), and changes in the exchange rate can give rise to temporary differences between book and tax values of these assets that result in a deferred tax liability in accordance with IAS 12 Income

Taxes.

16.           SUBSEQUENT EVENTS

Subsequent to March 31, 2013, 72,500 stock options with an exercise price between C$9.15 and C$10.44 expired unexercised.