Exhibit 99.2
 |
MAG Silver Corp.
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2024
Dated: November 8, 2024 |
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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 |
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TSX: MAG
NYSE American: MAG
info@magsilver.com |
MAG
SILVER CORP.
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2024
(expressed in thousands of US dollars except as otherwise noted)
Table of Contents
| 1. |
INTRODUCTION |
3 |
| 2. |
DESCRIPTION OF BUSINESS |
4 |
| 3. |
HIGHLIGHTS – SEPTEMBER 30, 2024 & SUBSEQUENT TO THE QUARTER END |
4 |
| 4. |
RESULTS OF JUANICIPIO |
7 |
| 5. |
DEER TRAIL PROJECT |
15 |
| 6. |
LARDER PROJECT |
16 |
| 7. |
OUTLOOK |
24 |
| 8. |
SUMMARY OF QUARTERLY INFORMATION |
25 |
| 9. |
REVIEW OF FINANCIAL RESULTS |
26 |
| 10. |
FINANCIAL POSITION |
29 |
| 11. |
CASH FLOWS |
31 |
| 12. |
NON-IFRS MEASURES |
32 |
| 13. |
LIQUIDITY AND CAPITAL RESOURCES |
38 |
| 14. |
CONTRACTUAL OBLIGATIONS |
41 |
| 15. |
SHARE CAPITAL INFORMATION |
42 |
| 16. |
OTHER ITEMS |
42 |
| 17. |
TREND INFORMATION |
43 |
| 18. |
RISKS AND UNCERTAINTIES |
44 |
| 19. |
OFF-BALANCE SHEET ARRANGEMENTS |
45 |
| 20. |
RELATED PARTY TRANSACTIONS |
45 |
| 21. |
CRITICAL ACCOUNTING JUDGMENTS, SIGNIFICANT ESTIMATES AND
ASSUMPTIONS |
47 |
| 22. |
CHANGES IN ACCOUNTING STANDARDS |
47 |
| 23. |
CONTROLS AND PROCEDURES |
48 |
| 24. |
ADDITIONAL INFORMATION |
49 |
| 25. |
CAUTIONARY STATEMENTS |
49 |
MAG SILVER CORP.
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2024
(expressed in thousands of US dollars except as otherwise noted)
1. INTRODUCTION
The following Management’s Discussion and Analysis (“MD&A”)
focuses on the financial condition and results of operations of MAG Silver Corp. (“MAG”, “MAG Silver” or the “Company”)
for the three and nine months ended September 30, 2024 (“Q3 2024”). It is prepared as of November 8, 2024 and should be read
in conjunction with the unaudited condensed interim consolidated financial statements of the Company for the three and nine months ended
September 30, 2024 (“Q3 2024 Financial Statements”) together with the notes thereto which are available on the Canadian Securities
Administrator’s System for Electronic Data Analysis and Retrieval + (“SEDAR+”) at www.sedarplus.ca and on the U.S. Securities
and Exchange Commission’s (“SEC”) website at www.sec.gov.
All dollar amounts referred to in this MD&A are expressed in thousands
of United States dollars (“US$”) unless otherwise stated; references to C$ refer to thousands of Canadian dollars. The
functional currency of the parent, its subsidiaries and its investment in Juanicipio (as defined herein), is the US$.
The common shares of the Company (“Common Shares”) trade on
the Toronto Stock Exchange (the “TSX”) and on the NYSE American, LLC both under the ticker symbol MAG. MAG Silver is a reporting
issuer in each of the provinces and territories of Canada and is a reporting “foreign issuer” in the United States of America.
Cautionary Statements and Risk Factors
This MD&A contains forward-looking statements (as defined herein) which
should be read in conjunction with the risk factors described in section “Risks and Uncertainties” and the cautionary statements
provided in section “Cautionary Statements – Cautionary Note Regarding Forward-Looking Statements” at the end
of this MD&A.
Unless otherwise indicated, technical disclosure regarding the Company’s
properties included or incorporated by reference herein, including use of the capitalized terms “Mineral Resources” and “Mineral
Reserves”, has been prepared in accordance with the requirements of, and imports the meaning of such terms as defined in, National
Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”) and the Canadian Institute of
Mining, Metallurgy and Petroleum (the “CIM”) – CIM Definition Standards on Mineral Resources and Mineral Reserves, adopted
by the CIM Council, as amended (the “CIM Definition Standards”), as applicable, and should be read in conjunction with the
cautionary statements provided in section “Cautionary Statements – Cautionary Note for United States Investors”
and “Cautionary Statements – Cautionary Note to Investors Concerning Estimates of Mineral Resources” at the end
of this MD&A.
Qualified Persons
Unless otherwise specifically noted herein, all scientific or technical
information in this MD&A, including assay results, Mineral Reserve and Mineral Resource estimates, and mineralization, if applicable,
is based upon information prepared by or under the supervision of, or has been approved by Gary Methven, P.Eng., Vice President, Technical
Services and Lyle Hansen, P.Geo., Geotechnical Director; both are “Qualified Persons” for the purposes of NI 43-101.
MAG SILVER CORP.
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2024
(expressed in thousands of US dollars except as otherwise noted)
2. DESCRIPTION
OF BUSINESS
MAG Silver Corp. is a growth-oriented Canadian mining and exploration company
focused on advancing high-grade, district scale precious metals projects in the Americas. MAG is a top-tier primary silver mining company
through its (44%) investment in the 4,000 tonnes per day (“tpd”) Juanicipio mine (the “Juanicipio Mine” or “Juanicipio”),
operated by Fresnillo plc (“Fresnillo”) (56%). The Juanicipio Mine is located in the Fresnillo Silver Trend in Mexico, the
world’s premier silver mining camp, where in addition to mining and processing operations, an expanded exploration program is in
place targeting multiple highly prospective targets. MAG is also executing multi-phase exploration programs at the 100% earn-in Deer Trail
Project (as defined herein) in Utah and the 100% owned Larder Project (as defined herein), located in the historically prolific Abitibi
region of Canada.
3. HIGHLIGHTS
– SEPTEMBER 30, 2024 & SUBSEQUENT TO THE QUARTER END (ON A 100% BASIS UNLESS OTHERWISE NOTED)
Q3 2024
| ü | MAG reported net income of $22,292 ($0.22 per share) driven by income
from Juanicipio (equity accounted) of $25,552, and adjusted EBITDA1 (as defined herein)
of $55,720. |
| ü | A total of 332,290 tonnes of ore at a silver head grade of 481 grams
per tonne (“g/t”) (equivalent silver head grade2 735 g/t) was processed
at Juanicipio. |
| ü | Juanicipio achieved silver production and equivalent silver production2
of 4.9 and 7.1 million ounces, respectively. |
| ü | Juanicipio generated strong operating cash flow of $109,836 and free
cash flow1 of $96,948. |
| ü | Building on the robust cost performance of the first half of 2024, Juanicipio
continued to improve delivering negative cash cost1 of $0.12 per silver ounce sold ($8.38 per equivalent silver ounce sold3)
and all-in sustaining cost1 of $3.28 per silver ounce sold ($10.83 per equivalent silver ounce sold3). |
__________________________
1 Adjusted EBITDA, cash cost per ounce, all-in
sustaining cost per ounce and free cash flow are non-IFRS measures, please refer to “Non-IFRS Measures” section of
this MD&A for a detailed reconciliation of these measures to the Q3 2024 Financial Statements.
2 Equivalent silver head grade and equivalent silver production have been calculated
using the following price assumptions to translate gold, lead and zinc to “equivalent” silver head grade and “equivalent”
silver production: $23/oz silver, $1,950/oz gold, $0.95/lb lead and $1.15/lb zinc.
3 Equivalent silver ounces sold have been
calculated using realized prices to translate gold, lead and zinc to “equivalent” silver ounces sold (metal quantity, multiplied
by metal price, divided by silver price). Three and nine months ended September 30, 2024 realized prices: $30.16/oz silver, $2,587.65/oz
gold, $0.91/lb lead, $1.29/lb zinc and $28.15/oz silver, $2,360.51/oz gold, $0.94/lb lead, $1.25/lb zinc, respectively.
MAG SILVER CORP.
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2024
(expressed in thousands of US dollars except as otherwise noted)
| ü | With continued operational outperformance, as reported by Fresnillo,
silver grades are expected to be at the top end of the revised grade guidance range (420g/t to 460g/t) for 2024. |
| ü | Juanicipio returned a total of $22,649 in interest and loan principal
repayments to MAG further augmenting MAG’s cash position to $113,491 at the end of the quarter. |
Nine Months Ended September 30, 2024
| ü | MAG reported net income of $58,801 ($0.57 per share) driven by income
from Juanicipio (equity accounted) of $69,919, and adjusted EBITDA1 of $138,688. |
| ü | A total of 994,566 tonnes of ore at a silver head grade of 485g/t (equivalent
silver head grade2 of 731 g/t) was processed at Juanicipio. |
| ü | Juanicipio achieved silver production and equivalent silver production2
of 14.3 and 20.6 million ounces, respectively. |
| ü | Juanicipio generated strong operating cash flow and free cash flow1
of $245,123 and $213,405, respectively. |
| ü | Juanicipio continued to improve on its cost performance with cash cost1
of $1.13 per silver ounce sold ($8.64 per equivalent silver ounce sold3) and all-in sustaining cost1 of $4.57 per
silver ounce sold ($11.12 per equivalent silver ounce sold3). |
| ü | Juanicipio returned a total of $69,927 in interest and loan principal
repayments to MAG. |
| ü | MAG published its updated technical report on Juanicipio, titled “Juanicipio
Mineral Resource and Mineral Reserves NI 43-101 Technical Report”, on March 27, 2024 (the “Technical Report”) outlining
robust economics over an initial 13-year life of mine, generating annual average free cash flow exceeding $130 million (at a $22/oz silver
price). Mineral Resources increased by 33% from the 2017 Preliminary Economic Assessment, with substantial growth in Measured and Indicated
categories. Inferred resources also expanded, highlighting significant near-term, high-grade upside potential. An inaugural 15.4 million
tonnes Mineral Reserve estimate at 628 g/t equivalent silver grade was declared enhancing economic confidence. Extensive exploration upside
remains, with only 5% of the property explored, indicating high potential for further discoveries. |
CORPORATE
| ü | On May 15, 2024, MAG announced that the TSX had accepted the Company’s Notice of Intention to Make
a Normal Course Issuer Bid (“NCIB”). Under the NCIB, the Company may purchase for cancellation up to an aggregate of 8,643,374
Common Shares, representing approximately 10% of the public float (as defined in the rules and policies of the TSX) of the Common Shares
as of May 8, 2024. As of November 8, 2024 no shares have been repurchased by the Company. |
MAG SILVER CORP.
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2024
(expressed in thousands of US dollars except as otherwise noted)
| ü | On May 31, 2024, MAG filed a Final Shelf Prospectus (as defined herein) and Registration Statement (as
defined herein) allowing the Company to offer up to $250,000 of Common Shares, preferred shares, debt securities, subscription receipts,
units and warrants or any combination thereof during the 25-month period that the Final Shelf Prospectus remains effective. In order to
maintain financial flexibility, and consistent with past practice, the Company has historically maintained a base shelf prospectus and
has no present intention to offer securities pursuant to this Final Shelf Prospectus. |
| ü | The Company published its 2023 sustainability report on July 18, 2024, underscoring its continued commitment
to transparency with its stakeholders while providing a comprehensive overview of the Company’s environmental, social and governance
(“ESG”) performance for 2023. A copy of MAG’s 2023 sustainability report and 2023 ESG Data Table are available on the
Company’s website at https://magsilver.com/esg/reports4. |
| ü | On September 20, 2024, MAG and Apollo Silver Corp. (“Apollo”) entered into an exploration,
earn-in and option agreement (the “Option”) pursuant to which Apollo has the option to acquire the Cinco de Mayo Project (“Cinco”).
In order for Apollo to exercise the Option, Apollo is required to obtain the necessary licensing to access and conduct exploration activities
on Cinco, and subsequently complete no less than 20,000 metres of drilling, all within a five-year period, and then finally issue consideration
shares equivalent to 19.9% of the then issued and outstanding common shares of Apollo to MAG. |
EXPLORATION
| · | Underground infill drilling at Juanicipio continued in Q3 2024, primarily focused on upgrading mineralization
in areas expected to be mined in the near to mid-term. During Q3 2024, 8,248 metres (nine months ended September 30, 2024: 30,218 metres)
were drilled from underground. Results to date (mainly first half of 2024) focus on infill and confirm vein continuity including grade
and thicknesses. |
| · | Surface drilling started in April 2024 and is currently focused on the Cañada-Honda structure with
three rigs turning. Since the beginning of the program, nine holes have been completed, with three in progress. During Q3 2024, 9,768
metres (nine months ended September 30, 2024: 14,314 metres) were drilled from surface. |
| · | Results from three holes are showing thin mineralized epithermal veins with vein textures and negligible
base metals consistent with being at high level and possibly above a productive boiling zone. Some holes were drilled deep enough to intercept
the Juanicipio vein previous deepest holes including a 0.7 metre, base metal rich intercept extending the Juanicipio vein by 450 metres
downdip. |
__________________________
4 Information contained in or otherwise accessible
through the Company’s website, including the 2023 sustainability report and 2023 ESG Data Table, do not form part of this MD&A
and are not incorporated into this MD&A by reference.
MAG SILVER CORP.
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2024
(expressed in thousands of US dollars except as otherwise noted)
| ü | Deer Trail Project, Utah: |
| · | During Q3 2024, 1,745 metres have been drilled from surface (nine months ended September 30, 2024: 4,782
metres). During the first nine months of the year, three holes have been completed, two at Carrisa and one in the Deer Trail Mine Corridor.
One hole is currently in progress at Carissa. |
| ü | Larder Project, Ontario: |
| · | Surface drilling at Twist, Swansea, Long Conglomerate and Kir Vit, totalled 12,661 metres in Q3 2024 (nine
months ended September 30, 2024: 29,811 metres). Targets tested include: |
| · | the central and western portions of the Twist zone; |
| · | a large induced polarization (“IP”) target at Swansea that coincides with the recent drill
program results and historic green carbonate altered komatiite horizons believed to be a second order splay off the Cadillac-Larder Break
(“CLB”) at the Swansea zone; |
| · | an approximately 4km long conglomerate zone (which runs through the central portion of the property),
that is a second order structure coincident with a parallel unconformity; and |
| · | the southeast extensions of the Kir Vit zone with four high priority geophysical targets to test in 2024. |
| · | Regional and field programs at the recently acquired Goldstake Property (as defined herein) led to outcrop stripping programs that
discovered high grade gold values in both channel and grab samples at the T Trench, including 32.1 g/t gold, 16.7 g/t gold, and 14.8 g/t
gold. |
4. RESULTS OF JUANICIPIO
MAG owns 44% of Minera Juanicipio, S.A. de C.V. (“Minera Juanicipio”),
a company incorporated under the laws of Mexico, which owns Juanicipio. Fresnillo is the project operator and holds the remaining 56%.
On December 27, 2021, for various business reasons, the Company and Fresnillo incorporated Equipos Chaparral, S.A. de C.V. (“Equipos
Chaparral”) in the same ownership proportions as Minera Juanicipio for the purpose of holding the Juanicipio plant and mining equipment
to be leased to Minera Juanicipio. Minera Juanicipio and Equipos Chaparral, are collectively referred to herein as “Juanicipio”
or the “Juanicipio Mine”.
All results of Juanicipio in this section are on a 100% basis, unless otherwise
noted. The Company’s attributable equity interest in Juanicipio is 44%. As the third quarter of 2023 was the first quarter of full
commercial production, comparative information presented below together with associated per unit values, where applicable, are not directly
comparable.
MAG SILVER CORP.
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2024
(expressed in thousands of US dollars except as otherwise noted)
Operating Performance
The following table and subsequent discussion provide a summary of the operating
performance of Juanicipio for the three and nine months ended September 30, 2024 and 2023, unless otherwise noted.
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Three months ended |
Nine months ended |
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September 30, |
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September 30, |
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September 30, |
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September 30, |
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| Key mine performance data of Juanicipio (100% basis) | |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
| | |
|
|
|
|
| Metres developed (m) | |
| 3,278 | |
| 4,105 | |
| 10,936 | |
| 10,989 | |
| | |
| | |
| | |
| | |
| | |
| Material mined (t) | |
| 331,194 | |
| 297,575 | |
| 1,005,735 | |
| 780,645 | |
| Material processed (t) | |
| 332,290 | |
| 322,249 | |
| 994,565 | |
| 921,990 | |
| | |
| | |
| | |
| | |
| | |
| Silver head grade (g/t) | |
| 481 | |
| 523 | |
| 485 | |
| 474 | |
| Gold head grade (g/t) | |
| 1.32 | |
| 1.32 | |
| 1.28 | |
| 1.23 | |
| Lead head grade (%) | |
| 1.58 | % |
| 1.33 | % |
| 1.50 | % |
| 1.07 | % |
| Zinc head grade (%) | |
| 2.83 | % |
| 2.25 | % |
| 2.78 | % |
| 1.92 | % |
| | |
| | |
| | |
| | |
| | |
| Equivalent silver head grade (g/t) (1) | |
| 735 | |
| 760 | |
| 731 | |
| 684 | |
| | |
| | |
| | |
| | |
| | |
| Silver ounces sold (koz) | |
| 4,462 | |
| 4,289 | |
| 12,728 | |
| 11,167 | |
| Gold ounces sold (koz) | |
| 9.12 | |
| 7.76 | |
| 25.22 | |
| 22.59 | |
| Lead pounds sold (klb) | |
| 9,984 | |
| 7,603 | |
| 26,955 | |
| 17,187 | |
| Zinc pounds sold (klb) | |
| 15,426 | |
| 9,596 | |
| 42,509 | |
| 23,348 | |
| | |
| | |
| | |
| | |
| | |
| Equivalent silver ounces sold (koz) (2) | |
| 6,204 | |
| 5,710 | |
| 17,627 | |
| 14,893 | |
| (1) | Equivalent silver head grades have been calculated using the following price assumptions to translate gold, lead and zinc to “equivalent”
silver head grade in 2024: $23/oz silver, $1,950/oz gold, $0.95/lb lead and $1.15/lb zinc (2023: $21.85/oz silver, $1,775/oz gold, $0.915/lb
lead and $1.30/lb zinc). |
| (2) | Equivalent silver ounces sold have been calculated using realized prices to translate gold, lead and zinc to “equivalent”
silver ounces sold (metal quantity, multiplied by metal price, divided by silver price). Three and nine months ended September 30, 2024
realized prices: $30.16/oz silver, $2,587.65/oz gold, $0.91/lb lead, $1.29/lb zinc and $28.15/oz silver, $2,360.51/oz gold, $0.94/lb lead,
$1.25/lb zinc, respectively (three and nine months ended September 30, 2023 realized prices: $23.51/oz silver, $1,911.99/oz gold, $1.00/lb
lead, $1.15/lb zinc and $23.49/oz silver, $1,942.32/oz gold, $0.97/lb lead, $1.16/lb zinc, respectively). |
During the three and nine months ended September 30, 2024, the
Total Reportable Injury Frequency Rate (which includes Lost Time Injury and medical treatment or first aid cases reported per 1,000,000
hours worked) was 8.2 and 10.0, respectively (three and nine months ended September 30, 2023: 17.3 and 17.8, respectively) and the Total
Lost Time Injury Frequency Rate was 4.5 and 5.7, respectively (three and nine months ended September 30, 2023: 9.9 and 11.4, respectively).
MAG SILVER CORP.
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2024
(expressed in thousands of US dollars except as otherwise noted)
On September 30, 2024 there were 1,813 employees and contractors
working at Juanicipio (523 employees and 1,290 contractors), for a total of 1,102,000 and 3,495,200 hours worked during the three and
nine months ended September 30, 2024, respectively.
| b) | Underground Development |
Total underground development to the end of Q3 2024 was approximately
85.73 km (53.3 miles), including 3.28 km (2.0 miles) and 10.94 km (6.8 miles) completed during the three and nine months ended September
30, 2024, respectively. Underground mine infrastructure is well advanced and development continues to focus on:
| · | advancing the three internal spiral footwall ramps to be used to further access the Mineral Reserves over
the full strike length of the Valdecañas Vein System; |
| · | making additional cross-cuts through the vein system and establishing new mining stopes; and |
| · | integrating additional ventilation and other associated underground infrastructure. |
During the three and nine months ended September 30, 2024, a
total of 331,194 and 1,005,735 tonnes of ore were mined, respectively. This represents an increase of 11% over Q3 2023 and an increase
of 29% over the nine months ended September 30, 2023. Increases in mined tonnages at Juanicipio have been driven by the operational ramp-up
of the mine towards steady state mining and milling targets.
The majority of production is currently coming from longhole
stopes throughout all three zones of the mine, and this is the preferred mining method for the remainder of the Valdecañas Vein.
During the three and nine
months ended September 30, 2024, a total of 332,290 and 994,565 tonnes of ore were processed through the Juanicipio plant, respectively.
The 3% and 8% increase over the three and nine months ended September 30, 2023 was mainly attributable to the Juanicipio plant operating
at nameplate per operating day during 2024.
The silver head grade and equivalent silver head grade for the
ore processed in the three and nine months ended September 30, 2024 was 481 g/t and 735 g/t, and 485 g/t and 731 g/t, respectively (three
and nine months ended September 30, 2023: 523 g/t and 760 g/t, and 474 g/t and 684 g/t, respectively). The higher silver head grade and
lower lead and zinc head grades in Q3 2023 were the result of processing ore from the upper levels of the mine, characterized by higher
silver grade, compared to deeper areas in Q3 2024. Head grades for the nine months ended September 30, 2023 were lower as low-grade commissioning
stockpiles were processed through the Juanicipio plant as it was ramped up. Silver metallurgical recovery during the three and nine months
ended September 30, 2024 was 95% and 92%, respectively (three and nine months ended September 30, 2023: 88% and 88%, respectively) reflecting
the commencement of commercial pyrite and gravimetric concentrate production during Q2 2024 delivering incremental silver and gold recovery
paired with ongoing optimizations in the processing plant.
MAG SILVER CORP.
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2024
(expressed in thousands of US dollars except as otherwise noted)
| e) | Total cash costs and all-in sustaining costs |
The following table provides a summary of the total
cash costs and all-in sustaining costs of Juanicipio for the three and nine months ended September 30, 2024, and 2023.
| Key mine performance data of Juanicipio (100% basis) | |
Three months ended | |
Nine months ended | |
| | |
September 30, | |
September 30, | |
September 30, | |
September 30, | |
| | |
2024 | |
2023 | |
2024 | |
2023 | |
| | |
| |
| |
| |
| |
| Total cash costs (1) | |
| (555 | ) |
| 20,067 | |
| 14,330 | |
| 77,432 | |
| Cash cost per silver ounce sold ($/oz) (1) | |
| (0.12 | ) |
| 4.68 | |
| 1.13 | |
| 6.93 | |
| Cash cost per equivalent silver ounce sold ($/oz) (1) | |
| 8.38 | |
| 9.37 | |
| 8.64 | |
| 11.07 | |
| | |
| | |
| | |
| | |
| | |
| All-in sustaining costs (1) | |
| 14,631 | |
| 39,411 | |
| 58,185 | |
| 120,111 | |
| All-in sustaining cost per silver ounce sold ($/oz) (1) | |
| 3.28 | |
| 9.19 | |
| 4.57 | |
| 10.76 | |
| All-in sustaining cost per equivalent silver ounce sold ($/oz) (1) | |
| 10.83 | |
| 12.75 | |
| 11.12 | |
| 13.94 | |
| (1) | Total cash costs, cash cost per ounce, cash cost per equivalent ounce, all-in sustaining costs, all-in
sustaining cost per ounce, and all-in sustaining cost per equivalent ounce are non-IFRS measures, please refer to “Non-IFRS Measures”
section of this MD&A for a detailed reconciliation of these measures to the Q3 2024 Financial Statements. Equivalent silver ounces
sold have been calculated using realized prices to translate gold, lead and zinc to “equivalent” silver ounces sold (metal
quantity, multiplied by metal price, divided by silver price). Three and nine months ended September 30, 2024 realized prices: $30.16/oz
silver, $2,587.65/oz gold, $0.91/lb lead, $1.29/lb zinc and $28.15/oz silver, $2,360.51/oz gold, $0.94/lb lead, $1.25/lb zinc, respectively
(three and nine months ended September 30, 2023 realized prices: $23.51/oz silver, $1,911.99/oz gold, $1.00/lb lead, $1.15/lb zinc and
$23.49/oz silver, $1,942.32/oz gold, $0.97/lb lead, $1.16/lb zinc, respectively). |
The Juanicipio exploration program expenditures for the three
and nine months ended September 30, 2024 totalled $2,728 and $6,331, respectively (three and nine months ended September 30, 2023: $2,059
and $6,121, respectively).
During Q3 2024, 8,248 metres (nine months ended September 30,
2024: 30,218 metres) were drilled from underground and focused on infilling the upper parts of the Valdecañas Vein System including
the Valdecañas, Ramal 1, Anticipada and Venadas veins. Results to date (mainly first half of 2024) focus on infill and confirm
vein continuity including grade and thicknesses. Drilling continues with assays pending for the balance of the program.
Surface drilling started in April 2024 and is currently focused
on the Cañada-Honda Structure with three rigs turning. Since the beginning of the program, 9 holes have been completed, with 3
in progress. During Q3 2024, 9,768 metres (nine months ended September 30, 2024: 14,314 metres) were drilled from surface. Initial results
show thin mineralized vein intercepts with textures and chemistry consistent with being at high level and possibly above a productive
boiling zone. Some holes are being extended to intercept the Juanicipio vein below the inferred resource with an initial base metal rich
intercept extending it 450 metres downdip. Assays are pending for the balance of the program.
MAG SILVER CORP.
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2024
(expressed in thousands of US dollars except as otherwise noted)
Drilling from both underground and surface are planned to continue
throughout the rest of the year, totalling approximately 50,000 metres for 2024.
Financial Results
The following table presents excerpts of the financial results of Juanicipio
for the three and nine months ended September 30, 2024 and 2023.
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Three months ended | |
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September 30, | |
September 30, | |
September 30, | |
September 30, | |
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2024 | |
2023 | |
2024 | |
2023 | |
| | |
| $ | |
| $ | |
| $ | |
| $ | |
| Sales | |
| 176,393 | |
| 125,046 | |
| 467,161 | |
| 311,303 | |
| Cost of sales: | |
| | |
| | |
| | |
| | |
| Production cost | |
| (38,596 | ) |
| (43,782 | ) |
| (115,248 | ) |
| (125,731 | ) |
| Depreciation and amortization | |
| (23,440 | ) |
| (21,646 | ) |
| (67,934 | ) |
| (47,001 | ) |
| Gross profit | |
| 114,357 | |
| 59,618 | |
| 283,978 | |
| 138,571 | |
| Consulting and administrative expenses | |
| (2,497 | ) |
| (3,458 | ) |
| (10,969 | ) |
| (9,115 | ) |
| Extraordinary mining and other duties | |
| (2,810 | ) |
| (1,635 | ) |
| (6,975 | ) |
| (3,532 | ) |
| Interest expense | |
| (1,839 | ) |
| (5,214 | ) |
| (9,058 | ) |
| (13,915 | ) |
| Exchange gains (losses) and other | |
| 1,961 | |
| 420 | |
| 1,360 | |
| (2,414 | ) |
| Net income before tax | |
| 109,172 | |
| 49,731 | |
| 258,335 | |
| 109,595 | |
| Income tax expense | |
| (52,937 | ) |
| (23,824 | ) |
| (108,485 | ) |
| (23,441 | ) |
| Net income (100% basis) | |
| 56,235 | |
| 25,907 | |
| 149,850 | |
| 86,154 | |
| MAG’s 44% portion of net income | |
| 24,743 | |
| 11,399 | |
| 65,934 | |
| 37,908 | |
| Interest on Juanicipio loans - MAG's 44% | |
| 809 | |
| 2,293 | |
| 3,985 | |
| 6,122 | |
| MAG’s 44% equity income | |
| 25,552 | |
| 13,692 | |
| 69,919 | |
| 44,030 | |
Three months ended September 30, 2024
Sales increased by $51,348 during the three months ended September 30,
2024, mainly due to 26% higher realized metal prices and 13% higher metal volumes.
Production costs decreased by $5,186 due to Juanicipio depleting higher-cost
stockpiles in Q3 2023 ($2,085), resulting from the operational ramp-up and processing facility commissioning in the first half of 2023,
and lower mining, milling and general and administrative expenses (“G&A expenses”) ($3,101).
Depreciation increased by $1,794 impacted by an increased depreciable asset
cost base as the Juanicipio mill achieved commercial production and commenced depreciating the processing facility and associated equipment
in June 2023. In addition, Juanicipio processed 3% more tonnes during Q3 2024, impacting units of production depreciation.
MAG SILVER CORP.
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2024
(expressed in thousands of US dollars except as otherwise noted)
Cash operating margin increased from 65% to 78%, mainly due to positive
commodity price movements, reduced operating costs, as well as operational leverage.
Other expenses decreased by $4,701 mainly as a result of lower consulting
and administrative expenses ($960), higher exchange gains ($1,542) and lower interest expense ($3,375) as Juanicipio reduced its outstanding
shareholder loans balance by $223,192 ($206,712 loan repayments and $16,480 converted to equity) over the course of September 2023 to
September 2024, offset by higher selling costs and other duties ($1,176) which were impacted by the commencement of commercial pyrite
and gravimetric concentrate production during Q2 2024.
Taxes increased by $29,113 mainly due to higher taxable profits generated
during Q3 2024, as well as non-cash deferred tax charges on fixed assets driven by a weakening in the Mexican peso versus the US dollar.
Gross Profit from Ore Processed at Juanicipio Plant (100% basis)
| Three Months Ended September 30, 2024 (332,290 tonnes processed) |
Three Months Ended
September 30, 2023
Amount
$ |
| Metals Sold |
Quantity |
Average Price
$ |
Amount
$ |
| Silver |
4,461,644 ounces |
30.16 per oz |
134,580 |
100,841 |
| Gold |
9,118 ounces |
2,588 per oz |
23,594 |
14,839 |
| Lead |
4,529 tonnes |
0.91 per lb. |
9,067 |
7,571 |
| Zinc |
6,997 tonnes |
1.29 per lb. |
19,885 |
11,005 |
| Treatment, refining, and other processing costs (1) |
(10,733) |
(9,211) |
| Sales |
176,393 |
125,046 |
| Production cost |
(38,596) |
(43,782) |
| Depreciation and amortization |
(23,440) |
(24,646) |
| Gross Profit |
114,357 |
59,618 |
(1) Q3 2023 includes toll milling costs from processing mineralized
material at the Saucito plant.
Sales and treatment charges are recorded on a provisional basis and are
adjusted based on final assay and pricing adjustments in accordance with the offtake contracts.
Nine months ended September 30, 2024
Sales increased by $155,858 during the nine months ended September 30,
2024, mainly due to 22% higher metal volumes, 18% higher realized metal prices, and $9,459 lower treatment, refining and toll milling
costs driven mainly by no toll milling at the Saucito and Fresnillo processing facilities during the first nine months of 2024.
Production costs decreased by $10,482 mainly due to Juanicipio depleting
higher-cost, lower-grade commissioning stockpiles during operational ramp-up and processing facility commissioning in the first nine months
of 2023 ($18,788), offset by higher mining, milling and G&A costs ($8,306, predominantly volume related) as Juanicipio shifted to
nameplate production levels post September 2023.
MAG SILVER CORP.
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2024
(expressed in thousands of US dollars except as otherwise noted)
Depreciation increased by $20,933, impacted by an increased depreciable
asset cost base as the Juanicipio mill achieved commercial production and commenced depreciating the processing facility and associated
equipment in June 2023. In addition, Juanicipio processed 8% more tonnes in the first nine months of 2024, impacting units of production
depreciation.
Cash operating margin increased from 60% to 75%, mainly due to reduced
operating costs as well as positive commodity prices augmented by operational leverage and no processing at the nearby Fresnillo and Saucito
processing facilities.
Other expenses decreased by $3,332 mainly as a result of higher exchange
gains and other costs ($3,773) and lower interest expense ($4,857) as Juanicipio reduced its outstanding shareholder loans balance by
$223,192 ($206,712 loan repayments and $16,480 converted to equity) over the course of September 2023 to September 2024, offset by higher
selling and other duties ($3,444) driven by the commencement of commercial pyrite and gravimetric concentrate production in Q2 2024 and
higher consulting and administrative expenses ($1,854) as an operator services agreement became effective upon initiation of commercial
production (the “Operator Services Agreement”).
Taxes increased by $85,044 mainly due to higher taxable profits generated
during the first nine months of 2024, as well as non-cash deferred tax charges on fixed assets driven by a weakening in the Mexican peso
versus the US dollar.
Gross Profit from Ore Processed at Juanicipio Plant (100% basis)
| Nine Months Ended September 30, 2024 (994,565 tonnes processed) |
Nine Months Ended
September 30, 2023
Amount
$ |
| Metals Sold |
Quantity |
Average Price
$ |
Amount
$ |
| Silver |
12,728,250 ounces |
28.15 per oz |
358,267 |
262,271 |
| Gold |
25,217 ounces |
2,361 per oz |
59,525 |
43,874 |
| Lead |
12,226 tonnes |
0.94 per lb. |
25,318 |
16,599 |
| Zinc |
19,282 tonnes |
1.25 per lb. |
53,054 |
27,020 |
| Treatment, refining, and other processing costs (2) |
(29,002) |
(38,461) |
| Sales |
467,161 |
311,303 |
| Production cost |
(115,248) |
(125,731) |
| Depreciation and amortization (1) |
(67,934) |
(47,001) |
| Gross Profit |
283,978 |
138,571 |
(1) The underground mine was considered readied for its intended
use on January 1, 2022, whereas the Juanicipio processing facility started commissioning and ramp-up activities in January 2023, achieving
commercial production status on June 1, 2023.
(2) Includes toll milling costs from processing mineralized
material at the Saucito and Fresnillo plants for the nine months ended September 30, 2023.
Sales and treatment charges are recorded on a provisional basis and are
adjusted based on final assay and pricing adjustments in accordance with the offtake contracts.
MAG SILVER CORP.
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2024
(expressed in thousands of US dollars except as otherwise noted)
Cash Flow Results
The following table provides a summary of cash flows for Juanicipio for the
three and nine months ended September 30, 2024 and 2023:
| | |
Three months ended | |
Nine months ended | |
| | |
September 30, | |
September 30, | |
September 30, | |
September 30, | |
| | |
2024 | |
2023 | |
2024 | |
2023 | |
| | |
| $ | |
| $ | |
| $ | |
| $ | |
| Cash provided by (used in): | |
| | |
| | |
| | |
| | |
| Operating activities | |
| 109,836 | |
| 57,271 | |
| 245,123 | |
| 60,918 | |
| Investing activities | |
| (12,656 | ) |
| (16,524 | ) |
| (30,929 | ) |
| (61,653 | ) |
| Financing activities | |
| (51,712 | ) |
| (25,843 | ) |
| (159,724 | ) |
| 23,091 | |
| Impact of foreign exchange on cash and cash equivalents | |
| (108 | ) |
| (9 | ) |
| (601 | ) |
| (25 | ) |
| Increase in cash and cash equivalents during the period | |
| 45,360 | |
| 14,895 | |
| 53,869 | |
| 22,331 | |
| Cash and cash equivalents, beginning of period | |
| 51,422 | |
| 8,539 | |
| 42,913 | |
| 1,102 | |
| Cash and cash equivalents, end of period | |
| 96,782 | |
| 23,434 | |
| 96,782 | |
| 23,433 | |
| a) | Cash flows from operating activities |
During the three months ended September 30, 2024, cash flow
from operating activities increased by $52,565 mainly as a result of higher operating margins driven by 26% higher realized metal prices
and 13% higher metal volumes, and lower tax payments of $13,909.
During the nine months ended September 30, 2024, cash flow from
operating activities increased by $184,205 mainly as a result of higher operating margins driven by 22% higher metal volumes and 18% higher
realized metal prices, as well as lower tax payments of $40,247.
| b) | Cash used in investing activities |
During the three months ended September 30, 2024, the net cash
used in investing activities decreased by $3,868. This decrease was mainly driven by lower initial capital development expenditures of
$4,990, as the project progressed from the commissioning and operational ramp-up phase in 2023 to the steady operations phase in 2024.
During the nine months ended September 30, 2024, the net cash
used in investing activities decreased by $30,724. This decrease was mainly driven by lower initial capital development expenditures of
$28,053 as the project progressed from the commissioning and operational ramp-up phase in 2023, characterized by intensive initial capital
development expenditures, to the steady operations phase in 2024.
| c) | Cash from (used in) financing activities |
During the three months ended September 30, 2024, net cash used
in financing activities increased by $25,868 due to $51,480 (three months ended September 30, 2023: $25,670, net of $16,480 converted
to equity) of loan and interest repayments to shareholders.
MAG SILVER CORP.
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2024
(expressed in thousands of US dollars except as otherwise noted)
During the nine months ended September 30, 2024, net cash used
in financing activities increased by $182,815 due to $158,935 (nine months ended September 30, 2023: $33,157, net of $16,480 converted
to equity) of loan and interest repayments to shareholders, offset by a nil (nine months ended September 30, 2023: $56,800) cash injection
from shareholders.
With commercial production declared on June 1, 2023, Juanicipio
is demonstrating its ability to sustain nameplate production levels. Going forward, cash flow from operations, along with the cash held
by Juanicipio at September 30, 2024 of $96,782 on a 100% basis, are expected to fund ongoing requirements.
5. DEER TRAIL PROJECT
BACKGROUND AND HISTORY
MAG executed an option agreement (the “Deer Trail Agreement”)
effective December 20, 2018 to acquire and consolidate 100% of the historic Deer Trail mine and surrounding Alunite Ridge area in Piute
County, Utah (the “Deer Trail Project”). The Deer Trail Project includes a mixture of patented and unpatented claims totaling
approximately 6,500 hectares (“ha”). The counterparties to the Deer Trail Agreement contributed their respective Deer Trail
claims and property rights to a newly formed company for a 99% interest in the company, with MAG holding the other 1% interest. MAG is
the project operator and has the right to earn a 100% interest in the company and the Deer Trail Project, with the counterparties retaining
a 2% net smelter returns royalty. In order to earn in 100%, MAG must make a total of $30,000 in escalating annual exploration expenditures
(criteria met: $34,147 expended to September 30, 2024) and $2,000 in advanced royalty payments ($850 paid to September 30, 2024), both
over the 10-year term of the Deer Trail Agreement, by December 2028. All minimum obligatory commitments under the Deer Trail Agreement
have been satisfied as of September 30, 2024.
The Company believes that the Deer Trail Project
is a silver-rich Carbonate Replacement Deposit related to one or more porphyry intrusive centres. Consolidating
the property package allows MAG to apply its integrated district scale exploration model and apply new technologies to the search for
an entire suite of mineralization systems expected to occur on the property.
| · | In May of 2023 MAG started the Phase 3 drilling program focused on up to three porphyry “hub”
target areas thought to be the source of the manto, skarn, epithermal mineralization and extensive alteration throughout the project area
including that at the Deer Trail and Carissa zones. The two completed “hub” holes to date total 2,738 metres. Both holes intercepted
alteration and mineralization in line with what is expected on the edges of porphyry systems. Follow-up drill targets are planned for
the summer of 2025. |
| · | Phase 4 drilling commenced in the last quarter of 2023 and continued through Q3 2024, focussed on lower
elevations and aimed at offsetting the Carissa discovery and testing other high-potential targets in the Deer Trail mine area. |
| · | During Q3 2024, 1,745 metres have been drilled from surface (nine months ended September 30, 2024: 4,782
metres). During the first nine months of the year, three holes have been completed, two at Carrisa and one in the Deer Trail Mine Corridor.
One hole is currently in progress at Carissa. |
MAG SILVER CORP.
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2024
(expressed in thousands of US dollars except as otherwise noted)
During the three and nine months ended September 30, 2024, and year ended
December 31, 2023, the Company has incurred the following exploration and evaluation expenditures on the Deer Trail Project:
| | |
Three months ended | | |
Nine months ended | | |
Year ended | |
| | |
September 30, | | |
September 30, | | |
December 31, | |
| | |
2024 | | |
2024 | | |
2023 | |
| | |
$ | | |
$ | | |
$ | |
| Deer Trail Project | |
| | | |
| | | |
| | |
| Option and other payments | |
| - | | |
| - | | |
| 275 | |
| Total acquisition costs | |
| - | | |
| - | | |
| 275 | |
| Drilling and geotechnical | |
| 2,149 | | |
| 6,838 | | |
| 5,854 | |
| Camp and site costs | |
| 67 | | |
| 367 | | |
| 875 | |
| Land taxes and government fees | |
| 214 | | |
| 218 | | |
| 213 | |
| Legal, community and other consultation costs | |
| 115 | | |
| 272 | | |
| 343 | |
| Travel | |
| 49 | | |
| 139 | | |
| 190 | |
| Total for the period | |
| 2,594 | | |
| 7,834 | | |
| 7,750 | |
| Balance, beginning of period | |
| 32,555 | | |
| 27,315 | | |
| 19,565 | |
| Total Deer Trail Project cost | |
| 35,149 | | |
| 35,149 | | |
| 27,315 | |
6. LARDER PROJECT
BACKGROUND AND HISTORY
Through the acquisition of Gatling Exploration Inc. (“Gatling”)
in 2022, the Company acquired 100% of the Larder Project in Ontario (the “Larder Project”), for which the Company recognized
$15,187 in exploration and evaluation assets.
The Larder Project hosts three gold zones along the CLB, 35km east of Kirkland
Lake and is comprised of patented and unpatented claims, leases and mining licenses of occupation within the McVittie and McGarry townships.
The concessions associated with the Larder Project are all in good standing with various underlying obligations or royalties associated
with individual mineral claims and varying payments upon a production announcement. MAG retained the Larder Project exploration team and
has since added to it.
On March 22, 2024, the Company, through its Gatling subsidiary, acquired
100% ownership of the Goldstake property (the “Goldstake Property”), contiguous to its Larder Project, from Goldstake Explorations
Inc. and Transpacific Resources Inc., for consideration of C$5,000. The Goldstake Property has historically seen minimal exploration activity, however
displays hallmark features, common in large orogenic gold camps in the region including identified second and third order structures with
shallow documented historical high-grade intercepts of 29.46 g/t gold over 10 metres and 28.65 g/t gold over 3 metres which are open at
depth.
During the three and nine months ended September 30, 2024, a total of 12,661
and 29,811 metres were drilled, respectively. Current exploration activities have shifted to testing regional targets that were developed
from new geophysical surveys and litho-structural models.
MAG SILVER CORP.
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2024
(expressed in thousands of US dollars except as otherwise noted)
Surface drilling at Twist, Swansea, Long Conglomerate and Kir Vit, totalled
12,661 metres in Q3 2024 (nine months ended September 30, 2024: 29,811 metres). Targets tested include:
| · | the central and western portions of the Twist zone; |
| · | a large induced polarization (“IP”) target at Swansea that coincides with the recent drill
program results and historic green carbonate altered komatiite horizons believed to be a second order splay off the CLB at the Swansea
zone; |
| · | an approximately 4km long conglomerate zone (which runs through the central portion of the property),
that is a second order structure coincident with a parallel unconformity; and |
| · | the southeast extensions of the Kir Vit zone with four high priority geophysical targets to test in 2024. |
Twist Update: The six holes of the Twist drilling program totalled
4,671 metres and were designed to test where the CLB flips from north dipping to south dipping, assay results are pending.
Swansea Update: New geophysics received in Q3 2024 defined high
priority magnetotelluric (“MT”) and IP drill targets at Swansea. Eight holes (6,300 metres) are planned to test an approximately
1.1km east-west trending high chargeability anomaly approximately 300 metres below surface. Drilling started in September 2024 and will
continue until the end of 2024.
Long Conglomerate Update: A roughly 4km second order structure known
as the Long Conglomerate is located in the central part of the property, and is consisting of greywackes, trachytes, syenites, conglomerates
and volcanics with litho-structural breaks identified in the MT-IP survey of the property. A total of 4,014 metres totalling 7 holes were
drilled at the Long Conglomerate in Q3 2024. Assays are pending on the western portion of the program.
Kir Vit Update: The Kir Vit southeast extension targets have been
designed utilizing historical data combined with new MT-IP geophysics. Five targets have been identified to test in Q3 and Q4 2024. The
Kir Vit program commenced in late September 2024 with 3,321 metres over 5 holes. All 5 holes intersected a broad zone of graphitic alteration
and 5% to 10% pyrite, within zones of hydrothermally alteration containing smoky quartz. All assays are pending
Regional and Field Update: Larder’s field season collected
over 500 surface grab samples across the entire Goldstake area. This led to three high priority areas (T Trench, L&I Trench and Copper
Creek – see Figure L1 below) to strip back the overburden and complete detailed mapping and channel sampling programs. The outcrops
tested are located within the Instant Pond zone, with encouraging results from the T Trench (see Figures L2 and L3 below). Highlights
include:
| · | Blake River pillowed and massive volcanics being intruded by late stage syenites and gabbros; |
MAG SILVER CORP.
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2024
(expressed in thousands of US dollars except as otherwise noted)
| · | High grade gold values in both channel and grab samples at the T Trench include: 32.1 g/t gold, 16.7 g/t
gold, and 14.8 g/t gold (see Tables L1 and L2 below); |
| · | Major East-West shear structures on all three outcrops with oblique riedel and extensional features occurring
throughout; |
| · | Gold mineralization observed has been closely associated with copper oxides (malachite) and hydrothermal
alteration packages that include epidote, albite and silica; |
| · | Localized areas of brecciated pillowed basalts also host increased gold values within mineralized pillow
selvages; |
| · | Larder considers this a newly discovered zone that has never been exposed on surface; |
| · | Upon completion of the channel samples program and regional MT-IP survey at Goldstake, targets will be
developed and be drill tested in 2025; and |
| · | All three outcrops are pending assays. |
Table L1 – Grab Samples at the T Trench
| Outcrop Grab Results |
| Sample ID |
Au (g/t) |
Lithology |
Description |
| M022551 |
32.1 |
Mafic Volcanic |
Epidote altered mafic volcanic with quartz veinlet/bleb; fracture fill cpy-py 1-2%. |
| M022550 |
16.7 |
Mafic Volcanic |
Mafic volcanic with moderate epidote alteration, vuggy calcite veining and 0.5-1% euhedral py. |
| M022556 |
15.8 |
Mafic Volcanic |
Mafic volcanic with moderate localized epidote alt; 0.5-1% cpy, <0.5% py. |
| M022548 |
14.8 |
Mafic Volcanic |
Mafic volcanic with semi pervasive strong epidote alt, 0.5-1% euhedral py. |
| M022554 |
14.8 |
Mafic Volcanic |
Aphanitic mafic volcanic with pervasive moderate epidote alteration; minor (0.5%) blebby cpy. |
| M022553 |
3.3 |
Mafic Volcanic |
Mafic Volcanic with moderate epidote alt; 0.5-1% frac fill cpy-py. |
MAG SILVER CORP.
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2024
(expressed in thousands of US dollars except as otherwise noted)
Table L2 – Channel Samples at the T Trench
| Channel Results |
| Channel ID |
Sample ID |
From (m) |
To (m) |
Length (m) |
Au (g/t) |
Lithology |
Comments |
| TO_CH04 |
M024030 |
1 |
1.5 |
0.5 |
16.6 |
Syenite |
K-spar altered syenite porphyry with mineralized fault running across channel; 3-5% frf py and diss py halo observed in the fault. |
| TO_CH05 |
M024049 |
3.2 |
3.7 |
0.5 |
18.5 |
Mafic Volcanic |
Brecciated mafic pillows with cpy blebs (1-2%) within interstitial spaces between pillows; ~0.5% Euhedral py grains in basalt matrix up to 4mm. |
| TO_CH05 |
M024050 |
3.7 |
4.2 |
0.5 |
10.1 |
Mafic Volcanic |
Mafic volcanic pillow breccia with fracture fill epidote alt; 1-2% cpy-py through fault/joint planes |
| TO_CH05 |
M024051 |
4.2 |
4.7 |
0.5 |
6.5 |
Mafic Volcanic |
2-3% cpy blebs in brecciated pillows; mod-strong epidote alteration. |
| TO_CH05 |
Total Composite |
|
|
1.5 |
11.7 |
Mafic Volcanic |
|
| TO_CH06 |
M024062 |
8.7 |
9.7 |
1 |
3.9 |
Mafic Volcanic |
Mafic volcanic with hematite and minor epidote alteration; ~0.5% cpy and euhedral py. |
MAG SILVER CORP.
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2024
(expressed in thousands of US dollars except as otherwise noted)
Figure L1 Regional Map with Outcrop Area Identified at Goldstake
MAG SILVER CORP.
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2024
(expressed in thousands of US dollars except as otherwise noted)
Figure L2 – T Trench Channel Sample Locations at Goldstake
MAG SILVER CORP.
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2024
(expressed in thousands of US dollars except as otherwise noted)
Figure L3 – T Trench with Geology and Gold Grades with Trends
MAG SILVER CORP.
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2024
(expressed in thousands of US dollars except as otherwise noted)
During the three and nine months ended September 30, 2024, and year ended
December 31, 2023, the Company has incurred the following exploration and evaluation expenditures on the Larder Project:
| | |
Three months ended | | |
Nine months ended | | |
Year ended | |
| | |
September 30, | | |
September 30, | | |
December 31, | |
| | |
2024 | | |
2024 | | |
2023 | |
| | |
$ | | |
$ | | |
$ | |
| Larder Project | |
| | | |
| | | |
| | |
| Acquisition of exploration property | |
| - | | |
| 3,802 | | |
| - | |
| Total acquisition costs | |
| - | | |
| 3,802 | | |
| - | |
| Drilling and geotechnical | |
| 2,672 | | |
| 8,237 | | |
| 6,357 | |
| Camp and site costs | |
| 323 | | |
| 1,456 | | |
| 772 | |
| Land taxes and government fees | |
| 19 | | |
| 39 | | |
| 43 | |
| Legal, community and other consultation costs | |
| 131 | | |
| 386 | | |
| 347 | |
| Travel | |
| 58 | | |
| 128 | | |
| 109 | |
| Total for the period | |
| 3,203 | | |
| 14,048 | | |
| 7,628 | |
| Balance, beginning of period | |
| 36,167 | | |
| 25,322 | | |
| 17,694 | |
| Total Larder Project cost | |
| 39,370 | | |
| 39,370 | | |
| 25,322 | |
MAG SILVER CORP.
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2024
(expressed in thousands of US dollars except as otherwise noted)
7. OUTLOOK
Juanicipio Outlook
All material mined at Juanicipio is now being processed through the Juanicipio
processing facility, with the resulting gravimetric, lead (silver-rich) and zinc concentrates treated at market terms under offtake agreements
with Met-Mex Peñoles, S.A. de C.V. (an affiliate of Fresnillo). A pyrite concentrate is also produced and marketed at market terms
by Fresnillo. The Operator Services Agreement became effective upon the declaration of commercial production, whereby Fresnillo and its
affiliates will continue to operate the mine for a fee of $13,000 per annum. With the plant operating at nameplate capacity, the focus
is now on ongoing cost and operational optimization.
With continued operational outperformance, as reported by Fresnillo, silver
grades are expected to be at the top end of the revised guidance range (420g/t to 460g/t) for 2024.
During 2024, Juanicipio plans to drill a total of 50,000 metres, with 33,000
metres from underground and 17,000 metres from surface.
Deer Trail Outlook
The planned 2024 exploration program at the Deer Trail Project includes
up to 7,500 metres of drilling to test around the Carissa Discovery, and follow-up drilling in the Deer Trail mine corridor. Additionally
surface exploration, geophysical surveys and modelling have defined many additional targets throughout the project area with drill permitting
to test many of these well advanced.
Larder Project Outlook
The planned 2024 exploration program at the Larder Project includes drilling
a minimum of 35,000 metres with multiple rigs. Targets include first, second and third order structures that have been identified from
the 2023 target generation program (geophysical, geochemical, and geological) as well as continuing to expand known zones at the Fernland,
Cheminis and Bear targets. The 2024 exploration program includes additional geophysics and field work to refine existing and identify
additional targets to the already rich target portfolio. With the completion of the Goldstake Property acquisition in March 2024, the
geological team at the Larder Project has commenced a large comprehensive field and geophysical program for completion in the second half
of 2024. MAG expects the 2024 field and geophysical programs to unlock a plethora of drill targets that will be ranked and tested in 2025.
MAG SILVER CORP.
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2024
(expressed in thousands of US dollars except as otherwise noted)
8. SUMMARY OF QUARTERLY
INFORMATION
Selected Quarterly Information
The following table summarizes selected financial data for the Company’s
eight most recently completed financial quarters. The information set forth below should be read in conjunction with the consolidated
financial statements and related notes thereto. All figures are reported in accordance with IFRS.
| | |
2024 | |
2023 | |
2022 |
| | |
| Q3 | | |
| Q2 | | |
| Q1 | | |
| Q4 | | |
| Q3 | | |
| Q2 | | |
| Q1 | | |
| Q4 | |
| | |
| $ | | |
| $ | | |
| $ | | |
| $ | | |
| $ | | |
| $ | | |
| $ | | |
| $ | |
| Income
from equity accounted investment in Juanicipio (3) | |
| 25,552 | | |
| 25,123 | | |
| 19,244 | | |
| 21,069 | | |
| 13,692 | | |
| 22,419 | | |
| 7,919 | | |
| 2,877 | |
| Interest
income (1) | |
| 1,336 | | |
| 928 | | |
| 827 | | |
| 726 | | |
| 663 | | |
| 641 | | |
| 564 | | |
| 295 | |
| Other
income (4) | |
| 533 | | |
| 650 | | |
| 537 | | |
| 388 | | |
| 269 | | |
| 233 | | |
| 127 | | |
| - | |
| General and administrative expenses | |
| 3,529 | | |
| 3,622 | | |
| 4,109 | | |
| 2,995 | | |
| 4,094 | | |
| 3,233 | | |
| 3,272 | | |
| 3,797 | |
| Net
income (loss) (2) | |
| 22,292 | | |
| 21,614 | | |
| 14,895 | | |
| 15,694 | | |
| 8,862 | | |
| 19,390 | | |
| 4,713 | | |
| (825 | ) |
| Net income (loss) per share | |
| 0.22 | | |
| 0.21 | | |
| 0.14 | | |
| 0.14 | | |
| 0.09 | | |
| 0.19 | | |
| 0.05 | | |
| (0.01 | ) |
| Diluted net income (loss) per share | |
| 0.22 | | |
| 0.21 | | |
| 0.14 | | |
| 0.14 | | |
| 0.09 | | |
| 0.19 | | |
| 0.05 | | |
| (0.01 | ) |
Notes:
| (1) | The Company’s only source of interest income during the quarters listed above was interest earned
on cash, cash equivalents and term deposits. The amount of interest earned correlates directly to the amount of cash, cash equivalents
and term deposits on hand during the period referenced and prevailing interest rates at the time. Interest from the Juanicipio loans,
where MAG owns a 44% interest, is recognized through MAG’s income from equity accounted investment in Juanicipio (see ‘Results
of the Juanicipio’ above) as applicable. |
| (2) | Net income (loss) by quarter is often materially affected by the timing and recognition of large non-cash
expenses (specifically share-based payments, exploration and evaluation property impairments, and deferred tax changes) as discussed above
when applicable in “Review of Financial Results”. |
| (3) | Income from equity accounted investment in Juanicipio is often materially affected by changes in volatile
metal prices, start-up and ramp-up activities associated with mining and processing, non-cash deferred tax movements related to assets
as well as fluctuating feed grades as the operations approached steady state. Q2 2023 through Q3 2024 higher income from equity accounted
investment in Juanicipio is mainly due to higher metal prices and processing more ore than in prior periods as Juanicipio transitioned
through mill commissioning, operational ramp-up, and ultimately achieved nameplate production levels during September 2023 (see ‘Results
of Juanicipio’ above). |
| (4) | On February 16, 2023, the Company closed a $17,133 (C$23,024) bought deal private placement of Common
Shares issued on a “flow-through” basis within the meaning of the Income Tax Act (Canada) (the “Flow-Through
Shares”), for which the Company recorded a $2,986 Flow-Through Share premium liability. As eligible expenditures are incurred, the
Company records associated amortization of the Flow-Through Share premium liability in other income. |
MAG SILVER CORP.
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2024
(expressed in thousands of US dollars except as otherwise noted)
9. REVIEW OF FINANCIAL
RESULTS
Three months ended September 30, 2024 vs. Three months ended September
30, 2023
| | |
| For
the three months ended | |
| | |
| September 30, | | |
| September 30, | |
| | |
| 2024 | | |
| 2023 | |
| | |
| $ | | |
| $ | |
| | |
| | | |
| | |
| Income from equity accounted investment in Juanicipio | |
| 25,552 | | |
| 13,692 | |
| General and administrative expenses | |
| (3,529 | ) | |
| (4,094 | ) |
| General exploration and business development | |
| (138 | ) | |
| (468 | ) |
| Operating Income | |
| 21,885 | | |
| 9,130 | |
| | |
| | | |
| | |
| Interest income | |
| 1,336 | | |
| 663 | |
| Other income | |
| 533 | | |
| 269 | |
| Financing costs | |
| (211 | ) | |
| - | |
| Foreign exchange loss | |
| (41 | ) | |
| (192 | ) |
| Income before income tax | |
| 23,502 | | |
| 9,870 | |
| | |
| | | |
| | |
| Deferred income tax expense | |
| (1,210 | ) | |
| (1,008 | ) |
| | |
| | | |
| | |
| Net income | |
| 22,292 | | |
| 8,862 | |
Income from equity accounted investment in Juanicipio increased
to $25,552 for the three months ended September 30, 2024 (September 30, 2023: $13,692), representing the Company’s 44% equity interest
in the Juanicipio Mine and is discussed above on a 100% basis in ‘Results of Juanicipio’.
General and administrative expenses decreased to $3,529 during the
three months ended September 30, 2024 (September 30, 2023: $4,094) mainly due to compensation and consulting fees decreasing to $1,268
(September 30, 2023: $1,727) impacted by higher executive search and consultant fees in Q3 2023.
Interest income increased to $1,336 during the three months ended
September 30, 2024 (September 30, 2023: $663) mainly due to higher cash balances compared to the comparative period.
Other income increased to $533 during the three months ended September
30, 2024 (September 30, 2023: $269) mainly due to higher eligible exploration spend driving higher amortization of the Company’s
Flow-Through Share premium liability.
Financing Costs increased to $211 during the three months ended
September 30, 2024 (September 30, 2023: nil) and is mainly attributable to the amortization of deferred financing fees and commitment
fees from the Company’s Credit Facility (as defined herein) (entered into October 2023).
MAG SILVER CORP.
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2024
(expressed in thousands of US dollars except as otherwise noted)
Deferred income tax expense of $1,210 during the three months ended
September 30, 2024 (September 30, 2023: $1,008) is primarily driven by the income from the equity accounted investment in Juanicipio recognized
by the Company.
Nine months ended September 30, 2024 vs. Nine months ended September 30,
2023
| | |
| For
the nine months ended | |
| | |
| September 30, | | |
| September 30, | |
| | |
| 2024 | | |
| 2023 | |
| | |
| $ | | |
| $ | |
| | |
| | | |
| | |
| Income from equity accounted investment in Juanicipio | |
| 69,919 | | |
| 44,030 | |
| General and administrative expenses | |
| (11,052 | ) | |
| (10,599 | ) |
| General exploration and business development | |
| (590 | ) | |
| (610 | ) |
| Operating Income | |
| 58,277 | | |
| 32,821 | |
| | |
| | | |
| | |
| Interest income | |
| 3,091 | | |
| 1,868 | |
| Other income | |
| 1,720 | | |
| 629 | |
| Financing costs | |
| (553 | ) | |
| - | |
| Foreign exchange loss | |
| (144 | ) | |
| (204 | ) |
| Income before income tax | |
| 62,391 | | |
| 35,114 | |
| | |
| | | |
| | |
| Deferred income tax expense | |
| (3,590 | ) | |
| (2,149 | ) |
| | |
| | | |
| | |
| Net income | |
| 58,801 | | |
| 32,965 | |
Income from equity accounted investment in Juanicipio increased
to $69,919 for the nine months ended September 30, 2024 (September 30, 2023: $44,030), representing the Company’s 44% equity interest
in the Juanicipio Mine and is discussed above on a 100% basis in ‘Results of Juanicipio’.
General and administrative expenses increased to $11,052 during
the nine months ended September 30, 2024 (September 30, 2023: $10,599) due to:
| · | increase in share-based compensation to $3,010 (September 30, 2023: $2,597) mainly due to the appointment
of an independent director in January 2024; |
| · | Juanicipio oversight costs increased to $741 (September 30, 2023: $332) as a result of being expensed
through profit and loss subsequent to the declaration of commercial production at Juanicipio in June 2023; |
| · | increase in depreciation and amortization expense to $394 (September 30, 2023: $201) mainly due to Juanicipio
achieving commercial production in June 2023, resulting in the recording of amortization of accumulated capitalized Juanicipio oversight
expenditures; |
MAG SILVER CORP.
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2024
(expressed in thousands of US dollars except as otherwise noted)
| · | decrease in compensation and consulting fees to $3,406 (September 30, 2023: $3,949) mainly due to higher
executive search and consultant fees incurred by the Company in 2023. |
Interest income increased to $3,091 during the nine months ended
September 30, 2024 (September 30, 2023: $1,868) mainly due to higher cash balances compared to the comparative period.
Other income increased to $1,720 during the nine months ended September
30, 2024 (September 30, 2023: $629) mainly due to higher eligible exploration spend and therefore higher amortization of the Company’s
Flow-Through Share premium liability.
Financing Costs increased to $533 during the nine months ended September
30, 2024 (September 30, 2023: nil) and is mainly attributable to the amortization of deferred financing fees and commitment fees from
the Company’s Credit Facility (entered into October 2023).
Deferred income tax expense of $3,590 during the nine months ended
September 30, 2024 (September 30, 2023: $2,149) is primarily driven by the income from the equity accounted investment in Juanicipio recognized
by the Company.
MAG SILVER CORP.
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2024
(expressed in thousands of US dollars except as otherwise noted)
10. FINANCIAL POSITION
The following table summarizes MAG’s financial position as at September
30, 2024 and December 31, 2023:
| | |
| September 30, | | |
| December 31, | |
| | |
| 2024 | | |
| 2023 | |
| | |
| $ | | |
| $ | |
| Assets | |
| | | |
| | |
| Current assets | |
| | | |
| | |
| Cash | |
| 113,491 | | |
| 68,707 | |
| Other current assets | |
| 3,769 | | |
| 3,346 | |
| Total current assets | |
| 117,260 | | |
| 72,053 | |
| Non-current assets | |
| | | |
| | |
| Investment in Juanicipio | |
| 394,928 | | |
| 394,622 | |
| Exploration and evaluation assets | |
| 74,519 | | |
| 52,637 | |
| Deferred financing fees | |
| 653 | | |
| 909 | |
| Property and equipment | |
| 236 | | |
| 301 | |
| Investments | |
| 8 | | |
| 8 | |
| | |
| 470,344 | | |
| 448,477 | |
| Total assets | |
| 587,604 | | |
| 520,530 | |
| Liabilities | |
| | | |
| | |
| Current liabilities | |
| 3,603 | | |
| 4,791 | |
| Non-current liabilities | |
| 12,572 | | |
| 8,982 | |
| Total liabilities | |
| 16,175 | | |
| 13,773 | |
| Total equity | |
| 571,429 | | |
| 506,757 | |
| Total liabilities and equity | |
| 587,604 | | |
| 520,530 | |
Cash totalled $113,491 as at September 30, 2024 compared to $68,707 at
December 31, 2023, with the increase primarily attributable to $69,927 of Juanicipio loan principal and interest repayments (see below
‘Company’s investment in Juanicipio’ section), offset by $17,025 in exploration and evaluation expenditures as
well as $3,802 attributable to the acquisition of the exploration property (see below ‘Cash Flows - Investing Activities’
section).
Other current assets as at September 30, 2024 include accounts receivable
of $1,675 (December 31, 2023: $1,559) and prepaid expenses of $2,094 (December 31, 2023: $1,787).
The equity accounted investment in Juanicipio increased from $394,622 at
December 31, 2023 to $394,928 at September 30, 2024. This movement was mainly driven by $65,235 of loans repayments from Juanicipio and
$3,985 of interest earned reclassified to receivables, offset by MAG’s share of earnings from Juanicipio of $69,919 - as depicted
below in ‘Company’s investment in Juanicipio’.
MAG SILVER CORP.
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2024
(expressed in thousands of US dollars except as otherwise noted)
Exploration and evaluation assets as at September 30, 2024 increased to
$74,519 (December 31, 2023: $52,637) reflecting exploration expenditures incurred on the Deer Trail Project ($7,834) and the Larder Project
($14,048 which includes $3,802 for the acquisition exploration property) during the nine months ended September 30, 2024.
Current liabilities as at September 30, 2024 decreased to $3,603 (December
31, 2023: $4,791) driven primarily by a decrease in the Flow-Through Share premium liability as a result of eligible exploration spend
on the Larder Project during the period. It is expected that the remainder Flow-Through Share premium liability of $249 as at September
30, 2024 will be fully extinguished by the end of the year, with $40 Flow-Through Share premium liability ($231 Flow-Through Share eligible
spend) remaining as at October 31, 2024.
Non-current liabilities of $12,572 as at September 30, 2024 (December 31,
2023: $8,982) includes a $484 reclamation provision (December 31, 2023: $484), and a deferred income tax liability of $12,088 (December
31, 2022: $8,498). The latter is primarily driven by the income from the equity accounted investment in Juanicipio recognized by the Company.
Company’s investment in Juanicipio
The following table provides a summary of
the Company’s investment relating to its interest in Juanicipio as at September 30, 2024 and December 31, 2023:
| | |
| September 30, | | |
| December 31, | |
| | |
| 2024 | | |
| 2023 | |
| | |
| $ | | |
| $ | |
| Balance, beginning of period | |
| 394,622 | | |
| 338,316 | |
| Juanicipio oversight expenditures incurred 100% by MAG | |
| - | | |
| 384 | |
| Amortization of Juanicipio's oversight expenditures incurred 100% by MAG | |
| (394 | ) | |
| (305 | ) |
| Loan repayments from Juanicipio | |
| (65,235 | ) | |
| (25,714 | ) |
| Cash contributions and advances to Juanicipio | |
| - | | |
| 24,992 | |
| Total for the period | |
| (65,628 | ) | |
| (642 | ) |
| Income from equity accounted Investment in Juanicipio | |
| 69,919 | | |
| 65,099 | |
| Interest earned, reclassified to accounts receivable | |
| (3,985 | ) | |
| (8,150 | ) |
| Balance, end of period | |
| 394,928 | | |
| 394,622 | |
During the nine months ended September 30, 2024 the Company did not capitalize
any Juanicipio oversight expenditures as following the declaration of commercial production in June 2023, the Company started expensing
Juanicipio oversight expenditures and recording amortization of accumulated capitalized Juanicipio oversight expenditures.
MAG SILVER CORP.
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2024
(expressed in thousands of US dollars except as otherwise noted)
11. CASH FLOWS
The following table summarizes MAG Silver’s cash flow activities
for the three and nine months ended September 30, 2024 and September 30, 2023:
| | |
| For the three months ended, | | |
| For the nine months ended, | |
| | |
| September 30, | | |
| September 30, | | |
| September 30, | | |
| September 30, | |
| | |
| 2024 | | |
| 2023 | | |
| 2024 | | |
| 2023 | |
| | |
| $ | | |
| $ | | |
| $ | | |
| $ | |
| Operating activities before movements in non-cash | |
| | | |
| | | |
| | | |
| | |
| working capital | |
| (1,260 | ) | |
| (3,007 | ) | |
| (5,632 | ) | |
| (6,645 | ) |
| Movements in non-cash working capital | |
| (621 | ) | |
| 1,706 | | |
| (1,162 | ) | |
| 413 | |
| Operating activities | |
| (1,881 | ) | |
| (1,301 | ) | |
| (6,794 | ) | |
| (6,232 | ) |
| Investing activities | |
| 17,257 | | |
| 7,412 | | |
| 49,100 | | |
| (20,859 | ) |
| Financing activities | |
| 924 | | |
| 103 | | |
| 2,434 | | |
| 55,880 | |
| Effect of exchange rate changes on cash | |
| (146 | ) | |
| (359 | ) | |
| 44 | | |
| (225 | ) |
| Increase / (decrease) in cash during the period | |
| 16,154 | | |
| 5,855 | | |
| 44,784 | | |
| 28,564 | |
| Cash, beginning of period | |
| 97,337 | | |
| 52,664 | | |
| 68,707 | | |
| 29,955 | |
| Cash, end of period | |
| 113,491 | | |
| 58,519 | | |
| 113,491 | | |
| 58,519 | |
Operating Activities
During the three months ended September 30, 2024, MAG used $1,881 in cash
for operations (three months ended September 30, 2023: $1,301) primarily for the payment of corporate office expenses. The increase in
cash used for operations was largely driven by changes in working capital items, mainly in accounts receivable and prepaid expenses.
During the nine months ended September 30, 2024, MAG used $6,794 in cash
for operations (nine months ended September 30, 2023: $6,232) primarily for the payment of corporate office expenses. The increase in
cash used for operations was largely driven by changes in working capital items, mainly in accounts receivable and prepaid expenses.
Investing Activities
During the three months ended September 30, 2024, cash from investing activities
amounted to $17,257 (three months ended September 30, 2023: $7,412). The increase in cash from investing activities was driven by loan
and interest repayments from Juanicipio of $22,649 (three months ended September 30, 2023: $11,295) offset by $5,392 which was used in
exploration and evaluation expenditures across the Deer Trail and Larder Projects (three months ended September 30, 2023: $3,811).
During the nine months ended September 30, 2024, cash from investing activities
amounted to $49,100 (nine months ended September 30, 2023: cash used of $20,859). The increase in cash from investing activities was driven
by loan and interest repayments from Juanicipio of $69,927 (nine months ended September 30, 2023: $14,589) offset by cash contributions
to Juanicipio of nil (nine months ended September 30, 2023: $25,376) and $20,827 (which includes $3,802 for the acquisition of exploration
property) in exploration and evaluation expenditures across the Deer Trail and Larder Projects (nine months ended September 30, 2023:
$10,053).
MAG SILVER CORP.
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2024
(expressed in thousands of US dollars except as otherwise noted)
Financing Activities
During the three months ended September 30, 2024, cash received from financing
activities amounted to $924 (three months ended September 30, 2023: $103). The increase in cash received mainly related to the issuance
of Common Shares from exercising stock options amounting to $961 (September 30, 2023: nil).
During the nine months ended September 30, 2024, cash received from financing
activities amounted to $2,434 (nine months ended September 30, 2023: $55,880). The increase in cash received mainly related to the issuance
of Common Shares from exercising stock options amounting to $2,548 (nine months ended September 30, 2023: $225) and by equity financings
of nil (nine months ended September 30, 2023: $55,749, completed in Q1 2023).
12. NON-IFRS MEASURES
The Company has included certain
non-IFRS performance measures throughout this MD&A. These performance measures are employed by management to assess the Company’s
operating and financial performance and to assist in business decision-making. The Company believes that, in addition to conventional
measures prepared in accordance with IFRS, certain investors and other stakeholders use this information to evaluate the Company’s
operating and financial performance; however, as explained elsewhere herein, these non-IFRS performance measures do not have any standardized
meaning and therefore may not be comparable to similar measures presented by other issuers. Accordingly, these performance measures are
intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared
in accordance with IFRS.
Juanicipio does not calculate this
information for use by both shareholders (Fresnillo 56%, and MAG 44%), rather it is calculated by the Company solely for the Company’s
own disclosure purposes and may differ from the non-IFRS measures calculated and presented by Fresnillo.
Cash cost per ounce
The Company has included the non-IFRS performance measure cash cost per
ounce on a by-product basis throughout this MD&A. In the gold and silver mining industry, this is a common performance measure but
does not have any standardized meaning. The Company follows the recommendations of the Gold Institute Production Cost Standard. The Gold
Institute, which ceased operations in 2002, was a non-regulatory body and represented a global group of suppliers of gold and gold products.
The production cost standard developed by the Gold Institute remains the generally accepted standard of reporting cash costs of production
by many gold and silver mining companies. Management uses cash cost per ounce to monitor the operating performance of Juanicipio. The
Company believes that, in addition to conventional measures prepared in accordance with IFRS, some investors use this information to evaluate
the Company’s performance and ability to generate cash flow, distribution of which is subject to the terms of the Juanicipio shareholders’
agreement. Accordingly, it is intended to provide additional information and should not be considered in isolation or as a substitute
for measures of performance prepared in accordance with IFRS. Other companies may calculate cash cost per ounce differently.
MAG SILVER CORP.
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2024
(expressed in thousands of US dollars except as otherwise noted)
The following table provides a reconciliation of cash cost per silver ounce
of Juanicipio to production cost of Juanicipio on a 100% basis (the nearest IFRS measure) as presented in the notes to the Q3 2024 Financial
Statements.
| | |
| Three
months ended September 30, | | |
| Nine
months ended September 30, | |
| (in
thousands of US$, except per ounce amounts) | |
| 2024 | | |
| 2023 | | |
| 2024 | | |
| 2023 | |
| Production cost as reported | |
| 38,596 | | |
| 43,782 | | |
| 115,248 | | |
| 125,731 | |
| Depreciation on inventory movements | |
| (147 | ) | |
| (1,145 | ) | |
| 1,000 | | |
| (2,799 | ) |
| Adjusted production cost | |
| 38,448 | | |
| 42,637 | | |
| 116,249 | | |
| 122,932 | |
| Treatment, refining, and other processing costs | |
| 10,733 | | |
| 9,211 | | |
| 29,002 | | |
| 38,461 | |
| By-product revenues (2) | |
| (52,546 | ) | |
| (33,415 | ) | |
| (137,897 | ) | |
| (87,493 | ) |
| Extraordinary mining and other duties | |
| 2,810 | | |
| 1,635 | | |
| 6,975 | | |
| 3,532 | |
| Total cash costs (1) | |
| (555 | ) | |
| 20,067 | | |
| 14,330 | | |
| 77,432 | |
| Add back by-product revenues (2) | |
| 52,546 | | |
| 33,415 | | |
| 137,897 | | |
| 87,493 | |
| Total cash costs for equivalent silver (1) | |
| 51,992 | | |
| 53,482 | | |
| 152,226 | | |
| 164,925 | |
| Silver ounces sold | |
| 4,461,644 | | |
| 4,288,747 | | |
| 12,728,250 | | |
| 11,167,181 | |
| Equivalent silver ounces sold (3) | |
| 6,203,678 | | |
| 5,709,900 | | |
| 17,627,355 | | |
| 14,892,542 | |
| Cash cost per silver ounce sold ($/ounce) | |
| (0.12 | ) | |
| 4.68 | | |
| 1.13 | | |
| 6.93 | |
| Cash cost per equivalent silver ounce sold ($/ounce) | |
| 8.38 | | |
| 9.37 | | |
| 8.64 | | |
| 11.07 | |
| (1) | As Q3 2023 represented the first full quarter of commercial production, information presented for total
cash costs and total cash costs for equivalent silver together with their associated per unit values are not directly comparable. |
| (2) | By-product revenues relate to the sale of other metals namely gold, lead, and zinc. |
| (3) | Equivalent silver ounces sold have been calculated using realized prices to translate gold, lead and zinc to “equivalent”
silver ounces sold (metal quantity, multiplied by metal price, divided by silver price). Three and nine months ended September 30, 2024
realized prices: $30.16/oz silver, $2,587.65/oz gold, $0.91/lb lead, $1.29/lb zinc and $28.15/oz silver, $2,360.51/oz gold, $0.94/lb lead,
$1.25/lb zinc, respectively (three and nine months ended September 30, 2023 realized prices: $23.51/oz silver, $1,911.99/oz gold, $1.00/lb
lead, $1.15/lb zinc and $23.49/oz silver, $1,942.32/oz gold, $0.97/lb lead, $1.16/lb zinc, respectively). |
All-in sustaining cost per ounce
In June 2013, the World Gold Council, a non-regulatory association of many
of the world’s leading gold mining companies was established to promote the use of gold to industry, provided guidance for the calculation
of “all-in sustaining cost per gold ounce” in an effort to encourage improved understanding and comparability of the total
costs associated with mining and producing an ounce of gold. The Company, in applying the same methodology for its silver production,
has adopted the reporting of “all-in sustaining cost per silver ounce”, which is a non-IFRS performance measure. The Company
believes that the all-in sustaining cost per silver ounce measure provides additional insight into the costs of producing silver by capturing
all of the expenditures required for the discovery, development and sustaining of silver production and allows the Company to assess Juanicipio’s
ability to support capital expenditures to sustain future production from the generation of operating cash flows. The Company believes
that, in addition to conventional measures prepared in accordance with IFRS, some investors use this information to evaluate Juanicipio’s
performance and ability to generate cash flow, distribution of which is subject to the terms of the Juanicipio shareholders’ agreement.
Other companies may calculate all-in sustaining cost per ounce differently. Accordingly, it is intended to provide additional information
and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.
MAG SILVER CORP.
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2024
(expressed in thousands of US dollars except as otherwise noted)
All-in sustaining costs adjust “Total cash costs” for G&A
expenses, exploration expenditures (sustaining in nature), sustaining capital expenditures, sustaining lease payments and interest expense,
and accretion on closure and reclamation costs. Exploration expenditures (sustaining in nature), sustaining capital expenditures, sustaining
lease payments and interest expense, and accretion on closure and reclamation costs are not line items on Juanicipio’s financial
statements. Sustaining capital expenditures are defined as those capital expenditures which do not materially benefit annual or life of
mine silver ounce production at a mine site.
A material benefit to a mine site is considered to be at least a 10% increase
in annual or life of mine production, net present value, or reserves compared to the remaining life of mine of the operation. As such,
sustaining capital expenditures exclude all expenditures at Juanicipio which are deemed expansionary in nature (see reconciliation below).
Accretion on reclamation and closure costs represents the growth in Juanicipio’s decommissioning provision due to the passage of
time. This amount does not reflect cash outflows, but it is considered to be representative of the periodic costs of closure and reclamation.
Lease payments on mining and service lease agreements represent cash outflows while interest expense represents the financing component
inherent in the lease. Reclamation cost accretion and lease interest are included in finance expense in the Juanicipio’s results
as disclosed in the notes to the Q3 2024 Financial Statements.
MAG SILVER CORP.
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2024
(expressed in thousands of US dollars except as otherwise noted)
The following table provides a reconciliation of all-in sustaining costs
of Juanicipio to production cost and various operating expenses of Juanicipio on a 100% basis (the nearest IFRS measure), as presented
in the notes to the Q3 2024 Financial Statements.
| | |
| Three
months ended September 30, | | |
| Nine
months ended September 30, | |
| (in
thousands of US$, except per ounce amounts) | |
| 2024 | | |
| 2023 | | |
| 2024 | | |
| 2023 | |
| Total cash costs | |
| (555 | ) | |
| 20,067 | | |
| 14,330 | | |
| 77,432 | |
| General and administrative expenses | |
| 2,497 | | |
| 3,458 | | |
| 10,969 | | |
| 9,115 | |
| Exploration | |
| 2,728 | | |
| 2,059 | | |
| 6,331 | | |
| 6,121 | |
| Sustaining capital expenditures | |
| 9,676 | | |
| 13,604 | | |
| 25,603 | | |
| 26,737 | |
| Sustaining lease payments | |
| 232 | | |
| 174 | | |
| 789 | | |
| 552 | |
| Interest on lease liabilities | |
| (13 | ) | |
| (15 | ) | |
| (47 | ) | |
| (32 | ) |
| Accretion on closure and reclamation costs | |
| 66 | | |
| 64 | | |
| 210 | | |
| 186 | |
| All-in sustaining costs (1) | |
| 14,631 | | |
| 39,411 | | |
| 58,185 | | |
| 120,111 | |
| Add back by-product revenues (2) | |
| 52,546 | | |
| 33,415 | | |
| 137,897 | | |
| 87,493 | |
| All-in sustaining costs for equivalent silver (1) | |
| 67,177 | | |
| 72,827 | | |
| 196,082 | | |
| 207,604 | |
| Silver ounces sold | |
| 4,461,644 | | |
| 4,288,747 | | |
| 12,728,250 | | |
| 11,167,181 | |
| Equivalent silver ounces sold (3) | |
| 6,203,678 | | |
| 5,709,900 | | |
| 17,627,355 | | |
| 14,892,542 | |
| All-in sustaining cost per silver ounce sold ($/ounce) | |
| 3.28 | | |
| 9.19 | | |
| 4.57 | | |
| 10.76 | |
| All-in sustaining cost per equivalent silver ounce sold ($/ounce) | |
| 10.83 | | |
| 12.75 | | |
| 11.12 | | |
| 13.94 | |
| Average realized price per silver ounce sold ($/ounce) | |
| 30.16 | | |
| 23.51 | | |
| 28.15 | | |
| 23.49 | |
| All-in sustaining margin ($/ounce) | |
| 26.88 | | |
| 14.32 | | |
| 23.58 | | |
| 12.73 | |
| All-in sustaining margin ($/equivalent ounce) | |
| 19.34 | | |
| 10.76 | | |
| 17.02 | | |
| 9.55 | |
| All-in sustaining margin | |
| 119,949 | | |
| 61,430 | | |
| 300,082 | | |
| 142,160 | |
| (1) | As Q3 2023 represented the first full quarter of commercial production, information presented for all-in
sustaining costs, all-in sustaining costs for equivalent silver, and all-in sustaining margin together with their associated per unit
values are not directly comparable. |
| (2) | By-product revenues relate to the sale of other metals namely gold, lead, and zinc. |
| (3) | Equivalent silver ounces sold have been calculated using realized prices to translate gold, lead and zinc to “equivalent”
silver ounces sold (metal quantity, multiplied by metal price, divided by silver price). Three and nine months ended September 30, 2024
realized prices: $30.16/oz silver, $2,587.65/oz gold, $0.91/lb lead, $1.29/lb zinc and $28.15/oz silver, $2,360.51/oz gold, $0.94/lb lead,
$1.25/lb zinc, respectively (three and nine months ended September 30, 2023 realized prices: $23.51/oz silver, $1,911.99/oz gold, $1.00/lb
lead, $1.15/lb zinc and $23.49/oz silver, $1,942.32/oz gold, $0.97/lb lead, $1.16/lb zinc, respectively). |
For the three and nine months ended September 30, 2024, the Company
incurred corporate G&A expenses of $3,429 and $10,658 respectively (three and nine months ended September 30, 2023: $3,961 and 10,398
respectively), which exclude depreciation expense.
For the three and nine months ended September 30, 2024, the Company’s
attributable silver ounces sold were 1,963,123 and 5,600,430 respectively (three and nine months ended September 30, 2023: 1,887,049 and
4,913,560 respectively) and attributable equivalent silver ounces sold were 2,729,618 and 7,756,036 respectively (three and nine months
ended September 30, 2023: 2,512,356 and 6,552,718 respectively), resulting in additional all-in sustaining cost for the Company of $1.75/oz
and $1.90/oz respectively (three and nine months ended September 30, 2023: $2.10/oz and $2.12/oz respectively); and $1.26/oz and $1.37/oz
respectively (three and nine months ended September 30, 2023: $1.58/oz and $1.59/oz respectively), in addition to Juanicipio’s all-in-sustaining
costs presented in the above table.
MAG SILVER CORP.
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2024
(expressed in thousands of US dollars except as otherwise noted)
The following table reconciles sustaining capital expenditures
(including exploration expenditures) to cash flow used in investing activities of Juanicipio on a 100% basis (the nearest IFRS measure),
as presented in the notes to the Q3 2024 Financial Statements.
| | |
| Three
months ended September 30, | | |
| Nine
months ended September 30, | |
| (in
thousands of US$) | |
| 2024 | | |
| 2023 | | |
| 2024 | | |
| 2023 | |
| Cash used in investing activities - Juanicipio | |
| 12,656 | | |
| 16,524 | | |
| 30,929 | | |
| 61,653 | |
| Less: | |
| | | |
| | | |
| | | |
| | |
| Development expenditures (1) | |
| (5 | ) | |
| (4,996 | ) | |
| (76 | ) | |
| (28,129 | ) |
| Change in accounts payable and deposits related to capital expenditures not included in AISC | |
| (248 | ) | |
| 4,807 | | |
| 1,081 | | |
| (666 | ) |
| Total sustaining capital expenditures (including exploration) (1) | |
| 12,404 | | |
| 15,663 | | |
| 31,934 | | |
| 32,858 | |
| Less capitalized exploration expenditures | |
| (2,728 | ) | |
| (2,059 | ) | |
| (6,331 | ) | |
| (6,121 | ) |
| Total sustaining capital expenditures (1) | |
| 9,676 | | |
| 13,604 | | |
| 25,603 | | |
| 26,737 | |
| (1) | As Q3 2023 represents the first full quarter of commercial production, information presented for sustaining
and development capital expenditures are not directly comparable. |
EBITDA and Adjusted EBITDA
Earnings before interest, tax, depreciation and amortization
(“EBITDA”) provides an indication of the Company’s continuing capacity to generate income from operations before considering
the Company’s financing decisions and costs of amortizing capital assets. Accordingly, EBITDA comprises net income excluding interest
expense, interest income, amortization and depletion, and income taxes. Adjusted EBITDA adjusts EBITDA to exclude non-recurring items
and non-cash items and includes the calculated Adjusted EBITDA of Juanicipio. Other companies may calculate EBITDA and Adjusted EBITDA
differently.
The following table provides a reconciliation of EBITDA and Adjusted
EBITDA attributable to the Company based on its economic interest in Juanicipio to net income (the nearest IFRS measure) of the Company
per the Q3 2024 Financial Statements. All adjustments are shown net of estimated income tax.
| | |
| Three
months ended September 30, | | |
| Nine
months ended September 30, | |
| (in
thousands of US$) | |
| 2024 | | |
| 2023 | | |
| 2024 | | |
| 2023 | |
| Net income after tax | |
| 22,292 | | |
| 8,862 | | |
| 58,801 | | |
| 32,965 | |
| Add back (deduct): | |
| | | |
| | | |
| | | |
| | |
| Taxes | |
| 1,210 | | |
| 1,008 | | |
| 3,590 | | |
| 2,149 | |
| Depreciation and depletion | |
| 100 | | |
| 133 | | |
| 394 | | |
| 201 | |
| Finance costs (income and expenses) | |
| (1,617 | ) | |
| (740 | ) | |
| (4,114 | ) | |
| (2,293 | ) |
| EBITDA (1) | |
| 21,985 | | |
| 9,263 | | |
| 58,671 | | |
| 33,022 | |
| Add back (deduct): | |
| | | |
| | | |
| | | |
| | |
| Adjustment for non-cash share-based compensation | |
| 991 | | |
| 822 | | |
| 3,010 | | |
| 2,597 | |
| Share of net earnings related to Juanicipio | |
| (25,552 | ) | |
| (13,692 | ) | |
| (69,919 | ) | |
| (44,030 | ) |
| MAG attributable interest in Junicipio Adjusted EBITDA | |
| 58,296 | | |
| 33,527 | | |
| 146,966 | | |
| 76,104 | |
| Adjusted EBITDA (1) | |
| 55,720 | | |
| 29,920 | | |
| 138,728 | | |
| 67,693 | |
| (1) | As Q3 2023 represents the first full quarter of commercial production, information presented for EBITDA
and Adjusted EBITDA is not directly comparable. |
MAG SILVER CORP.
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2024
(expressed in thousands of US dollars except as otherwise noted)
The following table reconciles Juanicipio’s EBITDA and
Adjusted EBITDA for the three and nine months ended September 30, 2024 and 2023 to the results of Juanicipio as disclosed in Note 5 to
the Q3 2024 Financial Statements.
| | |
| Three
months ended September 30, | | |
| Nine
months ended September 30, | |
| (in
thousands of US$) | |
| 2024 | | |
| 2023 | | |
| 2024 | | |
| 2023 | |
| Juanicipio net income after tax | |
| 56,235 | | |
| 25,907 | | |
| 149,850 | | |
| 86,154 | |
| Add back (deduct): | |
| | | |
| | | |
| | | |
| | |
| Juanicipio taxes | |
| 52,937 | | |
| 23,824 | | |
| 108,485 | | |
| 23,441 | |
| Juanicipio depreciation and depletion | |
| 23,440 | | |
| 21,646 | | |
| 67,934 | | |
| 47,001 | |
| Juanicipio finance costs (income and expenses) | |
| (123 | ) | |
| 4,794 | | |
| 7,699 | | |
| 16,329 | |
| Juanicipio EBITDA (1) | |
| 132,490 | | |
| 76,171 | | |
| 333,968 | | |
| 172,925 | |
| Add back (deduct): | |
| | | |
| | | |
| | | |
| | |
| Fixed asset write-down | |
| - | | |
| 27 | | |
| 46 | | |
| 38 | |
| Juanicipio adjusted EBITDA (1) | |
| 132,490 | | |
| 76,198 | | |
| 334,014 | | |
| 172,963 | |
| MAG's attributable interest in Juanicipio adjusted EBITDA | |
| 58,296 | | |
| 33,527 | | |
| 146,966 | | |
| 76,104 | |
| (1) | As Q3 2023 represents the first full quarter of commercial production, information presented for EBITDA
and Adjusted EBITDA is not directly comparable. |
While the above figures reflect an estimate of the Company’s “attributable
interest” in adjusted EBITDA generated from Juanicipio, cash and cash equivalents held by Juanicipio are not within the Company’s
exclusive control as the distribution of cash from Juanicipio is at the discretion of Fresnillo subject to the provisions in the Juanicipio
shareholders’ agreement.
Free Cash Flow
The Company uses the financial measure free cash flow, which
is a non-IFRS financial measure, to supplement information in its consolidated financial statements. Free cash flow does not have any
standardized meaning prescribed under IFRS, and therefore it may not be comparable to similar measures employed by other companies. The
Company believes that in addition to conventional measures prepared in accordance with IFRS, the Company and certain investors and analysts
use this information to evaluate Juanicipio’s performance with respect to its operating cash flow capacity to meet non-discretionary
outflows of cash. The presentation of free cash flow is not meant to be a substitute for the cash flow information presented in accordance
with IFRS, but rather should be evaluated in conjunction with such IFRS measures. Free cash flow is calculated as cash flow from operating
activities of Juanicipio adjusted for cash flows associated with sustaining and non-sustaining capital expenditures and payments made
to mining contractors for leases capitalized under IFRS 16.
MAG SILVER CORP.
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2024
(expressed in thousands of US dollars except as otherwise noted)
The following table provides a reconciliation of free cash flow
of Juanicipio to its cash flow from operating activities on a 100% basis (the nearest IFRS measure), as presented in Note 5 of the Q3
2024 Financial Statements.
| | |
| Three
months ended September 30, | | |
| Nine
months ended September 30, | |
| (in
thousands of US$) | |
| 2024 | | |
| 2023 | | |
| 2024 | | |
| 2023 | |
| Cash flow from operating activities | |
| 109,836 | | |
| 57,271 | | |
| 245,123 | | |
| 60,918 | |
| Less: | |
| | | |
| | | |
| | | |
| | |
| Cash flow used in investing activities | |
| (12,656 | ) | |
| (16,524 | ) | |
| (30,929 | ) | |
| (61,653 | ) |
| Sustaining lease payments | |
| (232 | ) | |
| (174 | ) | |
| (789 | ) | |
| (552 | ) |
| Juanicipio free cash flow (1) | |
| 96,948 | | |
| 40,573 | | |
| 213,405 | | |
| (1,287 | ) |
| (1) | As Q3 2023 represents the first full quarter of commercial production, comparative information presented
for free cash flow of Juanicipio is not directly comparable. |
While the above figures reflect free cash flow generated at Juanicipio,
cash and cash equivalents held by Juanicipio are not within the Company’s exclusive control as the distribution of cash from Juanicipio
is at the discretion of Fresnillo subject to the provisions in the Juanicipio shareholders’ agreement.
13. LIQUIDITY AND
CAPITAL RESOURCES
As at September 30, 2024, MAG had working capital (current assets less
current liabilities) of $113,657 (December 31, 2023: $67,262) including cash of $113,491 (December 31, 2023: $68,707) and no long-term
debt. At September 30, 2024, Juanicipio had working capital of $187,234 (December 31, 2023: working capital $86,336) including cash of
$96,782 (December 31, 2023: $42,913) (MAG’s attributable share is 44%). Future liquidity may depend upon the Company’s ability
to repatriate capital from Juanicipio, arrange debt or additional equity financing.
NCIB
On May 15, 2024, MAG announced that the TSX had accepted the Company’s
Notice of Intention to make a NCIB. Under the NCIB, the Company may purchase for cancellation up to an aggregate of 8,643,374 Common Shares,
representing approximately 10% of the public float (as defined in the rules and policies of the TSX) of the Common Shares as of May 8,
2024. The Company’s purchases in the United States will be subject to a limit of 5,148,977 Common Shares, being 5% of the public
float of the Common Shares as of May 8, 2024. The NCIB commenced on May 17, 2024 and will terminate on May 16, 2025, or earlier if the
maximum number of Common Shares under the NCIB have been purchased or if the NCIB has been terminated by the Company. As at September
30, 2024 the Company has not repurchased any Common Shares under the terms of the NCIB. In addition, the Company entered into an automatic
share purchase plan with its designated broker to allow for the purchase of Common Shares at times which the Company ordinarily would
not be active in the market due to trading blackout periods, insider trading rules or otherwise.
MAG SILVER CORP.
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2024
(expressed in thousands of US dollars except as otherwise noted)
Final Shelf Prospectus
On May 31, 2024, MAG filed a final short form base shelf prospectus with
the securities commissions in all of the provinces and territories of Canada (“Final Shelf Prospectus”) and a corresponding
registration statement on Form F-10 with the SEC under the United States Securities Act of 1933, as amended and the U.S./Canada Multijurisdictional
Disclosure System (“Registration Statement”) allowing the Company to offer up to $250,000 of Common Shares, preferred
shares, debt securities, subscription receipts, units and warrants or any combination thereof during the 25-month period that the Final
Shelf Prospectus remains effective. In order to maintain financial flexibility, and consistent with past practice, the Company has historically
maintained a base shelf prospectus. The Company has no present intention to offer securities pursuant to the Final Shelf Prospectus.
Revolving Credit Facility
In October 2023, the Company entered into a $40,000 senior secured revolving
credit facility with the Bank of Montreal (the “Credit Facility”). There is a provision for an accordion feature whereby,
upon request, the facility may be increased to $75,000 any time prior to the maturity date, at the discretion of the lender. The Credit
Facility will bear interest on a sliding scale of SOFR or the Lender’s Base Rate on US Dollar commercial loans plus an applicable
margin on a sliding scale of between 200 and 400 basis points based on the Company’s leverage ratio. Interest incurred on drawn
amounts is to be paid quarterly. Commitment fees on the undrawn portion of the facility are calculated on a similar sliding scale of between
50 and 75 basis points, and are also to be paid on a quarterly basis. The term of the facility is 34 months, maturing on August 4, 2026,
at which date any drawn amount is required to be paid back in full. All debts, liabilities and obligations under the facility are guaranteed
by the Company's material subsidiaries and secured by assets of the Company including the pledge of a material subsidiary. The facility
includes a number of customary covenants (liquidity, leverage, tangible net worth) and conditions including limitations on acquisitions
and investments (excluding exploration and capital expenditures) funded using cash with no limitations when equity is used as a funding
source. As at September 30, 2024, the Company is in compliance with all applicable covenants.
As of September 30, 2024, the Company has not drawn down any funds from
its Credit Facility, and as a result expensed $50 and $149 of commitment fees for the three and nine months ended September 30, 2024,
respectively.
MAG SILVER CORP.
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2024
(expressed in thousands of US dollars except as otherwise noted)
Expected Use of Proceeds and Financings
The Company closed a $42,558 bought deal public offering on February 7,
2023 and issued 2,905,000 Common Shares, including 170,000 Common Shares issued upon the partial exercise of the over-allotment option,
at a price of $14.65 per Common Share. A reconciliation of the expected use of net proceeds disclosed in the Company’s short form
prospectus dated February 2, 2023, against the actual use of net proceeds as at September 30, 2024 is as follows:
| Description | |
| Estimated
Amount ($) | | |
| Expended
Amount ($) | |
| Exploration expenditures related to Juanicipio, the Deer Trail Project and other projects | |
| 17,600 | | |
| 17,600 | (1) |
| Development and sustaining
capital expenditures not included in the estimated initial project capital related to Juanicipio (3) | |
| 14,200 | | |
| - | |
| Working capital and general
corporate purposes (3) | |
| 11,700 | | |
| 9,468 | (2) |
| Variance in previously
disclosed expected use of proceeds (3) | |
| - | | |
| 16,432 | |
| Total | |
| 43,500 | | |
| 43,500 | |
| (1) | The Company has now spent the full $17,600 of the proceeds from the offering to be allocated to exploration
expenditures, aligned with previously disclosed expectations. |
| (2) | The Company has now spent the full $9,468 proceeds from the offering allocated to working capital and
general corporate purposes, future spending from this category is expected to be funded by cash flows from its investment in Juanicipio. |
| (3) | All proceeds from the offering previously expected to be applied to development and sustaining capital
expenditures not included in the estimated initial project capital related to Juanicipio, and $2,232 expected to be applied to working
capital and general corporate purposes, were subsequently re-allocated to contribute to the extinguishment of substantial tax and mining
duty obligations of Juanicipio in Mexico. |
As noted above in ‘Cash Flows’, MAG expended $17,075,
net of $9,869 flow-through eligible expenditures at the Larder Project (year ended December 31, 2023: $15,862), on its exploration and
evaluation properties (excluding Juanicipio’s exploration expenditures as directly funded by Juanicipio) in the nine months ended
September 30, 2024, corresponding to the exploration expenditures in the first category in the table above (nil remaining, as of Q2 2024).
Furthermore, during the nine months ended September 30, 2024, MAG expended $6,794 (year ended December 31, 2023: $8,272) for operations
corresponding to working capital and general corporate purposes, namely the third category in the table above (nil remaining, as of Q1
2024). Post Q1 2024 and future spending to working capital and general corporate purposes is expected to be funded by cash flows from
MAG’s investment in Juanicipio.
In March 2023, MAG advanced $24,992 to Juanicipio and estimates that the
full amount was used to extinguish substantial tax and mining duty obligations not included in the initial project capital, constituting
a re-allocation in the initially anticipated use of funds of $14,200 and $2,232 previously disclosed in the second category (nil remaining)
and third category (nil remaining) respectively, of the foregoing table. Given the variances mentioned above, the Company does not expect
any adverse impact on its ability to achieve business objectives and milestones.
MAG SILVER CORP.
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2024
(expressed in thousands of US dollars except as otherwise noted)
Additionally, the Company closed a $17,133 (C$23,024) bought deal private
placement on February 16, 2023 and issued 969,450 Flow-Through Shares, including 126,450 Flow-Through Shares issued upon the full exercise
of a 15% over-allotment option at a price of $17.67 (C$23.75) per Flow-Through Share. Total proceeds are intended for the Larder Project,
whereby plans were finalized for exploration programs in 2023 and 2024 and are now being executed. For the nine months ended September
30, 2024, the Company incurred $9,869 of eligible spend at the Larder Project ($1,428 remaining). It is expected that the remainder Flow-Through
Share eligible spend of $1,428 as at September 30, 2024 will be fully expended by the end of the year, with $231 Flow-Through Share eligible
spend remaining as at October 31, 2024 ($1,197 Flow-Through Share eligible spend during October 2024). Other than as set forth above,
it is expected that the full use of these proceeds, once expended, will align with the above estimates, and the actuals will be reported
in future MD&A. However, there can be no assurances that the above objectives will be completed as circumstances may change and a
reallocation of the funds may be necessary in order for the Company to achieve its stated business objectives.
14. CONTRACTUAL
OBLIGATIONS
The following table discloses the contractual obligations of MAG and its
subsidiaries as at September 30, 2024 for committed exploration work and other committed obligations.
| | |
Total | |
Less than 1 year | |
1-3 Years | |
3-5 Years | |
More than 5 years |
| | |
$ | |
$ | |
$ | |
$ | |
$ |
| Minera Juanicipio (1) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
| Financing and consulting contractual commitments | |
| 546 | | |
| 302 | | |
| 244 | | |
| - | | |
| - | |
| Office lease commitments | |
| 2,156 | | |
| 157 | | |
| 393 | | |
| 417 | | |
| 1,189 | |
| Total Obligations and Commitments (2) | |
| 2,702 | | |
| 459 | | |
| 637 | | |
| 417 | | |
| 1,189 | |
| 1) | According to the operator, Fresnillo, as at September 30, 2024, contractual commitments including project
development and for continuing operations and purchase orders issued for project capital, sustaining capital, and continuing operations
total $22,982 (December 31, 2023: $13,779) with respect to Juanicipio, both on a 100% basis. |
| 2) | The Company also has discretionary commitments for property option payments and exploration expenditures
as outlined in Note 6 of the Q3 2024 Financial Statements. There is no obligation to make any of those payments or to conduct any work
on its optioned properties. As the Company advances them, it evaluates exploration results and determines at its own discretion which
option payments to make and which additional exploration work to undertake in order to comply with the funding requirements. |
Other than as disclosed above, there were no material changes in the specified
contractual obligations of the Company during the year ended September 30, 2024.
MAG SILVER CORP.
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2024
(expressed in thousands of US dollars except as otherwise noted)
15. SHARE CAPITAL
INFORMATION
MAG Silver’s authorized capital consists of an unlimited number of
Common Shares without par value. As at November 8, 2024, the following Common Shares, stock options, restricted share units, performance
share units (“PSUs”), and deferred share units were outstanding:
| | |
Number of shares | |
Exercise Price (in Canadian dollars) or Conversion Ratio | |
Remaining Life |
| Common shares | |
| 103,306,955 | | |
| n/a | | |
n/a |
| Stock options | |
| 1,110,937 | | |
| C$14.64 – C$23.53 | | |
0.41 to 4.51 years |
| Performance Share Units (“PSUs”) (1) | |
| 413,479 | | |
| 1:1(1) | | |
0.41 to 4.51 years |
| Restricted Share Units(“RSUs”) | |
| 175,356 | | |
| 1:1 | | |
1.30 to 4.51 years |
| Deferred Share Units (“DSUs”) (2) | |
| 514,957 | | |
| 1:1 | | |
n/a (2) |
| Fully Diluted | |
| 105,521,684 | | |
| | | |
|
(1) Includes 117,287 PSU grants
where vesting is subject to a market price performance factor, each measured over a three-year performance period which will result in
a PSU vesting range from 16,399 PSUs to 218,175 PSUs.
(2) To be share settled, but
no Common Shares are to be issued in respect of a participant in MAG’s deferred share unit plan prior to such eligible participant’s
termination date.
16. OTHER ITEMS
The Company is not aware of any undisclosed liabilities or legal actions
against MAG and MAG has no legal actions or cause against any third party at this time other than the claims of the Company with respect
to its purchase of 41 land rights within the Cinco de Mayo property boundaries, and the associated efforts to regain surface access with
the local community, or “local ejido”.
The Company is not aware of any condition of default under any debt, regulatory,
exchange related or other contractual obligation.
Cyber Security
The Company’s operations depend, in part, on the efficient operation
and management of the Company’s information technology and operational systems in a secure manner that minimizes cyber risks. A
breach of the Company’s systems could have a material adverse impact on the Company, its operations and reputation.
There has been an increase in cyber security incidents globally over the
past several years and this trend is expected to continue and intensify as global reliance on technology continues to increase. The Company
has programs and strategies in place that are designed to mitigate the risk of cyber-attacks and to allow the Company to recover from
cyber security incidents as rapidly as possible should one occur. The Company monitors, assesses and works to improve the effectiveness
of its technology programs and strategies, taking into account best industry practices. The Company has not experienced any material information
security breach in the last three years, nor has it experienced any known material losses relating to cyber-attacks or other data/information
security since its inception.
MAG SILVER CORP.
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2024
(expressed in thousands of US dollars except as otherwise noted)
The Company has policies and programs in place to manage cyber risks. Such
programs focus primarily on the following:
| · | protecting the Company’s assets from cyber-attacks and safeguarding sensitive information; |
| · | improving cyber security protection, detection, incident response and recovery capabilities to minimize
impact of adverse cyber events; |
| · | adopting practices to reduce third-party cyber security risks; |
| · | ongoing cyber security awareness in the workforce and the annual distribution of an information technology
security policy; |
| · | quarterly briefings by senior management of the Company to the Audit Committee on information security
matters; and |
| · | embedding security by design across the Company to proactively assess and manage cyber risk. |
The above policies and programs are subject to oversight by the Company’s
management team and board of directors (the “Board”). The Audit Committee, which is comprised entirely of independent directors,
has been tasked with assisting the Board in fulfilling its oversight responsibilities with regard to information security.
At Juanicipio, Fresnillo the project operator, employs various methods
to foster and elevate the cybersecurity culture, including workshops, communications, campaigns and exercises. This extends to working
closely with information technology departments, contributing to the definition and establishment of best practices and security standards.
There is no assurance that the Company’s policies and programs will
be sufficient to eliminate the risk of cyber-attack nor to protect the Company’s assets or operations.
17. TREND INFORMATION
As both the price and market for silver are volatile and difficult to predict,
a significant decrease in the silver price and to a lesser extent gold, zinc and lead prices, could have a material adverse impact on
the Company’s operations and market value.
The Company is exposed to global and localized inflation which continues
to be impacted by the ongoing Russia-Ukraine and Israel-Hamas conflicts, supply chain disruptions and fluctuating interest rates.
The nature of MAG’s business is demanding of capital for property
acquisition costs, exploration commitments, development and holding costs. MAG’s liquidity is affected by the results of its own
acquisition, exploration and advancement of mineral projects activities. The acquisition or discovery of an economic mineral deposit on
one of its mineral property interests may have a favourable effect on the Company’s liquidity, and conversely, the failure to acquire
or find one may have a negative effect. In addition, access to capital to fund exploration and development companies is at times challenging
in public markets, which could limit the Company’s ability to meet its objectives.
MAG SILVER CORP.
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2024
(expressed in thousands of US dollars except as otherwise noted)
Obtaining exploration permits in all the jurisdictions in which the Company
operates, often encounters First Nations, and other forms of community resistance. Likewise, surface rights in Mexico are often owned
by local communities or “ejidos” and there has been a trend in Mexico of increasing ejido challenges to existing surface right
usage agreements. The Company has already been impacted by this trend at its Cinco de Mayo project. Any further challenge to the access
or exploration of any of the properties in which MAG has an interest may have a negative impact on the Company, as the Company may incur
delays and expenses in defending such challenges and, if a challenge is successful, the Company’s interest in a property could be
materially adversely affected.
On March 28, 2023, a legislative initiative aimed at amending multiple
legal codes, inclusive of the Mexican Federal Mining Law (the “Federal Mining Law”), was presented to the Mexican Congress
by the President of Mexico. The proposed amendments pertain to, among other matters, granting of future mining permits and transfer of
permits, shortening concession life, granting of future water permits, mine reclamation, profit-sharing requirements to distribute at
least 7% of profits to local indigenous communities and management of mine waste. This initiative underwent a series of reviews and modifications,
culminating in preliminary approval by the lower house of Congress, the Chamber of Deputies, on April 20, 2023. On April 29, 2023, the
Mexican Senate approved the legislation. The amendments were approved by Mexico’s Federal Executive Branch and published in the
Official Gazette of the Mexican Federation on May 8, 2023, bringing the amendments into law on May 9, 2023. Numerous legal challenges
to the legality and constitutionality of several aspects of these changes have been filed with various Mexican courts and there is a possibility
that the Supreme Court will declare the reforms invalid due to violations committed during the legislative process. Juanicipio remains
committed to monitoring these judicial proceedings with the utmost attention.
Apart from these and the risks referenced below in “Risks and
Uncertainties,” management is not aware of any other trends, demands, commitments, events or uncertainties that would have a
material effect on the Company’s business, financial condition or results of operations.
18. RISKS AND UNCERTAINTIES
The Company’s securities should be considered a highly speculative
investment and investors are directed to carefully consider all of the information disclosed in the Company’s Canadian and U.S.
regulatory filings prior to making an investment in the Company, including the risk factors discussed under the heading “Risk Factors”
in the Company’s most recent Annual Information Form available on SEDAR+ at www.sedarplus.ca and incorporated by reference herein.
The Credit Facility includes certain customary restrictive covenants. The
Company does not currently anticipate any significant risk in complying with the financial ratios or financial covenants contained in
the Credit Facility. However, if the current facts and circumstances faced by the Company were to change due to unexpected operational
issues or due to other factors beyond the Company’s control, such changes could result in the Company being subject to certain restrictions
under, or being found in default of, the Credit Facility. Future exploration work and development of the properties in which the Company
has an interest may depend upon the Company’s ability to repatriate capital from its interest in the Juanicipio Mine, obtain financing
through joint venturing of projects, raise additional debt or equity finance, maintain the Credit Facility or raise financing though other
means. Failure to obtain access to such financing on a timely basis may have an adverse impact on the business of the Company.
MAG SILVER CORP.
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2024
(expressed in thousands of US dollars except as otherwise noted)
In addition, the Company
is exposed to a variety of financial instrument-related risks in the normal course of operations. The Company’s financial instruments
include cash, accounts receivable, investments, trade and other payables and a lease obligation. A discussion with respect to the fair
value of such instruments is included in Note 12 of the Q3 2024 Financial Statements. The Company examines the various financial instrument
related risks to which it is exposed and assesses the impact and likelihood of those risks. These risks may include market risk, credit
risk, liquidity risk, currency risk and interest rate risk. Management’s objectives, policies and procedures for managing these
risks are disclosed in Note 11 of the Q3 2024 Financial Statements.
19. OFF-BALANCE
SHEET ARRANGEMENTS
MAG has no off-balance sheet arrangements.
20. 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”). Dr. Peter Megaw, the Company’s former Chief Exploration
Officer (“CXO”), is a principal of both IMDEX and Cascabel, and was remunerated by the Company through fees to IMDEX.
On May 21, 2024, Dr. Megaw stepped down as CXO and will continue to provide
technical advice in a consulting role and as such will no longer be providing key management personnel services as defined under IAS 24.
Accordingly, Dr. Megaw is no longer considered a related party. Related party transactions incurred by the Company with Cascabel and IMDEX
will only be included up until the date of his retirement from executive duties.
MAG SILVER CORP.
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2024
(expressed in thousands of US dollars except as otherwise noted)
During the three and nine months ended September 30, 2024 and 2023, the
Company incurred expenses with Cascabel and IMDEX as follows:
| | |
| Three months
ended | | |
| Nine months
ended | |
| | |
| September 30, | | |
| September 30, | | |
| September 30, | | |
| September 30, | |
| | |
| 2024 | | |
| 2023 | | |
| 2024 | | |
| 2023 | |
| | |
| $ | | |
| $ | | |
| $ | | |
| $ | |
| | |
| | | |
| | | |
| | | |
| | |
| Fees related to Dr. Megaw: | |
| | | |
| | | |
| | | |
| | |
| Exploration and marketing services | |
| - | | |
| 53 | | |
| 69 | | |
| 190 | |
| Travel and expenses | |
| - | | |
| 5 | | |
| 11 | | |
| 34 | |
| Other fees to Cascabel and IMDEX: | |
| | | |
| | | |
| | | |
| | |
| Administration for Mexican subsidiaries | |
| - | | |
| 11 | | |
| 22 | | |
| 38 | |
| Field exploration services | |
| - | | |
| 40 | | |
| 66 | | |
| 118 | |
| Share-based payments (non-cash) | |
| - | | |
| 121 | | |
| 129 | | |
| 356 | |
| | |
| - | | |
| 230 | | |
| 297 | | |
| 736 | |
All transactions are incurred in the normal course of business and are
negotiated on arm’s length terms between the parties for all services rendered. A portion of the expenditures are incurred on the
Company’s behalf and are charged to the Company on a “cost + 10%” basis. The services provided do not include drilling
and assay work which are contracted out independently from Cascabel and IMDEX.
Any amounts due to related parties arising from the above transactions
are unsecured, non-interest bearing and are due upon receipt of invoices.
The details of the Company’s significant subsidiary and controlling ownership interests
are as follows:
| Name | |
Country of Incorporation | |
Principal Asset | |
MAG’s effective interest |
| | |
| | | |
| |
| 2024(%) | | |
| 2023(%) | |
| Minera Los Lagartos, S.A. de C.V. | |
| Mexico | | |
Juanicipio (44%) | |
| 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 section.
As at September 30, 2024, Fresnillo and the Company have advanced, net
of aggregate repayments, $66,316 as shareholder loans (MAG’s 44% share $29,179) to Juanicipio, bearing interest at 1 and 6 month
SOFR + 2%. Interest recorded by the Company for the nine months ended September 30, 2024 totalling $3,985 (nine months ended September
30, 2023: $6,122) has been included in MAG’s income from its equity accounted investment in Juanicipio.
MAG SILVER CORP.
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2024
(expressed in thousands of US dollars except as otherwise noted)
During the three and nine months ended September 30, 2024 and 2023, compensation
of key management personnel (including directors) was as follows:
| | |
| Three months
ended | | |
| Nine months
ended | |
| | |
| September 30, | | |
| September 30, | | |
| September 30, | | |
| September 30, | |
| | |
| 2024 | | |
| 2023 | | |
| 2024 | | |
| 2023 | |
| | |
| $ | | |
| $ | | |
| $ | | |
| $ | |
| Salaries and other short term employee benefits | |
| 442 | | |
| 704 | | |
| 2,297 | | |
| 1,205 | |
| Share-based payments (non-cash) | |
| 730 | | |
| 704 | | |
| 2,254 | | |
| 1,358 | |
| | |
| 1,172 | | |
| 1,408 | | |
| 4,551 | | |
| 2,563 | |
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, the Chief Sustainability Officer, and effective January 1, 2024, onwards, the
Chief Development Officer.
21. CRITICAL
ACCOUNTING JUDGMENTS, SIGNIFICANT ESTIMATES AND ASSUMPTIONS
| (a) | Significant judgements |
In preparing the unaudited condensed interim consolidated financial statements of
the Company as at September 30, 2024, the Company makes judgments when applying its accounting policies. The judgments that have the most
significant effect on the amounts recognized in the Q3 2024 Financial Statements have been set out in Note 5 of the audited consolidated
financial statements for the year ended December 31, 2023.
The preparation of consolidated financial statements in conformity with IFRS requires
management to make estimates and assumptions that affect the amounts reported and disclosed. These estimates are based on management’s
knowledge of the relevant facts and circumstances, having regard to previous experience, but actual results may differ materially from
the amounts included in the consolidated financial statements. Information about assumptions and other sources of estimating uncertainty
that have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities within the next 12
months have been set out in Note 5 of the audited consolidated financial statements for the year ended December 31, 2023.
22. CHANGES IN
ACCOUNTING STANDARDS
The accounting policies applied in the preparation of the Q3 2024 Financial
Statements are consistent with those applied and disclosed in the Company’s audited consolidated financial statements for the year
ended December 31, 2023.
MAG SILVER CORP.
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2024
(expressed in thousands of US dollars except as otherwise noted)
23. CONTROLS AND
PROCEDURES
The Company has filed certificates signed by the CEO and the CFO that,
among other things, report on the design of disclosure controls and procedures and the design of internal controls over financial reporting
as at September 30, 2024.
Disclosure Controls and Procedures
Disclosure controls and procedures have been designed to provide reasonable
assurance that all relevant information required to be disclosed by the Company is accumulated and communicated to senior management as
appropriate and recorded, processed, summarized and reported to allow timely decisions with respect to required disclosure, including
in its annual filings, interim filings or other reports filed or submitted by it under securities legislation.
Internal Control Over Financial Reporting
MAG Silver also maintains a system of internal controls over financial
reporting, as defined by National Instrument 52-109 - Certification of Disclosure in Issuers’ Annual and Interim Filings
in order to provide reasonable assurance that assets are safeguarded and financial information is accurate and reliable and in accordance
with IFRS. The Company retains a third-party specialist annually to assist in the assessment of its internal control procedures. The Board
approves the financial statements and MD&A before they are publicly filed and ensures that management discharges its financial responsibilities.
The unaudited condensed interim consolidated financial statements and MD&A for the three months and nine months ended September 30,
2024 were approved by the Board on November 8, 2024. The Board’s review is accomplished principally through the Audit Committee,
which is composed of independent non-executive directors. The Audit Committee meets periodically with management and auditors to review
financial reporting and control matters.
The Company’s management, including the CEO and CFO, believe that
any internal controls over financial reporting and disclosure controls and procedures, no matter how well designed, can have inherent
limitations. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls
must be considered relative to their costs. Therefore, even those systems determined to be effective can provide only reasonable (not
absolute) assurance that the objectives of the control system are met and as such, misstatements due to error or fraud may occur and not
be detected. The CEO and CFO have designed the Company’s internal control over financial reporting as of September 30, 2024 based
on the criteria set forth in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations
of the Treadway Commission to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with IFRS.
There have been no changes in internal controls over financial reporting
during the three months ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, MAG’s
internal control over financial reporting.
MAG SILVER CORP.
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2024
(expressed in thousands of US dollars except as otherwise noted)
24. ADDITIONAL
INFORMATION
Additional information on the Company, including the Company’s most
recent Annual Information Form is available for viewing under MAG’s profile on the SEDAR+ at www.sedarplus.ca and on SEC’s
EDGAR website at www.sec.gov.
25. CAUTIONARY
STATEMENTS
Cautionary Note Regarding Forward-Looking Statements
Certain information contained in this MD&A, including any information
relating to MAG’s future oriented financial information, are “forward-looking information” and “forward-looking
statements” within the meaning of applicable Canadian and United States securities legislation (collectively herein referred as
“forward-looking statements”), including the “safe harbour” provisions of provincial securities legislation, the
U.S. Private Securities Litigation Reform Act of 1995, Section 21E of the U.S. Securities Exchange Act of 1934, as amended and Section
27A of the U.S. Securities Act. Such forward-looking statements include, but are not limited to:
| · | statements that address maintaining the nameplate 4,000 tpd milling rate at Juanicipio; |
| · | statements that address our expectations regarding exploration and drilling; |
| · | statements regarding production expectations and nameplate; |
| · | statements regarding the expected use of the Credit Facility; |
| · | statements regarding the NCIB and any future purchases to be made thereunder; |
| · | statements regarding the remaining Flow-Through Share premium liability; |
| · | statements regarding the Final Shelf Prospectus; |
| · | statements regarding the Apollo Option and activities at Cinco; |
| · | statements regarding additional information from future drill programs; |
| · | estimated project economics, including but not limited to, plant or mill recoveries, metals produced,
metal grades, metals sold, underground mining rates; |
| · | the estimation of Mineral Resources; |
| · | estimated future exploration and development operations and corresponding expenditures and other expenses
for specific operations; |
| · | the anticipated impact on the Company’s business and operations from the re-allocation of proceeds
received from the Company’s recent public offerings; |
| · | expectations and estimates regarding use of proceeds; |
| · | the expected capital, sustaining capital and working capital requirements at Juanicipio, including the
potential for additional cash calls; |
| · | production rates, payback time, capital and operating and other costs, internal rate of return, anticipated
life of mine, and mine plan; |
| · | the effects on the Company as a result of shifts in the price and market of silver; |
| · | mining methodology expectations; |
| · | distinctly different mineralization styles expectations; |
| · | expected upside from additional exploration; |
| · | expected results from Deer Trail Project and Carissa zones drilling; |
| · | expected results from Larder Project at the Fernland, Cheminis, Bear, Swansea, Long Conglomerate, Kir
Vit, and Twist zones and other regional targets; |
MAG SILVER CORP.
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2024
(expressed in thousands of US dollars except as otherwise noted)
| · | expected capital requirements and sources of funding; |
| · | the effects of First Nations and other forms of community resistance on mining operations; |
| · | the Company’s ability to repatriate capital form the Juanicipio Mine, obtain financing through the
joint venturing of projects and raise additional debt, equity or other sources of financing; |
| · | the Company’s participation in equity investments; |
| · | statements regarding legal challenges to the amended Federal Mining Law; |
| · | statements regarding the Company’s ability to meet business objectives and milestones; |
| · | statements regarding the 2023 sustainability report, including the contents therein; and |
| · | other future events or developments. |
When used in this MD&A, any statements that express or involve discussions
with respect to predictions, beliefs, plans, projections, objectives, assumptions or future events of performance (often but not always
using words or phrases such as “anticipate”, “believe”, “estimate”, “expect”, “intend”,
“plan”, “strategy”, “goals”, “objectives”, “project”, “potential”
or variations thereof or stating that certain actions, events, or results “may”, “could”, “would”,
“might” or “will” be taken, occur or be achieved, or the negative of any of these terms and similar expressions),
as they relate to the Company or management, are intended to identify forward-looking statements. Such statements reflect the Company’s
current views with respect to future events and are subject to certain known and unknown risks, uncertainties and assumptions.
Forward-looking statements are necessarily based upon estimates and assumptions,
which are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond
the Company’s control and many of which, regarding future business decisions, are subject to change. Assumptions underlying the
Company’s expectations regarding forward-looking statements contained in this MD&A include, among others: MAG’s ability
to carry on its various exploration and development activities including project development timelines, the timely receipt of required
approvals and permits, the price of the minerals produced, the costs of operating, exploration and development expenditures, the impact
on operations of the Mexican tax regime and proposed amendments to applicable Mexican legislation, including the Federal Mining Law, MAG’s
ability to obtain adequate financing, and outbreaks or threat of an outbreak of a virus or other contagions or epidemic disease will be
adequately responded to locally, nationally, regionally and internationally.
Although MAG believes the expectations expressed in such forward-looking
statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments
may differ materially from those in the forward-looking statements. These forward-looking statements involve known and unknown risks,
uncertainties and many factors could cause actual results, performance or achievements to be materially different from any future results,
performance or achievements that may be expressed or implied by such forward-looking statements including amongst others: commodities prices; changes
in expected mineral production performance; unexpected increases in capital costs or cost overruns; exploitation and exploration
results; continued availability of capital and financing; general economic, market or business conditions; risks relating to the Company’s
business operations; risks relating to the financing of the Company’s business operations; risks related to the Company’s
ability to comply with restrictive covenants and maintain financial covenants pursuant to the terms of the Credit Facility; the expected
use of the Credit Facility; risks relating to the development of Juanicipio and the minority interest investment in the same; risks relating
to the Company’s property titles; risks related to receipt of required regulatory approvals; pandemic risks; supply chain constraints
and general costs escalation in the current inflationary environment heightened by the invasion of Ukraine by Russia and the events relating
to the Israel-Hamas war; risks relating to the Company’s financial and other instruments; operational risk; environmental risk;
political risk; currency risk; market risk; capital cost inflation risk; risk relating to construction delays; the risk that data is incomplete
or inaccurate; the risks relating to the limitations and assumptions within drilling, engineering and socio-economic studies relied upon
in preparing economic assessments and estimates, including the Technical Report; as well as those risks more particularly described under
the heading “Risk Factors” in the Company’s Annual Information Form available under the Company’s profile on SEDAR+
at www.sedarplus.ca.
MAG SILVER CORP.
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2024
(expressed in thousands of US dollars except as otherwise noted)
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from those described herein. This list is not exhaustive of
the factors that may affect any of the Company’s forward-looking statements. The Company’s forward-looking statements are
based on the beliefs, expectations and opinions of management on the date the statements are made and, other than as required by applicable
securities laws, the Company does not assume any obligation to update forward-looking statements if circumstances or management’s
beliefs, expectations or opinions should change. For the reasons set forth above, investors should not attribute undue certainty to or
place undue reliance on forward-looking statements.
Cautionary Note for United States Investors
Unless otherwise indicated, technical disclosure regarding the Company’s
properties included or incorporated by reference herein, including all Mineral Resource estimates contained in such technical disclosure
has been prepared in accordance with the requirements of NI 43-101 and the CIM Definition Standards. NI 43-101 is an instrument developed
by the Canadian Securities Administrators that establishes standards for all public disclosure an issuer makes of scientific and technical
information concerning mineral projects.
Canadian standards, including NI 43-101, differ significantly from the
disclosure requirements of the SEC under subpart 1300 of Regulation S-K (the “SEC Modernization Rules”). The Company is not
required to provide disclosure on its mineral properties under the SEC Modernization Rules and provides disclosure under NI 43-101 and
the CIM Definition Standards. Accordingly, information contained in this MD&A, or the documents incorporated by reference herein,
may differ significantly from the information that would be disclosed had the Company prepared the Mineral Resource estimates under the
standards adopted under the SEC Modernization Rules.
Cautionary Note to Investors Concerning Estimates of
Mineral Resources
“Inferred Mineral Resources” are Mineral Resources for which
quantity and grade or quality are estimated based on limited geological evidence and sampling. Geological evidence is sufficient to imply
but not verify geological and grade or quality continuity. “Inferred Mineral Resources” are based on limited information and
have a great amount of uncertainty as to their existence and great uncertainty as to their economic and legal feasibility, although it
is reasonably expected that the majority of “Inferred Mineral Resources” could be upgraded to “Indicated Mineral Resources”
with continued exploration.
MAG SILVER CORP.
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2024
(expressed in thousands of US dollars except as otherwise noted)
Under Canadian rules, estimates of Inferred Mineral Resources are considered too speculative
geologically to have the economic considerations applied to them to enable them to be categorized as Mineral Resources and, accordingly,
may not form the basis of feasibility or pre-feasibility studies, or economic studies except for a Preliminary Economic Assessment as
defined under NI 43-101. Indicated and Inferred Mineral Resources that are not Mineral Resources do not have demonstrated economic viability.
52