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

VANCOUVER OFFICE

Suite 770

800 W. Pender Street

Vancouver, BC V6C 2V6

604 630 1399 phone

866 630 1399 toll free

604 681 0894 fax

TSX: MAG

NYSE MKT: MAG

www.magsilver.com

info@magsilver.com

MAG SILVER CORP.
Condensed Interim Consolidated Statements of Financial Position (Unaudited)

(In thousands of US dollars, except shares)
	Note	March 31, 2017			December 31, 2016

ASSETS

CURRENT
Cash and cash equivalents	3	$	77,442		$	83,347
Term deposits	3		55,000			55,000
Accounts receivable	4		759			628
Investments	5		722			718
Prepaid expenses			569			181
TOTAL CURRENT ASSETS			134,492			139,874
EQUIPMENT	6		50			54
INVESTMENT IN ASSOCIATE	7		42,384			37,312
TOTAL ASSETS		$	176,926		$	177,240

LIABILITIES

CURRENT
Trade and other payables		$	854		$	733
COMMITMENTS	7,14

DEFERRED INCOME TAXES	15		-			589

TOTAL LIABILITIES			854			1,322

EQUITY

Share capital	8		343,993			343,654
Equity reserve			16,247			16,133
Accumulated other comprehensive income			895			882
Deficit			(185,063	)		(184,751	)
TOTAL EQUITY			176,072			175,918
TOTAL LIABILITIES AND EQUITY		$	176,926		$	177,240

SUBSEQUENT EVENT	16

See accompanying notes to the condensed interim consolidated financial statements

MAG SILVER CORP.
Condensed Interim Consolidated Statements of Loss and Comprehensive Loss (Unaudited)
(In US dollars except for shares and per share amounts)

		For the three months ended
		March 31
	Note	2017			2016
EXPENSES
Accounting and audit		$	66		$	83
Amortization	6		4			4
Filing and transfer agent fees			211			163
Foreign exchange gain			(81	)		(269	)
General office expenses			155			138
Legal			77			57
Management compensation and consulting fees			430			427
Mining concession taxes and other property costs			354			41
Share based payment expense	8b,c,d		367			579
Shareholder relations			142			123
Travel			90			84
			1,815			1,430
INTEREST INCOME			362			113
LOSS ON WARRANTS (MARK-TO-MARKET)	5		(20	)		-
EQUITY PICK UP FROM ASSOCIATE	7		572			(43	)
LOSS FOR THE PERIOD BEFORE INCOME TAX		$	( 901	)	$	( 1,360	)

DEFERRED INCOME TAX RECOVERY	15		589			63
LOSS FOR THE PERIOD		$	( 312	)	$	( 1,297	)

OTHER COMPREHENSIVE INCOME (LOSS)
Items that may be reclassified subsequently to profit or loss:
UNREALIZED GAIN ON AVAILABLE-FOR-SALE
SECURITIES, NET OF TAXES	5		13			1,326

TOTAL COMPREHENSIVE INCOME (LOSS)		$	( 299	)	$	29

BASIC AND DILUTED LOSS PER SHARE		$	( 0.00	)	$	( 0.02	)

WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING - BASIC AND DILUTED			80,715,744			72,772,656

See accompanying notes to the condensed interim consolidated financial statements

MAG SILVER CORP.
Condensed Interim Consolidated Statements of Changes in Equity (Unaudited)
(In thousands of US dollars, except shares)
											Unrealized			Accumulated
		Common shares							Currency		gain (loss) on			other
		without par value				Equity			translation		available-for-sale			comprehensive						Total
	Note	Shares		Amount		Reserve			adjustment		securities			income (loss)			Deficit			equity
Balance, January 1, 2016			69,407,386	$	262,218	$	19,993		$	784	$	52		$	836		$	(128,905	)	$	154,142
Stock options exercised	8a,b		691,705		6,632		(1,973	)		-		-			-			-			4,659
Stock options exercised cashless	8a,b		325,671		3,823		(3,823	)		-		-			-			-			-
Restricted and performance share units converted	8a,c		38,692		327		(327	)		-		-			-			-			-
Share based payment	8b,c,d		-		-		2,263			-		-			-			-			2,263
Issued for cash	8a		10,240,750		70,654		-			-		-			-			-			70,654

Unrealized gain on available-for-sale securities	5		-		-		-			-		1,198			1,198						1,198
Gain on sale of available-for-sale securities	5		-		-		-			-		(1,152	)		(1,152	)					(1,152	)
Net loss			-		-		-			-		-			-			(55,846	)		(55,846	)
Total Comprehensive Income (Loss)			-		-		-			-		46			46			(55,846	)		(55,800	)

Balance, December 31, 2016			80,704,204	$	343,654	$	16,133		$	784	$	98		$	882		$	(184,751	)	$	175,918
Stock options exercised	8a,b		12,400		118		(32	)		-		-			-			-			86
Stock options exercised cashless	8a,b		39,239		221		(221	)		-		-			-			-			-
Share based payment	8b,c,d		-		-		367			-		-			-			-			367

Unrealized gain on available-for-sale securities	5		-		-		-			-		13			13						13
Net loss			-		-		-			-		-			-			(312	)		(312	)
Total Comprehensive Income (Loss)			-		-		-			-		13			13			(312	)		(299	)

Balance, March 31, 2017			80,755,843	$	343,993	$	16,247		$	784	$	111		$	895		$	(185,063	)	$	176,072


Three Month Comparative:
Balance, January 1, 2016			69,407,386	$	262,218	$	19,993		$	784	$	52		$	836		$	(128,905	)	$	154,142
Stock options exercised	8a,b		71,000		714		(219	)		-		-			-			-			495
Stock options exercised cashless	8a,b		77,529		1,482		(1,482	)		-		-			-			-			-
Share based payment expense	8b,c,d		-		-		579			-		-			-			-			579
Issued for cash	8a		10,240,750		70,699		-			-		-			-			-			70,699

Unrealized gain on marketable securities	4		-		-		-			-		1,326			1,326			-			1,326
Net loss			-		-		-			-		-			-			(1,297	)		(1,297	)
Total Comprehensive Income (Loss)			-		-		-			-		1,326			1,326			(1,297	)		29

Balance, March 31, 2016			79,796,665	$	335,113	$	18,871		$	784	$	1,378		$	2,162		$	(130,202	)	$	225,944

See accompanying notes to the condensed interim consolidated financial statements

MAG SILVER CORP.
Condensed Interim Consolidated Statements of Cash Flows (Unaudited)
(In thousands of US dollars, unless otherwise stated)
		For the three months ended
		March 31
	Note	2017			2016

OPERATING ACTIVITIES
Loss for the period		$	(312	)	$	(1,297	)
Items not involving cash:
Amortization	6		4			4
Deferred income tax recovery	15		(589	)		(63	)
Equity pick up from associate	7		(572	)		43
Loss on warrants (mark-to-market)	5		20			-
Share based payment expense	8b,c,d		367			579
Unrealized foreign exchange loss			(78	)		(281	)

Changes in operating assets and liabilities
Accounts receivable			(131	)		126
Prepaid expenses			(388	)		(306	)
Trade and other payables			(1	)		33
Net cash used in operating activities			(1,680	)		(1,162	)

INVESTING ACTIVITIES
Exploration and evaluation expenditures			-			(663	)
Investment in associate	7		(4,378	)		(3,034	)
Purchase of equipment	6		-			(11	)
Investment in securities	5		(11	)		-
Net cash used in investing activities			(4,389	)		(3,708	)

FINANCING ACTIVITIES
Issuance of common shares upon exercise of stock options	8		86			495
Issuance of common shares, net of share issue costs	8		-			70,699
Net cash from financing activities			86			71,194

EFFECTS OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
			78			280
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS			(5,905	)		66,604
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD			83,347			75,424
CASH AND CASH EQUIVALENTS, END OF PERIOD		$	77,442		$	142,028

TERM DEPOSITS (Maturities in excess of 90 days)	3	$	55,000		$	-

See accompanying notes to the condensed interim consolidated financial statements

MAG SILVER CORP.

Notes to the Condensed Interim Consolidated Financial Statements

For the three months ended March 31, 2017

(Unaudited - expressed in thousands of US dollars unless otherwise stated)

1. NATURE OF OPERATIONS

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

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

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

Address of registered offices of the Company:

2600 – 595 Burrard Street

Vancouver, British Columbia,

Canada V7X 1L3

Head office and principal place of business:

770 – 800 West Pender Street

Vancouver, British Columbia,

Canada V6C 2V6

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Statement of compliance

These condensed interim consolidated financial statements (“Interim Financial Statements) are prepared under International Accounting Standards 34 Interim Financial Reporting (“IAS 34”) in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). They do not include all of the information required for full annual IFRS financial statements and therefore should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2016.

The accounting policies set out below have been applied consistently by the Company and its subsidiaries to all periods presented herein.

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

MAG SILVER CORP.

Notes to the Condensed Interim Consolidated Financial Statements

For the three months ended March 31, 2017

(Unaudited - expressed in thousands of US dollars unless otherwise stated)

These Interim Financial Statements were authorized for issuance by the Board of Directors of the Company on May 10, 2017.

(a) Basis of consolidation

These Interim Financial Statements include the accounts of the Company and its controlled subsidiaries. Control exists when the Company has power over the investee, is exposed or has rights to variable returns from its involvement with the investee, and has the ability to use its power over the investee to affect the amount of the investor’s returns. Subsidiaries are included in the consolidated financial results of the Company from the effective date that control is obtained up to the effective date of disposal or loss of control. The principal wholly-owned subsidiaries as at March 31, 2017 are Minera Los Lagartos, S.A. de C.V., Minera Pozo Seco S.A. de C.V., and Minera Sierra Vieja S.A. de C.V. All intercompany balances, transactions, revenues and expenses have been eliminated upon consolidation.

These Interim Financial Statements also include the Company’s 44% interest in the Juanicipio Joint Venture (Note 7), an associate (Note 2(b)) accounted for using the equity method.

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

(b) Investments in Associates

The Company conducts a portion of its business through an equity interest in associates. An associate is an entity over which the Company has significant influence, and is neither a subsidiary nor a joint arrangement, and includes the Company’s 44% interest in Minera Juanicipio S.A. de C.V., a Mexican incorporated joint venture company. The Company has significant influence when it has the power to participate in the financial and operating policy decisions of the associate but does not have control or joint control over those policies.

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

Impairment

At the end of each reporting period, the Company assesses whether there is any evidence that an investment in associate is impaired. The Company has performed an assessment for impairment indicators of its investment in associate as of March 31, 2017, and noted no impairment indicators. This assessment is generally made with reference to the timing of exploration work, work programs proposed, exploration results achieved, and an assessment of the likely results to be achieved from performance of further exploration by the associate. When there is evidence that an investment in associate is impaired, the carrying amount of such investment is compared to its recoverable amount. If the recoverable amount of an investment in associate is less than its carrying amount, the carrying amount is reduced to its recoverable amount and an impairment loss, being the excess of carrying amount over the recoverable amount, is recognized in the period of impairment. When an impairment loss reverses in a subsequent period, the carrying amount of the investment in associate is increased to the revised estimate of recoverable amount to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had an impairment loss not been previously recognized. A reversal of an impairment loss is recognized in net earnings in the period the reversal occurs.

MAG SILVER CORP.

Notes to the Condensed Interim Consolidated Financial Statements

For the three months ended March 31, 2017

(Unaudited - expressed in thousands of US dollars unless otherwise stated)

The preparation of consolidated financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenditures during the reported period. Significant estimates used in preparation of these financial statements include estimates of the net realizable value and any impairment of exploration and evaluation assets and of investment in associates, recoveries of receivable balances, estimates of fair value of financial instruments where a quoted market price or secondary market for the instrument does not exist, provisions including closure and reclamation, share based payment expense, and income tax provisions. Actual results may differ from those estimated. Further details of the nature of these estimates may be found in the relevant notes to the consolidated statements.

(d) Critical judgments

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

(e) Financial instruments

Measurement – initial recognition

Financial assets and financial liabilities are recognized when the Company becomes a party to the contractual provisions of the financial instrument. All financial instruments are measured at fair value on initial recognition plus attributable transaction costs, except for financial assets and financial liabilities classified as fair value through profit and loss (“FVTPL”). The directly attributable transactions costs of financial assets and liabilities classified as FVTPL are expensed in the period in which they are incurred.

Classification and measurement – subsequent to initial recognition

The Company classifies financial instruments as either held-to-maturity, available-for-sale, FVTPL, loans and receivables, or other financial liabilities. Financial assets held to maturity, loans and receivables and other financial liabilities, are subsequently measured at amortized cost. Instruments classified as FVTPL are measured at fair value with changes in fair values recognized in profit or loss. Available-for-sale instruments are measured at fair value with mark-to-market gains and losses recognized in other comprehensive income (“OCI”).

MAG SILVER CORP.

Notes to the Condensed Interim Consolidated Financial Statements

For the three months ended March 31, 2017

(Unaudited - expressed in thousands of US dollars unless otherwise stated)

The Company has designated its cash and cash equivalent with original maturities less than 90 days, as FVTPL, which is measured at fair value. Term deposits with original maturities in excess of 90 days and accounts receivable are classified as loans and receivables, which are measured at amortized cost. Trade and other payables are classified as other liabilities, which are measured at amortized cost.

Investment in securities such as warrants, that meet the definition of a derivative are classified as FVTPL and are measured at fair value with unrealized gains and losses recognized in profit or loss. Warrants listed on a recognized exchange are valued at the latest available close. Warrants not listed on a recognized exchange, but where a secondary market exists, are valued at independent broker prices (if available) traded within that secondary market. If no secondary market exists, the warrants are valued using the Black Scholes option pricing model. All of the Company’s investment in securities have been designated as available-for-sale, and are reported at fair value. Other comprehensive income includes the gains and losses from available-for-sale securities which are not included in profit or loss until realized, and currency translation adjustments on its net investment in foreign operations.

Impairment

The Company assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets are impaired. Financial assets are considered impaired if objective evidence indicates that a change in the market, economic or legal environment in which the Company invested has had a negative effect on the estimated future cash flows of that asset.

For available-for-sale financial assets, a significant or prolonged decline in fair value is evidence that the asset may be impaired. If such evidence exists, the cumulative loss that has been recognized in accumulated other comprehensive income (loss) is removed and recognized as an impairment of investment in the consolidated statement of loss. The Company evaluates whether a decline in value is significant or prolonged through analysis of the facts and circumstances of the financial assets, the market price of the actively traded securities, the severity of the loss, the financial position and near-term prospects of the investment, length of time the fair value has been below costs, evidence that the carrying amount is recoverable within a reasonable period of time, management’s intent and ability to hold the financial assets for a period of time sufficient to allow for any anticipated recovery of fair value and management’s market view and outlook. If the value of the previously impaired available-for-sale asset subsequently recovers, additional unrealized gains are recorded in other comprehensive income (loss) and the previously recognized impairment is not reversed.

For financial assets measured at amortized cost, an impairment loss recognized in profit or loss is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the original effective interest rate. Any reversal of impairment is recognized in profit or loss.

MAG SILVER CORP.

Notes to the Condensed Interim Consolidated Financial Statements

For the three months ended March 31, 2017

(Unaudited - expressed in thousands of US dollars unless otherwise stated)

(f) Cash, cash equivalents and term deposits

Cash and cash equivalents include cash on hand, bank deposits, and term deposits with original maturities of three months or less.

Term deposits are comprised of bank term deposits with an original term to maturity in excess of three months from date of acquisition.

(g) Exploration and evaluation assets

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

Exploration and evaluation expenditures include acquisition costs of rights to explore; topographical, geological, geochemical and geophysical studies; exploratory drilling; trenching and sampling; all costs incurred to obtain permits and other licenses required to conduct such activities, including legal, community, strategic and consulting fees; and activities involved in evaluating the technical feasibility and commercial viability of extracting mineral resources. This includes the costs incurred in determining the most appropriate mining/processing methods and developing feasibility studies.

Impairment

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

MAG SILVER CORP.

Notes to the Condensed Interim Consolidated Financial Statements

For the three months ended March 31, 2017

(Unaudited - expressed in thousands of US dollars unless otherwise stated)

(h) Equipment

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

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

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

(i) Income taxes

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

(j) Provisions

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

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

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

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

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

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

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

MAG SILVER CORP.

Notes to the Condensed Interim Consolidated Financial Statements

For the three months ended March 31, 2017

(Unaudited - expressed in thousands of US dollars unless otherwise stated)

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

Closure and reclamation

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

The provision for closure and reclamation is reviewed at the end of each reporting period for changes in estimates and circumstances. There was no provision recorded by the Company for closure and reclamation as at March 31, 2017 or December 31, 2016.

The operating company of the Company’s investment in associate, Minera Juanicipio, S.A. de C.V., recorded a provision for reclamation and remediation costs of $350 and capitalized a corresponding asset as at March 31, 2017 (March 31, 2016: $365) (see Note 7).

(k) Functional currency and presentation currency

The functional currency of the parent and the functional currency of its Mexican subsidiaries and investment in associate is the United States dollar (“US$”).

Each entity within the Company determines its own functional currency, and the items included in the financial statements of each entity are measured using that functional currency. The functional currency determination involves certain judgments in evaluating the primary economic environment, and the Company reconsiders the functional currencies of each entity if there is a change in the underlying transactions, events and conditions which determine the primary economic environment.

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

(l) Foreign currency transactions

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

MAG SILVER CORP.

Notes to the Condensed Interim Consolidated Financial Statements

For the three months ended March 31, 2017

(Unaudited - expressed in thousands of US dollars unless otherwise stated)

(m) Loss per common share

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

Diluted loss per share is computed using the weighted average number of common and common equivalent shares outstanding during the period. Common equivalent shares consist of the incremental common shares upon the assumed exercise of stock options and warrants, and upon the assumed conversion of deferred share units and units issued under the Company’s share unit plan, to the extent their inclusion is not anti-dilutive.

As at March 31, 2017, the Company had 2,729,716 (March 31, 2016: 3,797,230) common share equivalents consisting of common shares issuable upon the exercise of outstanding exercisable stock options, restricted and performance share units, and deferred share units. These common share equivalents were not included for the purpose of calculating diluted loss per share as their effect would be anti-dilutive.

(n) Share based payments

The fair value of equity-settled share-based payment awards are estimated as of the date of the grant and recorded as share-based payment expense in the consolidated statements of loss over their vesting periods, with a corresponding increase in equity. The amount recognized as an expense is adjusted to reflect the number of awards for which the related service and non-market vesting conditions are expected to be met. Market price performance conditions are included in the fair value estimate on the grant date with no subsequent adjustment to the actual number of awards that vest. Forfeiture rates are estimated on grant date, and adjusted annually for actual forfeitures in the period. Changes to the estimated number of awards that will eventually vest are accounted for prospectively. Share based payment awards with graded vesting schedules are accounted for as separate grants with different vesting periods and fair values.

The fair value of stock options is estimated using the Black-Scholes-Merton option valuation model. The fair value of restricted and deferred share units, is based on the fair market value of a common share equivalent on the date of grant. The fair value of performance share units awarded with market price conditions is determined using the Monte Carlo pricing model and the fair value of performance share units with non-market performance conditions is based on the fair market value of a common share equivalent on the date of grant.

(o) Changes in Accounting Standards

(i)	Adoption of new and amended IFRS pronouncements

MAG SILVER CORP.

Notes to the Condensed Interim Consolidated Financial Statements

For the three months ended March 31, 2017

(Unaudited - expressed in thousands of US dollars unless otherwise stated)

Certain pronouncements were issued by the IASB that are mandatory for accounting periods after December 31, 2016. Pronouncements that are not applicable to the Company have been excluded from those described below. The following new standards have been adopted effective January 1, 2017:

IAS 7 Statements of cash flows. As of January 1, 2017, the Company adopted the amendments within IAS 7 which require disclosure of information enabling users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes. The adoption of the amendments to IAS 7 did not have a significant impact on the Company's consolidated financial statements.

IAS 12 Income taxes. Beginning January 1, 2017, the Company adopted the amendments to IAS 12 which provide clarification on the requirements to the recognition of deferred tax assets for unrealized losses on debt instruments measured at fair value. The adopted of the amendments to IAS 12 did not have a significant impact on the Company's consolidated financial statements.

(ii)	Recent accounting pronouncements

The Company has reviewed new accounting pronouncements that have been issued but are not yet effective at March 31, 2017. These include:

IFRS 2 Share-based payments. In June 2016, the IASB issued amendments to IFRS 2 Share-based Payment to address certain issues related to the accounting for cash settled awards and the accounting for equity settled awards that include ‘net settlement feature’ in respect of employee withholding taxes. The amendments apply for annual periods on or after January 1, 2018 with early adoption permitted. The Company will adopt this standard on the effective date, and is currently evaluating the impact this standard may have on its consolidated financial statements.

IFRS 9 Financial Instruments. In July 2014, the IASB issued the final version of IFRS 9 which replaced IAS 39 Financial Instruments: Recognition and Measurement. The new standard replaces the current classification and measurement criteria for financial assets and liabilities with only two classification categories: amortized cost and fair value. The standard is effective for annual periods beginning on or after of January 1, 2018, with early adoption permitted. The Company will adopt this standard on the effective date and is currently evaluating the impact this standard may have on its consolidated financial statements.

IFRS 15 Revenue from Contracts with Customers. The final standard on revenue from contracts with customers was issued on May 8, 2014. In July 2015, the IASB determined that the revised effective date for IFRS 15 would be for annual reporting periods beginning on or after January 1, 2018, with earlier application permitted. Entities have the full option of using either a full retrospective or a modified retrospective approach to adopt the guidance. The Company’s only source of revenue in the current and prior periods is interest income from high interest savings accounts and term deposits, but the Company is currently evaluating the impact this standard may have on its consolidated financial statements once revenue from contracts with customers is generated.

IFRS 16 Leases. In January 2016, the IASB published a new accounting standard, IFRS 16 – Leases (IFRS 16) which replaces IAS 17 – Leases and its associated interpretative guidance. IFRS 16 applies a control model to the identification of leases, distinguishing between a lease and a service contract on the basis of whether the customer controls the asset being leased. For those assets determined to meet the definition of a lease, IFRS 16 introduces significant changes to the accounting by lessees, introducing a single, on-balance sheet accounting model that is similar to current finance lease accounting, with limited exceptions for short-term leases or leases of low value assets. Lessor accounting remains similar to current accounting practice. The standard is effective for annual periods beginning on or after January 1, 2019, with early application permitted for entities that apply IFRS 15. The Company will adopt this standard on the effective date, and is currently evaluating the impact this standard may have on its consolidated financial statements.

MAG SILVER CORP.

Notes to the Condensed Interim Consolidated Financial Statements

For the three months ended March 31, 2017

(Unaudited - expressed in thousands of US dollars unless otherwise stated)

IFRIC 22 Foreign currency transactions and advance consideration. In December 2016, the IASB issued IFRS interpretation, IFRIC 22 which clarifies the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income, when a related non-monetary asset or non-monetary liability arising from the payment or receipt of advance consideration in a foreign currency is derecognized. The standard is effective for annual periods beginning on or after January 1, 2018 with early application permitted. The Company will adopt this standard on the effective date and is currently evaluating the impact this standard may have on its consolidated financial statements.

3. CASH, CASH EQUIVALENTS AND TERM DEPOSITS

The Company’s cash and cash equivalents include cash on hand, bank deposits and term deposits with original maturities of three months or less, as follows:

	Interest			March 31,			December 31,
	Rate			2017			2016
Cash at bank and on hand		0-.95	%		$	27,422		$	33,347
Short-term deposit		1.33	%			50,000			50,000
Cash and cash equivalents					$	77,422		$	83,347

Term deposits are comprised of bank term deposits with an original term to maturity in excess of three months from date of acquisition.

The Company has invested in non-redeemable bank term deposits, with a term to maturity in excess of three months from the date of acquisition, as follows:

	Interest			March 31,			December 31,
	Rate			2017			2016
Term deposit with maturity of April 18, 2017		1.20	%		$	55,000		$	55,000

MAG SILVER CORP.

Notes to the Condensed Interim Consolidated Financial Statements

For the three months ended March 31, 2017

(Unaudited - expressed in thousands of US dollars unless otherwise stated)

4. ACCOUNTS RECEIVABLE

	March 31,		December 31,
	2017		2016
Goods and services tax ("GST") recoverable	$	46	$	19
Mexican value added tax ("IVA") recoverable		54		37
Interest receivable		659		572
	$	759	$	628

5. INVESTMENTS

The Company holds investments as follows:

	March 31,			December 31,
	2017			2016


Available-for-sale securities		$	574		$	550
Fair value through profit or loss - warrants			148			168
		$	722		$	718

During the quarter ended March 31, 2017, the Company recorded an unrealized loss of $20 (March 31, 2016: nil) in the statement of loss on warrants held designated as fair value through profit and loss.

The Company recorded an unrealized gain of $13, net of nil tax, in other comprehensive income (loss) (March 31, 2016: $1,326) on investments designated as available-for-sale instruments. The following table summarizes the movements in available-for-sale securities:

	March 31,		December 31,
	2017		2016
Available-for-sale securities, beginning of period	$	550	$	279
Purchase of available-for-securities		11		442
Unrealized gain for the period		13		1,198
Sale of available-for-sale securities		-		(1,369	)
Available-for-sale securities, end of period	$	574	$	550

MAG SILVER CORP.

Notes to the Condensed Interim Consolidated Financial Statements

For the three months ended March 31, 2017

(Unaudited - expressed in thousands of US dollars unless otherwise stated)

6. EQUIPMENT

Cost	Computer equipment		Field & Office equipment		Leasehold improvements		Total
Balance, January 1, 2016	$	252	$	163	$	7	$	422
Additions		39		-		-		39
Balance, December 31, 2016	$	291	$	163	$	7	$	461
Additions		-		-		-		-
Balance, March 31, 2017	$	291	$	163	$	7	$	461

Accumulated depreciation	Computer equipment		Field & Office equipment		Leasehold improvements		Total
Balance as at January 1, 2016	$	226	$	151	$	7	$	384
Amortization		19		4		-		23
Balance, December 31, 2016	$	245	$	155	$	7	$	407
Amortization		3		1		-		4
Balance, March 31, 2017	$	248	$	156	$	7	$	411

Carrying amounts	Computer equipment		Field & Office equipment		Leasehold improvements		Total
At December 31, 2016	$	46	$	8	$	-	$	54
At March 31, 2017	$	43	$	7	$	-	$	50

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

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

In mid 2007, Peñoles met all of the earn-in requirements of the Agreement. In December 2007, the Company and Peñoles created an operating company named Minera Juanicipio, S.A. de C.V. (“Minera Juanicipio”) for the purpose of holding and operating the Juanicipio Property. In 2008, MAG was notified that Peñoles had transferred its 56% interest of Minera Juanicipio to Fresnillo plc (“Fresnillo”) pursuant to a statutory merger. Minera Juanicipio is held 56% by Fresnillo and 44% by the Company. Fresnillo is the operator of Minera Juanicipio, and with its affiliates, beneficially owns 12% of the common shares of the Company as at March 31, 2017, as publicly reported. In December 2007, all mineral rights and surface rights relating to the Juanicipio project held by the Company and Peñoles, respectively, were ceded into Minera Juanicipio. Minera Juanicipio is currently governed by a shareholders agreement. All costs relating to the project and Minera Juanicipio are required to be shared by the Company and Fresnillo pro-rata based on their ownership interests in Minera Juanicipio, and if either party does not fund pro-rata, their ownership interest will be diluted in accordance with the Minera Juanicipio shareholders agreement.

MAG SILVER CORP.

Notes to the Condensed Interim Consolidated Financial Statements

For the three months ended March 31, 2017

(Unaudited - expressed in thousands of US dollars unless otherwise stated)

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

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

	March 31,		December 31,
	2017		2016
Joint venture oversight expenditures incurred 100% by MAG	$	320	$	262
Cash contributions to Minera Juanicipio ⁽¹⁾		4,180		7,137
Total for the current period		4,500		7,399
Equity pick up of current income (loss) for the period ⁽²⁾		572		(1,327	)
Balance, beginning of period		37,312		31,240

Balance, end of period	$	42,384	$	37,312

⁽¹⁾ Represents the Company's 44% share of Minera Juanicipio cash contributions for the period.
⁽²⁾ Represents the Company's 44% share of Minera Juanicipio's income (loss) for the period, as determined by the Company.

Summary of financial information of Minera Juanicipio (on a 100% basis reflecting adjustments made by the Company, including adjustments for differences in accounting policies):

	March 31,		December 31,
	2017		2016

Cash	$	3,523	$	3,573
IVA and other receivables		2,090		842
Prepaids		24		-
Total current assets		5,637		4,415
Minerals, surface rights, exploration & development expenditures		90,293		82,017
Total assets	$	95,930	$	86,432

Payables to Peñoles and other vendors	$	411	$	348
Total current liabilities		411		348
Provision for reclamation and remediation costs		350		313
Deferred income tax liability		6,523		7,926
Total liabilities & equity		7,284		8,587
Shareholders' equity		88,646		77,845
Total liabilities & equity	$	95,930	$	86,432

MAG SILVER CORP.

Notes to the Condensed Interim Consolidated Financial Statements

For the three months ended March 31, 2017

(Unaudited - expressed in thousands of US dollars unless otherwise stated)

	March 31,			December 31,
	2016			2016

Deferred income tax recovery	$	1,403		$	(2,134	)
Exchange loss		(103	)		(881	)

Net income (loss )	$	1,300		$	(3,015	)

MAG's 44% equity pick up	$	572		$	(1,327	)

Evaluation and exploration expenditures and initial development expenditures, capitalized directly by Minera Juanicipio for the quarter ended March 31, 2017 amounted to $8,305 (March 31, 2016: $3,194).

There are no direct operating expenses or income in Minera Juanicipio, as all mineral, surface rights, and exploration and development expenditures are capitalized.

8. SHARE CAPITAL

(a) Issue and outstanding

The Company is authorized to issue an unlimited number of common shares without par value.

At March 31, 2017, there were 80,755,843 shares outstanding (March 31, 2016: 79,796,665).

On March 1, 2016, the Company closed a bought deal public offering of 8,905,000 common shares at $7.30 per share, for gross proceeds of $65,006. On March 4, 2016, the over-allotment option granted to the underwriters to purchase up to an additional 1,335,750 common shares was exercised in full for additional gross proceeds of $9,751 for total gross proceeds of $74,757. The Company paid a commission to the underwriters of $3,497 and legal and filing costs totaled an additional $606 resulting in net proceeds of $70,654.

During the quarter ended March 31, 2017, 12,400 stock options were exercised for cash proceeds of $86. An additional 75,000 stock options were exercised under a less dilutive cashless exercise provision of the plan, whereby 39,239 shares were issued in settlement of the stock options, and the remaining 35,761 options were cancelled.

During the year ended December 31, 2016, 691,705 stock options were exercised for cash proceeds of $4,659. An additional 1,125,001 stock options were exercised under a less dilutive cashless exercise provision of the plan, whereby 325,671 shares were issued in settlement of the stock options, and the remaining 799,330 options were cancelled.

MAG SILVER CORP.

Notes to the Condensed Interim Consolidated Financial Statements

For the three months ended March 31, 2017

(Unaudited - expressed in thousands of US dollars unless otherwise stated)

(b) Stock options

The Company has entered into Incentive Stock Option Agreements (“Agreements”) with officers, employees and consultants, and prior to June 24, 2014, also with directors. On June 24, 2014, the Shareholders re-approved the Company’s 8% rolling Stock Option Plan (the “Plan”). The maximum number of common shares that may be issuable under the Plan is set at 8% of the number of issued and outstanding common shares on a non-diluted basis at any time, provided that (i) the number of common shares issued or issuable under all share compensation arrangements (including under the Share Unit Plan and Deferred Share Unit Plan – see Notes 8(c) and 8(d), respectively) shall not exceed 8% of the issued and outstanding common shares of the Company on a non-diluted basis. Options granted under the Plan have a maximum term of 5 years. As at March 31, 2017, there were 1,591,772 stock options outstanding under the Plan and 575,000 inducement options outstanding outside of the Plan.

Stock option grants are recommended for approval to the Board of Directors by the Compensation Committee consisting of three independent members of the Board of Directors. At the time of a stock option grant, the exercise price of each option is set and in accordance with the Plan, cannot be lower than the market value of the common shares at the date of grant.

The following table summarizes the Company’s option activity for the period:

				Weighted					Weighted
	Period ended			average		Year ended			average
	March 31,			exercise price		December 31,			exercise price
	2017			(C$/option)		2016			(C$/option)

Balance outstanding, beginning of period		2,254,172		$	8.71		3,843,105		$	8.71
Granted		-			-		227,773			17.55
Exercised for cash		(12,400	)		9.28		(691,705	)		8.79
Exercised cashless		(75,000	)		9.15		(1,125,001	)		10.46

Balance outstanding, end of period		2,166,772		$	8.69		2,254,172		$	8.71

During the quarter ended March 31, 2017, no stock options were granted (March 31, 2016: nil).

During the quarter ended March 31, 2017, 87,400 stock options were exercised (March 31, 2016: 506,000), with a weighted average market share price at the date of exercise of C$18.99 (March 31, 2016: C$12.39).

MAG SILVER CORP.

Notes to the Condensed Interim Consolidated Financial Statements

For the three months ended March 31, 2017

(Unaudited - expressed in thousands of US dollars unless otherwise stated)

The following table summarizes the Company’s stock options outstanding and exercisable as at March 31, 2017:

	Exercise price	Number	Number	Weighted average remaining
	($C/option)	outstanding	exercisable	contractual life (years)
⁽¹⁾	5.35	500,000	500,000	1.54
	5.86	455,000	455,000	1.21
	9.15	60,000	60,000	0.34
	9.16	21,666	-	3.45
	9.28	372,333	252,333	3.68
⁽¹⁾	9.61	75,000	75,000	0.92
	10.02	187,500	133,333	3.23
	10.04	267,500	267,500	2.25
	17.55	227,773	-	4.68
	C$5.35 - C$17.55	2,166,772	1,743,166	2.37

⁽¹⁾	Inducement options issued outside the Company's Plan as an incentive to attract
	senior officers for employment.

During the quarter ended March 31, 2017, the Company recorded share based payment expense of $222 (March 31, 2016: $228) relating to stock options vested to employees and consultants in the period.

On June 24, 2014, the Shareholders approved a share unit plan (the “Share Unit Plan”) for the benefit of the Company’s employees and consultants. The Share Unit Plan provides for the issuance of common shares from treasury, in the form of Restricted Share Units (“RSUs”) and Performance Share Units (“PSUs”). The maximum number of common shares that may be issuable under the Share Unit Plan is set at 0.75% of the number of issued and outstanding common shares on a non-diluted basis, provided that (i) the number of common shares issued or issuable under all share compensation arrangements (including under the Plan and Deferred Share Unit Plan – see Notes 8(b) and 8(d), respectively) shall not exceed 8% of the issued and outstanding common shares on a non-diluted basis. RSUs and PSUs granted under the Share Unit Plan have a term of 5 years, unless otherwise specified by the Board.

Under the Share Unit Plan, each RSU and PSU entitle participants to receive one common share of the Company subject to vesting criteria, and in the case of PSUs, performance criteria. During the quarter ended March 31, 2017, no RSUs or PSUs were granted (March 31, 2016: nil and nil respectively). As at March 31, 2017, there were 46,520 RSUs and 140,203 PSUs issued and outstanding under the Share Unit Plan, of which 39,850 RSUs and 30,169 PSUs have vested and are convertible into common shares of the Company. Included in the PSUs as at March 31, 2017, are 69,085 PSUs which vest on December 6, 2019, with the number of PSUs to vest subject to a market price performance factor measured over a three-year performance period. The resulting PSU payout range is from 0% (nil PSUs) to 200% (138,170 PSUs), based on the Company’s market price performance relative to a specified peer group of companies.

In the quarter ended at March 31, 2017, no RSUs or PSUs (March 31, 2016: nil and nil respectively) were converted and settled in common shares. In the quarter ended March 31, 2017, the Company recognized a share-based payment expense of $101 (March 31, 2016: $305) relating to RSUs and PSUs vesting in the period.

(d) Deferred share units

On June 24, 2014, the Shareholders approved a Deferred Share Unit Plan (the “DSU Plan”) for the benefit of the Company’s non-executive directors. On June 22, 2015, the Shareholders approved an amendment to the DSU Plan to allow participation by employees. The DSU Plan provides for the issuance of common shares from treasury, in the form of Deferred Share Units (“DSUs”). Directors may also elect to receive all or a portion of their annual retainer and meeting fees in the form of DSUs, and employees may elect to receive all or a portion of their annual incentive in the form of DSUs. DSUs may be settled in cash or in common shares issued from treasury, as determined by the Board at the time of the grant. The maximum number of common shares that may be issuable under the DSU Plan is set at 0.75% of the number of issued and outstanding common shares on a non-diluted basis, provided that (i) the number of common shares issued or issuable under all share compensation arrangements (including under the Plan and the Share Unit Plan – see Notes 8(b) and 8(c), respectively) shall not exceed 8% of the issued and outstanding common shares on a non-diluted basis.

During the quarter ended March 31, 2017, 2,916 DSUs (March 31, 2016: 3,254) were granted to directors who elected to receive their retainer and meeting fees for the period in the form of DSUs. A DSU share-based payment expense of $44 (March 31, 2016: $46) was recognized in the quarter ended March 31, 2017. Under the DSU plan, no common shares are to be issued, or cash payments made to, or in respect of a participant in the DSU Plan prior to such eligible participant’s termination date.

As at March 31, 2017, there are 376,221 DSUs issued and outstanding under the DSU Plan, all of which have vested except for 4,990 DSUs.

As at March 31, 2017, there are 2,154,716 common shares issuable under the combined share compensation arrangements referred to above (the Plan, the Share Unit Plan and the DSU Plan) representing 2.67% of the issued and outstanding common shares on a non-diluted basis, and there are 4,305,751 share based awards available for grant under these combined share compensation arrangements.

9. CAPITAL RISK MANAGEMENT

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

MAG SILVER CORP.

Notes to the Condensed Interim Consolidated Financial Statements

For the three months ended March 31, 2017

(Unaudited - expressed in thousands of US dollars unless otherwise stated)

Capital as defined above is summarized in the following table:

	March 31,			December 31,
	2017			2016
Equity	$	176,072		$	175,918
Cash, cash equivalents and term deposits		(132,442	)		(138,347	)
	$	43,630		$	37,571

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

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

As at March 31, 2017, the Company does not have any long-term debt and is not subject to any externally imposed capital requirements.

The Company currently has sufficient working capital ($133,638 as at March 31, 2017) to maintain all of its properties and currently planned programs for a period in excess of the next year. In management’s opinion, the Company is able to meet its ongoing current obligations as they become due. However, the Company may require additional capital in the future to meet its project related expenditures (see Note 14), as the Company is currently not generating cash flow from operations, and it may not therefore generate sufficient operating cash flows to meet all of its future expenditure requirements. Future liquidity may depend upon the Company’s ability to arrange additional debt or equity financing, as the Company relies on equity financings to fund its exploration and corporate activities.

10. FINANCIAL RISK MANAGEMENT

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

(a) Credit risk

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

MAG SILVER CORP.

Notes to the Condensed Interim Consolidated Financial Statements

For the three months ended March 31, 2017

(Unaudited - expressed in thousands of US dollars unless otherwise stated)

(i) Trade credit risk

The Company is in the exploration stage and has not yet commenced commercial production or sales. Therefore, the Company is not exposed to significant trade credit risk and overall the Company’s credit risk has not changed significantly from December 31, 2016.

(ii) Cash

In order to manage credit and liquidity risk the Company’s policy is to invest only in highly rated investment grade instruments backed by Canadian commercial banks.

(iii) Mexican value added tax

As at March 31, 2017, the Company had a receivable of $54 from the Mexican government for value added tax (Note 4). Management expects the balance to be fully recoverable within the year.

The Company’s maximum exposure to credit risk is the carrying value of its cash and term deposits, and accounts receivable, as follows:

	March 31,		December 31,
	2017		2016
Cash and cash equivalents	$	77,442	$	83,347
Term deposits		55,000		55,000
Accounts receivable (see Note 4)		759		628
	$	133,201	$	138,975

(b) Liquidity risk

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

The Company's overall liquidity risk has not changed significantly from December 31, 2016.

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

MAG SILVER CORP.

Notes to the Condensed Interim Consolidated Financial Statements

For the three months ended March 31, 2017

(Unaudited - expressed in thousands of US dollars unless otherwise stated)

Exposure to currency risk

As at March 31, 2017, the Company is exposed to currency risk through the following assets and liabilities denominated in currencies other than the functional currency of the applicable entity:

March 31, 2017 (in 000's of US$ equivalent)	Mexican peso			Canadian dollar

Cash	$	5		$	6,781
Accounts receivable		54			51
Prepaid		6			-
Investments		-			722
Accounts payable		(125	)		(525	)
Net assets exposure (US$ equivalent)	$	(60	)	$	7,029


March 31, 2016 (in 000's of US$ equivalent)	Mexican peso			Canadian dollar

Cash	$	101		$	6,118
Accounts receivable		126			76
Prepaid		9			-
Marketable securities		-			1,605
Accounts payable		(141	)		(392	)
Net assets exposure (US$ equivalent)	$	95		$	7,407

Mexican Peso relative to the US$

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

An appreciation/depreciation in the Mexican peso against the US$ will also result in a gain/loss to the extent that the Company holds net monetary assets in Pesos. Specifically, the Company's foreign currency exposure is comprised of peso denominated cash, prepayments and value added taxes receivable, net of trade and other payables. The carrying amount of the Company’s net peso denominated monetary assets at March 31, 2017 is 1,128 pesos (March 31, 2016: 1,637 pesos). A 10% appreciation in the peso against the US$ would result in loss at March 31, 2017 of $6 (March 31, 2016: $9 gain), while a 10% depreciation in the peso relative to the US$ would result in an equivalent gain.

C$ relative to the US$

The Company is exposed to gains and losses from fluctuations in the C$ relative to the US$.

As general and administrative overheads in Canada are denominated in C$, an appreciation in the C$ relative to the US$ will increase the Company’s overhead costs as reported in US$. Alternatively, a depreciation in the C$ relative to the US$ will decrease the Company’s overhead costs as reported in US$.

MAG SILVER CORP.

Notes to the Condensed Interim Consolidated Financial Statements

For the three months ended March 31, 2017

(Unaudited - expressed in thousands of US dollars unless otherwise stated)

An appreciation/depreciation in the C$ against the US$ will result in a gain/loss to the extent that MAG, the parent entity, holds net monetary assets in C$. The carrying amount of the Company’s net Canadian denominated monetary assets at March 31, 2017 is C$9,350 (March 31, 2016: C$9,619). A 10% appreciation in the C$ against the US$ would result in gain at March 31, 2017 of $703 while a 10% depreciation in the C$ relative to the US$ would result in an equivalent loss.

(d) Interest rate risk

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

11. FINANCIAL INSTRUMENTS AND FAIR VALUE DISCLOSURES

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

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy establishes three levels to classify the inputs to valuation techniques used to measure fair value as described below:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities.

Level 2: Observable inputs other than quoted prices in Level 1 such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Unobservable inputs which are supported by little or no market activity.

MAG SILVER CORP.

Notes to the Condensed Interim Consolidated Financial Statements

For the three months ended March 31, 2017

(Unaudited - expressed in thousands of US dollars unless otherwise stated)

The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs. The Company’s financial assets and liabilities are categorized as follows:

	Three months ended, March 31, 2017
	FVTPL		Available for sale		Loans and receivables		Other liabilities		Total
Financial assets
Cash and cash equivalents	$	77,442	$	-	$	-	$	-	$	77,442
Term deposits		-		-		55,000		-		55,000
Accounts receivables (Note 4)		-		-		759		-		759
Investments (Note 5)		148		574		-		-		722
Financial liabilities
Trade and other payables		-		-		-		854		854


	Year ended December 31, 2016
	FVTPL		Available for sale		Loans and receivables		Other liabilities		Total
Financial assets
Cash and cash equivalents	$	83,347	$	-	$	-	$	-	$	83,347
Term deposits		-		-		55,000		-		55,000
Accounts receivables (Note 4)		-		-		628		-		628
Investments (Note 5)		168		550		-		-		718
Financial liabilities
Trade and other payables		-		-		-		733		733

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

	Three months ended, March 31, 2017
	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	77,442	$	-	$	-	$	77,442
Term deposits		55,000		-		-		55,000
Investments (Note 5)⁽¹⁾		20		702		-		722
	$	132,462	$	702	$	-	$	133,164


	Year ended December 31, 2016
	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	83,347	$	-	$	-	$	83,347
Term deposits		55,000		-		-		55,000
Investments (Note 5)⁽¹⁾		15		703		-		718
	$	138,362	$	703	$	-	$	139,065

⁽¹⁾ The fair value of available-for-sale securities quoted in active markets, is determined based on a market approach reflecting the closing price of each particular security as at the statement of financial position date. The closing price is a quoted market price obtained from the exchange that is the principal active market for the particular security, and therefore available-for-sale securities are classified within Level 1 of the fair value hierarchy. The fair values of available-for-sale securities and warrants that are not quoted in active markets are valued based on quoted prices of similar instruments in active markets or using valuation techniques where all inputs are directly or indirectly observable from market data and are classified within Level 2 of the fair value hierarchy.

MAG SILVER CORP.

Notes to the Condensed Interim Consolidated Financial Statements

For the three months ended March 31, 2017

(Unaudited - expressed in thousands of US dollars unless otherwise stated)

There were no transfers between levels 1, 2 and 3 during the quarter ended March 31, 2017 or during year ended December 31, 2016.

12. SEGMENTED INFORMATION

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

13. RELATED PARTY TRANSACTIONS

The Company does not have offices or direct personnel in Mexico, but rather is party to a Field Services Agreement, whereby it has contracted administrative and exploration services in Mexico with MINERA CASCABEL S.A. de C.V. (“Cascabel”) and IMDEX Inc. (“IMDEX”). Dr. Peter Megaw, the Company’s Chief Exploration Officer, is a principal of both IMDEX and Cascabel, and is remunerated by the Company through fees to IMDEX. In addition to corporate executive responsibilities with MAG, Dr. Megaw is responsible for the planning, execution and assessment of the Company’s exploration programs, and he and his team developed the geologic concepts and directed the acquisition of the Juanicipio Project.

During the period, the Company incurred expenses with Cascabel and IMDEX as follows:

	Three months ended March 31,
	2017		2016

Fees related to Dr. Megaw:
Exploration and marketing services	$	70	$	70
Travel and expenses		28		22
Other fees to Cascabel and IMDEX:
Administration for Mexican subsidiaries		29		30
Field exploration services		111		163
	$	238	$	285

All transactions are incurred in the normal course of business, and are negotiated on terms between the parties which are believed to represent fair market value 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 typical of industry standards. The services provided do not include drilling and assay work which are contracted out independently from Cascabel and IMDEX. Included in trade and other payables at March 31, 2017 is $168 related to these services (March 31, 2016: $192).

MAG SILVER CORP.

Notes to the Condensed Interim Consolidated Financial Statements

For the three months ended March 31, 2017

(Unaudited - expressed in thousands of US dollars unless otherwise stated)

The Company holds various mineral property claims in Mexico upon which full impairments have been recognized. The Company is obligated to a 2.5% NSR royalty on the Cinco de Mayo property payable to the principals of Cascabel under the terms of an option agreement dated February 26, 2004, whereby the Company acquired a 100% interest in the property from Cascabel, and under the terms of assignment agreements entered into by Cascabel with its principals. The Company is also obligated to a 2.5% NSR royalty to Cascabel on the Guigui and Batopilas mining concessions.

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

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

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

Significant subsidiaries of the Company are as follows:
			MAG' effective interest
Name	Country of Incorporation	Principal Activity	2017 (%)	2016 (%)

Minera Los Lagartos, S.A. de C.V.	Mexico	Exploration	100%	100%
Minera Pozo Seco S.A. de C.V.	Mexico	Exploration	100%	100%
Minera Sierra Vieja S.A. de C.V.	Mexico	Exploration	100%	100%

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

Minera Juanicipio, S.A. de C.V. (“Minera Juanicipio”), created for the purpose of holding and operating the Juanicipio Property, is held 56% by Fresnillo plc (“Fresnillo”) and 44% by the Company. Fresnillo is the operator of Minera Juanicipio, and with its affiliates, beneficially owns 12% of the common shares of the Company as at March 31, 2017, as publicly reported. Minera Juanicipio is currently governed by a shareholders agreement. All costs relating to the project and Minera Juanicipio are required to be shared by the Company and Fresnillo pro-rata based on their ownership interests in Minera Juanicipio (see Note 7).

During the period, compensation of key management personnel (including directors) was as follows:

	Three months ended March 31,
	2017		2016
Salaries and other short term employee benefits	$	257	$	248
Share based payments (Note 8(b), (c ), and (d))		158		484
	$	415	$	732

MAG SILVER CORP.

Notes to the Condensed Interim Consolidated Financial Statements

For the three months ended March 31, 2017

(Unaudited - expressed in thousands of US dollars unless otherwise stated)

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 and the Chief Financial Officer.

14. COMMITMENTS

As at March 31, 2017, the Company’s contractual obligations and commitments are summarized as follows:

	Office Lease


2017		100
2018		133
2019		136
	$	369