MAG Silver Corp. (TSX: MAG) is a mineral exploration and development company. The company is focused on the acquisition, exploration and development of projects located within the Mexican silver belt.

Positives

• MAG shares are trading well above the immediate, short-term and long-term support levels of 10-day, 20-day, 30-day, 50-day, 100-day and 200-day SMAs, indicating a bullish price trend.
• The company has a strong liquidity position, with cash position bolstered in the third quarter of FY20 to USD 136.045 million from USD 94.599 million in the same quarter of the previous financial year.

Negatives

• Recently in December insiders have offloaded some of their stake near CAD 24. The President & Chief Executive Officer of MAG Silver (MAG), George Nickolas Paspalas, sold shares of MAG in December.

Financial Highlights: Q3FY20

• Initial production from the mine commenced during the third quarter ahead of schedule, with 42,476 tonnes of development material successfully processed through the Fresnillo plant in August (21,126 tonnes) and September (21,350 tonnes) of 2020.
• Provisional sales of USD 9.525 million on a 100% basis less USD 1.530 million in related costs, netting USD 7.995 million was credited against project capital in accordance with MAG’s pre-commercial production accounting policy.
• As at September 30, 2020, MAG had working capital of USD 137.814 million (September 30, 2019: USD 94.895 million) including cash and cash equivalents of USD 13.045 million (September 30, 2019: USD 94.599) and no long-term debt.
• The company’s net loss for the three and nine months ended September 30, 2020 amounted to USD 3.607 million and USD 17.208 million respectively.

Risk associated with investment

MAG shares are hovering near its 52W high level; a price consolidation could take place as investors may start booking some profit at peak levels. Also, company performance is broadly linked to commodity prices, especially silver. A correction or fall in the silver price may weigh on its performances as well.

Stock Recommendation

MAG shares have recorded spectacular performance over the past one year and surged approximately 72% on a YoY basis, 22% in the past three months and 34% in a month over period and trading close to its 52W peak level.  However, company’s performance is linked to movement in silver prices, a steep fall in the silver price could weigh on the group’s performance. Also, insiders have sold shares of MAG in October as well as in December as well including CEO of the company. Further, the group has yet to record revenue, and it may take some time for the group to reach profitability at the operating level. Further, a profit booking can be seen near the current price level as its shares are hovering in the Overbought zone from Williams %R and STOCH RSI (14-day) standpoint. Therefore, considering the above rationale, we prefer to remain on the sideline and recommend a ‘Watch’ stance at the closing price of CAD 26.39 on December 30, 2020.

1-Year Price Chart (as on December 30^th, 2020, after the market close). Source: Refinitiv (Thomson Reuters)

Disclaimer

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