Juanicipio Progress Made With Further Development Of The Flotation Plant And Other Infrastructure

VANCOUVER - MAG Silver Corp., President and CEO, said, “We are very pleased with the progress at Juanicipio. The metallurgical response of the mineralization is correlating well with our expectations. We will start optimizing flotation parameters over the next two quarters, which will significantly de-risk the Juanicipio plant start-up. Whilst the early cash flow at Juanicipio is a welcome boost, we remain eager explorers at both the Juanicipio JV and Deer Trail.”

Under the terms of an Engineering, Procurement, Construction and Management agreement, Fresnillo and its affiliates are overseeing the construction of the 4,000 tpd process plant and associated surface and underground infrastructure. In the previous quarter, surface construction progress at Juanicipio was limited due to temporary COVID-19 restrictions imposed by the Mexican Government in response to the virus outbreak. Construction ramped up again starting June 1, 2020 and into the quarter ended September 30, 2020, and according to Fresnillo, the overall development timetable currently remains unchanged with the Juanicipio processing plant expected to be commissioned in mid-2021.

In the nine months ended September 30, 2020, further development progress was made on construction of the flotation plant and other infrastructure. The mill foundations are completed and curing. Underground development to date at Juanicipio is now at 32 km (20 miles) with access to the upper portion of the resource now achieved. Initial development indicates that the grade and width of the vein are in line with previous drilling-derived estimates, and preparation of the first production stope was concluded during the three months ended September 30, 2020.

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. The Joint Venture produced and sold 394 thousand silver ounces, 610 gold ounces, 138 tonnes of lead and 174 tonnes of zinc in the third quarter. Provisional sales (net of treatment charges) of $9,525 less $1,530 in related mining and transportation costs, netting $7,995 on a 100% basis, was credited against Juanicipio capitalized costs in accordance with the Company’s pre-commercial production accounting policy. The provisional sales and treatment charges will be adjusted in the fourth quarter based on final assay and pricing adjustments in accordance with the offtake contracts.

By bringing forward the start-up of the mine and by processing mineralized material early, MAG and Fresnillo expect to secure several positive outcomes for the Juanicipio Project: Generating cash-flow from production to offset some of the cash requirements of the initial project capital (provisional net $7,995 was generated on a 100% basis in the third quarter of 2020); De-risking the flotation process through a better understanding of the metallurgical characteristics and response of the Juanicipio mineralization; Increased certainty around the geological block model prior to start-up of the processing plant; and Allowing a quicker and more certain ramp-up to the nameplate 4,000 tonnes per day plant design; Mineralized material from the mine is expected to be processed on commercial terms at a rate of 16,000 tonnes per month at the Fresnillo plant facility (100% owned by Fresnillo) until the Juanicipio plant is commissioned in mid-2021. Subsequent to the quarter end, another 15,400 tonnes of material were processed in October 2020.

On the exploration front, most of the Juanicipio property remains unexplored with many untested exploration targets still to be pursued by the joint venture partners. After a temporary halt in exploration activity in the prior quarter due to COVID-19 restrictions, drilling on the property resumed in the third quarter with five rigs currently on site. Drilling is presently focused on continued step-out and infill drilling of the Valdecanas Deep Zone. Holes are also being directed at the Anticipada Vein and NE-trending Venadas Vein family targeting them independently from the Valdecanas Vein. Despite the temporary COVID-19 restrictions noted above, the full Juanicipio 2020 drilling program is expected to be completed as planned in 2020.

During the quarter, MAG announced its Deer Trail earn-in project in Utah, a silver-rich CRD target. With drill roads completed and drill pads fully permitted, a 6,500-meter Phase I surface drilling program commenced subsequent to the quarter end in November 2020