MAG Silver Is a Silver Stock You Need to Keep an Eye On

MAG Silver [stock_market_widget type="inline" template="generic" color="default" assets="MAG.TO" markup="(TSX: {symbol} {currency_symbol}{price} ({change_pct}))" api="yf"] is a Vancouver-based development stage miner with an interest in the Juanicipio mine in the Fresnillo district of Mexico. Development work at the mine is still going on, and not surprisingly, MAG Silver does not have any revenue to show just yet.

But the stock has enjoyed a nice rally so far this year, gaining nearly 50% as the price of silver has been on a roll. Now, MAG Silver’s stock price will be driven by the direction silver prices take until it moves into the production phase, as well as the progress the company makes at Juanicipio.

In such a scenario, does it make sense to bet on MAG Silver stock? Let’s find out.

Where Does MAG Silver Stand Right Now?

The development of the Juanicipio mine has been approved earlier this year and an EPC (engineering, procurement, and construction) management contract has been struck already. MAG Silver says that the Juanicipio is witnessing good progress as far as engineering and construction milestones are concerned. More importantly, the company believes that it is on track to commission the plant at Juanicipio in the second half of 2020.

In all, the project will require a capital investment of $395 million, and produce an estimated 11.7 million ounces of silver each year along with 43,500 ounces of gold every year for a period of 12 years. So MAG Silver has an asset with a lot of potential that could help it deliver a strong financial performance in the long run.

However, until that happens, investors will have to be cautious with their investment as the stock’s direction will depend on silver prices. But the good news on that front is that demand for silver is on the rise of late and a potential supply deficit could be in the cards. These two factors have the potential to push silver prices higher.

Remain Invested in MAG Silver Stock

If you are already invested in MAG Silver stock, it would be a good idea to continue holding it for two reasons. Silver is currently trading at more than $17 an ounce and it is expected to end the year at $18 an ounce, according to Commerzbank. quotes Commerzbank analysts as saying:

“The environment for silver remains positive,” they wrote. “After breaking out of the sideways trend in which it had been trading since mid-2018, there is further upside potential for the silver price.”

Since silver is “significantly undervalued” compared to gold, there is “catch-up potential” in silver, analysts continued.

“We are therefore revising our year-end forecast for silver up to $18 per troy ounce (previously: $16.50),” they wrote. “This would put the gold/silver ratio at 83, which roughly corresponds to its level at the start of the year.”

The favourable silver price sentiment can rub off positively on MAG Silver stock as well, sending the stock to new highs in the coming months while it works to bring its asset into production.

Harsh Singh Chauhan has a wealth of experience evaluating publicly-traded companies across several verticals, including technology, oil and gas, retail, and consumer goods. His financial writing has been published across platforms such as The Motley Fool, TheStreet, and Seeking Alpha. Harsh's philosophy is to find great businesses for the long run based on company fundamentals and industry prospects. Address: 682 Indian Road, Toronto, Ontario, M6P 2C9. Phone: 416-721-8257.


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