First Majestic Posts Record Quarterly Output, Ups Guidance
(Kitco News) - First Majestic Silver Corp. (NYSE: AG; TSX: FR; FRANKFURT: FMV) late Monday upped its 2018 output guidance after posting a company production record of 5.1 million silver-equivalent ounces in the second quarter following the acquisition of a seventh operating mine in May.
Second-quarter silver output rose 21% year-on-year to 2.78 million ounces, while gold production climbed 68% to 25,449 ounces. The company also produced 3.9 million pounds of lead and 1.4 million pounds of zinc.
First Majestic increased its 2018 annual silver production to a new range of 12 million to 13.2 million ounces, or 20.5 million to 22.6 million silver-equivalent ounces. Officials said this is primarily due to the addition of the San Dimas silver and gold mine that was acquired on May 10. This guidance is up from the previous range of 10.6 million to 11.8 million ounces of silver, or 15.7 million to 17.5 million silver-equivalent ounces.
“During the quarter, the integration of the newly acquired San Dimas mine into our Mexican portfolio was our primary focus,” said Keith Neumeyer, president and chief executive officer.
Several other mines posted quarter-on-quarter declines in output, according to First Majestic. In fact, BMO Capital Markets said the producer missed BMO’s consolidated guidance by some 20%.
San Dimas has become the company’s cornerstone asset and will remain a major focus for the next several quarters as First Majestic works to optimize the operation, the CEO said. Consolidated silver grades in the quarter rose to 127 grams per tonne from 111 g/t in the previous quarter, which First Majestic said was primarily due to the addition of production from San Dimas.
“Short term, we are focused on reducing underground dilution and implementing mill automation processes, including the installation of high-intensity grinding technologies in order to increase efficiencies and reduce production costs,” Neumeyer said.
“In addition, under the new streaming agreement, we are going back to mine numerous high-grade silver veins that were previously deemed uneconomic by the previous operator. In 2018, all-in sustaining costs at San Dimas are projected to be between $6.99 to $8.19 per ounce, making it our lowest-cost and our largest producing mine.”
Meanwhile, Neumeyer reported that construction of a new roaster at La Encantada is in the final stages. Commissioning and start-up are expected to begin in late August before ramping up to commercial production by the end of the year, he said.
First Majestic also said it was putting the La Guitarra mine and mill under “care and maintenance” on Aug. 1 and will review its options, including the potential sale of the operation. The company said it was looking to reallocate capital and resources to projects that have “better economics” and internal rates of return, such as San Dimas. In the meantime, First Majestic said it will continue with current permitting activities and remediation programs to prepare the operation for a potential reopening in the future.