Tight silver market is only going to get worse - First Majestic Silver CEO
The founder and CEO of First Majestic Silver spoke with Kitco on Wednesday--the same day silver hit a 6.5-year high with September Comex silver prices trading up to $1.1403 at $22.96 an ounce. First Majestic (NYSE:AG, TSX:FR) is benefitting having traded up 14% on Wednesday and hitting a multi-year high of $14.05 a share.
"I have to pinch myself just to make sure I'm actually awake, because I've been a bull on silver for 18 years," said Neumeyer.
Demand from green technology manufacturers, precious metal investors, as well as hampered production due to COVID-19 mine suspensions are all aiding silver.
"I know the tightness of the market. It's only gonna get worse as we go green. When I put this company together, we didn't have solar panels and we didn't have any electric cars to any great degree. Now solar panels are the largest consumer of silver in the space. They're consuming over 10% of the world's supply of metal--one industry which didn't exist 20 years ago."
First Majestic, as well as other silver miners, have all been hampered by COVID-19 related suspensions.
In March, as the coronavirus was spreading across the world, the Mexican government along with other Latin-American nations implemented strict lockdown measures. Mining companies were not considered essential services and were forced to temporarily halt production. Mexico accounts for 28% of global silver production.
In Q1 Neumeyer said First Majestic's San Dimas produced a total of 2.4 million silver equivalent ounces, or 35% lower than the previous quarter. Total production at the Santa Elena and La Encantada operations were 63% and 45% lower, respectively, compared to the prior quarter as a result of suspending operations in early April.
Silver miners are still coping with rolling closures due to COVID-19 flare ups.
On Tuesday, Pan American Silver (NASDAQ: PAAS) said that it was moving its Huaron and Morococha operations in Peru into care and maintenance in response to several workers at the mines recently testing positive for COVID-19. In 2019 Huaron and Morococha produced 3.8 million ounces and 2.5 million ounces of silver respectively. Total silver production during the year was 25.8 million ounces.
Despite the disruptions First Majestic believes it will weather the year mostly unfazed. The company said its revised guidance for 2020 total production remains relatively unchanged at 21.4 to 22.9 million silver equivalent ounces compared to the prior guidance of 21.5 to 24.0 million silver equivalent ounces. The company is also anticipating a reduction in annualized cash costs of approximately 30% due to the higher gold by-product revenues and the weaker Mexican Peso.