FIRST MAJESTIC SILVER CORP. (NYSE:AG) (TSX:FR)
(the "Company" or “First Majestic”) is pleased to announce the
unaudited interim consolidated financial results of the Company for
the second quarter ended June 30, 2017. The full version of the
financial statements and the management discussion and analysis can
be viewed on the Company's web site at
www.firstmajestic.com or on SEDAR at www.sedar.com and
on EDGAR at www.sec.gov. All amounts are in U.S. dollars unless
stated otherwise.
SECOND QUARTER 2017 HIGHLIGHTS(compared to
First Quarter 2017)
- Silver equivalent production decreased 9% to 3.9 million
ounces
- Silver production decreased 16% to 2.3 million ounces
- All-in sustaining costs (“AISC”) increased 19% to $14.58 per
payable silver ounce
- Revenues decreased 13% to $60.1 million
- Realized average silver price decreased 2% to $17.17 per
ounce
- Mine operating earnings decreased 86% to $1.4 million
- Cash flow per share was $0.11 per share (non-GAAP), a decrease
of 32% from the prior quarter
- Cash costs increased 11% to $7.41 per payable silver ounce (net
of by-product credits)
- Net earnings of $1.4 million (Basic EPS of $0.01)
- Adjusted net loss, excluding non-cash and non-recurring items,
totaled $3.6 million (Adjusted loss per share of $0.02)
- Strong treasury with cash and cash equivalents totaling $126.9
million at the end of the quarter
“Our second quarter results were unfortunately
burdened by a number of labour issues which have since been
resolved,” stated Keith Neumeyer, President and CEO of First
Majestic. “While weaker revenues and cash flows were realized as a
result of these work stoppages and a strengthening Mexican Peso,
our treasury remained relatively unchanged at a very healthy $126.9
million. Due to this unexpected weakness in cash flows, as a
conservative measure, management has decided to reduce capital
expenditures by $17.5 million for the year. Our focus in the second
half of 2017 remains to be the construction of the new roaster
system at our La Encantada mine which is on schedule for
commissioning in the first quarter of 2018 as well as the renewed
investments in underground development which has been lacking over
the past few years. This increase in underground development, which
started in mid-2016, will have a direct impact on improving
production, however, the positive impacts of these types of
investments are generally delayed by 12 to 24 months.”
OPERATIONAL AND FINANCIAL
HIGHLIGHTS
Key Performance
Metrics |
|
2017-Q2 |
|
2017-Q1 |
Change Q2 vs Q1 |
|
2016-Q2 |
Change Q2 vs Q2 |
|
2017-YTD |
|
Operational |
|
|
|
|
|
|
|
|
|
|
|
Ore
Processed / Tonnes Milled |
|
|
691,833 |
|
|
|
822,336 |
|
(16 |
%) |
|
|
798,182 |
|
(13 |
%) |
|
|
1,514,170 |
|
|
Silver
Ounces Produced |
|
|
2,287,188 |
|
|
|
2,708,978 |
|
(16 |
%) |
|
|
2,844,930 |
|
(20 |
%) |
|
|
4,996,166 |
|
|
Silver
Equivalent Ounces Produced |
|
|
3,888,944 |
|
|
|
4,267,350 |
|
(9 |
%) |
|
|
4,681,608 |
|
(17 |
%) |
|
|
8,156,294 |
|
|
Cash
Costs per Ounce (1) |
|
$ |
7.41 |
|
|
$ |
6.68 |
|
11 |
% |
|
$ |
6.41 |
|
16 |
% |
|
$ |
7.02 |
|
|
All-in
Sustaining Cost per Ounce (1) |
|
$ |
14.58 |
|
|
$ |
12.21 |
|
19 |
% |
|
$ |
10.97 |
|
33 |
% |
|
$ |
13.30 |
|
|
Total
Production Cost per Tonne (1) |
|
$ |
51.53 |
|
|
$ |
44.72 |
|
15 |
% |
|
$ |
44.97 |
|
15 |
% |
|
$ |
47.83 |
|
|
Average Realized Silver
Price per Ounce (1) |
|
$ |
17.17 |
|
|
$ |
17.55 |
|
(2 |
%) |
|
$ |
17.01 |
|
1 |
% |
|
$ |
17.37 |
|
|
Financial (in $millions) |
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
60.1 |
|
|
$ |
69.1 |
|
(13 |
%) |
|
$ |
66.1 |
|
(9 |
%) |
|
$ |
129.2 |
|
|
Mine
Operating Earnings (2) |
|
$ |
1.4 |
|
|
$ |
10.0 |
|
(86 |
%) |
|
$ |
9.9 |
|
(86 |
%) |
|
$ |
11.4 |
|
|
(Loss)
Earnings before Income Taxes |
|
($6.7 |
) |
|
$ |
2.6 |
|
(358 |
%) |
|
$ |
9.2 |
|
(173 |
%) |
|
($4.1 |
) |
|
Net
Earnings (Loss) |
|
$ |
1.4 |
|
|
$ |
2.7 |
|
(48 |
%) |
|
$ |
6.1 |
|
(77 |
%) |
|
$ |
4.1 |
|
|
Operating
Cash Flows before Working Capital and Taxes (2) |
|
$ |
18.0 |
|
|
$ |
26.6 |
|
(32 |
%) |
|
$ |
23.5 |
|
(23 |
%) |
|
$ |
44.6 |
|
|
Cash and
Cash Equivalents |
|
$ |
126.9 |
|
|
$ |
127.6 |
|
(1 |
%) |
|
$ |
108.2 |
|
17 |
% |
|
$ |
126.9 |
|
|
Working Capital
(1) |
|
$ |
130.9 |
|
|
$ |
136.8 |
|
(4 |
%) |
|
$ |
119.1 |
|
10 |
% |
|
$ |
130.9 |
|
|
Shareholders |
|
|
|
|
|
|
|
|
|
|
|
Earnings
(Loss) per Share ("EPS") - Basic |
|
$ |
0.01 |
|
|
$ |
0.02 |
|
(48 |
%) |
|
$ |
0.04 |
|
(78 |
%) |
|
$ |
0.03 |
|
|
Adjusted
EPS (1) |
|
($0.02 |
) |
|
$ |
0.02 |
|
(198 |
%) |
|
$ |
0.03 |
|
174 |
% |
|
$ |
0.00 |
|
|
Cash Flow
per Share (1) |
|
$ |
0.11 |
|
|
$ |
0.16 |
|
(33 |
%) |
|
$ |
0.15 |
|
(26 |
%) |
|
$ |
0.27 |
|
|
(1) The Company reports non-GAAP measures which include cash
costs per ounce, all-in sustaining cost per ounce, total production
cost per ounce, total production cost per tonne, average realized
silver price per ounce, working capital, adjusted EPS and cash flow
per share. These measures are widely used in the mining industry as
a benchmark for performance, but do not have a standardized meaning
and may differ from methods used by other companies with similar
descriptions.(2) The Company reports additional GAAP measures which
include mine operating earnings and operating cash flows before
movements in working capital and income taxes. These additional
financial measures are intended to provide additional information
and do not have a standardized meaning prescribed by IFRS.
FINANCIAL REVIEW
The Company realized an average silver price of
$17.17 per ounce during the second quarter of 2017, representing a
1% increase compared with the second quarter of 2016 and a 2%
decrease compared to $17.55 in the prior quarter.
Revenues generated in the second quarter totaled
$60.1 million, a decrease of 9% compared to the second quarter of
2016 primarily due to a 13% decrease in silver equivalent ounces
sold, which resulted from lost production due to the illegal work
stoppages at the La Encantada, La Parrilla and Santa Elena mines
and lower grades due to the lack of investment in underground
development over the past few years.
Mine operating earnings were $1.4 million in the
quarter compared to $9.9 million in the second quarter of 2016. The
decrease in mine operating earnings was primarily affected by lost
revenue from the La Encantada illegal strike, where
$1.4 million in standby costs continued to be incurred, and
$0.2 million in severance costs that were paid out.
Cash flow from operations before movements in
working capital and income taxes in the quarter was $18.0 million
($0.11 per share) compared to $23.5 million ($0.15 per share)
in the second quarter of 2016. The decrease was primarily
attributed to lower mine operating earnings impacted by the mine
stoppages in the quarter.
The Company generated net earnings of $1.4
million (EPS of $0.01) in the second quarter compared net earnings
of $6.1 million (EPS of $0.04) in the second quarter of 2016. The
decrease of $4.7 million was primarily attributed to: 1) $8.5
million decrease in mine operating earnings as a result of mine
stoppages; 2) $6.0 million decrease in investment and other income,
mainly attributed to market price volatility on the Company's
holdings in marketable securities; partially offset by 3) an income
tax recovery of $8.1 million in the second quarter due to the
impact of foreign exchange on deferred tax liabilities. Excluding
all non-cash and non-recurring items, the Company generated an
adjusted loss of $3.6 million (adjusted loss of $0.02 per share)
during the quarter.
The Company maintains a strong treasury with
$126.9 million in cash and cash equivalents at the end of the
quarter, reflecting a 1% decrease compared to the prior quarter.
The Company’s working capital position decreased 4% to $130.9
million compared to $136.8 million at the end of the prior
quarter.
OPERATIONAL HIGHLIGHTS
The table below represents the quarterly
operating and cost parameters at each of the Company’s six
producing silver mines.
Second Quarter
Production Summary |
|
Santa Elena |
La Encantada |
La Parrilla |
Del Toro |
San Martin |
La Guitarra |
Consolidated |
Ore Processed / Tonnes Milled |
|
|
232,451 |
|
|
|
148,039 |
|
|
|
132,880 |
|
|
81,843 |
|
|
|
67,073 |
|
|
|
29,547 |
|
|
|
691,833 |
|
Silver Ounces Produced |
|
|
557,914 |
|
|
|
374,901 |
|
|
|
425,060 |
|
|
365,323 |
|
|
|
425,645 |
|
|
|
138,345 |
|
|
|
2,287,188 |
|
Silver Equivalent Ounces Produced |
|
|
1,399,940 |
|
|
|
375,563 |
|
|
|
593,852 |
|
|
712,714 |
|
|
|
577,598 |
|
|
|
229,276 |
|
|
|
3,888,944 |
|
Cash Costs per Ounce |
|
$ |
2.86 |
|
|
$ |
13.59 |
|
|
$ |
11.15 |
|
$ |
3.99 |
|
|
$ |
5.43 |
|
|
$ |
12.65 |
|
|
$ |
7.41 |
|
All-in Sustaining Cost per Ounce |
|
$ |
6.64 |
|
|
$ |
17.95 |
|
|
$ |
17.12 |
|
$ |
7.93 |
|
|
$ |
7.53 |
|
|
$ |
19.51 |
|
|
$ |
14.58 |
|
Total Production Cost per Tonne |
|
$ |
54.44 |
|
|
$ |
33.65 |
|
|
$ |
44.54 |
|
$ |
57.16 |
|
|
$ |
69.37 |
|
|
$ |
93.49 |
|
|
$ |
51.53 |
|
Production in the quarter totalled 3.9 million
silver equivalent ounces consisting of 2.3 million ounces of
silver, 15,186 ounces of gold, 7.6 million pounds of lead and
0.9 million pounds of zinc. Compared to the previous quarter, total
production decreased by 9% primarily due to unusual efforts by
unionized workers to illegally disrupt mining activities which
caused labour issues, including minor stoppages at La Parrilla and
Santa Elena, and a more serious stoppage at the La Encantada mine
which lasted 42 days and contributed to a 47% or 333,396 silver
equivalent ounce reduction in production at La Encantada. The
leaders of the National Union and Confederation of Mexican Workers
Union were both supportive of the corrective actions taken by the
Company which are expected to lead to improvements in productivity
at each of the operations in the coming quarters. The Company
anticipates production at La Encantada will be back on track in the
third quarter and will work to recuperate lost tonnage over the
remainder of 2017.
COSTS AND CAPITAL
EXPENDITURES
Cash cost per ounce in the quarter was $7.41, an
increase of 11% or $0.73 per ounce compared to the previous
quarter. The increase in cash cost per ounce was primarily due to
the 16% decrease in silver production and a stronger Mexican peso
which appreciated 11% against the U.S. dollars compared to the
previous quarter.
AISC per ounce in the second quarter was $14.58,
an increase of 19% or $2.37 per ounce compared to the previous
quarter. The increase in AISC was primarily due to the 16% decrease
in silver production and an increase in sustaining capital
expenditures as the Company catches up with program targets for
2017 after a slower than expected initiation of exploration and
development activities at the beginning of the year.
Total capital expenditures in the second quarter
were $16.3 million, a decrease of 14% compared to the prior
quarter, primarily consisting of $3.4 million at Santa Elena, $2.8
million at La Encantada, $3.3 million at La Parrilla, $1.7 million
at Del Toro, $2.5 million at San Martin and $1.4 million at La
Guitarra.
OUTLOOK
The Company is updating its 2017 annual silver
production guidance to be in the range of 10.0 million to 10.6
million ounces (or 15.7 million to 16.6 million silver equivalent
ounces), compared to the previous guidance of 11.1 to 12.4 million
ounces (or 16.6 to 18.5 million silver equivalent ounces). The 12%
decrease in silver production is primarily due to lower head grades
from slow initiation of underground development activities at the
beginning of the year and lost production as a result of three
illegal blockades in the second quarter which amounted to four days
at La Parrilla, two days at Santa Elena and 42 days at La
Encantada.
Annual cash cost is now expected to be within
the range of $7.00 to $7.75 per ounce, compared to the previous
guidance of $6.06 to $6.48 per ounce, primarily due to lower
anticipated production levels, higher energy costs attributed to
the Mexican government's oil and gas deregulation policies that
came into effect in the first quarter of 2017, as well as
strengthening of the Mexican pesos against the U.S. dollar.
The Company has also updated its capital budget
for 2017 and has reduced capital investments by $17.5 million to
$106.5 million consisting of $45.6 million for sustaining
requirements and $60.9 million for expansionary projects. This
represents a 14% decrease compared to the original 2017 capital
budget of $124.0 million. The revised annual budget includes
capital investments totaling $43.6 million to be spent on
underground development, $36.9 million towards property, plant and
equipment, $21.6 million in exploration and $4.3 million towards
corporate automation and efficiency projects. Total capital
expenditures in the first half of 2017 totalled $35.4 million,
representing approximately 33% of the $106.5 million revised
budget. The Company expects capital spending to increase in the
second half of 2017 to catch up to program targets, with a majority
of the investment focused on underground development, exploration
and the completion of the roaster at La Encantada and the tailings
filters at San Martin.
Furthermore, the Company is now expecting to
complete a total of 64,500 metres of underground development in
2017, representing a 14% decrease compared the original budget of
74,850 metres. In addition, the Company is planning to complete a
total of 145,000 metres of exploration drilling in 2017,
representing a 21% decrease compared to the original budget of
183,000 metres. The Company completed 28,692 metres of development
and 58,070 exploration metres in the first half of 2017,
representing 44% and 40%, respectively, of the revised budget.
A mine-by-mine breakdown of the revised 2017
production guidance is included in the table below. Cash cost and
AISC guidance is shown per payable silver ounce. Metal price and
foreign currency assumptions for calculating silver equivalent
ounces were updated to: silver: $17.00/oz, gold: $1,250/oz, lead:
$1.00/lb, zinc: $1.25/lb, MXN:USD 18:1, compared to previous
assumptions of: silver: $16.50/oz, gold: $1,200/oz, lead: $1.00/lb,
zinc: $1.20/lb, MXN:USD 20:1.
Mine |
|
Silver Oz (M) |
Silver Eqv Oz (M) |
Cash Costs ($) |
AISC ($) |
Santa Elena |
|
2.2 -
2.3 |
5.2 -
5.5 |
2.58 -
2.85 |
6.23 -
6.71 |
La Encantada |
|
2.3 -
2.5 |
2.3 -
2.5 |
11.06
- 12.23 |
14.68
- 16.07 |
La Parrilla |
|
1.8 -
1.9 |
2.5 -
2.7 |
9.36 -
10.35 |
14.37
- 15.65 |
Del Toro |
|
1.3 -
1.4 |
2.5 -
2.7 |
3.33 -
3.68 |
9.32 -
10.00 |
San Martin |
|
1.7 -
1.8 |
2.2 -
2.3 |
6.04 -
6.68 |
9.46 -
10.29 |
La Guitarra |
|
0.6 -
0.7 |
0.9 -
1.0 |
10.83
- 11.97 |
19.64
- 21.28 |
Consolidated |
|
10.0 - 10.6 |
15.7 - 16.6 |
$7.00 - $7.75 |
$14.40 - $15.50 |
*Certain amounts shown may not add exactly to
the total amount due to rounding differences.*Consolidated AISC
includes general and administrative cost estimates and non-cash
costs of $2.67 to $2.83 per payable silver ounce.
The Company is projecting its 2017 AISC, as
defined by the World Gold Council ("WGC"), to be within a range of
$14.40 to $15.50 consolidated on a per payable silver ounce basis,
compared to the previous guidance of $11.96 to $12.88. An itemized
AISC cost table is provided below:
All-In Sustaining Cost Calculation |
|
FY 2017 ($/oz) |
Total Cash Costs per
Payable Silver Ounce (1) |
|
7.00 -
7.75 |
Workers Participation
Costs |
|
0.24 -
0.26 |
General and
Administrative Costs |
|
1.75 -
1.85 |
Sustaining Development
Costs |
|
1.93 -
2.04 |
Sustaining Property,
Plant and Equipment Costs |
|
2.25 -
2.29 |
Sustaining Exploration
Costs |
|
0.31 -
0.33 |
Share-based Payments
(non-cash) |
|
0.83 -
0.88 |
Accretion
of Reclamation Costs (non-cash) |
|
0.09 - 0.10 |
All-In
Sustaining Costs: (WGC definition) |
|
$14.40 - $15.50 |
All-In Sustaining Costs: (WGC excluding non-cash
items) |
|
$13.48 - $14.52 |
1. The cash cost per payable silver ounce includes estimated
royalties and 0.5% mining environmental fee of $0.12 per
ounce.
CONFERENCE CALL
The Company will be holding a conference call
and webcast on Friday, August 4, 2017 at 10 am PDT (1 pm
EDT).
To participate in the conference call, please
dial the following:
|
|
Toll Free Canada &
USA: |
|
1-800-319-4610 |
|
|
Outside of Canada &
USA: |
|
1-604-638-5340 |
|
|
Toll Free Germany: |
|
0800 180
1954 |
|
|
Toll Free UK: |
|
0808 101
2791 |
Participants should dial in 10 minutes prior to
the conference.
Click on WEBCAST on the First Majestic homepage
as a simultaneous audio webcast of the conference call will be
posted at www.firstmajestic.com.
The conference call will be recorded and you can
listen to an archive of the conference by calling:
|
|
Canada & USA Toll
Free: |
|
|
1-800-319-6413 |
|
|
Outside Canada &
USA: |
|
|
1-604-638-9010 |
|
|
Access
Code: |
|
|
1572 followed
by the # sign |
The replay will be available approximately one
hour after the conference and will available for 7 days following
the conference. The replay will also be available on the
Company’s website for one month.
ABOUT FIRST MAJESTIC
First Majestic is a mining company focused on
silver production in Mexico and is aggressively pursuing the
development of its existing mineral property assets. The Company
presently owns and operates six producing silver mines; the La
Parrilla Silver Mine, the San Martin Silver Mine, the La Encantada
Silver Mine, the La Guitarra Silver Mine, Del Toro Silver Mine and
the Santa Elena Silver/Gold Mine. Production from these six mines
is projected to be between 10.0 to 10.6 million ounces of pure
silver or 15.7 to 16.6 million ounces of silver equivalents in
2017.
FOR FURTHER INFORMATION contact
info@firstmajestic.com, visit our website at
www.firstmajestic.com or call our toll free number
1.866.529.2807.
FIRST MAJESTIC SILVER CORP.“signed”Keith
Neumeyer, President & CEO
SPECIAL NOTE REGARDING FORWARD-LOOKING
INFORMATIONThis news release includes certain "Forward-Looking
Statements" within the meaning of the United States Private
Securities Litigation Reform Act of 1995 and applicable Canadian
securities laws. When used in this news release, the words
“anticipate”, “believe”, “estimate”, “expect”, “target”, “plan”,
“forecast”, “may”, “schedule” and similar words or expressions,
identify forward-looking statements or information. These
forward-looking statements or information relate to, among other
things: the price of silver and other metals; the accuracy of
mineral reserve and resource estimates and estimates of future
production and costs of production at our properties; estimated
production rates for silver and other payable metals produced by
us, the estimated cost of development of our development projects;
the effects of laws, regulations and government policies on our
operations, including, without limitation, the laws in Mexico which
currently have significant restrictions related to mining;
obtaining or maintaining necessary permits, licences and approvals
from government authorities; and continued access to necessary
infrastructure, including, without limitation, access to power,
land, water and roads to carry on activities as planned.
These statements reflect the Company’s current
views with respect to future events and are necessarily based upon
a number of assumptions and estimates that, while considered
reasonable by the Company, are inherently subject to significant
business, economic, competitive, political and social uncertainties
and contingencies. Many factors, both known and unknown, could
cause actual results, performance or achievements to be materially
different from the results, performance or achievements that are or
may be expressed or implied by such forward-looking statements or
information and the Company has made assumptions and estimates
based on or related to many of these factors. Such factors include,
without limitation: fluctuations in the spot and forward price of
silver, gold, base metals or certain other commodities (such as
natural gas, fuel oil and electricity); fluctuations in the
currency markets (such as the Canadian dollar and Mexican peso
versus the U.S. dollar); changes in national and local government,
legislation, taxation, controls, regulations and political or
economic developments in Canada, Mexico; operating or technical
difficulties in connection with mining or development activities;
risks and hazards associated with the business of mineral
exploration, development and mining (including environmental
hazards, industrial accidents, unusual or unexpected formations,
pressures, cave-ins and flooding); risks relating to the credit
worthiness or financial condition of suppliers, refiners and other
parties with whom the Company does business; inability to obtain
adequate insurance to cover risks and hazards; and the presence of
laws and regulations that may impose restrictions on mining,
including those currently enacted in Mexico; employee relations;
relationships with and claims by local communities and indigenous
populations; availability and increasing costs associated with
mining inputs and labour; the speculative nature of mineral
exploration and development, including the risks of obtaining
necessary licenses, permits and approvals from government
authorities; diminishing quantities or grades of mineral reserves
as properties are mined; the Company’s title to properties; and the
factors identified under the caption “Risk Factors” in the
Company’s Annual Information Form, under the caption “Risks
Relating to First Majestic's Business”.
Investors are cautioned against attributing
undue certainty to forward-looking statements or information.
Although the Company has attempted to identify important factors
that could cause actual results to differ materially, there may be
other factors that cause results not to be anticipated, estimated
or intended. The Company does not intend, and does not assume any
obligation, to update these forward-looking statements or
information to reflect changes in assumptions or changes in
circumstances or any other events affecting such statements or
information, other than as required by applicable law.
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