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First Majestic Silver Corp. Message Board

  • yatozhe yatozhe Mar 4, 2013 8:53 AM Flag

    Cost of silver production

    I know, I know, I could dig through the report, but I'm wondering if anyone knows off the top of his head what it costs AG to produce per ounce of silver? Thanks.

    Sentiment: Strong Buy

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    • if you want that some miners cannot even break even right now....

    • real cost of silver is the break even cost of sales + administrative expenses.

      find the required revenue needed and that is the break even cost.

      if you factor in stuff like expansion adding machines then that is investment and not expense.

      the taxes can be excluded because break even means net income = 0 thus taxes also = 0.

      break even cost means just enough to survive while paying the workers and debt.
      no expansion no building up infrastructure etc.
      degrading year by year. that is break even then.

    • Hey yatozhe,

      Stop waisting everyone's time. We don't have access to the specific information to provide an EXACT break even cost of silver per ounce at AG.

      I read the same article that Kinks read which had AG around $18 or $19. That was a year ago. Someone here posted it as $21.30 which seems like you could basically say that break even I likely $20-21/oz. Another recent article posted that AG was the low cost producer at $28/ton. Problem with these exact numbers are that the ore grades/oz taken out of these mines changes from q to q along with other variables.

      Just assume the break even is $20/oz and know that AG is the low cost silver producer!

    • like I said before .. wait, let me close these blinds ... there ... time for the cone of silence ... there ...


      I'd go with $17.00 but it is whatever you want it to be

      • 1 Reply to pumpjob_guru
      • It's not whatever anyone wants it to be. It is what it is, a specific number based on not only the bare costs to extract the metal from the earth but all the overhead that goes along with running a company. Bottom line: whatever price of silver is for a company to break even, that is the cost of silver production for that entity.

        Sentiment: Strong Buy

    • Hey guys, since there seemed to be some disagreement or confusion about the numbers, I got off my lazy butt and did some investigation. It wasn't hard to find the answer. The FM year end report states it clearly and it is almost exactly as eaglerockson said, $9.62 cash cost per ounce.

      However, I think this cost is really deceptive. There is a good article on seekingalpha entitled, "The True Silver Mining Cost - What Does It REALLY Cost To Mine Silver?" in which the author examines six silver producers and concludes that,

      The third quarter production of these companies incorporates 27 million
      equivalent ounces and comes out to about $26.54 per ounce of silver --
      this should be shocking to investors who follow the "cash cost" number
      offered by silver companies.

      For FM, I would say that the true cost per ounce of silver is about $21.29. That is, if the price of silver fell below $21.29, FM would no longer be viable as an on-going concern.

      Sentiment: Strong Buy

      • 1 Reply to yatozhe
      • There was a post last year from Seeking Alpha, either here or on Stockhouse, that had AG at $18.50/oz. They were the lowest with a few others around $20 but most above and up to $28. So with slightly higher fuel costs, etc., that same article might today have AG around $20 or very near your $21.29 price.

        Being the low cost producer will begin to payoff if the world's silver supply begins to drop (ie if low price starts to diminish production). AG also will budget $192 million for cap ex in 2013 but they have $110 million in the bank. This is very aggressive but much of it is discretionary meaning they don't need to spend about half of this to meet their oz out of the ground target which is already sitting in the bank.

        Bottom line: AG will continue to weather this downturn relative to others which the market will eventually come to realize thru pricing. Personally, It's a blessing that CDE took Orko at the higher premium. Otherwise, the low cost producer status/further share dilution would have hit AG eps for the next 2 years. At end of 2014, with 16million ozs coming out of the ground, AG should be able to handle these types of acquisitions from cash.

    • How much do you want it to cost?

    • Right about where silver is at today: $28.50

      Sentiment: Strong Buy

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