First Majestic Silver Corp. AG issued an update on its first-quarter 2020 silver equivalent ounces production. Recently, the company announced operation suspensions at all of its three mines in Mexico — San Dimas, Santa Elena and La Encantada — to comply with the Ministry of Health’s decree to curb the spread of coronavirus. The company stated it cannot ascertain the impact of the suspension at present, and consequently revoked the production and cost guidance for 2020.
In the first quarter, the company recorded stellar consolidated production of 6.2 million silver equivalent ounces, consisting of 3.2 million ounces of silver and 32,202 ounces of gold. Total production came in line with the previous quarter and 9% above the previous guidance.
Average consolidated silver and gold recoveries were 89% and 96% in the first quarter respectively, consistent with the prior quarter. The company continues to expect strong silver and gold recoveries aided by the installation of a new 3,000 tpd high-intensity grinding (HIG) mill at San Dimas and the ongoing HIG mill optimization program at Santa Elena. Consolidated silver grades remained above budget, averaging 185 g/t in the March-end quarter compared with 189 g/t in the prior quarter. Moreover, quarterly consolidated gold grades averaged 1.74 g/t compared with the prior quarter’s 1.71 g/t.
Notably, San Dimas, Santa Elena and La Encantada mines performed well above the respective guidance prior to the Mexican Federal Government’s mandate to suspend all mining activities in the wake of the pandemic. During the first quarter, total ore processed from the three mines amounted to 599,142 tons. However, this represented a sequential decrease of 4% primarily due to lower volumes at Santa Elena following a seven day planned mill maintenance program and the suspension of milling activities at Del Toro. These were partly offset by higher volumes at San Dimas.
During the January-March period, San Dimas mine produced total silver equivalent ounces of 3,672,169, consisting 1,677,376 ounces of silver and 21,308 ounces of gold. This represents a 4% increase from the previous quarter, mainly due to a 10% increase in tons milled offset by lower silver and gold grades. Santa Elena produced total production of 1,593,400 silver equivalent ounces during the first quarter, consisting 550,133 ounces of silver and 10,842 ounces of gold. Production came in line with the prior quarter. Moreover, La Encantada produced 924,472 ounces of silver, down 6% from the prior quarter but 15% above the previous guidance. The decrease in silver production primarily resulted from a marginal decline in silver grades compared with the prior quarter.
Measures to Combat Coronavirus
The company has implemented several measures including social distancing, the cancellation of any non-essential visit to the mines, sanitation measures and pre-screening for virus symptoms. Further, access restrictions to limit travel in and out of the local communities have been implemented. First Majestic has yet not experienced any coronavirus related cases at its sites and corporate offices.
Another silver miner, Pan American Silver Corp. PAAS announced that it has decided to suspend its La Colorada and Dolores mining operations to comply with Mexico’s Ministry of Health mandate. Newmont Corporation NEM also intends to ramp down operations at its Peñasquito mine.
Silver prices have slumped 9.8% so far this year. This decline primarily resulted from the coronavirus pandemic, which has disrupted global economic activity consequently weakening consumption of industrial raw materials like silver. Low silver prices will likely dent First Majestic’s results in the near term.
Share Price Performance
First Majestic currently carries a Zacks Rank #3 (Hold). The company, along with Fortuna Silver Mines Inc. FSM, is part of the Mining – Silver industry. So far this year, First Majestic’s shares have gained 25.7% as against the industry’s decline of 9.4%.
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