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First Majestic Reports Better-Than-Expected Production in Q2

Zacks Equity Research

First Majestic Silver Corp. AG announced total production in the second quarter of 2020 reached 3.5 million silver equivalent ounces comprising 1.8 million ounces of silver and 15,764 ounces of gold. Despite the COVID-19 pandemic impacting operations in the quarter, total production was better than expected. This can be attributed to the extended and safe ramp down of the San Dimas operation throughout the month of April. The company stated that all of its operations — San Dimas, Santa Elena and La Encantada have resumed back to pre-pandemic production rates following the Mexican government’s decision to allow the company restart mining activities on May 23, 2020.

The company processed total ore of 333,559 tons, which reflected a sequential decline of 44% as the company had to temporarily suspend activities amid the coronavirus pandemic. Average consolidated silver and gold recoveries were 89% and 96%, respectively, in the second quarter consistent with the prior quarter. Consolidated silver grades in the second quarter averaged 193 g/t compared with 185 g/t in the previous quarter as a result of higher grades at San Dimas. Consolidated gold grades averaged 1.52 g/t down from 1.74 g/t in the prior quarter due to lower gold grades at Santa Elena.

During the second quarter, total ore processed from the San Dimas, La Encantada and Santa Elena mines amounted to 114,390 tons, 129,579 tons and 89,590 tons respectively. Production at the San Dimas, La Encantada and Santa Elena mines, represented a sequential decrease of 35%, 45% and 63% respectively.

The company expects to recover the lost ounces owing to the shutdown in the second half of 2020 as the mines have resumed regular production rates. First Majestic expects silver production to improve 27% from the first half of 2020 to 6.1-6.6 million ounces in the second half of the year. Total production is anticipated in the range of 11.9-13.1 million silver equivalent ounces in the back half of 2020, indicating an increase of 29% from the first half of 2020.

Silver production is expected in the range between 11.0 million ounces and 11.7 million ounces in 2020 compared with the prior guidance of 11.8-13.2 million ounces.  Total production is estimated at 21.4 to 22.9 million silver equivalent ounces compared with its previous guidance of 21.5 to 24.0 million silver equivalent ounces.

It also expects annualized cash costs between $3.95 to $4.59 per ounce and annual AISC to be $12.29-$13.45 per ounce.

Gold prices have gained 19% so far this year primarily fueled by the coronavirus pandemic. Silver prices have gained 8% year to date. Given that industrial applications account for 60% of the global silver consumption, the slowdown in industrial activity amid the coronavirus pandemic impacted demand for silver and prices. Lately, silver has delivered a turnaround as industrial activity is picking up as governments are easing restrictions. Improving prices bode well for First Majestic.

Share Price Performance



Over the past year, First Majestic’s shares have gained 21.9% against the industry’s rally of 36.3%.

Zacks Rank & Other Stocks to Consider

First Majestic carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some other top-ranked stocks in the basic materials space are Sandstorm Gold Ltd SAND, Harmony Gold Mining Company Limited HMY and AngloGold Ashanti Limited AU, all carrying a Zacks Rank #2 currently.

Sandstorm Gold has an expected earnings growth rate of 33.3% for 2020. The company’s shares have surged 71.8% in the past year.

Harmony Gold has a projected earnings growth rate of 28.6% for fiscal 2020. Its shares have soared 87.7% in a year’s time.

AngloGold has an estimated earnings growth rate of 109.9% for the ongoing year. The company’s shares have appreciated 71.3% in the past year.

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