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First Majestic Silver Jumps on 1st-Quarter Results

- By Alberto Abaterusso

Shares of First Majestic Silver Corp. (AG) closed at $6 on Thursday, up 2.74% from the previous close, on the back of first-quarter results. The mining company posted GAAP earnings of 1 cent per share, which were in line with estimates.

The non-GAAP loss of 1 cent per share improved from a loss of 6 cents per share a year ago.

Revenue of $86.8 million grew 48.1% from the prior-year quarter, but fell 7.12% short of expectations.

Despite the 6% year-over-year decrease in the silver price to $15.73 per ounce, the miner recorded an increase in operating earnings to $10.3 million, 152% growth in net earnings to $2.9 million and a 52% jump in operating cash flow to $23.7 million.

The miner attributed its performance to strong production contributions from the San Dimas and Santa Elena mines in Mexico, which reflected lower costs and 62% growth to 6,273,677 ounces of equivalent gold produced.

The miner reported a 19% reduction in cash costs to $6.34 per ounce and all-in sustaining costs of $12.91 per ounce.

Higher production at San Dimas and Santa Elena more than offset the lower production at the La Parrilla and Del Toro silver mines due to planned contraction of throughput levels.

For full-year 2019, First Majestic guided for silver equivalent production of 24.7 million to 27.5 million ounces.

Regarding the balance sheet as of March 31, the company said that following the sale of 5.25 million ordinary shares at $6.34 per unit during the quarter, the liquidity available in cash on hand and equivalents grew 60.5% to $91.5 million from the final quarter of 2018.

"We continue to prudently manage the business in a very challenging silver price environment by balancing capital investments with expected cash flows and ensuring we maximize returns on invested capital," President and CEO Keith Neumeyer said.

Silver has traded lower since the beginning of the year, falling 4% to close at $14.82 per ounce on May 9. The precious metal averaged $14.99 per ounce from the beginning of the second quarter through May 9, reflecting 4.7% depreciation compared to the average silver price per ounce the miner realized in the first quarter.

Analysts expect First Majestic Silver to outperform the industry within 52 weeks. The average target price of $7.45 per share is 24% upside from the closing price of $6.01 per share on Thursday.

The stock declined 16% over the past year to below the 200-, 100- and 50-day simple moving average lines. The market capitalization is $1.17 billion.

The 52-week range is $4.59 to $8.48.

The 14-day relative strength index of 46 suggests the stock is neither overbought nor oversold.

Disclosure: I have no positions in any securities mentioned.

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This article first appeared on GuruFocus.