First Majestic Silver Reports Steady 3Q Output, Plans Layoffs Due To Low Prices

By Paul Ploumis (ScrapMonster Author)

October 15, 2015 03:42:43 AM

(Kitco News) - First Majestic Silver Corp. (TSX: FR; NYSE: AG) announced stable silver production in the third quarter Wednesday, but the company also plans to cut expenses and lay off some workers in response to the low-price environment, expecting to leave high-cost metal in the ground for now.

Silver-equivalent production at First Majestic’s five operating silver mines in Mexico climbed 1% year-on-year in the third quarter to 3,558,035 ounces, the company reported.

“Our third-quarter results saw overall improvements in silver recoveries and throughput rates primarily due to the recent expansion of the La Encantada plant to 3,000 tonnes per day. At San Martin and La Guitarra, we continue to encounter high grades of silver and gold, which resulted in record quarterly production at both operations,” said Keith Neumeyer, president and chief executive of First Majestic.

Company-wide silver output dipped 3% year-on-year to 2,593,309 ounces in the third quarter, while gold production climbed 59% to 4,434. The company also listed lead production of 8,743,453 pounds, down 10%; and zinc output of 3,122,498 pounds, down 3%.

“However, due to the continued weakness in metal prices, we are modifying our operations in order to ensure free cash flow is generated across the entire business,” Neumeyer said. “These changes include additional layoffs and mine-plan revisions. Once these changes are fully implemented, and with the addition of the newly acquired Santa Elena Mine, the company is expected to benefit from improved operating margins, increased cash flows and greater economies of scale.”

First Majestic assumed operations at the Santa Elena Mine in Sonora, Mexico, as of Oct. 1 following the acquisition of SilverCrest Mines. Santa Elena is expected to increase annual silver-equivalent production by over 25%. However, with the continued weakness in metal prices, First Majestic said officials are reviewing all operating mine plans, which may result in reduced production targets at some of operations in order to improve profitability.

“Management believes leaving higher-cost ounces in the ground is a prudent choice for its shareholders until silver prices improve,” First Majestic said. Officials added that the company is expected to provide further details in conjunction with the release of the third-quarter financial results on Nov. 16.

The total ore processed during the third quarter at the company’s mines was 675,032 tonnes, a 9% increase compared to the third quarter of 2014 and a 2% increase from the previous quarter. The rise in tonnes compared to the prior quarter was primarily due to a 33% increase in throughput rates at La Encantada following the completion of the plant expansion, however, offset by a 23% decrease in throughput rates at Del Toro, which was affected by ventilation issues during the quarter.

Average silver grades in the quarter for the five mines decreased to 167 grams per tonne compared to 196 g/t in the third quarter of 2014. The total also decreased 8% from the second quarter. Combined silver recoveries averaged 72% during the quarter, up from 68% in the same quarter of the prior year and above the second quarter average of 70%.

Courtesy: Kitco News