First Majestic Reports Second Quarter Financial Results
August 13, 2013
FIRST MAJESTIC SILVER CORP.
(AG: NYSE; FR: TSX) (the “Company” or
“First Majestic”) is pleased to announce the unaudited interim
consolidated financial results for the Company for the second quarter
ending June 30, 2013. The full version of the financial statements and
the management discussion and analysis can be viewed on the Company’s
web site at www.firstmajestic.com
or on SEDAR at www.sedar.com
and on EDGAR at www.sec.gov
2013 SECOND QUARTER HIGHLIGHTS
- Silver ounces produced increased by 44% to 2,767,966 ounces compared to 1,917,248 ounces in Q2 2012.
- Silver equivalent ounces produced increased by 55% to 3,268,117 ounces compared to 2,102,222 ounces in Q2 2012.
- Net Earnings after Taxes amounted to $0.2 million ($0.00 per share)
primarily due to the suspension of silver sales in the second quarter
which would have added approximately $7.6 million to net earnings or
$0.06 per share.
- Adjusted Earnings Per Share (non-GAAP) of $0.07 after excluding non-cash and non-recurring items.
- Cash Flow Per Share (non-GAAP) of $0.30, representing a 3% increase from Q2 2012.
- Generated Revenues of $48.4 million, a 12% decrease compared to Q2
2012 primarily due to the suspension of silver sales late in the second
- Mine Operating Earnings amounted to $14.3 million, a decrease of 54%
from Q2 2012, primarily due to the suspension of silver sales late in
the second quarter.
- Total Cash Cost, net of by-product credits, was $9.43 per ounce,
down slightly from $9.49 compared to Q1 2013 and up 7% compared to Q2
- Average realized silver price per ounce was $22.19, a decrease of 23% compared to Q2 of 2012.
- At the end of the quarter, Cash and Cash Equivalents was $78.9 million and Working Capital was $80.4 million.
- As of August 12, the Company held approximately 150,000 ounces of silver in inventory.
“Despite the weak silver price environment, First Majestic achieved a
new quarterly record in silver production and continues to demonstrate
its commitment to maximizing shareholder value,” said Keith Neumeyer,
CEO and President of First Majestic. “The silver price fell 31% during
the second quarter which is equal to the largest quarterly drop during
the 2008 financial crisis and the third largest quarterly drop in the
past 50 years. As such, management decided to suspend a portion of
silver sales to await a rebound in prices. While the suspension had a
negative impact on this quarter’s revenues and earnings, we are
confident the silver price will revert back to the mean in the near
future. In the meantime, regular sales are now taking place in order to
allow silver inventories to return to normal levels.”
Mr. Neumeyer continues; “Furthermore, as a result of the recent
cost-cutting measures and improved operating parameters, cash costs are
expected to decrease during the second half of 2013.”
2013 SECOND QUARTER HIGHLIGHTS TABLE
(1) Payable Silver Ounces Produced is equivalent to Silver Ounces Produced less metal deductions from smelters and refineries.
|Silver Equivalent Ounces Produced
|Silver Ounces Produced (excluding equivalent ounces from by-products)
|Payable Silver Ounces Produced (1)
|Total Cash Costs Per Ounce (2)
|Total Production Cost Per Tonne (2)
|Average Realized Silver Price Per Ounce ($/eq. oz) (2)
|Revenue ($ millions)
|Mine Operating Earnings ($ millions)
|Net Earnings ($ millions)
|Operating Cash Flows Before Movements in Working Capital and Income Taxes ($ millions)
|Cash and Cash Equivalents ($ millions)
|Working Capital ($ millions)
|Earnings Per Share (“EPS”) - Basic
|Cash Flow Per Share (2)
|Weighted Average Shares Outstanding for the Periods
(2) The Company reports non-GAAP measures which include Total Cash Costs
per Ounce, Total Production Cost per Tonne, Average Realized Silver
Price per Ounce and Cash Flow Per Share. These measures are widely used
in the mining industry as a benchmark for performance, but do not have a
standardized meaning and may differ from methods used by other
companies with similar descriptions.
- Net earnings for the second quarter of 2013 was $0.2 million (EPS of
$nil), compared to net earnings of $26.5 million (EPS of $0.23) in the
first quarter of 2013 and net earnings of $15.3 million (EPS of $0.14)
in the second quarter of 2012. While the Company achieved production
growth of 55% compared to the same quarter of the prior year, earnings
were affected by the suspension of silver sales in early June and market
conditions as the price of silver declined by over 30% during the
quarter. As a result of the dramatic fall in silver prices in a very
short timeframe, the Company held approximately 700,000 ounces of silver
in inventory at quarter end in an attempt to maximize future profits.
This suspension of sales resulted in lower revenues by approximately
$14.8 million and profits by $7.6 million for the second quarter, or an
impact of reducing EPS by $0.06 in the quarter.
- Adjusted EPS (a non-GAAP measure) for the second quarter of 2013 was
$0.07, after excluding non-cash and non-recurring items, such as
share-based payments, losses on investment in silver futures and
marketable securities, and a gain on fair value adjustment of the
prepayment facility for the pre-sale of lead and zinc.
- Cash costs remained relatively unchanged from $9.49 in the prior
quarter to $9.43 in the second quarter of 2013, and increased by 7%
compared to $8.83 in the second quarter of 2012. The increase in cash
cost compared to the same quarter of the prior year was primarily
attributed to 9% appreciation of the Mexican peso against the US dollar.
Cost cutting measures that were announced previously will take effect
in the second half of 2013 and are anticipated to reduce cash costs
through to the end of the year.
- Generated revenues of $48.4 million for the second quarter of 2013, a
decrease of 28% compared to the first quarter of 2013, primarily due to
25% decrease in average realized silver price per ounce and
management’s decision to suspend approximately 700,000 ounces of silver
sales near quarter end in an attempt to maximize future profits.
Revenues decreased 12% despite a 55% increase in production over the
same period compared to the second quarter of 2012, primarily due to the
suspension of silver sales and the 23% decline in average realized
silver price per ounce.
- Recognized mine operating earnings of $14.3 million compared to
$34.6 million in the first quarter of 2013 and $31.1 million in the
second quarter of 2012. The decrease in mine operating earnings was
attributed to lower revenues and higher depreciation, depletion and
amortization expense related to the increased production rates and the
addition of plant, equipment and mineral properties related to the
addition of two new mines, the La Guitarra and Del Toro mines.
- Cash flows from operations before movements in working capital and
income taxes (an additional GAAP measure) in the second quarter of 2013
decreased by 22% to $34.8 million ($0.30 per share) compared to $44.9
million ($0.38 per share) in the first quarter of 2013, and increased by
14% compared to $30.6 million ($0.29 per share) in the second quarter
- Total Production Cost per Tonne was $39.57, an increase from $26.97
in Q2 2012 as a result of the addition of two new mines, the La Guitarra
Silver mine with costs of $49.90 per tonne and the Del Toro Silver mine
with costs of $40.38 per tonne. In addition, the change of blend at the
La Encantada Silver mine to incorporate a greater percentage of higher
grade fresh mine ore has increased the costs per tonne while the costs
per ounce remained relatively unchanged.
- During the second quarter, the Company received a positive judgment
from the Supreme Court of British Columbia on the Bolaños trial (see
note 22 of interim consolidated financial statements), which awarded a
net opportunity loss of $93.8 million in favour of First Majestic. The
amount does not include pre-judgment interest or legal costs, of which a
portion is recoverable. In June 2013, the Company received $14.1
million as partial payment of the judgment.
- During the second quarter, the Company invested approximately $2.4
million (CDN$2.5 million) to repurchase and cancel 215,000 common shares
of the Company under the previously disclosed Normal Course Issuer Bid.
The Del Toro Silver Mine successfully completed its first commercial
quarter producing 369,772 ounces of silver, 1,967,741 pounds of lead,
1,139,583 pounds of zinc and 83 ounces of gold. The flotation mill
averaged 905 tonnes per day (tpd) with an average recovery rate of 72%
and head grade of 216 g/t silver. Total cash costs recorded at the new
operation during the quarter were $8.20 per ounce net of by-products.
Underground mining and milling costs were $13.70 and $18.43 per tonne,
respectively. Further ongoing daily improvements are underway with a
focus toward increasing daily tonnage, recoveries, quality of
concentrate production and other plant optimizations. Following the
construction of the cyanidation circuit, which is scheduled to begin
ramp-up late in the third quarter, the Company will begin producing its
own silver doré bars which is expected to further reduce cash costs at
As announced on May 15, 2013, the Company had cut over $30.0 million
from its 2013 capital budget primarily in the areas of exploration and
development. Since then, management has cut an additional $20.0
million, also focusing on reducing exploration and development and
postponing investments in non-critical areas that will not impact
guidance. The budget for expansionary expenditures in the second half
of 2013 has been reduced to $71.4 million, which consists of $28.0
million for the plant expansion at Del Toro, $8.8 million for the
expansion at San Martin, $3.2 million for the shaft and underground rail
system at La Parrilla, $2.8 million of pre-development costs at La Luz,
$0.5 million for modifications at La Encantada, and $0.7 million for
the expansion at La Guitarra. Also included in the total expansionary
capital, the company has planned $25.5 million in mine development costs
and $1.9 million in exploration for all of the Company’s properties,
excluding sustaining costs.
The completion of the underground rail system project at La Parrilla,
including the new 2,000 tpd production shaft at the Rosa/Rosario area,
has now been extended to early 2015 versus mid-2014 as a result of the
recent budget cuts. The decision to slow this project will not affect
annual silver production as this project was primarily aimed at
improving operational efficiencies and reducing transportation and fuel
The San Martin Silver Mine produced 371,301 ounces of silver and 512
ounces of gold in the second quarter, an improvement of 43% and 68%,
respectively, compared to the first quarter of 2013 and the highest
quarterly production results since the Company took over control of the
mine in 2006. The average silver head grade increased 32% to 166 g/t in
the second quarter, compared to 126 g/t in the first quarter of 2013.
The increase in grade was attributed to the commencement of production
in the Rosarios/Huichola and La Lima vein areas which are returning
positive results. Furthermore, the mill expansion to 1,300 tpd is
progressing as planned and is now 75% complete with ramp-up scheduled in
At the La Guitarra Silver Mine, improvements to the mine plan and the
increase of throughput levels have continued to reduce total costs.
During the quarter, production costs at the operation decreased 20% to
$49.90 per tonne, which is ahead of schedule and below the $50.00 per
tonne target set by management to achieve by year end. Since taking
over control of La Guitarra, First Majestic has now reduced production
costs per tonne by more than 60%, from $128.00 in the second quarter of
2012. Further cost improvements are expected in the second half as a
new smelter agreement was signed late in the second quarter for the
direct sale of the silver-gold concentrates.
The Company performs impairment testing annually and when impairment
indicators are present. The decline in silver prices towards the end of
the second quarter was an indication of potential impairment.
Consequently, impairment testing was performed for each of the Company’s
projects based on life of mine cash flow projections, considering
reasonable assumptions for factors such as future metal prices,
production based on current estimates of recoverable mineral reserves
and mineral resources, future operating costs, capital expenditures,
inflation and long-term foreign exchange rates. Based on these
assessments, the Company has concluded that there are no impairment
charges in respect to its mining interesting as of June 30, 2013.
First Majestic experienced another solid quarter as it achieved record
production of 3,268,117 silver equivalent ounces, an increase of 55%
compared to 2,102,222 silver equivalent ounces produced in the second
quarter of 2012. Silver production also hit record levels during the
second quarter with 2,767,966 ounces of silver being produced,
representing an increase of 44% compared to 1,917,248 ounces of silver
produced in the second quarter of 2012. This increase is primarily
attributed to the additional production from the new Del Toro mine, an
82% increase in silver production at San Martin, the acquisition of La
Guitarra in July 2012 and its subsequent expansion from 350 tpd to the
current 500 tpd.
Total ore processed in the quarter reached 668,398 tonnes, an increase
of 9% compared to the second quarter of 2012. The increase in milled
ore is a result of the successful plant expansion at La Guitarra and the
first quarter of commercial production at Del Toro, offset by a
reduction of processed old tailings at the La Encantada mine.
Cash costs in the second quarter decreased $0.06 to $9.43 per ounce,
relatively unchanged compared to $9.49 in the first quarter of 2013.
Due to the previously announced budget cuts of $50 million, the Company
anticipates cash costs per ounce will decline in the second half of 2013
compared to the first half.
Total production costs increased in the second quarter to $39.57 per
tonne from $31.79 in Q1 2013 primarily due to the first commercial
quarter of Del Toro production coming on line and the higher costs at La
Guitarra. These costs are anticipated to improve as further
efficiencies are achieved at both Del Toro and La Guitarra mines in the
In addition, the La Encantada mill feed was altered which reduced the
old tailings feed by almost 50% while slightly increasing the feed of
fresh ore. The result was a 29% reduction in total throughput compared
to the previous quarter with an average 3,171 tpd consisting of 1,741
tpd of fresh mine ore and 1,430 tpd of old tailings material. The
reduction in tonnage resulted in various cost savings, such as a
reduction in cyanide consumption and equipment operating costs.
However, with the increase of fresh ore from the mine and the reduction
of processed old tailings the production costs per tonne increased to
$34.70 compared to $25.65 in the previous quarter. Cash costs per ounce
at La Encantada were relatively consistent at $8.85 compared to $8.79 in
the previous quarter.
The consolidated average head grade for the second quarter was 201 g/t, a
sizable 22% increase compared to 164 g/t in the second quarter of 2012
and an 11% increase compared the first quarter of 2013. The two most
significant grade improvements were seen at the La Encantada and San
Martin silver mines, where silver grades were up 17% and 32%,
respectively, over the previous quarter. Combined recoveries for all
mines in the second quarter were 64%, a notable 9% increase compared to
59% seen in both the second quarter of 2012 and the first quarter of
2013. The higher recoveries are a result of the successful optimization
program at La Encantada and Del Toro’s first commercial quarter of
CONFERENCE CALL AND WEBCAST
A conference call and webcast will be held today, August 13, 2013 at
10:00 a.m. PDT (1:00 p.m. EDT) to review and discuss the second quarter
results. To participate in the conference call, please dial the
|Toll Free Canada & USA:
|Outside of Canada & USA:
|Toll Free Germany:
||0800 180 1954
|Toll Free UK:
||0808 101 2791
Participants should dial in 10 minutes prior to the conference.
Click on WEBCAST on the First Majestic homepage as a simultaneous audio webcast of the conference call will be posted at www.firstmajestic.com
First Majestic is a mining company focused on silver production in
México and is aggressively pursuing its business plan of becoming a
senior silver producer through the development of its existing mineral
property assets and the pursuit through acquisition of additional
mineral assets which contribute to the Company achieving its aggressive
corporate growth objectives.
FOR FURTHER INFORMATION contact email@example.com, visit our website at www.firstmajestic.com
or call our toll free number 1.866.529.2807.
FIRST MAJESTIC SILVER CORP.
Keith Neumeyer, President & CEO
SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION
This news release includes certain “Forward-Looking Statements” within
the meaning of the United States Private Securities Litigation Reform
Act of 1995 and applicable Canadian securities laws. When used in this
news release, the words “anticipate”, “believe”, “estimate”, “expect”,
“target”, “plan”, “forecast”, “may”, “schedule” and similar words or
expressions, identify forward-looking statements or information. These
forward-looking statements or information relate to, among other things:
the price of silver and other metals; the accuracy of mineral reserve
and resource estimates and estimates of future production and costs of
production at our properties; estimated production rates for silver and
other payable metals produced by us, the estimated cost of development
of our development projects; the effects of laws, regulations and
government policies on our operations, including, without limitation,
the laws in Mexico which currently have significant restrictions related
to mining; obtaining or maintaining necessary permits, licences and
approvals from government authorities; and continued access to necessary
infrastructure, including, without limitation, access to power, land,
water and roads to carry on activities as planned.
These statements reflect the Company’s current views with respect to
future events and are necessarily based upon a number of assumptions and
estimates that, while considered reasonable by the Company, are
inherently subject to significant business, economic, competitive,
political and social uncertainties and contingencies. Many factors, both
known and unknown, could cause actual results, performance or
achievements to be materially different from the results, performance or
achievements that are or may be expressed or implied by such
forward-looking statements or information and the Company has made
assumptions and estimates based on or related to many of these factors.
Such factors include, without limitation: fluctuations in the spot and
forward price of silver, gold, base metals or certain other commodities
(such as natural gas, fuel oil and electricity); fluctuations in the
currency markets (such as the Canadian dollar and Mexican peso versus
the U.S. dollar); changes in national and local government, legislation,
taxation, controls, regulations and political or economic developments
in Canada, Mexico; operating or technical difficulties in connection
with mining or development activities; risks and hazards associated with
the business of mineral exploration, development and mining (including
environmental hazards, industrial accidents, unusual or unexpected
formations, pressures, cave-ins and flooding); risks relating to the
credit worthiness or financial condition of suppliers, refiners and
other parties with whom the Company does business; inability to obtain
adequate insurance to cover risks and hazards; and the presence of laws
and regulations that may impose restrictions on mining, including those
currently enacted in Mexico; employee relations; relationships with and
claims by local communities and indigenous populations; availability and
increasing costs associated with mining inputs and labour; the
speculative nature of mineral exploration and development, including the
risks of obtaining necessary licenses, permits and approvals from
government authorities; diminishing quantities or grades of mineral
reserves as properties are mined; the Company’s title to properties; and
the factors identified under the caption “Risk Factors” in the
Company’s Annual Information Form, under the caption “Risks Relating to
First Majestic’s Business”.
Investors are cautioned against attributing undue certainty to
forward-looking statements or information. Although the Company has
attempted to identify important factors that could cause actual results
to differ materially, there may be other factors that cause results not
to be anticipated, estimated or intended. The Company does not intend,
and does not assume any obligation, to update these forward-looking
statements or information to reflect changes in assumptions or changes
in circumstances or any other events affecting such statements or
information, other than as required by applicable law.