First Majestic Reports Third Quarter Financial Results
November 12, 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 third quarter
ending September 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 THIRD QUARTER HIGHLIGHTS
- Silver equivalent ounces produced increased by 38% to 3,370,457 ounces compared to 2,438,085 ounces in Q3 2012.
- Silver ounces produced increased by 22% to 2,689,237 ounces compared to 2,205,237 ounces in Q3 2012.
- Net Earnings after Taxes amounted to $16.3 million or a Basic $0.14 Earnings Per Share.
- Adjusted Earnings Per Share (non-GAAP) of $0.22 after excluding non-cash and non-recurring items.
- Cash Flow Per Share (non-GAAP) of $0.32, representing a 2% increase from Q3 2012.
- Generated Revenues of $76.9 million, a 21% increase compared to
Q3 2012 primarily due to an increase in silver equivalent ounces sold.
- Mine Operating Earnings amounted to $29.2 million, a decrease
of 19% from Q3 2012, primarily due to a 29% decrease in the average
realized silver price per ounce.
- Total Cash Cost, net of by-product credits, was $8.84 per
ounce, down 6% from $9.43 compared to Q2 2013 and down 4% compared to Q3
- Average realized silver price per ounce was $21.58, a decrease of 29% compared to Q3 2012.
- At the end of the quarter, Cash and Cash Equivalents was $67.5 million and Working Capital was $69.6 million.
Neumeyer, CEO and President of First Majestic, stated, “Management’s
focus for this quarter has been on cost reductions and capital program
reductions. This initiative, which began in April has resulted in two
back to back quarters of total cash cost reductions. In addition, costs
at the corporate level have also declined 11% compared to the previous
quarter. As we can’t count on an improved environment in the short term
for silver prices, management has little choice other than to cut
further. Our focus for 2014 will be to optimize operations, to
continually reduce costs, and remove all discretionary investments that
don’t have major impacts on future guidance. As a result, we expect to
see continued improvements in our cost structures over the coming
2013 THIRD QUARTER HIGHLIGHTS TABLE
||Year to Date
|Year to Date
|Silver Equivalent Ounces Produced
|Silver Ounces Produced
(excluding equivalent ounces from by-products)
|Payable Silver Ounces Produced(1)
|Total Cash Costs per Ounce(2)
|Total Production Cost per Tonne(2)
|Average Realized Silver Price Per Ounce ($/eq. oz.)(2)
|Revenues ($ millions)
|Mine Operating Earnings ($ millions)
|Net Earnings ($ millions)
|Operating Cash Flows Before Movements in
Working Capital and Income Taxes
|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
- Payable Silver Ounces Produced is equivalent to Silver Ounces Produced less metal deductions from smelters and refineries.
- 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.
MEXICO TAX REFORM
- Net earnings for the third quarter of 2013 were $16.3 million (EPS
of $0.14), compared to net earnings of $0.2 million (EPS of $nil) in the
second quarter of 2013 and net earnings of $24.9 million (EPS of $0.22)
in the third quarter of 2012. Net earnings in the third quarter
includes the sales of approximately 650,000 ounces of silver that were
held in inventories at the end of the second quarter.
- Adjusted EPS (a non-GAAP measure) for the third quarter
of 2013 was $0.22, after excluding non-cash and non-recurring items,
such as deferred income taxes, share-based payments, write-down on
marketable securities, gains from investment in silver futures and fair
value adjustment of the prepayment facility.
- Generated revenues of $76.9 million for the third
quarter of 2013, an increase of 59% compared to the second quarter of
2013. Higher revenues were primarily due to an increase in payable
equivalent silver ounces sold, which included suspended sales from the
second quarter that were sold in the third quarter. This was partially
offset by a 3% decrease in average realized silver price per ounce in
the quarter. Compared to the third quarter of 2012, revenues increased
by 21% due to a 75% increase in silver equivalent ounces sold, offset by
a 29% decrease in average realized price per ounce.
- Recognized mine operating earnings of $29.2 million
compared to $14.3 million in the previous quarter and $35.8 million in
the third quarter of 2012. The increase in mine operating earnings
compared to the second quarter of 2013 was attributed to the sale of the
finished goods inventories that were built up at the end of the second
quarter, and a 3% increase in production, but offset by higher
depletion, depreciation and amortization related to the increased
production rates and the addition of plant, equipment and mineral
properties related to San Martin and Del Toro mines.
- Cash flows from operations before movements in working
capital and income taxes (an additional GAAP measure) in the third
quarter of 2013 increased by 7% to $37.2 million ($0.32 per share)
compared to $34.8 million ($0.30 per share) in the second quarter of
2013, and increased by 4% compared to $35.9 million ($0.31 per share) in
the third quarter of 2012. The increase in cash flows from operations
compared to the previous quarter was attributed to higher gross margin
as a result of the second quarters suspended sales of approximately
700,000 ounces of silver, 650,000 ounces of which were sold in the third
quarter and higher mine operating earnings.
On September 8, 2013, the Executive Branch of the Mexican government
presented its 2014 Tax Reform bill to Congress with a proposed effective
date of January 1, 2014. On October 18, 2013, the Chamber of Deputies
(Lower House of Congress) approved the bill with certain amendments. On
October 29, 2013, the Tax Commission of the Senate (Upper House of
Congress) approved the tax reform bill and on October 31, 2013, the
Mexican Congress approved the 2014 Mexican tax reform package. The
reforms will be published in the Mexican Official Gazette and will have
legal force in January 2014.
There are a number of significant changes in the Mexican Tax Reform
package that will impact the Company effective January 1, 2014.
Specifically, a 7.5% royalty calculated based on earnings before
interest, taxes, depreciation and amortization will be imposed. In
addition, a 0.5% additional royalty calculated based on revenues will be
levied. Further, the planned corporate tax rate reductions to 29% in
2014 and 28% thereafter have been repealed and the corporate tax rate
will remain at 30%. In addition, a 10% withholding tax on dividend
distributions has been introduced but will not supercede treaty rates.
These Mexican Tax Reform changes to the Federal Tax Code are significant
and, are expected to increase the Company’s tax burden in Mexico and
significantly impact management’s capital investment decisions going
forward. The Company is in the process of evaluating and quantifying
this impact and will make further announcements in its 2014 Outlook
scheduled for release in early January.
Silver equivalent production in the third quarter increased to a record
3,370,457 ounces, an increase of 3% compared to 3,268,117 ounces in the
previous quarter. The new Del Toro Silver Mine contributed 567,723
ounces of production in the third quarter, an increase of 14% compared
to 499,357 ounces in the previous quarter. Compared to the same quarter
of the prior year, silver equivalent production increased by 38%
primarily attributed to additional production from Del Toro, improved
head grade and tonnage milled at La Parrilla and San Martin, and the
plant expansion at La Guitarra from 350 tonnes per day (” tpd”) to the
current 500 tpd.
The overall average head grade for the third quarter of 2013 was 202
grams per tonne (“g/t”), a 21% increase compared to 167 g/t in the third
quarter of 2012 and 1% increase compared to 201 g/t in the second
quarter of 2013. The increase from the same quarter of the prior year
was primarily attributed to 33% increase in head grades from La
Encantada due to a higher proportion of fresh ore being processed, 23%
higher grades from San Martin as the mine began extracting ore from the
Rosario mine during the quarter, 12% higher grades from La Parrilla,
offset by 40% lower head grade from the La Guitarra mine as production
ore came from areas within the La Guitarra vein which contained higher
gold grades in conjunction with lower silver grades.
Total ore processed during the third quarter amounted to 641,345 tonnes
milled, representing a slight decrease of 4% over the previous quarter
due to the effects of two major hurricanes which struck Mexico during
the quarter combined with a break-down of the third ball mill at the La
Encantada mine, which has since been repaired.
Cash costs per ounce in the third quarter was $8.84, a decrease of 6%
from $9.43 in the previous quarter and a decrease of 4% compared to
$9.19 in the third quarter of 2012. The decrease in cash cost compared
to the same quarter of the prior year was primarily attributed to an
increase in by-product credits. By-product credits increased due to the
additional production from the new Del Toro flotation plant, an
increase in lead and zinc production from the La Parrilla flotation
plant, as well as higher gold production from the La Guitarra and San
Production cost was $43.49 per tonne in the third quarter, an increase
of 10% from $39.57 in the previous quarter. Compared to the third
quarter of 2012, production cost per tonne increased from $30.05, or
45%, primarily due to higher production costs per tonne at the Del Toro
mine and the proportional increase of fresh mine ore being mined versus
old tailings at the La Encantada mine.
La Parrilla Silver Mine
Total production at the La Parrilla mine was 1,208,635 equivalent ounces
of silver in the third quarter of 2013, which was an increase of 27%
compared to 952,819 equivalent ounces in the second quarter of 2013 due
to an increase in grade and recoveries of lead and zinc, and an increase
of 42% compared to the third quarter of 2012, due to 12% increase in
head grades and 8% increase in tonnage processed.
Cash costs per ounce decreased by 29% from $9.20 in the second quarter
to $6.54 in the third quarter. The decrease is cash cost were a result
of higher silver grades, improved recoveries and an increase in
The Company continued a reduced pace of construction for the extensive
underground ore haulage at Level 11. The new San José production shaft
has proceeded to 25 metres below the surface from the head of the shaft
with a cost of $0.4 million in the third quarter. Also, a total of $0.5
million was spent on underground Level 11 with 286 metres developed
during the quarter. This new haulage and underground electric rail
system will consist of 5,000 metres of development and a 260 vertical
metre shaft replacing the current less efficient above-ground system of
trucking ore to the mill. Once completed, this investment is expected
to improve ore logistics, ultimately reducing overall operating costs
and thereby delivering operational efficiencies.
Del Toro Silver Mine
Phase 2 construction of the Del Toro Silver Mine, which includes the
addition of a 1,000 tpd cyanidation circuit, is now completed and
commissioning began on October 20th, bringing the total production
capacity to 2,000 tpd. The first production of silver doré bars is
planned for November 20, 2013.
Total production at Del Toro was 567,723 equivalent ounces of silver in
the third quarter, which was an increase of 14% compared to 499,357
equivalent ounces in the second quarter of 2013. Mill throughput during
the third quarter, calculated based on 73 actual operating days instead
of the planned 84 days due to delays from cyanidation construction
interference, was 1,061 tpd with head grades of 244 g/t silver, 4.3%
lead and 2.8% zinc compared to 216 g/t silver, 3.4% lead and 3.3% zinc
in the second quarter. Silver recoveries averaged 69% during the third
quarter compared to 72% in the previous quarter due to a variation in
the ore feed from a transition zone between oxides and sulfides.
Further testing is underway at the Company’s central lab with the
objective of improving overall metallurgical recoveries, however, once
the new cyanidation circuit is operational, some of these ores will be
processed through this new circuit.
Cash cost per ounce for the third quarter was $9.29, an increase of
$1.09 compared to $8.20 in the previous quarter. The increase in cash
cost per ounce is primarily attributed to operating days lost due to the
construction overlapping, heavy rainfalls in the area during the
quarter, and some inefficiencies related to early stage operations.
Cash cost per ounce is expected to decline in the fourth quarter as
operations get more routine and efficient and as ramping up of oxide
production begins in the cyanidation processing plant.
To conserve capital in a reduced silver price environment, management is
altering its capital investment and production plan for the Del Toro
mine. With some minor plant and process modifications, the Company is
planning to accelerate the ramp up of the cyanidation circuit to 2,000
tpd by January 2014, and further ramping up to 2,250 tpd by the end of
2014; however, the Company will be reducing the flotation circuit
production plan from 1,000 tpd to approximately 550 tpd during 2014.
Capital investments will be delayed for the installation of one of the
two SAG mills and the completion of the San Juan shaft. Despite the
delay of these investments, the Del Toro plant will be capable of
ramping up production to 3,000 tpd during 2014 once the first SAG Mill
is installed. Further details will be released with the Company’s 2014
guidance outlook in January.
La Encantada Silver Mine
A total of 931,027 equivalent ounces of silver were produced by the La
Encantada plant during the third quarter of 2013. Production in the
third quarter of 2013 decreased 18% compared to the 1,132,399 equivalent
ounces of silver produced in the second quarter of 2013 and 15%
compared to the 1,090,966 equivalent ounces of silver produced in the
third quarter of 2012. The decrease in production during the third
quarter was attributed to the breakdown that occurred in the gear and
motor at ball mill #1, resulting in the ball mill to remain offline for a
period of 6 weeks. The Company also used this repair period to do a
complete overhaul of the ball mill and its foundation in order to have a
more reliable operation in the future. Ball mill #1 is now fully
operational and fresh ore tonnage and silver grades returned to normal
Due to the reduction in quarterly production ounces, cash cost per ounce
increased by 21% from $8.85 in the second quarter to $10.70 in the
current quarter. The increase in cash cost per ounce was attributed to a
19% decrease in ounces produced in the third quarter, as operating
costs remained fairly constant but less tonnage was processed and fewer
silver ounces were produced resulting in dis-economies of scale. Now
that the ball mill is fully operational, cash costs per ounce are
projected to return to normal levels in the fourth quarter.
San Martin Silver Mine
Total production in the third quarter of 2013 was 377,816 ounces of
silver equivalent, a decrease of 6% compared to the 402,798 ounces of
silver equivalent produced in the second quarter of 2013, but 47% higher
than the 257,688 equivalent ounces of silver produced in the third
quarter of 2012.
Cash costs per ounce in the third quarter was $10.34, a decrease of 5%
from compared to $10.91 in the second quarter. The decrease is cash
costs were a result of higher recoveries and an increase in gold
The Company’s expansion project at San Martin was completed in early
October. Portions of the plant upgrade such as new tanks and clarifiers
showed improvements in production, recoveries, and higher quality silver
doré during the third quarter. The scheduled production ramp up will
increase from 900 tpd to 1,200 tpd in the fourth quarter with no delays
in achieving commercial production levels and qualities. Due to a
decision to swap-out the older 8.5’ x 12’ ball mill for a newer, larger,
and more reliable 9.5’ x 12’ ball mill, full capacity to 1,300 tpd is
expected to be reached in the first quarter of 2014.
La Guitarra Silver Mine
During the quarter, total production at La Guitarra was 285,256
equivalent ounces of silver, an increase of 2% compared to the 280,744
ounces produced in the second quarter of 2013 and an increase of 20%
compared to the 237,803 ounces in the third quarter of 2012, which was
the first quarter of La Guitarra operations under First Majestic’s
Total cash cost per ounce in the third quarter were significantly
reduced by 57% to $5.63 per ounce, compared to $13.21 per ounce in the
previous quarter. As a result of a new smelting and refining agreement,
the Company achieved a significant $4.49 per ounce reduction in
treatment charges and transportation costs. The 57% decrease was
primarily attributed to the smelting and refining costs and also an
increase in gold by-product credits.
During the third quarter, production ore came from areas within the La
Guitarra vein which contained higher gold grades in conjunction with
lower silver grades. Looking ahead to early 2014, the average silver
grade is expected to improve once production commences at the new Joya
Larga structure. This new area has indicated grades ranging between 200
g/t to 350 g/t of silver.
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 firstname.lastname@example.org
, 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.