FIRST MAJESTIC SILVER CORP. (AG: NYSE; FR: TSX) (the "Company" or
“First Majestic”) is pleased to announce the unaudited interim
consolidated financial results of the Company for the second
quarter ended June 30, 2019. The full version of the financial
statements and the management discussion and analysis can be viewed
on the Company's website at www.firstmajestic.com or on SEDAR at
www.sedar.com and on EDGAR at www.sec.gov. All amounts are in U.S.
dollars unless stated otherwise.
SECOND QUARTER 2019 HIGHLIGHTS (compared to Q2
2018)
- Silver equivalent production up 25% to 6.4 million ounces
- Pure silver production up 16% to 3.2 million ounces
- Revenue up 5% to $83.7 million primarily due to 13% increase in
silver equivalent ounces, partially offset by a 12% decrease in
silver prices
- Mine operating earnings up 283% to $4.2 million
- Cash flow per share was $0.09 per share (non-GAAP)
- Reduction in cash costs by 10% to $6.84 per payable silver
ounce
- Reduction in AISC by 10% to $14.76 per payable silver
ounce
- Net earnings of ($12.0) million
- Adjusted EPS of ($0.02) after excluding non-cash and
non-recurring items
- Realized average silver price of $14.80 per ounce
- Strong balance sheet with $94.5 million in cash and cash
equivalents
“In the second quarter, our strong production
results were mostly offset by lower silver prices which impacted
revenues, earnings and cash flows compared to the same quarter of
the prior year,” stated Keith Neumeyer, President and CEO of First
Majestic. “Continued strong production from our San Dimas and Santa
Elena mines, which together produced approximately 80% of the
Company’s total production, generated mine operating earnings of
$14.2 million. At Santa Elena, we are already seeing improvements
in metallurgical recoveries following the installation of its new
high-intensity grinding mill in the second quarter. This project
has been a success and a great example of how new technologies are
changing the mining industry.”
“In an effort to further improve margins and
profitability, we made the difficult decision to temporarily
suspend mining operations at La Parrilla towards the end of 2019,”
stated Neumeyer. “Year-to-date, the La Parrilla complex of mines
has produced approximately 7% of our total production but
unfortunately has struggled to make a profit due to continued low
silver and lead prices. However, we will continue to staff our
Central lab at La Parrilla and will revitalize the exploration
program to test near mine targets in order to build enough Reserves
and Resources to justify a potential restart by early
2021.”
OPERATIONAL AND FINANCIAL
HIGHLIGHTS
Key Performance
Metrics |
|
2019-Q2 |
|
2019-Q1 |
Change Q2 vs Q1 |
|
2018-Q2 |
Change Q2 vs Q2 |
|
2019-YTD |
Operational |
|
|
|
|
|
|
|
|
|
|
Ore
Processed / Tonnes Milled |
|
|
736,896 |
|
|
|
812,654 |
|
(9 |
%) |
|
|
851,349 |
|
(13 |
%) |
|
|
1,549,550 |
|
Silver
Ounces Produced |
|
|
3,193,566 |
|
|
|
3,331,388 |
|
(4 |
%) |
|
|
2,756,263 |
|
16 |
% |
|
|
6,524,954 |
|
Silver
Equivalent Ounces Produced |
|
|
6,410,483 |
|
|
|
6,273,677 |
|
2 |
% |
|
|
5,137,318 |
|
25 |
% |
|
|
12,684,160 |
|
Cash
Costs per Ounce (1) |
|
$ |
6.84 |
|
|
$ |
6.34 |
|
8 |
% |
|
$ |
7.59 |
|
(10 |
%) |
|
$ |
6.58 |
|
All-in
Sustaining Cost per Ounce (1) |
|
$ |
14.76 |
|
|
$ |
12.91 |
|
14 |
% |
|
$ |
16.43 |
|
(10 |
%) |
|
$ |
13.82 |
|
Total
Production Cost per Tonne (1) |
|
$ |
77.93 |
|
|
$ |
66.65 |
|
17 |
% |
|
$ |
61.04 |
|
28 |
% |
|
$ |
72.01 |
|
Average Realized Silver Price
per Ounce (1) |
|
$ |
14.80 |
|
|
$ |
15.73 |
|
(6 |
%) |
|
$ |
16.74 |
|
(12 |
%) |
|
$ |
15.26 |
|
|
|
|
|
|
|
|
|
|
|
|
Financial (in
$millions) |
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
83.7 |
|
|
$ |
86.8 |
|
(4 |
%) |
|
$ |
79.7 |
|
5 |
% |
|
$ |
170.5 |
|
Mine
Operating Earnings (Loss) |
|
$ |
4.2 |
|
|
$ |
10.3 |
|
(59 |
%) |
|
($ |
2.3 |
) |
283 |
% |
|
$ |
14.5 |
|
Net
(Loss) Earnings |
|
($ |
12.0 |
) |
|
$ |
2.9 |
|
(516 |
%) |
|
($ |
40.0 |
) |
70 |
% |
|
($ |
9.1 |
) |
Operating Cash Flows before Movements in Working Capital and
Taxes |
|
$ |
17.7 |
|
|
$ |
23.7 |
|
(25 |
%) |
|
$ |
14.2 |
|
25 |
% |
|
$ |
41.4 |
|
Cash
and Cash Equivalents |
|
$ |
94.5 |
|
|
$ |
91.5 |
|
3 |
% |
|
$ |
109.2 |
|
(13 |
%) |
|
$ |
94.5 |
|
Working Capital (1) |
|
$ |
129.5 |
|
|
$ |
130.9 |
|
(1 |
%) |
|
$ |
141.4 |
|
(8 |
%) |
|
$ |
129.5 |
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders |
|
|
|
|
|
|
|
|
|
|
Earnings (Loss) per Share ("EPS") - Basic |
|
($ |
0.06 |
) |
|
$ |
0.01 |
|
(505 |
%) |
|
($ |
0.22 |
) |
73 |
% |
|
($ |
0.05 |
) |
Adjusted EPS (1) |
|
($ |
0.02 |
) |
|
($ |
0.01 |
) |
(79 |
%) |
|
($ |
0.07 |
) |
73 |
% |
|
($ |
0.03 |
) |
Cash
Flow per Share (1) |
|
$ |
0.09 |
|
|
$ |
0.12 |
|
(27 |
%) |
|
$ |
0.08 |
|
12 |
% |
|
$ |
0.21 |
|
- The Company reports non-GAAP measures which include cash costs
per ounce, all-in sustaining cost per ounce, total production cost
per ounce, total production cost per tonne, average realized silver
price per ounce, working capital, adjusted EPS 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.
Q2 2019 FINANCIAL RESULTS
The Company realized an average silver price of
$14.80 per ounce during the second quarter of 2019, representing a
12% decrease compared with the second quarter of 2018 and a 6%
decrease compared to $15.73 in the prior quarter.
Revenues generated in the second quarter totaled
$83.7 million, an increase of 5% compared to $79.7 million in the
second quarter of 2018 primarily due to the acquisition of the San
Dimas mine, which resulted in a 13% increase in silver equivalent
ounces sold, partially offset by a 12% decrease in average realized
silver price compared to the same quarter of the prior year.
The Company reported mine operating earnings of
$4.2 million compared to ($2.3) million in the second quarter
of 2018. The increase in mine operating earnings in the quarter was
attributed to the San Dimas and Santa Elena mines, which generated
mine operating earnings of $11.0 million and $3.2 million,
respectively, offset by losses at the other units due to scaled
back production at San Martin, Del Toro and La Parrilla mines.
Cash flow from operations before movements in
working capital and income taxes in the quarter was $17.7 million
($0.09 per share) compared to $14.2 million ($0.08 per share)
in the second quarter of 2018.
The Company generated net earnings of ($12.0)
million (EPS of ($0.06)) compared to ($40.0) million (EPS of
$(0.22)) in the second quarter of 2018. Adjusted net earnings for
the quarter was
($3.6) million (adjusted EPS of $(0.02)),
after excluding non-cash and non-recurring items.
Cash and cash equivalents at June 30, 2019
was $94.5 million, an increase of $3.0 million compared to the
previous quarter. In addition, working capital remained consistent
to the previous quarter at $129.5 million. The Company completed
the $50.0 million "at-the-market" distribution program announced in
December 2018 by selling a total of 8,039,363 common shares of the
Company on the New York Stock Exchange for net proceeds of $48.5
million of which $16.0 million was received in the second
quarter.
OPERATIONAL HIGHLIGHTS
The table below represents the quarterly
operating and cost parameters at each of the Company’s six
producing silver mines.
Production
Summary |
San Dimas |
Santa Elena |
La Encantada |
San Martin |
La Parrilla |
Del Toro |
Consolidated |
Ore Processed / Tonnes Milled |
|
172,368 |
|
|
229,761 |
|
|
207,421 |
|
|
39,213 |
|
|
61,544 |
|
|
26,587 |
|
|
736,896 |
|
Silver Ounces Produced |
|
1,603,016 |
|
|
596,872 |
|
|
489,194 |
|
|
224,056 |
|
|
202,698 |
|
|
77,729 |
|
|
3,193,566 |
|
Silver Equivalent Ounces Produced |
|
3,641,139 |
|
|
1,461,345 |
|
|
492,957 |
|
|
271,450 |
|
|
420,712 |
|
|
122,879 |
|
|
6,410,483 |
|
Cash Costs per Ounce |
$ |
1.64 |
|
$ |
4.28 |
|
$ |
16.57 |
|
$ |
16.52 |
|
$ |
14.13 |
|
$ |
27.29 |
|
$ |
6.84 |
|
All-in Sustaining Cost per Ounce |
$ |
8.49 |
|
$ |
7.73 |
|
$ |
18.87 |
|
$ |
21.15 |
|
$ |
21.61 |
|
$ |
36.33 |
|
$ |
14.76 |
|
Total Production Cost per Tonne |
$ |
142.42 |
|
$ |
58.88 |
|
$ |
38.29 |
|
$ |
109.51 |
|
$ |
75.96 |
|
$ |
91.89 |
|
$ |
77.93 |
|
Total production in the second quarter 6,410,483
silver equivalents ounces, representing a 2% increase compared to
the prior quarter. Total production consisted of 3.2 million ounces
of silver, 33,576 ounces of gold, 2.5 million pounds lead and 1.4
million pounds of zinc. In the first half of 2019, total production
reached 12.7 million ounces, or approximately 49% of the Company’s
previous guidance midpoint.
COSTS AND CAPITAL
EXPENDITURES
Cash cost per ounce for the quarter was $6.84
per payable ounce of silver, an increase of 8% from $6.34 per ounce
in the first quarter of 2019. The increase in cash cost was
primarily attributed to $2.3 million in severance and retirement
costs related to retirement and permanent reduction of 45 unionized
workers at San Dimas plus $0.9 million in retroactive adjustments
to labour costs upon reaching a new collective bargaining agreement
with the union at San Dimas. Excluding these one-time items, cash
cost per ounce would have been approximately $5.89 per payable
ounce of silver during the quarter.
All-in sustaining cost per ounce in the second
quarter was $14.76 compared to $12.91 per ounce in the previous
quarter. The increase in AISC was primarily attributed to a $0.62
per ounce increase in workers participation costs and a
$0.82 per ounce increase in sustaining capital expenditures
due to certain major equipment overhauls performed during the
quarter.
Total capital expenditures in the second quarter
were $29.7 million, primarily consisting of $9.2 million at San
Dimas, $4.6 million at Santa Elena, $3.6 million at La Encantada,
$2.0 million at San Martin, $3.2 million at La Parrilla, $1.1
million at Del Toro and $6.0 million for strategic projects.
OUTLOOK
The Company is revising annual guidance for 2019
to reflect changes in its operational plans during the second half
of the 2019 fiscal year. Details of the operational changes and
their expected impacts are presented below:
- Increased metallurgical recoveries at Santa Elena in the second
half of 2019 due to the recent installation of the High-Intensity
Grinding (“HIG”) mill.
- Higher production at San Dimas primarily due to higher than
expected grades from the Jessica and Victoria veins.
- Lower production at La Encantada related to the ongoing
challenges with the roaster's material handling system. During the
reengineering process, production from the roaster has been removed
from 2019 guidance until the necessary modifications have been
completed.
- Following an extensive review of the La Parrilla operation, the
Company has decided to temporarily suspend mining operations
towards the end of the year in order to improve the Company's
operating cash flow and profit margins while focusing on an
expanded drilling program in the area. In addition, the processing
plant will be temporarily halted in mid-September in order to build
adequate surface stockpiles to be used during the commissioning
phase of the new high-recovery microbubble flotation cells. The
Company has doubled the exploration budget at La Parrilla to
approximately 24,000 metres to test near mine targets in an effort
to develop new Resources necessary to justify preparing the mine
for a potential reopening in the future, subject to a sufficient
improvement in the economic situation to justify a restart. In the
meantime, the Company’s central ISO-9001 Laboratory located at La
Parrilla will remain fully staffed and operational. Additionally,
the Company is in discussions with regional miners in order to
process ores as a toll treatment facility.
- Lower production from the San Martin mine as a result of
suspended operations as announced in the Company's news release on
July 15, 2019. The updated annual guidance assumes production will
resume before the end of the year.
As a result of these operational modifications,
our 2019 total production remains relatively unchanged at 24.4 to
26.0 million silver equivalent ounces when compared to the previous
guidance of 24.7 to 27.5 million silver equivalent ounces. Our 2019
annual silver production has decreased slightly to an estimated
range of 12.8 to 13.5 million ounces when compared to the previous
annual production guidance of 14.2 to 15.8 million ounces of silver
primarily due to the temporary suspension of production from the
roaster at La Encantada. The Company is also anticipating a
reduction in annualized cash costs of approximately $1.00 per ounce
of silver, or 14% from the guidance mid-point, due to continued
improvements at San Dimas and throughput reductions at La Parrilla
and San Martin.
A mine-by-mine breakdown of the revised full
year 2019 production guidance is included in the table below. Cash
cost and AISC guidance is shown per payable silver ounce. Silver
and gold prices used for calculating silver equivalent ounces were
increased slightly compared to the previous budget to: silver:
$16.00/oz, gold: $1,400/oz, lead: $1.00/lb, zinc: $1.10/lb, MXN:USD
19:1.
GUIDANCE FOR FULL YEAR 2019
Mine |
Silver Oz (M) |
Silver Eqv Oz (M) |
Cash Costs ($) |
AISC ($) |
San Dimas |
6.2 -
6.6 |
13.5 -
14.4 |
0.46 -
0.95 |
6.67 -
7.52 |
Santa Elena |
2.4 -
2.5 |
5.6 -
6.1 |
3.76 -
4.41 |
6.71 -
7.53 |
La Encantada |
2.4 -
2.5 |
2.4 -
2.5 |
13.84 -
14.37 |
16.16 -
16.81 |
San Martin |
0.9 -
0.9 |
1.1 -
1.2 |
12.54 -
12.95 |
16.45 -
17.04 |
La Parrilla |
0.5 -
0.5 |
1.1 -
1.1 |
18.58 -
18.68 |
30.39 -
30.72 |
Del Toro |
0.4 -
0.5 |
0.7 -
0.7 |
17.61 -
18.96 |
24.95 –
26.85 |
Consolidated |
12.8 - 13.5 |
24.4 - 26.0 |
$5.62 - $6.18 |
$12.98 - $13.94 |
*Certain amounts shown may not add exactly to
the total amount due to rounding differences.*Consolidated AISC
includes general and administrative cost estimates and non-cash
costs of $2.16 to $2.41 per payable silver ounce.
Annual cash costs are now expected to be within
the range of $5.62 to $6.18 per ounce, compared to the previous
guidance of $6.39 to $7.37 per ounce, primarily due to higher gold
by-product credits at San Dimas and Santa Elena. In addition,
annual AISC are expected to remain consistent to within a range of
$12.98 to $13.94 per ounce, compared to the previous guidance of
$12.55 to $14.23 per ounce.
REVISED CAPITAL BUDGET
The Company has updated its annual 2019 capital
budget to include the reallocation of development and exploration
expenditures across its operations and investments in innovative
projects. As a result, the Company plans to invest a total of
$138.2 million (consistent with previous guidance of $137.4
million) on capital expenditures consisting of $56.9 million of
sustaining investments and $81.3 million of expansionary
investments. The Company plans to reallocate capital to higher
return projects including:
- HIG technology, including a third HIG mill for San Dimas,
and microbubble technology;
- increasing the Santa Elena 2019 exploration budget at Ermitaño
to approximately 32,700 metres, representing an 85% increase from
the original 2019 budget of 17,700 metres;
- developing an underground portal in Q4 2019 to be able to drift
into the Ermitaño ore body;
- increasing the La Parrilla 2019 exploration budget to
approximately 24,000 metres, representing a 98% increase from the
original 2019 budget of 12,120 metres.
The 2019 annual budget includes total capital
investments of $55.0 million on underground development, $27.9
million towards property, plant and equipment, $26.6 million on
exploration and $28.7 million towards automation and efficiency
projects.
In the first half of 2019, the Company completed
31,477 metres of underground development and 92,294 metres of
exploration drilling. Under the revised 2019 budget, the Company is
planning to complete a total of 58,100 metres of underground
development, representing a 10% decrease compared to the original
budget of 64,610. In addition, the Company is planning to complete
a total of approximately 209,000 metres of exploration drilling in
2019, representing an 11% increase compared to the original
budget.
RENEWS ATM OFFERING EQUITY
PROGAM
The Company announces it has entered into an
equity distribution agreement dated August 7, 2019 (the “Sales
Agreement”) with BMO Capital Markets Corp. (the “Agent”) pursuant
to which the Company may, at its discretion and from time-to-time
until December 5, 2020 under the term of the Sales Agreement, sell,
through the Agent, such number of common shares of the Company
(“Common Shares”) as would result in aggregate gross proceeds to
the Company of up to US$50.0 million (the “Offering”). Sales
of Common Shares will be made through “at-the-market distributions”
as defined in the Canadian Securities Administrators’ National
Instrument 44-102-Shelf Distributions, including sales made
directly on the New York Stock Exchange (the “NYSE”), or any other
recognized marketplace upon which the Common Shares are listed or
quoted or where the Common Shares are traded in the United States.
The sales, if any, of Common Shares made under the Sales Agreement
will be made by means of ordinary brokers’ transactions on the NYSE
at market prices, or as otherwise agreed upon by the Company and
the Agent. No offers or sales of Common Shares will be made in
Canada on the Toronto Stock Exchange (the “TSX”) or other trading
markets in Canada.
The Offering will be made by way of a prospectus
supplement dated August 7, 2019 to the base prospectus
included in the Company’s existing US registration statement
on Form F-10 (the “Registration Statement”) and Canadian short
form base shelf prospectus (the “Base Shelf Prospectus”) dated
November 5, 2018. The prospectus supplement relating to the
Offering has been filed with the securities commissions in each of
the provinces of Canada (other than Québec) and the United States
Securities and Exchange Commission (the "SEC"). The US prospectus
supplement (together with the related base prospectus) will be
available on the SEC's website (www.sec.gov) and the Canadian
prospectus supplement (together with the related Base Shelf
Prospectus) will be available on the SEDAR website maintained by
the Canadian Securities Administrators at www.sedar.com.
Alternatively, the Agent will provide copies of the
US prospectus and US prospectus supplement upon request by
contacting the Agent (c/o BMO Capital Markets Corp., Attention:
Equity Syndicate Department, 3 Times Square, New York, NY 10036, or
by telephone at (800) 414-3627, or by email:
bmoprospectus@bmo.com).
The Company expects to use the net proceeds of
the Offering, if any, together with the Company’s current cash
resources, to develop and/or improve the Company's existing mines
and to add to the Company's working capital.
This press release does not constitute an offer
to sell or the solicitation of an offer to buy securities, nor will
there be any sale of the securities in any jurisdiction in which
such offer, solicitation or sale would be unlawful prior to the
registration or qualification under the securities laws of any such
jurisdiction.
ABOUT THE COMPANY
First Majestic is a publicly traded mining
company focused on silver production in Mexico and is aggressively
pursuing the development of its existing mineral property assets.
The Company presently owns and operates the San Dimas Silver/Gold
Mine, the Santa Elena Silver/Gold Mine, the La Encantada Silver
Mine, the La Parrilla Silver Mine, the San Martin Silver Mine and
the Del Toro Silver Mine. Production from these mines are projected
to be between 12.8 to 13.5 million silver ounces or 24.4 to 26.0
million silver equivalent ounces in 2019.
FOR FURTHER INFORMATION contact
info@firstmajestic.com, visit our website at www.firstmajestic.com
or call our toll-free number 1.866.529.2807.
FIRST MAJESTIC SILVER CORP."signed"Keith
Neumeyer, President & CEO
Cautionary Note Regarding Forward Looking
Statements
This press release contains “forward‐looking
information” and "forward-looking statements” under applicable
Canadian and U.S. securities laws (collectively, “forward‐looking
statements”). These statements relate to future events or the
Company's future performance, business prospects or opportunities
that are based on forecasts of future results, estimates of amounts
not yet determinable and assumptions of management made in light of
management's experience and perception of historical trends,
current conditions and expected future developments.
Forward-looking statements include, but are not limited to,
statements with respect to: the Company’s business strategy; future
planning processes; commercial mining operations; cash flow;
budgets; the timing and amount of estimated future production;
recovery rates; mine plans and mine life; the future price of
silver and other metals; costs of production; costs and timing of
the development of new deposits; capital projects and exploration
activities and the possible results thereof. Assumptions may
prove to be incorrect and actual results may differ materially from
those anticipated. Consequently, guidance cannot be guaranteed. As
such, investors are cautioned not to place undue reliance upon
guidance and forward-looking statements as there can be no
assurance that the plans, assumptions or expectations upon which
they are placed will occur. All statements other than statements of
historical fact may be forward‐looking statements. Statements
concerning proven and probable mineral reserves and mineral
resource estimates may also be deemed to constitute forward‐looking
statements to the extent that they involve estimates of the
mineralization that will be encountered as and if the property is
developed, and in the case of measured and indicated mineral
resources or proven and probable mineral reserves, such statements
reflect the conclusion based on certain assumptions that the
mineral deposit can be economically exploited. Any statements that
express or involve discussions with respect to predictions,
expectations, beliefs, plans, projections, objectives or future
events or performance (often, but not always, using words or
phrases such as “seek”, “anticipate”, “plan”, “continue”,
“estimate”, “expect”, “may”, “will”, “project”, “predict”,
“forecast”, “potential”, “target”, “intend”, “could”, “might”,
“should”, “believe” and similar expressions) are not statements of
historical fact and may be “forward‐looking statements”.
Actual results may vary from forward-looking
statements. Forward-looking statements are subject to known and
unknown risks, uncertainties and other factors that may cause
actual results to materially differ from those expressed or implied
by such forward-looking statements, including but not limited to:
risks related to the integration of acquisitions; actual results of
exploration activities; conclusions of economic evaluations;
changes in project parameters as plans continue to be refined;
commodity prices; variations in ore reserves, grade or recovery
rates; actual performance of plant, equipment or processes relative
to specifications and expectations; accidents; labour relations;
relations with local communities; changes in national or local
governments; changes in applicable legislation or application
thereof; delays in obtaining approvals or financing or in the
completion of development or construction activities; exchange rate
fluctuations; requirements for additional capital; government
regulation; environmental risks; reclamation expenses; outcomes of
pending litigation; limitations on insurance coverage as well as
those factors discussed in the section entitled "Description of the
Business - Risk Factors" in the Company's most recent Annual
Information Form, available on www.sedar.com, and Form 40-F on file
with the United States Securities and Exchange Commission in
Washington, D.C. Although First Majestic has attempted
to identify important factors that could cause actual results to
differ materially from those contained in forward-looking
statements, there may be other factors that cause results not to be
as anticipated, estimated or intended.
The Company believes that the expectations
reflected in these forward‐looking statements are reasonable, but
no assurance can be given that these expectations will prove to be
correct and such forward‐looking statements included herein should
not be unduly relied upon. These statements speak only as of the
date hereof. The Company does not intend, and does not assume any
obligation, to update these forward-looking statements, except as
required by applicable laws.
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