First Majestic Silver Reports US$40-million Loss in Q2

First Majestic Silver’s (TSX:FR,NYSE:AG) second-quarter results show a US$40-million loss compared to a profit this time last year. The news drove shares down by almost 15 percent.

The Canadian miner reported a loss of 22 cents on a per-share basis. In terms of one-time gains and costs, losses were 7 cents per share and all-in sustaining costs (AISC) were US$16.43 per payable silver ounce, which is a 3-percent increase quarter-on-quarter.

“Looking ahead to the second half of 2018, we expect higher operating margins along with a significant reduction in our consolidated AISC to between US$13.28 to US$14.84 per ounce,” stated Keith Neumeyer, president and CEO, in a Monday (August 13) release.

“[This will be] primarily due to higher production rates from the start-up of the 2,000 tonnes per day roaster at La Encantada, higher silver grades at La Encantada and Del Toro, increased production at San Dimas and the decision to place La Guitarra on care and maintenance,” he added.

In addition to the previously mentioned losses, the company also incurred in an impairment charge of US$31.7 million due to placing the La Guitarra mine on care and maintenance.

The miner’s revenue during Q2 stood at US$79.7 million — a 36-percent increase compared to Q1 of this year — but it reported mine operating losses of US$2.3 million compared to earnings of US$1.4 million in the second quarter of last year.

Despite the glaring declines in First Majestic’s second quarter, the company managed to come out on top in terms of silver production.

First Majestic recorded production of 2.8 million ounces of silver during the quarter, up 27 percent from Q1. The uptick was mainly thanks to the addition of the San Dimas mine to its portfolio.

“During the 52 days since being acquired, San Dimas made an immediate impact to our production profile and bottom line by producing 808,923 ounces of silver plus 11,348 ounces of gold and generated mine operating earnings of US$5.1 million,” noted Neumeyer.

“Additionally, the AISC at San Dimas came in at US$5.41 per ounce, making it our lowest cost and largest-producing mine. Silver grades at La Encantada and Del Toro saw significant improvements at the end of the second quarter and continue to date,” he added.

San Dimas has contributed US$5.1 million in mine operating earnings during its 52 days of operation.

First Majestic gained the silver-gold asset in Mexico when it officially acquired Primero Mining in May of this year. The deal was announced in January 2018 at a cost of US$320 million.

As of 2:02 p.m. EST on Monday, shares of First Majestic were down 14.82 percent, trading at C$7.24.

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Securities Disclosure: I, Nicole Rashotte, hold no direct investment interest in any company mentioned in this article.