| | Published : November 09th, 2011 | Earnings Hit $27.8 million in Third Quarter |
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Earnings Hit $27.8 million in Third Quarter
FIRST MAJESTIC SILVER CORP. (AG: NYSE; FR: TSX) (the "Company" or
"First Majestic") is pleased to announce the unaudited condensed consolidatedinterim financial results for the Companyfor the third quarter ending September 30, 2011. 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.
All financial information is prepared in accordance with IFRS and all dollar
amounts are expressed in US dollars unless otherwise indicated. All Cash Costs
information is now being presented on a payable ounces basis consistent with
the recommendations of the Silver Institute. All prior period information has
been restated or reclassified for comparative purposes unless otherwise noted.
2011 THIRD QUARTER HIGHLIGHTS
- Cash Flow per share (non-IFRS)
of $0.38 representing a 122% increase from Q3 2010
- Earnings per share (basic)
amounted to $0.27 representing a 146% increase from Q3 2010
- Adjusted earnings per share
(non-IFRS) amounted to $0.30
- Gross Revenue of $61.4 million
showing an88% increase from Q3 2010
- Net Earnings after Taxes
amounted to $27.8 million, a 176% increase from Q3 2010
- Mine Operating Earnings of
$42.5 million showing an increase of 168% from Q3 2010
- Total Cash Cost was US$8.39 per
ounce, up 19% compared to Q3 2010
- Silver ounces produced
decreased by 6% to 1,708,865 compared to 1,823,370 ounces in Q3 2010
- Fully un-hedged to silver
prices as treasury exceeds $106 million
2011 THIRD QUARTER HIGHLIGHTS TABLE
HIGHLIGHTS
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Third Quarter
2011
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Third Quarter
2010
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Change
Year-on-Year
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Second Quarter
2011
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Change from
Second Quarter
2011
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Revenues
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$61.4 million
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$32.6 million
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Up 88%
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$68.0 million
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Down 10%
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Mine
Operating Earnings
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$42.5 million
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$15.9 million
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Up 168%
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$46.8 million
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Down 9%
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Net
Earnings after Taxes
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$27.8 million
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$10.1 million
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Up 176%
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$30.6 million
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Down 9%
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Cash Flow Per Share before changes in non-cash
working capital
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$0.38 per share
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$0.17 per share
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Up 122%
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$0.36 per share
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Up 7%
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Earnings Per Share - basic
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$0.27 per share
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$0.11 per share
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Up 146%
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$0.30 per share
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Down 10%
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Silver Ounces Produced
(excluding equivalent ounces of gold, zinc and lead)
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1,708,865
oz. Ag
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1,823,370
oz. Ag
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Down 6%
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1,780,379
oz. Ag
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Down 4%
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Payable
Silver Ounces Produced
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1,655,297
oz. Ag
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1,802,172
oz. Ag
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Down 8%
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1,761,697
oz. Ag
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Down 6%
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Silver Equivalent Ounces Produced
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1,791,770
eq. oz.
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1,920,498
eq. oz.
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Down 7%
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1,843,830
eq. oz.
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Down 3%
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Total Cash Costs per Ounce
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$8.39
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$7.03
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Up 19%
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$8.32
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Up 1%
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Average Revenue per Payable Equivalent Ounces Sold
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$38.83
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$19.77
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Up 96%
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$39.08
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Down 1%
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Cash and Cash Equivalents (as at September 30)
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$106.2 million
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$24.8 million
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Up 328%
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$105.0 million
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Up 1%
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CORPORATE UPDATE
The newly expanded 1,000 tpd flotation circuit at the
La Parrilla Silver Mine commenced operations on
September 2, 2011 and was deemed commercial less than 30 days later on October
1, 2011. The expansion of the cyanidation circuit is continuing well with progress
now reaching approximately 90% completion. Construction is expected to complete
with start-up commencing later in November 2011. The new leaching tanks are now
completed and the new counter current thickeners are almost complete pending
the installation of the mechanisms. Once fully operational, the older 425
tpdcyanidation circuit will be replaced with this new state-of-art 1,000 tpd
circuit expected by the first quarter of 2012. Also, the new 115,000 Kw power
line is expected to be completed also in November which is required to run the
entire plant.
The La Parrilla expansion once completed, will result in the total mill
capacity reaching 2,000 tpd, effectively doubling the previous output of the La
Parrilla operation from approximately 1.8 million ounces of silver equivalent
produced in 2010 tomore than 3.2 million equivalent ouncesin 2012, consisting
of 2.9 million ounces of silver, 6.0 million pounds of lead and 4.3 million
pounds of zinc.
The total capital budget for the expansion, including expanded underground
development is expected to be $40.5 million when completed. Incremental
production, revenues and operating costs associated with the new flotation
circuit were capitalized in the quarter ended September 30, 2011. Effective
October 1, 2011, all revenues and costs from the flotation circuit will be
treated as normal course operations and recorded in the income statement rather
than being capitalized as pre-production.A total of 40,592 equivalent ounces of
silver were excluded from commercial production during the quarter.
In September 2011, the Company issued a new NI 43-101 Technical Report for the
La Parrilla Silver Mine which indicated that the Company's exploration and
development efforts have resulted in upgrading a significant portion of the
Measured and Indicated Resources to Proven and Probable Reserves. This positive
development resulted in the 'Life of Mine' ("LOM") at the La Parrilla
being extended from two years to fourteen years.
At the La Encantada Silver Mine, efforts are continuing to focus on increasing
recoveries. Three areas of focus include: 1) changing the blend of fresh ore
versus old tailings; 2) increasing development to access areas absent of
manganese; and 3) metallurgical tests to dissolve the manganese prior to cyanidation.
The plan to change the mixture of fresh ore to tailings from the current
1:3(25% fresh ore and 75% tailings) to 5:9(36% fresh ore and 64% tailings) by
the end of 2011 is going well. This change requires additional milling capacity
which will be supplied by the installation of a third ball mill which arrived
during the third quarter and is expected to be commissioned at the end the
fourth quarter. Under planned conditions with the revised mix of fresh ore and
tailings, this plant should be able to achieve 60% recovery rates, based on 78%
recoveries for fresh ore and 50% recoveries for tailings.
In addition to changing the blend, the presence of manganese in areas of the La
Encantada mine is well known. In recent quarters, an area within the mine with
higher manganese levels has been exploited resulting in lower than budgeted
recoveries. As a short term solution, in order to compensate for these lower
recoveries, mill throughput was increased to an average of 4,259 tpd in the
third quarter. The effect was slightly higher costs due to additional chemical
and diesel consumption. As a longer term solution, underground development has
been increased to access areas for better blending in the future with ores
absent of manganese. A total of 3,200 metres of underground development at La
Encantada was completed in the third quarter of 2011 compared to 2,784 metres
of development completed in the second quarter of 2011, representing anincrease
of 15%.
In addition to these initiatives, the Company is also testing a new sulphuric
acid leach process to dissolve the manganese from the ore prior to the
cyanidation processing. During the quarter, extensive metallurgical tests were
undertaken by two independent labs in the United States and the Company's own
lab at the La Encantada operation. The Company retained Hazen Research, Inc. to
construct a laboratory pilot plant in order to test and re-confirm internal lab
tests. The results of the metallurgic tests show the possibility of improving
metallurgical recoveries substantially and are currently being evaluated
further to define the economic parameters of adding this additional process.
The Company began the construction of a 500 tpd pilot plant at La Encantada
during the third quarter to test the SO2 circuit. It is expected that
construction will be completed prior to the end of November. The focus of the
engineeringstaff working at the pilot plant is to define the optimum SO2
consumption parameters for an economicdesign base for a new 4,000 tpdSO2
circuit.
At the San Martin Silver Mine, installation of a new ball mill, replacing an
older and smaller mill was completed in the quarter. Total mill capacity has
increased from 900 tpd to 950 tpd allowing for increased silver production and
lower costs. In addition, two new induction furnaces and two new filter presses
were installed and commissioned in the quarter. These mill improvements which
were all completed in the third quarter are expected to have a positive impact
on overall production, quality of dor� and total costs.
Ground breaking at the Del Toro Silver Mine, which commenced in April for the
construction of the Company's fourth silver mine in Mexico, is progressing
well. Two out of the five large pads have been cleared and levelled in
preparation for foundation construction. Approximately 80% of the mill
equipment has been ordered and is expected to begin arriving on-site during the
first quarter of 2012. Re-permitting for a 2,000 tpd operation is currently
underway in conjunction with a Preliminary Economic Evaluation which is
expected to be released prior to year end. Currently, the permit granted covers
only a 1,000 tpd flotation mill, however, due to recent drilling results, a
decision was made to build a cyanidation circuit. The mill re-design process is
nearing completion resulting in a much larger dual process facility.
A bulk metallurgical test of 5,000 tonnes of ore was conducted at the La
Parrilla mill in October to reconfirm metallurgical parameters.Construction of
a new three kilometre road was completed during the third quarter allowing for
heavy equipment and vehicles to access the mine site bypassing the town of
Chalchihuites.A contractor has been assigned to build the water treatment plant
and work is expected to be completed by mid-2012. Also, a new power line from
the town of Vicente Guerrero and Chalchihuites required for the mine is in the
permitting process.
The Company purchased a neighbouring claim called Dolores during the quarter
consisting of 12 hectares. The previous owner was shipping high-grade ore to
the La Parrilla mill for processing. The total purchase price was
US$1.5million. Underground development is currently underway to explore the
extension of the known ore body. The Dolores mine will be incorporated into the
Del Toro operations.
Initial capital costs, pending changes upon completion of the NI 43-101
Technical Report / Preliminary Economic Evaluationfor the Del Toro Silver Mine,
which will include final metallurgical testing and final plant designsis
estimated at $43.9 million for 2011 with additional capital required in 2012.
FINANCIAL HIGHLIGHTS
- The Company generated Revenues
of $61.4 million for the third quarter of 2011, an increase of 88% or
$28.8 million compared to the third quarter of 2010, and a decrease of
$6.6 million or 10% compared to the prior quarter due to slightly lower
silver prices and reduced production due primarily to the lower recoveries
at the La Encantadamine.
- Revenues were 88% higher than
for the third quarter of 2010 due to the significant increase (96%) in
silver prices compared to the prior year, as the Company realized an
average silver price of $38.83 (COMEXaverage of
$38.78) per payable equivalent ounces, compared to $19.77 in the third
quarter of 2010. Revenue in the current quarter excludes $1.4 million of
pre-commercial sales receipts from the new flotation circuit at the La Parrilla Silver Mine, which were capitalized as a net
reduction against the cost of the plant expansion as it had not achieved
commercial production status prior to the end of the quarter.
- Recognized Mine Operating
Earnings of $42.5 million for thethird quarter
of 2011 compared to $15.9 million in the third quarter of 2010, an
increase of $26.6 million or 168%. The increase reflects the 96% increase
in average revenue per ounce of silver sold in the current quarter
compared to the same quarter of the prior year and was partially offset by
a 7% decreasein silver equivalent ounces produced compared to the third
quarter of 2010.
- The Company generated Net
Earnings after Taxes of $27.8 million for the third quarter of 2011 (EPS
of $0.27) compared to $10.1 million (EPS of $0.11) in the third quarter of
2010 and net earnings of $30.6 million (EPS of $0.30) in the second
quarter of 2011. Net earnings for the quarter include a $1.5 million loss
on derivatives, a $0.7 million charge to restructure the collective
bargaining agreement at the San Martin Silver Mine during the quarter and
excludes gross margin of $1.1 million related to pre-commercial shipments
at the La Parrilla Silver Mine. Adjusted EPS (a non-IFRS measure) was
$0.30, after removing the loss on derivatives, the restructuring charge
for the San Martin collective bargaining agreement and adding back gross
margin on pre-commercial shipments.
- During the third quarter, the
Company realized a gain of $4.8 million on its investments in silver
futures, and also recognized an unrealized loss on silver futures of $6.3
million. As at quarter end, the Company was carrying a long position on
silver futures equivalent to 1.0 million ounces of silver at an average
price of US$36.375. Subsequent to the end of the quarter, the long
position was increased to 1.25 million ounces at an average price of
US$35.80. Management is bullish on silver prices and believes the price of
silver will recover sufficiently to erase the unrealized loss. At the date
of this MD&A, the $6.3 million unrealized loss on the Company's silver
futures position has been reduced to $0.8million.
- The income tax provision for
the third quarter ended September 30, 2011, was reduced to $7.4 million
(20.9% effective rate) and $26.9 million (24.7% effective rate) for the
year to date period, due to the Company realizing the benefits of
effective tax planning.
- Earned cash flows from
operations, prior to working capital changes, of $39.8 million ($0.38 per
share) (a non-IFRS measure) for the third quarter of 2011 compared to
$16.0 million ($0.17 per share) for the third quarter of 2010, an increase
of 122%.
- Total Cash Cost per ounce (a
non-IFRS measure) increased by 1% from $8.32 in the second quarter of 2011
to $8.39, however, the Company's total production costs per tonne decreased 11% to $26.86 per tonne.
The increased Cash Cost per ounce is primarily related to an increase in
consumables at the La EncantadaSilver Mine.
- Cash and cash equivalents
increased to $106.2 million compared to $41.2 million as at December 31,
2010, and improved working capital to $97.9 million from $46.1 million as
at December 31, 2010. At the same time, the Company has invested $60.8
million into its mineral properties, plant and equipment since December
31, 2010.
OUTLOOK FOR 2011
Management wishes to update the Company's production guidance for the year
ending December 31, 2011. Due to the major expansion at the La Parrilla operation that's been underway for the past three
quarters and the areas within the La Encantada mine
currently being exploited with higher manganese content, production levels have
been slightly lower than originally anticipated. Even though the La Parrilla construction is coming to an end and production
levels are expected to improve and action is being taken at the La Encantada to improve recoveries, management feels it's
prudent to revise its previous production guidance for the 2011 fiscal year to
7.6 millionounces of silver equivalents which is
anticipated to include 7.3 million ounces of silver and 0.3 million ounces of
silver equivalents in the form of lead, zinc, gold and iron. Guidance for 2012
will be released in January 2012.
First Majestic is a producing silver company focused on silver production in
M�xico 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.
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PRODUCER |
CODE : FR.TO |
ISIN : CA32076R1029 |
CUSIP : 32076R1029 |
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ProfileMarket IndicatorsVALUE : Projects & res.Press releasesAnnual reportRISK : Asset profileContact Cpy |
First Majestic is a silver producing company based in Canada. First Majestic produces silver, gold, lead and zinc in Mexico, and holds various exploration projects in Canada and in Mexico. Its main assets in production are LA PARRILLA SILVER MINE, LA ENCANTADA (FIRST MAJESTIC SILVER), SAN MARTIN and LA ENCANTADA SILVER MINE in Mexico and its main exploration properties are REAL DE CATORCE, DEL TORO and CUITABOCA in Mexico and PITT ISLAND, PINCOURT, DOMPIERRE and DESJARDINS in Canada. First Majestic is listed in Canada, in Germany and in United States of America. Its market capitalisation is 465.4 millions as of today (US$ 340.6 millions, € 313.9 millions). Its stock quote reached its lowest recent point on November 02, 2001 at 0.01, and its highest recent level on May 17, 2024 at 9.99. First Majestic has 47 442 200 shares outstanding. |
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