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« Gold and Silver A Few Thoughts | Main | First Majestic Silver Corporation: Silver Sales Direct to the Public »
Wednesday
Jul222009

First Majestic Silver Corporation: Update 20 July 2009

First Majestic chart 22 July 2009.JPG



Chart courtesy of Stockcharts

This is part two of our Saturday morning telephone conference with Keith Neumeyer, the President and CEO of First Majestic Silver Corporation (TSX: FR)and Dan McIntyre Investor Relations regarding the latest developments taking place within the company.

The La Encantada Silver Mine is now the top Priority for First Majestic with the following being previously reported:

The flotation plant with a capacity of 800 tons per day is presently being operated at 85% of its capacity. In recent years, very little reinvestment was made to open new areas up within the mine to take advantage of higher mill capacity. Construction of a 3500 tpd cyanide mill commenced in July 2008 and is expected to be completed during the second quarter of 2009. Once this expansion program is complete, it is anticipated that silver production will reach 3.5 million ounces of silver on an annual basis.

However during our discussions Keith Neumeyer told us that the latest projections suggest that production could reach 4.3 million ounces compared to 2.0 million ounces last year.

Another important point of interest is that historically the production had been split almost 50:50 between Concentrate and Dore with the Concentrate attracting a smelting cost of around $3.50 per ounce. However once this phase of the construction is complete the revised split would be close to 10:90 between Concentrate and Dore thereby negating the lions share of the smelting cost. With the cash costs at close to $5.00 and the smelting cost of an additional $3.50 the total cost is around the $8.50 mark, these improvements on site will reduce the cash cost to around the $4.00 level.

As La Encantada was producing 100% of its production in concentrate and was their biggest mine, the costs side of the business should change dramatically as a result of the new mill producing 100% dore bars. Looking ahead, the only mill to produce concentrate will be La Parrilla, which is a smaller operation, so the production profile will change considerably from the current 50/50 split to the concentrate accounting for only 10% of production.

View of main building of mill operations First Maj.JPG

View of main building of mill operations


Taking a quick look at the chart covering the last eighteen months we can see that the de-leveraging episode hit hard last year but an upward trend is now in place and a recovery appears to be on the way.

Its now a question of watch this space in order to ascertain whether or not First Majestic can achieve its objectives in the coming months. We will be keeping an eye on their progress and posting our updates as usual on this site. For disclosure purposes we do not own this stock.

If you have a comment, whether you agree with us or not, then please feel free to add it to the article via the comments box.

Have a sparkling day.


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