First Majestic (AG) Reports Strong Production Numbers in Q3

First Majestic Silver Corp. AG recently announced that total production in third-quarter 2020 reached 5.2 million silver equivalent ounces comprising 3.2 million ounces of silver and 25,771 ounces of gold. Compared to the second quarter, silver and gold production increased 72% and 63%, respectively, aided by strong operating performances across its three mines. Notably the company had to suspend operations in the second quarter owing to pandemic induced restrictions.

All Mines Report Solid Production Numbers

The company processed total ore of 655,920 tons during the quarter ended Sep 30, 2020, which reflected a sequential improvement of 97%. This is primarily because all of its operations — San Dimas, Santa Elena and La Encantada have returned to pre-pandemic production rates following the Mexican government’s decision to allow the company restart mining activities on May 23, 2020.

In third-quarter 2020, the La Encantada mine’s production improved 92% sequentially to 978,416 silver ounces — the second highest quarterly production since 2014. With this performance, the mine is on track to fully recover its lost silver ounces, owing to the COVID-19 shutdowns, by the end of 2020.

San Dimas produced 1,678,075 ounces of silver and 18,268 ounces of gold — the highest quarterly silver production since it was acquired in May 2018. Silver and gold production both improved 52% sequentially in the quarter under review.

Santa Elena produced 502,375 ounces of silver and 7,428 ounces of gold, representing an increase of 126% and 102%, respectively, compared with the second quarter.

Other Updates

Construction of a second portal, including the initial development of a new parallel south ramp, at Santa Elena’s Ermitaño project was completed during the third quarter. As of Sep 30, 2020, 26 exploration drill rigs were active across the company’s mines and projects comprising 14 rigs at San Dimas, eight rigs at Santa Elena, two rigs at La Encantada and two rigs at La Parrilla.

Gold prices have gained 25% so far this year primarily fueled by the coronavirus pandemic. Silver prices have also climbed 34% year to date. Given that industrial applications account for 60% of the global silver consumption, the slowdown in industrial activity amid the coronavirus pandemic impacted demand for the white metal. Lately, silver has delivered a turnaround as industrial activity is picking up as governments continue easing restrictions.

Higher production numbers and rising gold and silver prices in the third quarter are likely to have benefited the company’s third-quarter 2020 results. The company is expected to report its third-quarter 2020 results on Nov 5, 2020. The Zacks Consensus Estimate for quarter’s earnings is pegged at 11 cents, suggesting an improvement of 83% from the prior-year reported figure. The estimate has gone up 10% over the past 60 days.

The strong quarterly silver production at both La Encantada and San Dimas in the third quarter was driven by higher milling rates and this trend is expected to continue in 2021. Santa Elena is expected to see higher grades and milling rates in fourth-quarter 2020 as additional workers have recently arrived on site to assist with increasing underground ore production.

Silver production is expected between 11.0 million ounces and 11.7 million ounces in 2020.  Total production is estimated at 21.4 to 22.9 million silver equivalent ounces.

Share Price Performance

So far this year, First Majestic’s shares have declined 14.1% against the industry’s rally of 16.4%.

Zacks Rank & Stocks to Consider

First Majestic carries a Zacks Rank #5 (Strong Sell).

Some better-ranked stocks in the same Basic Materials space include Agnico Eagle Mines Limited AEM, Eldorado Gold Corporation EGO and Barrick Gold Corporation GOLD. All of these stocks currently sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Agnico Eagle Mines has a projected earnings growth rate of 104% for the current year. The company’s shares have gained 35% year to date.

Eldorado Gold has an estimated earnings growth rate of 2444% for fiscal 2020. So far this year, its shares have appreciated 63%.

Barrick Gold has an expected earnings growth rate of 94% for fiscal 2020. Year to date, the company’s shares have surged 50%.

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