First Majestic (AG) Loses 16% Since Reporting a Loss in Q2
Shares of First Majestic Silver Corp. AG have declined around 16% as of Aug 11, 2020, after the company reported second-quarter 2020 adjusted loss per share of 10 cents on Aug 6. The figure was wider than the Zacks Consensus Estimate of a loss of 2 cents. Notably, it had reported an adjusted loss of 2 cents in the prior-year quarter. The weaker-than-expected performance was primarily due to the suspension of operations at the company’s three operating mines in April and May due to the COVID-pandemic and its decision to delay metal sales in anticipation of realizing higher prices.
Including standby costs related to the suspensions and other one-time items, the company reported a loss of 5 cents per share in the second quarter compared with a loss of 6 cents in the year-ago quarter.
First Majestic’s revenues plunged 58% year over year to $35 million in the second quarter. The top line also missed the Zacks Consensus Estimate of $55 million. This can primarily be attributed to temporary suspension of operations. Further, the company’s decision to delay sales and build inventory in an effort to capitalize on higher silver and gold prices impacted the top-line performance in the quarter. At the end of the second quarter, First Majestic held approximately 970,000 ounces of silver and 6,000 ounces of gold in metal inventory. This has been subsequently sold and will add $25 million to the company’s third-quarter revenues.
First Majestic Silver Corp. Price, Consensus and EPS Surprise
First Majestic Silver Corp. price-consensus-eps-surprise-chart | First Majestic Silver Corp. Quote
Operational Update
First Majestic produced 3,505,376 silver equivalent ounces, down 43% from the prior-year quarter mainly due to the suspension of operations. Total production consisted of 1.8 million ounces of silver, 15,764 ounces of gold.
The company recorded consolidated cash costs per ounce of $6.73, down 2% from the year-ago quarter. Consolidated all-in sustaining costs (AISC) of $18.57 per ounce came in 26% higher than the prior-year quarter. Total production cost was $78.78 per ton, up 1% year over year. The company realized an average silver price of $17.33 per ounce during the second quarter of 2020, reflecting year-over-year improvement of 17%.
Adjusted mine operating costs (excluding standby costs) fell 58% year over year to $33 million in the quarter. This was primarily owing to a year-over-year decline of 58% in production costs on account of reduction in operational days following the temporary suspension related to the pandemic and 13-day union work stoppage at San Dimas, and weaker Mexican Peso.
First Majestic reported adjusted mine-operating profit of $1.4 million in the June-end quarter compared with $4.2 million in the prior year quarter. During the quarter, the company incurred a standby costs to the tune of $9.2 million comprising $7.2 million related to temporary suspension due to COVID-19 and $2.0 million related to the 13-day union work stoppage at San Dimas. Including the impact of standby costs, the company reported a mine operating loss of $7.8 million in second-quarter 2020.
Financial Position
First Majestic ended second-quarter 2020 with $95.2 million of cash in hand, down from the $169 million held at 2019 end. The company had total available liquidity of $204.9 million, including $65 million of undrawn revolving credit facility. The company utilized $18.5 million of cash in operating activities in the first half of 2020 compared with the $48.3 million of cash generated from operating activities in the prior-year comparable period.
First Majestic’s operations had been impacted by government mandated closures in the second quarter. Following the Mexican government’s decision to allow the restart of mining activities on May 23, 2020, the company resumed operations and is expected to return to pre-pandemic production rates early in the third quarter. It is expected to gain on higher gold and silver prices this year.
Price Performance
Shares of the company have gained 11.2% over the past year compared with the industry’s rally of 60.5%.
Zacks Rank & Stocks to Consider
First Majestic currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the basic materials space are Coeur Mining Inc. CDE, Commercial Metals Company CMC and The Scotts MiracleGro Company SMG, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Coeur Mining has an expected earnings growth rate of 138.7% for 2020. The company’s shares have surged 46% over the past year.
Commercial Metals has a projected earnings growth rate of 15% for the current year. The company’s shares have gained 36% in a year’s time.
Scotts MiracleGro has an estimated earnings growth rate of 44.5% for the ongoing year. Its shares have appreciated 38% in the past year.
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