First Majestic Silver

Date: 30 Sept 2016

Earlier today we have a question on First Majestic Silver AG). Its share price has fallen from above US$18 to just above US$10.

Here’s a look at its Q2 result

Silver equivalent production of 4.7 million ounces, representing a 23% increase compared Q2 2015.

Silver production of 2.8 million ounces, representing a 5% increase compared to Q2 2015.

Revenues totaled $66.1 million, representing a 22% increase compared to Q2 2015, primarily due to a 23% increase in total production.

Net earnings of $6.1 million (EPS of $0.04) compared to a loss of $2.6 million (loss per share of $0.02) in Q2 2015

All-in sustaining costs (“AISC”) of $10.97 per payable silver ounce, representing a 24% reduction compared to Q2 2015

Cash and cash equivalents totaled $108.2 million at the end of the quarter, representing a $46.5 million increase compared to the previous quarter.

Cash flow from operations before movements in working capital and income taxes in the quarter was $23.5 million ($0.15 per share) compared to $16.4 million ($0.14 per share) in the second quarter of 2015.

As it stands, the Q2 results were much better this year vs 2015. Even cash at hand was more in Q2 2016 vs Q1 201

Institutional investors and hedge funds own 37.16% of the company’s stock.

However, the fall in the price could be attributed by the following:

Drop in silver price from US$21 per oz to US$19 per oz. The 10% drop creates multiples in price of mining shares especially AG is almost  a pure silver play. Other silver miners have gold as a second resource to help buffer the impact. AG therefore is hit harder.

Analyst report which lowers the target price of AG. Yet other raised its price target.

In May 12, 2016, the Company closed a $44.7 million (CAD$57.5 million) bought-deal private placement with a syndicate of underwriters for the issuance of 5,250,900 common shares at a price of CAD$10.95 per common share. This could impact upon the share price. But the increased in capital allows the company to intensify its mining operations.

Overall, silver could trend higher in the coming months as we once face another potential for a full blown financial crisis. Only this time it is much worse.

 

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