Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
We made our first purchase of First Majestic Silver Corporation (FR:TSX || AG:NYSE) on 9th Feb 2011 at $13.13 and decided to hold despite a rapid rise in the order of 92% gained within two months of purchase. As we can see from the above chart the stock price has eased along with the correction in silver prices.
Still, at $20.79 we are sitting on a paper profit of 58.33% at the moment and intend to increase in our exposure to First Majestic shortly, as per our with acquisition program. There is a school of thought that expects a jump in prices this summer, however, we are of the opinion that prices will drift lower until mid August before we see the beginnings of any real action. So we are looking to make acquisitions in about four weeks or so. Our plan is to be in position before September as we anticipate some exciting record breaking moves by gold and silver with both metals finishing the year much higher than they are now.
Back to First Majestic Silver Corporation, the RSI and STO are a tad too high for us at the moment, so we will keep our powder dry for now and wait til mid August before adding to our position. We could be trying too hard to buy at lower prices and our tightness could cost us, however, that’s a chance that we are prepared to take and we will try to stick to our game plan.
Now for the good news, First Majestic have just released a terrific set of quarterly results which we now highlight below:
Silver production increases by 16% to a quarterly record of 1,780,379 ounces
Silver ounces amount to 97% of total equivalent silver production of 1,843,830 ounces
Total processed ore in the quarter increased by 6% to a record 482,075 tonnes
First Majestic Silver Corporation is pleased to announce that production in the second quarter of 2011 reached 1,843,830 equivalent ounces of silver, representing an 11% increase over the 1,656,165 equivalent ounces of silver produced in the second quarter of 2010. Production during the quarter consisted of 1,780,379 ounces of silver, making First Majestic’s second quarter production 97% pure silver, the highest in the silver mining industry.
Silver production in the second quarter of 2011 represents a 16% increase compared to the second quarter of the prior year of 1,538,798 ounces, and a 1% increase over the 1,769,208 silver ounces produced in the first quarter of 2011. In addition to the 1,780,379 ounces of pure silver, the Company produced 1,392,132 pounds of lead, representing a 7% decrease from the second quarter of the previous year, and 337 ounces of gold, representing a decrease of 38% compared to the second quarter of 2010.
Company guidance for 2011 released on January 11, 2011 stated, “Silver production is anticipated to exceed 7.5 million ounces of silver in 2011″. Results of the second quarter are within this guidance. As previously announced, the increasing production for the balance of the year will be achieved once the two-stage mill expansion project at La Parrilla begins to come on-line over the next three quarters. Firstly, the expanded flotation circuit is expected to reach 800 tpd during the third quarter compared to the current rate of 425 tpd. Secondly, the expanded cyanidation circuit is anticipated to reach 800 tpd, up from the current 425 tpd, within the first quarter of 2012.
During the second quarter of 2011 the total ore processed at the company’s three operating silver mines, the La Encantada Silver Mine, the La Parrilla Silver Mine and the San Martin Silver Mine, amounted to 482,075 tonnes milled in the quarter representing a 6% increase over the previous quarter of 456,505 tonnes and an increase of 19% over the 404,350 tonnes milled in the second quarter of 2010.
First Majestic is a producing silver company focused in Mexico and is aggressively pursuing its business plan to become a senior silver producer through the development of its existing assets and the pursuit through acquisition of additional assets that contribute to achieving its corporate growth objectives.
We draw your attention to the following “Silver production is anticipated to exceed 7.5 million ounces of silver in 2011″ which is currently in line with previous guidance. If they can execute their strategy successfully then the second half of this year should prove to be a profitable one.
The news stream from this company is good, which we regard as very important as investors, in order that we can position ourselves accordingly.
First Majestic Corporation has a market capitalization of $1.92 billion, a P/E ratio of 33.00, an EPS of $0.63, with an average volume of around 1.3 million shares traded per day and trades in Toronto under the symbol of FR and on the NYSE under the symbol of AG.
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