First Majestic Q2 earnings plunge 50% despite increased production

Mexico-focused First Majestic Silver's (TSX:FR) (NYSE:AG) joined the group of silver producers that have been hit hard by the falling prices of the precious metal, as the company’s reported a profit drop of 50% year-on-year in the second quarter.

For the period ending in June, the Canadian miner said silver production increased by 8% to 1.9-million ounces when compared with 1.78-million ounces produced in the same quarter of 2011.

First Majestic sold 1.88-million silver ounces, an increase of 8% for an average price of $28.69/oz, compared with the $39.08/oz it received for silver in 2011.

Other highlights:

  • Revenue of $54.8 million, a 19% decrease from Q2 2011 while average silver prices fell by 27%
  • Mine Operating Earnings totalling $31.1 million
  • Cash Flow per Share (non-GAAP) of $0.29, a decrease of 35% from Q2 2011
  • Basic Earnings per Share amounted to $0.14, representing a 51% decrease from Q2 2011
  • Adjusted Earnings per Share (non-GAAP) amounted to $0.19 after removing legal fees for the First Silver trial, the acquisition costs for the Silvermex Resources Inc. and losses from silver futures and marketable securities
  • Total Production Cost per Tonne decreased to $26.97, a 10% reduction compared to Q2 2011
  • Total Cash Cost was $8.83 per ounce, up only 6% compared to Q2 2011
  • Cash and Cash Equivalents at June 30, 2012 totalled $70.9 million and Working Capital of $94.6 million
  • In addition to cash, First Majestic was carrying 574,000 PSLV (Sprott Physical Silver Trust) units at quarter end with an approximate market value of $6.65 million and 100 Silver Futures contracts representing 500,000 ounces of silver valued at $1.7 million including the unrealized gain and the margin requirement. The company is currently holding 150 contracts representing 750,000 ounces of silver at an average cost basis of $27.277.

The miner’s shares closed down 2.31% at C$16.49 on the TSX on Tuesday.