Saturday 10th December 2016

Resource Clips


Posts tagged ‘First Majestic Silver Corp (FR)’

Opportunism knocks

December 5th, 2016

First Mining Finance found bad times beneficial for good deals

by Greg Klein

Struggling junior? Not this company. Since its trading debut in April 2015, First Mining Finance TSXV:FF has compiled 25 projects covering some 300,000 hectares, from early stage to a PEA with 4.4 million gold ounces indicated. Just as aggressively, the company boosted its treasury to a current $35 million. Now First Mining looks forward to a $21-million exploration and development program for 2017 that includes 47,000 metres of drilling.

“We were able to execute on the vision of the company, which last year was to take advantage of the bear market and acquire projects,” VP of investor relations Derek Iwanaka explains. “I don’t know of any other company that was able to acquire as many projects, or projects as good as we got, during that period.”

First Mining Finance found bad times beneficial for good deals

Located in northwestern Ontario’s Birch-Uchi greenstone belt,
First Mining’s 32,448-hectare Springpole flagship has an
updated PEA scheduled for next year.

Certainly there were deals to be had for canny acquisitors. But that was while many other companies faced financing difficulties. First Mining bucked the trend last August by closing a $27-million private placement. How did they pull that off?

“Quite easily,” responds Iwanaka. “We were literally turning down millions of dollars. We had over $70 million in orders but we didn’t want that kind of dilution. So we just took the $27 million. That should carry us for at least the next few years, including all the drilling and overhead.”

First Mining seems to have something that eludes others.

“First of all we have Keith Neumeyer at the helm, who runs a multi-billion-dollar company as it stands,” says Iwanaka. “Keith has been adept at starting companies during very bad times and manoeuvring them so when times are good we can reap the rewards for our shareholders.”

Among companies founded by the First Mining director were First Quantum Minerals TSX:FM and First Majestic Silver TSX:FR, where Neumeyer’s president/CEO. First Majestic acts as a sort of mentor to First Mining, placing some FR directors in FF’s management and board, helping to get the new company started, lending it about $1 million, vending three Mexican properties and even providing office space.

Among considerations behind an acquisition are “size and quality of the project,” Iwanaka points out. “We look at projects with good grade, scalability, exploration upside. The jurisdiction’s quite important to us. We’re basically looking at North America, but not the North. We will look at South America as well. Quebec, Ontario and Newfoundland are our favourite places although we could go to other provinces too. In the U.S. we see Nevada and Arizona as fairly mining-friendly states. We could probably look at New Mexico as well. We do have some early-stage properties in Mexico, where First Majestic has its base, but we certainly focus on Canada.”

As for commodities, “we particularly like gold but silver, platinum and palladium are also attractive, as well as base metals—anything that’s exchange-tradeable.”

Other factors include “the price of the projects, the holding cost, the infrastructure. In many cases the projects we take already have roads and power lines going to them.”

If gold’s the company’s focus, the Springpole flagship explains why. Described as one of Canada’s largest undeveloped gold projects, the northwestern Ontario potential open pit came with the past owner’s 2013 PEA. Using a 0.4 g/t gold cutoff, the 2012 resource showed:

  • indicated: 128.2 million tonnes averaging 1.07 g/t gold and 5.7 g/t silver for 4.41 million ounces gold and 23.8 million ounces silver

  • inferred: 25.7 million tonnes averaging 0.83 g/t gold and 3.2 g/t silver for 690,000 ounces gold and 2.7 million ounces silver

First Mining has work underway to bring the resource and PEA up to date. But looking back at 2013, the report calculated a post-tax NPV of US$388 million using a 5% discount, with a 13.8% post-tax IRR. Initial capex came to US$438 million with payback in 35 months of an 11-year mine life.

First Mining Finance found bad times beneficial for good deals

Visible gold was one attraction of the Goldlund project,
which has another 27,000 metres of drilling planned.

“We expect the updated PEA will be even more robust,” Iwanaka says. “The U.S. dollar has appreciated since 2013, when it was at par. We’re also looking at increasing the recovery and the pit shell. Those three things could substantially improve the economics and we hope to have the new PEA out probably by the first half of next year.”

With assays pending, a four-hole, 1,712-metre fall program provided metallurgical fodder. Next summer’s agenda calls for another 6,000 metres of infill to upgrade the resource. In the meantime, pre-permitting environmental and baseline work will soon begin.

A newer acquisition gets even more rig attention next year. Goldlund, about 60 kilometres north of Dryden and roughly 200 klicks south of Springpole, has 27,000 metres planned to upgrade the resource and work towards an eventual PEA. The former open pit and underground operation came with an estimate that First Mining considers an historic non-43-101. Using a 0.4 g/t gold cutoff, it showed:

  • measured and indicated: 19.1 million tonnes averaging 1.94 g/t for 1.19 million ounces gold

  • inferred: 25.8 million tonnes averaging 2.51 g/t for 2.08 million ounces

Cameron, maybe another 100 kilometres south of Goldlund, gets up to 9,000 metres of infill to pump up the measured and indicated prior to PEA. Using a 0.5 g/t cutoff, a 2015 resource from Chalice Gold Mines TSX:CXN showed:

  • measured: 3.72 million tonnes averaging 2.64 g/t for 316,000 ounces gold

  • indicated: 4.1 million tonnes averaging 1.92 g/t for 253,000 ounces

  • inferred: 14.5 million tonnes averaging 1.92 g/t for 894,000 ounces

Moving to southwestern Newfoundland, Hope Brook will see 5,000 metres of exploration and infill. A high 3 g/t gold cutoff gives the current resource:

  • indicated: 5.5 million tonnes averaging 4.77 g/t for 844,000 ounces gold

  • inferred: 836,000 tonnes averaging 4.11 g/t for 110,000 ounces

Again, a resource upgrade precedes a PEA, this one slated for late 2017.

Back in Ontario and roughly 110 kilometres northeast of the Springpole flagship, autumn drilling has wrapped up at Pickle Crow. Assays from the nine-hole, 1,319-metre campaign are expected in early 2017. The former mine came with a 2011 inferred resource that used a 2.25 g/t gold cutoff for an underground deposit and a 0.35 g/t cutoff for an open pit deposit:

Underground

  • 6.52 million tonnes averaging 5.4 g/t for 1.14 million ounces gold

Open pit

  • 3.63 million tonnes averaging 1.1 g/t for 126,000 ounces

Total

  • 10.15 million tonnes averaging 3.9 g/t for 1.26 million ounces

With assays to come, drilling to do and announcements for other North American projects anticipated, First Mining plans a steady news flow, says Iwanaka.

First Majestic appoints Guillermo Lozano VP Exploration

August 30th, 2012

Resource Clips - essential news on junior gold mining and junior silver miningFirst Majestic Silver Corp TSX:FR announced the appointment of Guillermo Lozano as Vice President of Exploration. Lozano holds a BSc degree in geology from the National Polytechnic Institute in Mexico City, an MSc in geology from the Missouri University at Columbia and an MBA in Finance from the University of Texas at El Paso. He has 30 years experience in Mexico and worked previously for Canplats, Kennecott, the Peñoles group and, most recently, spent 10 years with Silver Standard as Country Manager for Mexico and Exploration Director.

Previously this month, First Majestic announced 2Q net earnings of $15.3 million, $0.14 per share, on revenue of $54.8 million. Earnings were down 50% from 2Q 2011, and revenue was down 19% from that time period, developments attributed to the lower cost of silver. Silver-equivalent production was up 14% to 2.1 million ounces, and silver production was up 6% to 1.92 million ounces. Cost of production was $8.83 per ounce, up 6% from a year earlier.

I think the fundamentals for silver are much better than the fundamentals for gold… There is a major problem with the supply of silver, and I believe we’re going to see much higher silver prices, north of $100 an ounce—Keith Neumeyer

President/CEO Keith Neumeyer tells Resource Clips, “Guillermo Lozano is a very well-known and respected geologist in Mexico. He spent the last 10 years at Silver Standard as their man in Mexico. There were several companies trying to get him, and we were fortunate in having him join us. We hadn’t had a VP Exploration before and actually created the position for him. It allowed us to reorganize the entire geological department, which has become quite large. We’ve got over 50 geologists now spread around our mines and over 100 support staff. We needed to divide our staff into two separate groups, operations and regional explorations, and Guillermo will be in charge of both.”

With regard to the 2Q results, Neumeyer comments, “We did lose some production at the San Martin Silver Mine, which is our smallest operation. We lost about 100,000 ounces as a result of the Bolaños River drying up, which is quite an unusual event. We had to build a pipeline from about 13 kilometers away to supply water to the community, and obviously the community was very happy that we were able to do that. The pipeline remains in place today, even though it’s not currently being used, because there is plenty of water now in the region.

“Overall, production was up, and it would have been nice to have that 100,000 ounces we lost, but it wouldn’t have been enough to take care of the reduction in silver prices. If you at our press release, you’ll see that the silver price is down 27%, but the revenue is down only by 17%. So we were able to make up a significant amount of the revenue due to the increase in production. So you’ll continually see that increase in production and metal prices have turned around.”

Neumeyer says of that turnaround, “I put together First Majestic in 2002 for the sole reason that I was a big believer in silver. I think the fundamentals for silver are much better than the fundamentals for gold. As we become more reliant on technology, we become more reliant on silver. It’s one of those very important metals in our lives, and most people don’t realize this. Without it, most everything we do on a daily basis simply wouldn’t happen. So we’re depleting stocks of silver, and it’s becoming quite dramatic. The BBC came out with a report just last week saying there were only 17 years of silver left on the planet. There is a major problem with the supply of silver, and I believe we’re going to see much higher silver prices, north of $100 an ounce.

“There are so many derivatives in the market that in a single day on the Comex we have an entire year of physical metal traded in the form of paper, which tells you that the amount of leverage in the system is out of control. I’m a big believer in supply and demand, and I believe it will prevail in the silver market and force the paper market to unleverage.”

Neumeyer is bullish on Mexico as well, explaining, “It’s a very easy place to do business. Geographically, it’s easy to get to, and geologically, it’s a very exciting environment. The tip of the iceberg has been discovered in Mexico, and I think you’re going to see a lot more mines open there over the next 10 to 20 years. There is a lot more metal to be found in Mexico. Politically, it’s a very easy environment to deal in. You’ve got a good system in place, and we’re protected under NAFTA. It’s good regulatory environment, and permitting there is not too difficult. You’ve got local communities who are very supportive of mining, unlike many regions around the world. You have workforces in these towns that are used to having a mine in their backyard, and they’ve relied on these mines for their livelihood for generation after generation. So we come in as Canadian mining companies with investment and new tools for modernization, and these communities grow. Then you really see the wealth of Mexico occurring as a result of mining, and it’s a very exciting thing to witness.”

First Majestic shares have risen by about half since spring. Neumeyer comments, “Silver prices have helped. We saw silver reach below the $26 range a couple of times this year, and there has been a lot of negative feeling in the equity markets. I think stocks generally on a global basis have been sold off regardless of how good fundamentally they are. You saw some good-quality companies trading at some very low valuations, and I think there was some panic out there. People have excuses to sell, so they sell. So that created an opportunity for others who believed that it was a good time to step in. Our stock is around $19 today but is still undervalued based on our growth. Our stock was $26 about 18 months ago, and that was when the company was much smaller. I think once the market believes the silver price is going to be stable or at least on its way back to higher prices, combined with our growth production over the next couple of years, the future is pretty bright for people who own First Majestic stock.”

Neumeyer concludes, “By 2014, our production will be in the 14 million to 15 million ounce area. I am very proud of our cost structure. We’re one of the lowest-cost producers in this space and one of the fastest-growing silver companies in the world.”

View Company Profile

Keith Neumeyer
President/CEO
604.688.3033
866.529.2807

by Kevin Michael Grace

First Majestic reports $103.6M 2011 Profit, $1 per Share, 7.22M oz Silver produced, $91.2M Cash

March 8th, 2012

Resource Clips - essential news on junior gold mining and junior silver miningFirst Majestic Silver Corp TSX:FR announced financial results for the company’s fourth quarter and year ending December 31, 2011. Highlights include

Cash flow of $1.55 per share, a 147% increase over 2010
Earnings of $1 per share, a 167% increase over 2010
Adjusted earnings of $0.24 per share for the quarter and $1.04 for the year
Total cash cost increased by 9% to $8.24 per silver ounce, equivalent to $368 per gold ounce based on the average annual gold-to-silver ratio
Net revenue after smelting and refining of $245.5 million, a 108% increase over 2010
Mine operating earnings of $163.3 million, a 174% increase over 2010
Net earnings after taxes of $103.6 million, a 195% increase over 2010
Cash and cash equivalents of $91.2 million, a 122% increase over 2010
Silver-only production of 7.22 million ounces, an 11% increase over 2010
2012 guidance between 8.8 million ounces and 9.3 million ounces silver-equivalent production
Fully un-hedged to silver prices and no debt
Invested US$10 million into Sprott Physical Silver Trust after year end

President/CEO Keith Neumeyer stated, “Our dedicated team of management and staff have done an outstanding job and should be congratulated for their efforts in 2011. The year marked the eighth year in a row that First Majestic has achieved record production of silver. Not only is this a great achievement, but our growth is not slowing down. As the fastest-growing and purest silver producer in the world, management’s focus and top priority remains to continually deliver shareholder value.”

View Company Profile

Contact:
Keith Neumeyer
President/CEO
604.688.3033
866.529.2807

by Greg Klein