TORONTO (miningweekly.com) – Staring down the reality of sustained lower precious metals prices, Mexico-focused silver producer First Majestic Silver’s president and CEO Keith Neumeyer on Wednesday said the company was focused on bringing company-wide cost structures down to 2006 levels.
In an effort to cut costs in the low metal price environment, the Vancouver-based company had reduced its workforce from about 4 900 in January last year to about 3 800 currently. The reduction was achieved by eliminating certain management positions and cutting operational staff and contractors in an effort to reduce its workforce without impairing future growth plans.
"Due to the fact that the silver price is dropping more quickly than costs, diligence is required to remain focused on bringing all cost structures down to 2006 levels. I'm confident that the changes currently under way in our business will allow us to produce profitable ounces in this lower metal price environment," Neumeyer explained.
The company noted that it expected its cost-cutting initiatives to gain traction and show cost savings in the current quarter.
For the three months ended September 30, a net loss of $10.5-million, or $0.09 a share, was recorded, compared with earnings of $7.6-million, or $0.06 a share, in the previous quarter. After excluding noncash and nonrecurring items, the adjusted net loss was $5-million, or 0.04 a share, which was mainly attributable to a reduction in ounces sold after the company suspended the sale of 934 000 oz of silver, which was expected to be realised in the fourth quarter.
Analysts had on average expected adjusted earnings of $0.03 a share on revenue of $61.27-million.
The company reported revenues of $40.8-million for the 2014 third quarter, 39% lower over the previous quarter. The average realised silver price was $19.10/oz, a decrease of 3% compared with the prior quarter.
First Majestic suspended silver sales in response to a 19% decline in the spot price of silver during the quarter and a 9% decrease in total output. In October, First Majestic sold all 934 000 oz of silver that it held over from the third quarter for an average price of $17.29/oz, representing a small gain over the closing spot price of silver on September 30.
Total output in the third quarter was 3.52-million silver equivalent ounces. The lower output was mainly owing to a 25% decrease in output at La Encantada, following a change in the production sequence and a 21% decrease in output from Del Toro. This was the result of lower tonnage processed owing to the reconfiguration of the plant to process all ore through flotation, as well as seasonal disruptions owing to severe weather during the Mexican rainy season, which affected the La Parrilla, San Martin and Del Toro mines.
Cash costs in the third quarter were $10.41/oz, an 8% increase from the previous quarter. All-in sustaining costs were $19.89 a payable silver ounce, a 9% increase from the previous quarter.
First Majestic’s NYSE-listed stock trended lower on Wednesday, losing 6.17% at $4.87 apiece.