As the Covid-19 pandemic sparked higher than normal volatility in the metals market near the end of the March quarter, NYSE- and TSX-listed First Majestic Silver decided to rather not sell its silver and gold inventories.
The company says paper prices of the metals dropped significantly below true physical prices and that these ounces have been carried over into the second quarter to be sold as prices improve.
First Majestic withheld the sale of 292 000 oz of silver and 700 oz of gold in the quarter under review, worth $5.3-million.
The company holds a total one-million ounces of silver and 1 459 oz of gold in inventory.
The company’s three operating mines, in Mexico, generated earnings of $21.1-million, representing a 106% increase year-on-year.
The mines produced 3.1-million ounces of silver and 32 202 oz of gold in the reporting quarter, which was in line with the corresponding quarter last year.
First Majestic made a net loss of $32-million, or $0.15 apiece, in the quarter under review, compared with earnings of almost $3-million, or $0.01 apiece, in the first quarter of last year.
Majestic Silver explains that the decrease in earnings was attributed to an accounting loss of $10.1-million on the divesting of the Plomosas exploration project, to reduce annual holding costs, and an unrealised loss of $22.7-million on mark-to-market adjustment of its foreign currency derivatives holdings – as a result of a 25% depreciation of the Mexican pesos against the US dollar during the quarter.
Adjusted net earnings for the quarter were $8.2-million in the quarter under review.
Some of the company’s mines had to ramp down operations in April, in light of Covid-19 government directives in Mexico, but CEO Keith Neumeyer says full production will be reached again from all operations by early July.
Despite the recent temporary suspension of three operating mines, total production in the quarter was consistent with the first quarter of 2019 and 9% above the previously withdrawn 2020 guidance.