VANCOUVER (miningweekly.com) – Primary silver producer First Majestic Silver has lowered its full-year production guidance by 11% on the back of lower expected throughput rates at its Del Toro and La Guitarra mines, in Mexico.

The TSX- and NYSE-quoted company now expects to produce between 10.7-million and 11.9-million ounces of silver, or 16.8-million to 18.7-million silver equivalent ounces (SEOs), down from previous guidance of 12-million to 13.3-million ounces of silver, or 17.8-million to 19.8-million SEOs.

However, a lower cash cost guidance, driven by positive revised by-product price assumptions, could counter the lower production guidance. Based on the mid-point of guidance, cash costs net of by-products were down 22% and all-in sustaining costs were down 7% as a result of increased capital expenditure (capex).

The Vancouver-based company advised that it had increased planned capex for the second half of the year, planning to use the proceeds from a recent C$57.5-million equity raise to focus on higher development and exploration spending.

First Majestic announced a 40% increase in the capital budget for the second half of the year to $88.5-million, including a $20.9-million increase in development and exploration spending.

“We believe this will be viewed as a positive, as First Majestic had openly stated that its development budget was running below a sustainable level,” stated Desjardins Capital Markets analyst Michael Parkin in a note to clients.

First Majestic has also budgeted for a number of expansion projects, including the roaster at La Encantada, improved underground equipment at La Guitarra for a planned 1 000 t/d expansion and an initial drill programme at Plomosas.

BUOYANT QUARTER
The company generated net earnings of $6.1-million, or $0.04 a share, in the second quarter, compared with a net loss of $2.6-million, or $0.02 a share, in the comparable quarter of 2015. Excluding all noncash and nonrecurring items, First Majestic generated adjusted earnings of $4.7-million, or $0.03 a share, which was on par with analyst projections.

Revenues in the second quarter rose 22% year-on-year to $66.1-million, an increase of $11.9-million when compared with the $54.2-million achieved in the second quarter of 2015. The increase in revenue was mainly owing to a 22% increase in SEOs sold as a result of production from the Santa Elena mine, which was acquired in October 2015.

Cash flow from operations before movements in working capital and income taxes in the quarter was $23.5-million, or $0.15 a share, compared with $16.4-million, or $0.14 a share, in the prior-year quarter.

During the three months ended June 30, total output totalled 4.7-million SOEs, comprising 2.8-million ounces of silver, 16 371 oz of gold, 8.8-million pounds of lead and 3.8-million pounds of zinc. Total output was down 8% quarter-on-quarter owing to an 8% decrease in average silver grades, the result of lower grades at the La Encantada and Santa Elena mines.