TORONTO (miningweekly.com) – Mexico-focused precious metals miner First Majestic Silver on Tuesday reported weak profit for the three months ended September 30, as a 29% drop in the average realised silver price offset higher output and increased revenue.

The NYSE- and TSX-listed firm’s net profit fell to $16.3-million, or $0.14 a share, compared with earnings of $24.9-million, or $0.22 a share, in the same period a year earlier.

Adjusted earnings per share was $0.22, after excluding noncash and nonrecurring items, beating six Wall Street analysts’ expectations of $0.15 a share on revenues of $74.38-million.

Revenues rose 21% year-on-year to $76.9-million, compared with $63.6-million a year earlier, mainly owing to a 75% increase in silver-equivalent ounces sold. The average realised silver price, however, declined to $21.58/oz, down from $30.48/oz.

Silver-equivalent output rose by 38% to 3.37-million ounces, compared with 2.44-million ounces a year earlier, and silver output rose 22% year-on-year to 2.69-million ounces.

The total cash cost per ounce, net of by-product credits, declined 4% to $8.84.

At the end of the quarter, cash and cash equivalents totalled $67.5-million and working capital totalled $69.6-million.

"Management's focus for this quarter has been on cost reductions and capital programme reductions. This initiative, which began in April has resulted in two back-to-back quarters of total cash cost reductions.

“In addition, costs at the corporate level have also declined 11% compared with the previous quarter,” First Majestic CEO and president Keith Neumeyer said.

He added: “As we can't count on an improved environment in the short term for silver prices, management has little choice other than to cut further. Our focus for 2014 will be to optimise operations, to continually reduce costs, and remove all discretionary investments that don't have major impacts on future guidance. As a result, we expect to see continued improvements in our cost structures over the coming quarters."

MEXICAN TAX REFORM

First Majestic also said it expected a number of significant changes to the Mexican tax regime in January 2014, including a 7.5% royalty calculated based on earnings before interest, taxes, depreciation and amortisation that would be imposed. This would be on top of a 0.5% additional royalty calculated based on revenues that would be levied.

Further, the planned corporate tax rate reductions to 29% in 2014, and 28% thereafter, have been repealed, and the corporate tax rate would remain at 30%, while a 10% withholding tax on dividend distributions had been introduced but would not supersede treaty rates.

First Majestic said these changes to the federal tax code were significant and were expected to increase the company's tax burden in that country and significantly impact on management's capital investment decisions going forward.

The company was in the process of evaluating and quantifying this impact and would make further announcements in its 2014 outlook, slated for release early in January.