Mexico- and US-focused First Majestic has reported weaker third-quarter results, as the company withheld 1.4-million ounces in inventory to maximise future profits.
The NYSE- and TSX-listed miner reported revenue of $124.6-million ounces, a 1% year-on-year decrease and a 19% quarter-on-quarter slump. Had these ounces been sold at the end of the quarter, First Majestic would have generated about $33.2-million in additional revenue.
As a result of withholding sales, First Majestic reported a third-quarter net loss of $18.4-million and an adjusted net loss of $0.07 a share.
“Our decision to inventory a significant amount of silver during the quarter obviously impacted our third quarter financial results but those additional revenues and cash flows are expected to be realised in the coming quarters as prices improve,” stated president and CEO Keith Neumeyer.
The company realised mine operating earnings of $3.5-million compared with mine operating earnings of $48-million in the third quarter of 2020. The decrease in mine operating earnings was primarily attributed to the decision to withhold ounces from sale along with higher costs primarily attributed to the first full quarter of operations of Jerritt Canyon.
During the quarter, First Majestic produced 3.3-million ounces of silver, a 1% increase on that of the second quarter and a 5% year-on-year increase. Silver-equivalent production rose to 73-million ounces, up 14% quarter-on-quarter and 41% year-on-year.
All-in sustaining costs (AISC) for each silver-equivalent ounce increased to $19.93, from $19.42 in the second quarter and $14.01 in the same quarter of 2020.
“During the quarter, we also invested in two two significant capital projects at Jerritt Canyon, which temporarily increased our all-in sustaining costs at the site. With the majority of these investments now complete, we expect a reduction in costs starting in the fourth quarter driven by higher production, reduced capital costs and continued improvements in operating efficiencies," said Neumeyer.
At San Dimas, AISC costs decreased by 19% to $11.58/oz owing to higher production and higher consumption rates of low-cost energy from our hydro dam when compared to diesel or grid power. At Santa Elena, the mill is preparing to begin test batching low-grade stockpiles from the Ermitaño deposit which is expected to further drive down costs and increase overall production.
The company declared its third quarter dividend which was also impacted by the lower quarterly revenues. However, Neumeyer said that the upcoming future quarter dividends were expected to increase as the large inventory was divested.