E First Majestic Silver: After A Tough 2017- Cautiously Bullish

First Majestic Silver (AG) is a mining company focused on silver production in Mexico. It has been nearly a year since we checked in on the name. We like this miner because it is aggressively pursuing the development of its existing mineral property assets, and plans to ramp up production. First Majestic presently owns and operates six producing silver mines; the La Parrilla Silver Mine, the San Martin Silver Mine, the La Encantada Silver Mine, the La Guitarra Silver Mine, Del Toro Silver Mine and the Santa Elena Silver/Gold Mine. The purpose of the present column is to check in on the company’s performance, honing in on production and the finances of the company. Further, we will discuss our expectation for the company going forward.

Stock price action

The stock is, of course, correlated the price of precious metals, namely silver, however, operationally the stock has faced pressure due to operational weakness in 2017:

Source: Yahoo finance

As you can see, the stock has been under pressure for the last year. This is in large part due to some of the operational issues we have seen in 2017. Let us discuss.

Production numbers

Production was down year-over-year, but this was expected. Total production in 2017 was 16,207,905 silver equivalent ounces, in the mid-point of First Majestic’s guidance of 15.7 to 16.6 million silver equivalent ounces.

This represents a decrease of 13% compared to the previous year. The decrease in metal production can be attributed to lack of investment in underground development over the previous three years, which has had a direct impact on throughputs and grades.

Here is a key point. This trend is expected to begin to reverse as a result of 2017 and 2018 investments in development and exploration. The increase in development and exploration investments represent 43% over 2015 and 31% over 2016.

First Majestic produced 9.7 million ounces of silver in 2017, representing an 18% decrease compared to 11.9 million ounces produced in the previous year.  The decrease in production was primarily attributed to lower throughput as a result of lower head grades and some issues with workers.