Despite Challenges, First Majestic Silver Delivers Solid 1Q21

First Majestic Silver announced its 1Q22 operating and financial results, showing that the company was able to deliver a strong quarter despite encountering many challenges. Additionally, First Majestic announced its plans to deal with inflationary cost pressures and revealed its priorities for the remainder of 2022.

During 1Q22, the company produced 2.6Moz of silver and 58,891oz of gold, displaying a 59 percent increase compared to 1Q21’s production. The rise was mainly due to the acquisition of the Jerritt Canyon mine and the start of production at the Ermitaño mine. Although the company delivered a strong production quarter compared to 4Q21, output decreased by 16 percent primarily due to rising COVID-19 infections, which led to absences and fewer tons of ore processed.In addition, the company explained that the spread of COVID-19 as well as the inflationary cost pressures generated a cash cost of US$14.94/AgEq oz during 1Q22, higher than the US$12.32/AgEq oz in 1Q21. The company emphasized that in order to be less affected by inflationary cost pressures, it is carrying out cost reduction initiatives across all its assets to reduce expenses for production, capital and care, as well as and maintain corporate and holding costs. Additionally, First Majestic announced that it will prioritize projects in Jerritt Canyon to reduce costs and improve production rates.

“In the first quarter, we faced a number of obstacles and challenges that were outside of our usual control. Not only was Mexico hit hard by the Omicron COVID-19 variant, which significantly reduced personnel and production rates across our operations, we experienced increasing inflationary cost pressure across the operating portfolio for reagents and consumables such as diesel, cyanide and grinding media. However, cost-cutting measures are underway across the company to improve profitability and help reduce further impacts to the business,” said  stated Keith Neumeyer, President and CEO, First Majestic.

First Majestic is a silver-gold producer in Mexico and the US. Its assets are the San Dimas Silver-Gold Mine, the Jerritt Canyon Gold Mine, the Santa Elena Silver-Gold Mine and the La Encantada Silver Mine. Previously, First Majestic was a company focused solely on Mexico, but  it decided to diversify after a prolonged tax dispute with Mexico’s Tax Administration Office (SAT).

In Sept. 2020, First Majestic explained that the Federal Court ordered the annulment of the Advance Price Agreement (APA), which since 2012 has allowed First Majestic to pay taxes at a lower rate in Mexico. However, SAT claims that the Canadian company owes a debt of at least US$180.3 million due to missing taxes from 2010 to 2018, reported La Jornada. Consequently, the company started  legal proceedings against the Mexican government.