First Majestic Silver Q1 2011: Firing on All Cylinders

| About: First Majestic (AG)

First Majestic Silver (NYSE:AG) published excellent figures on the first quarter. Let’s discuss the key points of the most recent earnings release.

First Majestic generated 55.3 million USD of revenues in the first quarter of 2011. This is a rise of 211% compared to the 17.7 million USD reported in the first quarter of 2010. It is 38% higher than in the fourth quarter of 2010. Obviously, First Majestic Silver was helped by a 95% rise of silver, as well as by a 13% rise of production.

First Majestic generated 34.4 million USD of operational cashflow (0.34 USD per share) in the first quarter of 2011, compared to 6.3 million USD (0.07 USD per share) for the first quarter of 2010, which is a huge rise of 407%.

The company also reported net earnings of 23.9 million USD in the first quarter of 2011, compared to net profits of 0.4 million USD in the first quarter of 2010 and net earnings of 13.7 million USD in the fourth quarter of 2010.

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It goes without saying that First Majestic Silver is following the right path. In the last quarter, the company clearly profited from the sharp rise in silver prices, while production levels remained stagnant compared to the last quarter, even with two important projects in the pipeline. The expansion of the La Parrilla project is right on track, and the mine development of Del Toro is advancing well.

Nonetheless, as the American dollar has depreciated significantly versus the Mexican peso, cash costs are rising. There is also some core inflation to be seen in material prices and energy costs are on the rise as well. Guidance for production figures remains unchanged, as well as guidance for cash costs, but we are likely to adapt our outlook after the second quarter.

We must admit that rising cash costs are being countered by a very aggressive growth strategy, in order to obtain higher output. Moreover, various economies of scale can be achieved from operations. The stock remains a must have on the long term and the recent weakness has made it interesting again to accumulate.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.