Blackmont Analyst: First Majestic's Expansion Should Double Production

Blackmont raised its target price for First Majestic Silver Corp. (FRMSF.PK) from C$8.50 to C$8.75 as the miner received the final permit to build a large expansion at its La Encantada mine in Mexico, which should more than double its production capacity by 2010.

Construction of the new 3,500 tonne per day cyanidation circuit is expected to start immediately and be completed by February 2009. It will allow for the processing of both a mixture of ore and tailings, raising production to 4 million an ounce per year by 2010, from an estimated 1.65 million an ounce in 2008.

"This stock remains one of our top picks in the entire precious metals sector and we maintain our Buy recommendation," wrote Blackmont Capital analyst Richard Gray.

He qualified the stock as highly attractive because it is currently trading at a significant discount to peers and is also a highly attractive takeout target for companies looking to ramp up production.

Due to low historical recoveries for the last 30 years using a flotation circuit, the Encantada mine had accumulated a large stockpile of tailings. The new cyanidation circuit will allow for a refining of those tailings with an average grade of 150 g/t., in combination with fresh ore from the mine.

Comments

[Dean Plassaras:]

First Majestic looks like a good value.

2008 Jun 18 05:03 PM