The silver market continues to be a white knuckle ride with volatility being the watch word of the day. The oscillations can be gut-wrenching as we have warned about many times. However, if you have the stomach for it the silver space can be profitable for you. As regular readers will know, our philosophy has been to acquire physical silver as a top priority, followed by a small section of good quality mining shares and finally for those of a more adventurous nature a well thought out strategy in the options sector can give your portfolio a boost.
Today, however, we are looking at one of those quality silver producers and for disclosure purposes we do own it. We tracked First Majestic Corporation (AG) for a long time before finally making a purchase February 2011 for an average price of $13.13. The stock has traded both higher and lower since we bought it, but our intention was to hold it for the long term. Today it is trading at $22.27 which is a paper profit of 72.12%, putting a smile on our faces.
Latest Comments from AG
So today we were in touch with Todd Anthony MBA, Investments Relationships Manager for AG regarding their latest achievement and this is what he had to say:
"We are very pleased with the quarterly production results in Q3'12 with total silver production breaking through the 2M ounce mark for the first time. Del Toro (the Bull) is sharpening its horns for initial production to commence in the latter half of Q4'12. This operation will double the size of the Company and it's very possible we could see a re-rating in the stock in the near future. By 2014, silver production is estimated to be approximately 16M ounces at which time First Majestic will have achieved its current goal of becoming a senior silver producer."
This is an aggressive move on their part; however, with the possibility of producing 16M of silver by 2014 is a mouthwatering prospect so we can see why this deal was so attractive to them.
The following is an excerpt from the news release:
First Majestic Silver Corporation is pleased to announce that total production at its four operating mines in Mexico for the third quarter ending September 30, 2012, reached 2,438,085 equivalent ounces of silver, representing a 36% increase compared to the same quarter in 2011. Total silver production for the quarter consisted of 2,205,237 ounces of silver, representing a 29% increase compared to the same quarter in 2011. In addition, 3,307,944 pounds of lead and 844,953 pounds of zinc were produced representing increases of 75% and 100%, respectively, compared to the same quarter in the previous year. Also, 1,537 ounces of gold was produced, representing an increase of 276% compared to the third quarter of 2011.
Keith Neumeyer, CEO and President of First Majestic, states, "I would like to congratulate the entire First Majestic team for their efforts at reaching the milestone of producing over 2 million ounces of pure silver for the first time in the Company's history in a single quarter. With the additional production from La Guitarra, total silver production grew well past the 2 million ounce mark. Over the next several quarters as Del Toro begins to ramp up production and La Guitarra is further expanded, we can envision attaining the next major milestone of producing 3 million ounces of pure silver per quarter."
Background to First Majestic
First Majestic Silver Corp. is committed to building a senior Silver producing mining company based on an aggressive development and acquisition plan with a focus on Mexico. The Company presently owns and operates four producing silver mines in Mexico; the La Parrilla Silver Mine, the San Martin Silver Mine, the La Encantada Silver Mine, and the La Guitarra Silver Mine. Production from these four mines is anticipated to be between 9.2 to 9.5 million ounces of silver equivalents or 8.4 to 8.7 million ounces of pure silver in 2012. The target being to hit a major milestone of producing 3 million ounces of pure silver per quarter.
Updated construction photos from Del Toro
First Majestic Chart:
As we can see it has been a roller coaster ride for AG as the underlying asset continues to be extremely volatile. Expect this volatility to continue and the fortunes of AG to oscillate accordingly.
Below is a table of the opinions of 10 analysts, as of today it stands at 4 Buys and 6 Holds, 0 Sells.
There are now a great number of mining companies positioning themselves in the silver space in an attempt attract your hard earned cash, a few of which will be successful, but many of them will fall by the wayside. In our humble opinion this is a stock that is worth your consideration. As always do your own due diligence, don't just take our word for it. Also remember that we do not have the resources to cover every silver producer out there and therefore we can only short list and place on the 'watch list' those companies who we think have a chance of becoming profitable investments some down the road.
First Majestic Corporation has a market capitalization of $2.63 billion, a P/E ratio of 23.47, a 52 week trading range of $12.12 to $23.95, an EPS of $0.97, with an average volume of around 800 thousand shares traded per day and trades in Toronto under the symbol of FR and on the NYSE under the symbol of AG. It closed today at $22.77.
Have a good one.
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Disclosure: I am long AG.