Point Roberts, WA and Delta, BC - May 28, 2020 (Investorideas.com Newswire) Investor Ideas, a global investor news source covering mining and metals stocks releases a sector snapshot on silver stocks featuring First Majestic Silver Corp. (NYSE: AG) (TSX: FR.TO).
Silver stocks have been making headlines with some significant single day runs in the double digits. On May 15th Motley Fool reported, "Shares of silver miner Coeur Mining (NYSE:CDE) were higher by 19% at 2 p.m. EDT. Following close behind were mining peers First Majestic Silver (NYSE: AG) (TSX: FR.TO), Pan American Silver (NASDAQ:PAAS) (TSX: PAAS.TO), up 10%, 11%, respectively."
Continued: "Silvercorp Metals (TSX: SVM.TO) also jumped, peaking at a gain of 10% before pulling back into the high single digits."
But this is not a one day wonder when you look at some of the recent trends and performances.
Looking at the why, some key points noted by First Majestic Silver Corp. (NYSE: AG) (TSX: FR.TO) in their most recent investor presentation; "Over the past 10 years, the silver industry has been in a 500M ounce physical deficit, and the current silver to gold mine supply ratio is 8:1."
Another key trend driving silver that fits into the growing ESG investing movement; First Majestic Silver notes that, "As we go green we need more silver."
Key highlights included:
Revenues generated in the first quarter totaled $86.1 million compared to $86.8 million in the first quarter of 2019. Due to the volatile decline in silver and gold prices near the end of the quarter, the Company decided to withhold pricing on approximately 292,000 ounces of shipped silver and 700 ounces of shipped gold and retained those ounces in its finished goods inventory. Had these ounces been sold at the end of the quarter, it would have contributed an additional $5.3 million to revenues based on spot metal prices.
The Company reported mine operating earnings of $21.1 million compared to $10.3 million in the first quarter of 2019. The increase in mine operating earnings in the quarter was attributed to a 10% increase in average realized silver price and lower cost of sales and depletion, depreciation and amortization due to the temporary suspension of lower margin mines.
From the news release - "As the COVID-19 pandemic sparked higher than normal volatility in the metals market near the end of the quarter, we temporarily suspended our silver and gold sales as paper prices dropped significantly below true physical prices," stated Keith Neumeyer, President and CEO of First Majestic. "These inventoried ounces have been carried over into the second quarter and will be sold as prices improve. Nevertheless, strong production from each of our three mines generated operating earnings of $21.1 million, representing a 106% increase over the same quarter of 2019."
Looking at the company’s recent earnings report, Zacks Research said, "Shares of the company have gained 45.4% over the past year, outperforming the industry’s growth of 15.5%."
Continued: "First Majestic reported mine-operating earnings of $21.1 million in the March-end quarter compared with the year-ago quarter’s $10.3 million. This upside resulted from a 10% increase in average realized silver price and lower cost of sales and depletion, depreciation and amortization due to the temporary suspension of lower margin mines."
From the news release: "Despite the extended shut-down during the three months ended March 31, 2020 ("Q4 Fiscal 2020") due to COVID-19, the Company was able to achieve full year production target, surpassing its Fiscal 2020 guidance. As reported in the Company’s news release dated May 7, 2020, the Company’s operations were ramped up to full capacity in March 2020 with no employee infection and the Company is in full compliance with government measures to prevent spread of COVID-19."
Following the earnings report, Zacks Research noted, "Silvercorp (SVM) came out with quarterly earnings of $0.02 per share, beating the Zacks Consensus Estimate of a loss of $0.01 per share. This compares to earnings of $0.03 per share a year ago. These figures are adjusted for non-recurring items."
"This quarterly report represents an earnings surprise of 300%. A quarter ago, it was expected that this mineral miner would post earnings of $0.06 per share when it actually produced earnings of $0.04, delivering a surprise of -33.33%."
"The COVID-19 pandemic escalated quickly over Q1 2020. Pan American took immediate steps to protect the health and safety of our people, and mobilized our business continuity plans. We are also providing support to our local communities during this very difficult time. In addition to our existing community programs, we are donating $2 million in food and hygiene supplies, as well as facilitating access to health care," said Michael Steinmann, President and Chief Executive Officer.
Added Mr. Steinmann: "Cash flow generation of $114.1 million in Q1 reflects the Company's strong operating performance before the impact of the COVID-19 related mine suspensions. However, earnings in the period were significantly impacted by non-cash, mark-to-market investment losses and non-cash tax expense due to COVID-19 related currency devaluations. We have a strong balance sheet with approximately $479 million of total available liquidity, and we have taken steps to defer or reduce non-essential expenditures to preserve our financial strength. Many of the temporary COVID-19 related suspensions are now being lifted, and we are preparing to restart those operations. Profit margins should benefit from the improvement in gold prices combined with lower costs due to currency devaluations in our operating jurisdictions."
Also realizing the importance of attracting ESG investor acceptance and participation, in their May 8th sustainability report, Pan American Silver (NASDAQ:PAAS) (TSX: PAAS.TO), announced, "ESG Call - Save the Date: Pan American is planning to host a call to discuss its sustainability strategy and practices, including its performance on ESG factors. The call is scheduled for September 14, 2020."
Coeur Mining (NYSE:CDE) announced its responsibility report at the end of April noting, "We strive to integrate our ESG principles at every level of our business – from our Board of Directors to our frontline employees and contractors," said Mitchell J. Krebs, President and Chief Executive Officer."Publishing our Responsibility Report validates our goal of increased transparency and accountability for our sustainability objectives. It is imperative that we uphold our core values of Protecting our people, places and planet, Developing quality resources, growth and plans, and Delivering impactful results through teamwork. We plan to continue aligning our goals of maximizing long-term stakeholder value with our strategy of safely and responsibly discovering, developing and operating a balanced portfolio of quality precious metals assets."
Looking at the future of silver miners and mining and metals stocks in general, adopting an ESG policy might invite a whole new generation of investors to the sector.
Blackrock set the bar for ESG standards for the sector and now reports, "Companies with strong profiles on material sustainability issues have potential to outperform those with poor profiles. In particular, we believe companies managed with a focus on sustainability should be better positioned versus their less sustainable peers to weather adverse conditions while still benefiting from positive market environments."
First Majestic Silver Corp. (NYSE: AG) (TSX: FR.TO), in addition to building out revenue and profitability for its shareholders, also recognizes the importance of ESG to its investors. "One of our core values-and a key building block of First Majestic’s vision-is to work towards sustainability through exceptional corporate citizenship. We know that operational excellence goes beyond the return to our shareholders; it considers the well-being of our employees and their families, the communities where we work and the impact on our environment while respecting the fundamental human rights, cultures, customs and values of our employees and communities. First Majestic is committed to socially responsible mining: working safely, ethically and with integrity, taking responsibility for our impacts on the environment and the communities where we operate, and contributing to local sustainable development. We recognize that integrating responsible practices into our management systems and standards across the Company is essential to ensure the long-term prosperity of our business."
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