With the price of gold hitting historic highs, it is natural to wonder if silver has also seen significant price appreciation. Sadly, for silver mining companies like First Majestic Silver (NYSE:AG), the answer is…not so much. Perhaps if the spot price of silver were higher, First Majestic would be profitable and a more attractive mining stock for investors. Neither of those things is accurate, and the company appears lackluster. There are other more appealing options for investors interested in mining stocks.
Silver Mining and Mint Operation
First Majestic Silver is a mining company focusing on producing, developing, exploring, and acquiring primarily silver mineral properties. It has full ownership of three productive mines: the San Dimas Silver/Gold Mine, the Santa Elena Silver/Gold Mine, and the La Encantada Silver Mine, located in different parts of México. These mines have a daily throughput capacity ranging from 2,500 to 4,000 tonnes per day.
The company’s growth strategy focuses on increasing production and developing its core assets (e.g., mining more). The company is also diversifying its operations with the launch of its own minting facility, First Mint, which recently began selling eco-friendly, investment-grade silver bullion made in Nevada. The mint plans to expand its operation to meet the demand for its products, including ‘First Strike’ collectible bars and one-ounce rounds for investors and collectors.
Due to its unique chemical composition, silver surpasses other metals in electrical and thermal conductivity. Key sectors using silver extensively include electric vehicles (EVs), solar panel installations, and 5G/mobile phone technology, with EVs using almost double the amount compared to internal combustion engines. According to The Silver Institute, industrial demand for silver is forecasted to increase by 8% and reach a record 632 million ounces this year. However, that demand may not be enough to move the spot price of silver substantially in the near future.
First Majestic Silver’s Recent Financial Results
First Majestic Silver recently reported its financial results for the latest quarter, ending December 31, 2023. The company posted revenue of $136.36 million and a net profit of $10.23 million, reflecting a year-over-year decline of 8% and 18%, respectively.
For the full year 2023, the company produced 26.9 million silver equivalent ounces (AgEq) and realized an average silver price of $23.29 per payable ounce. It registered annual revenues of $573.8 million, a decline from the previous year’s top line of $624.2 million. The decrease in revenue was primarily due to the temporary suspension of mining operations at Jerritt Canyon in March 2023.
Furthermore, First Majestic Silver reported a net loss of $135.1 million for 2023, compared to a net loss of $114.3 million in 2022. This higher loss was primarily due to an impairment charge of $125.2 million associated with the suspension of the Jerritt Canyon mine.
As of year-end, the company’s cash and cash equivalents and restricted cash balance stood at $251.2 million.
Is AG Stock a Buy, Hold, or Sell?
AG stock has been declining over the past three years, trending down over 50%, though it has shown some signs of life, recently climbing over 59% in the past month. It is trading at the high end of the 52-week price range of $4.17-$8.07 and demonstrates positive price momentum trading above the 20-day (5.70) and 50-day (5.35) moving averages.
Analysts following the stock have taken a wait-and-see stance. Based on the recommendations of six Wall Street analysts, the company is rated a Hold. The average price target for AG stock of $5.87 reflects 21.73% downside from current levels.
Silver Lining?
First Majestic’s latest financial report presents an intriguing picture of the challenges and opportunities in the silver mining industry. Despite reasonable production figures and a profitable average spot price for silver, the company still posted a loss.
However, First Majestic Silver is not standing still. There is still hope for the company with strategies to increase production, develop core assets, and diversify operations through its new minting facility. However, until real signs of progress are evidenced in the bottom line, investors are best holding off on this one.
