Silver was touted a fair bit earlier this year as gold continued its slide, but now the silver camp is sobering up a bit too.
Silver has, thus far this year, fallen 23 percent against gold’s 15 percent drop, per Reuters. Indeed, First Majestic Silver Corp. (NYSE: AG) has reduced capital expenditure estimates for this year by 16 percent as a result of the sustained drop in silver prices.
The cuts mean a revision in figures from $192.3 million to $162.3 million. First Majestic’s mining operations are primarily focused in Mexico, but the company is based in Vancouver.
While the company’s future exploration and development prospects are now dampened somewhat, existing projects will continue as planned, though future reductions aren’t out of the question. Through 2013, First Majestic hopes to produce between 11.1 and 11.7 million ounces of silver.
Q1 profits were up slightly, leading net income to $26.5 million at 23 cents per basic share. Overall revenue was fairly healthy as well – up 16 percent, based on higher production overall, to $67.1 million.
Between January and March this year, silver’s dropped 7.8 percent from the same period a year earlier. Gold, over the same period, has dropped 3.5 percent.
Overall, the company cut worldwide exploration funding by between $12 and $12.5 million (a cut of 49 percent), while worldwide mine development took a 21 percent hit, decreasing by between $18 to $68.2 million. General construction and expansion was reduced by 16 percent, reports MiningWeekly.com.
Other Struggling Silver Miners
First Majestic isn’t alone in taking action as a consequence of silver’s decline. Pan American Silver Corp. (NASDAQ: PAAS) aims to curtail operating expenses, reduce green fields exploration projects, and generally improve efficiencies to reduce overheads. However, the company expects to sustain present production levels and meet projected goals.
Forbes quotes the company’s President and CEO, Geoff Burns:
“The majority of our capital this year is required to maintain our production levels at our current operations. Our goal is clear; to preserve our balance sheet strengths while at the same time not sacrificing our future production capabilities.”
Pan American’s overall earnings stood at $20.1 million. That’s a rather big decrease from figures from the same quarter a year ago, which put earnings at $50.2 million. Revenue was up 6 percent at $243 million, based largely on a general increase in sales of precious metals.
Production was up 14 percent over Q1 to 6.2 million ounces. Gold, over the same period, was up 65 percent at 32,100 ounces, though cash costs increased nearly 8 percent.
In yet another tale of concern, Silver Bear Resources Inc. (TSX: SBR) saw its stocks drop to levels that near 52-week lows. Silver Bear’s down to 18 cents, or a dip of 5 percent.
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To ease the pressure, the company is completing a private placement financing worth $3,000,000. 16,666,666 units will be involved, at $0.18 each. The proceeds from the deal will be applied toward financing the Mangazeisky Silver Project’s exploration program and feasibility study, as well as repayment of debt and boosting up the company’s working capital.
Fortunately, the company has good expectations for two other projects within the Mangazeisky area, and Silver Bear hopes for around 10 million ounces of high-grade near-surface indicated resources through the summer.
Silver Around the World
It looks like silver’s suffering from a dent all around. Last Friday, the price of Indian silver fell by 5.1 percent, and that of Chinese silver by 1.4 percent. Comparatively, the drop in U.S. silver prices was milder—just 0.8 percent.
Overall, though, U.S. production for silver was up by nearly 17 percent through February this year, according to the U.S. Geological Survey. Mines produced 2,957,868 troy ounces that month. Last year, production amounted to just 2,530,263 troy ounces.
For January and February this year, Nevada beat out all other states for silver production, with a total of 1,167,072 ounces. Comparatively, other states produced about 4,694,009 ounces.
As of yesterday, prices for spot silver were down to $22.60 per ounce in New York. That’s likely what made First Majestic take the decision to revise forecasts.
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