First Majestic Silver (NYSE:AG) Files Mixed Shelf for SHTF or Acquisition
Hey ya'll,
Its been a while since I dropped into SSG so I wanted to update you on First Majestic Silver. For those that follow, I've been invested with them when S*** first hit the fan in 2012, and have been actively taking positions in the company since 2015. Periodically, I would update SSG on the company with relevant information.
Quick bullet points before the news and projections on First Majestic:
- They are a Canadian headquartered Silver miner operating exclusively in Mexico.
- They purchased a major project, San Dimas, earlier this year from Primero.
- San Dimas can operate in a low silver price environment. The All-in sustaining costs (AISC) for this mine is $5.41 per ounce providing a nice cushion if the price dips.
- Other mines in the portfolio operate in the AISC range of $7-$24 per ounce.
The News:
- First Majestic announced their production numbers for Q3, and they look good. They produced a record 6.7 Million ounces of Silver Equiv.
- First Majestic Announced they filed for a Mix-Shelf of 300 million U.S. dollars.
My Take:
A mixed shelf is an offering that can be exercised quickly to raise cash under Canadian law. The filing for a mixed shelf is a strong signal of two possibilities for the company.
- First majestic is preparing for further dips in the price of silver. The mixed shelf will be a tool on the table if they need cash quickly.
- First majestic is preparing for a quiet takeover of another distressed miner.
I'm not sure which is the real reason, but I'd bet on lower silver prices. FM recently closed one of their high cost mines, La Guitarra, and I'd put money up that they were prepping to close two more in the near future. If the mines are operating at AISC over 20 dollars, they are losing money big time. I believe the next mine to close is Del Toro.
Does this hurt the company? Well not exactly. Shedding mines in a low silver price environment is prudent. To the long-term shareholder, your Return on capital takes a hit, but your Reserves (the future earning potential) are preserved, and your margins/earnings on a per share basis will increase. Now wall street isn't going to like this. They are quarterly earnings driven.
The bottom line:
I'm staying invested, but not adding to any position until things become a bit more certain. The silver price very well could be smacked lower, even under 12 dollars an ounce.
Cheers ya'll!
-Phaup Metals
https://PhaupMetals.com
