First Majestic Silver: A Mexican silver producer with a bright future

First Majestic Silver is a Mexican silver producer with five operating mines, two development properties and several exploration properties. Since it began operating its first mine in 2004 the company, which is focused entirely on Mexico, has achieved impressive growth through the acquisition of mature but abandoned or under-capitalized properties.

The 8.3 million ounces of silver produced in 2012 is expected to jump to between 11.1 and 11.7 million ounces this year, and by the end of 2014 the company is aiming for annualized production of 16 million ounces. In 2012 First Majestic maintained its low cash cost of $9.08 per ounce of silver giving it an operating margin of $22.02.

Thanks to its focus on keeping operating costs low and the increase in production (particularly from its Del Toro mine), revenue is expected to increase by 50% from $402 million in 2013 to $592 million in 2014.

Not only has the company ramped up production, it has also been pursuing an aggressive exploration program which has increased its proven and probable reserves from 23 million ounces in 2007 to 88 million today.

First Majestic has a net profit margin of 42.2% and a ROE (return on equity) of 28.5%. In addition, the company has $94.6 million in working capital (current assets minus current liabilities), $70.9 million in cash, and earnings (net income) of $103.6 million.

Importantly however, the company does not produce these impressive results at the expense of the environment or local communities, in fact, First Majestic prides itself on operating as a part of the community. Not only is the manager of each of its mines a Mexican national, but the company also builds irrigation and sewage treatment facilities, creates education initiatives, donates computer equipment, endows scholarships, provides sports facilities and generally brings opportunity to all the areas in which it operates.

As a result of this approach the company has won the Socially Responsible Business Award for the past five years, something which has allowed them to avoid the costly protests and other entanglements that have affected its rivals.

It is easy to see why First Majestic is a favorite among many mining analysts, and thanks to a production profile that consists of 91% silver (9% gold, lead and zinc), the company provides a pure play on higher silver prices.

The company also sells coins, medallions and bullion from its bullion store.

Company data

Company Name First Majestic Silver Corp.
Website www.firstmajestic.com
Exchange / Ticker TSE:FR & NYSE:AG
Share Price CAD$ 12.16
1 Year Performance -19.4%
10 Year Performance +4,442%
Dividend Yield n/a
Market Cap 1,395.65M
Shares Outstanding 116.99M
Earnings per Share (EPS) 0.79
P/E Ratio 15.14
Beta 1.10
52 Week Range 11.06 – 24.18

Source: Google Finance

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