First Majestic Silver Corp shares sank 23% to $7.87 on Tuesday after the silver and gold producer with operations in Mexico and the US announced that it is taking action to reduce overall costs by paring investments, as well as temporarily suspending all mining activities and reducing its workforce at the Jerritt Canyon Gold Mine in Nevada, effective immediately.
First Majestic said since acquiring the mine 22 months ago, its efforts to increased underground mining rates in order to sustainably feed the processing plant at a minimum of 3,000 tonnes per day in order to generate free cash flow have failed.
The company attributed the shortfall primarily to ongoing challenges such as contractor inefficiencies and high costs, inflationary cost pressures, lower than expected head grades and multiple extreme weather events affecting northern Nevada.
"The decision to temporarily suspend mining activities at Jerritt Canyon, which represented approximately 21% of the company's 2022 revenue, was driven by our goal to produce profitable ounces across the company," First Majestic Silver CEO Keith Neumeyer said in a statement.
“The company will continue exploring both near-mine and prospective regional ‘greenfield’ targets to grow Jerritt Canyon's resources, which we believe will significantly enhance the economics for the eventual restart of operations," he added.
First Majestic noted that planned exploration activities in 2023 will include:
- Exploring for new regional discoveries and expand current known reserves and resources;
- Analyzing the optimization of bulk mining and cost-effective mining methods;
- Conversion of inferred and indicated resources into measured resources;
- Reducing mining costs through adopting self-perform mining and improve contractor rates and terms and;
- Continue modernizing the processing plant to be able to better withstand severe weather conditions.
As well, the company said guidance for its Mexican operations remain current and a revised consolidated production and cost guidance, including capital investments, are expected to be published in July.
Contact Sean at sean@proactiveinvestors.com