First Majestic Silver Corp. (AG) Earnings Call Transcript & Summary

Thank you for standing by. This is the conference operator. Welcome to the First Majestic Silver Second Quarter Production Results and H2 2024 Guidance Conference Call. [Operator Instructions] The conference is being recorded. [Operator Instructions]. I would now like to turn the conference over to Mr. Keith Neumeyer, President and Chief Executive Officer of First Majestic. Keith, please go ahead.

Thank you, operator, and welcome, everyone, to our midyear conference call, which we do every July and I'm surrounded by a number of our key staff today here in Vancouver. I just want to quickly go through the names of each individual. We have Samir Patel, who's our General Counsel and Corporate Secretary. We also have David Soares, our CFO, Chief Financial Officer. We also have Mani Alkhafaji, VP, Corporate Development and Investor Relations. We also have James Dickson, Director of Finance; [indiscernible], Investor Relations Manager; Joel Faltinsky, Investor Relations Analyst; Mark Carruthers, Manager Private Client Services, Corporate Relevant. And online, we're happy to have Steve Holmes, who's dialed in from far. He's actually at our San Dimas mine in Mexico joining us today. Before I get into the call, I'm just going to transfer over to Samir. Go ahead, Samir.

Before we begin today's call, I would like to remind you that we will be referring to certain non-IFRS measures and making certain statements regarding First Majestic Silver and its operations that constitute forward-looking statements in accordance with applicable Canadian and U.S. securities laws. All statements that are not historical facts such as statements regarding future estimates and plans or expectations of future performance constitute forward-looking statements that reflect the company's current views with respect to future events. These statements are necessarily based upon a number of assumptions and estimates that are considered reasonable by the company, are inherently subject to significant business, economic, competitive, political and social uncertainties and contingencies. We encourage you to refer to the cautionary language included in our news release that was disseminated earlier this morning and the disclosure on non-IFRS measures in our most recently filed management's discussion and analysis, as well as the risk factors set out in our most recently filed annual information form. As a reminder, these documents, along with all of our continuous disclosure documents are available on SEDAR+ and on EDGAR. Investors are cautioned against attributing undue certainty or reliance on any forward-looking statements made during today's call, and the company does not intend or assume any obligation to update these forward-looking statements or information, other than as required by law. With that, I will turn the call back to Keith.

Thank you, Samir. I'm sure everyone online has seen our news release that was put out earlier this morning. Just as a headline, we produced 5.3 million silver equivalent ounces, of which 2.1 million ounces was silver and just under 40,000 ounces of gold and we also updated our guidance for the balance of the year. Some highlights that you may not have noticed, due to the increased metal prices, we've decided to increase our CapEx slightly by 9%. We've increased our development expenses by 11%, primarily at San Dimas by adding 3 kilometers of additional development. We've also increased our exploration as well, primarily at San Dimas by going from 95,000 meters there to 115,000 meters. Nice increase in exploration at San Dimas. We also just started on the exploration front at Jerritt Canyon this week. We've got 3 rigs being [indiscernible] deployed, which was in our original forecast anyway. So I just wanted to add that for people who wanted to have questions regarding Jerritt Canyon. Our production and our guidance. Silver is up by 1%. Gold is down a little bit due to grade. So we reduced our gold guidance by 3%, mostly San Dimas related. If you look at H2 only, because we only did put out the consolidated guidance, you'll see an improvement on silver production of 26% and an improvement in gold production of 7%. So H2 is looking to be quite a robust half of the year compared to H1. La Encantada. We have a 38% increase in silver production in La Encantada and we're expecting a 26% increase in silver equivalent production at San Dimas, and that's going to be very heavily weighted in Q4. There is a slight increase in cost on a consolidated basis, about 3% cash cost and 4% all-in sustaining costs. But if you isolate out H2 on its own, you'll see a drop in cost at La Encantada by 16%, which is obviously nice to see. We were affected by the peso. We did guide in our January guidance of 18.25:1 against the U.S. dollar for the peso. The peso average is 17.09 for H1, which is much stronger than what we anticipated, and that did affect us by over $10 million for H1. We're hoping to see the peso weaken in H2 once the new government takes over, but we are obviously uncertain. We continually guide the peso at 18.25. And that's really it for my notes. So if we open the call up to questions, we would be happy to answer any questions that may come in.

[Operator Instructions] First question is from Don DeMarco with National Bank Financial.

Thank you for taking my call, operator. Keith and Steve, really strong performance out of Santa Elena. Great to see that continue in the second half. Looking at good grades and throughput, but can you comment on the recoveries? I know you had the [indiscernible] system installed there. Any read-through to kind of get the recoveries trending back up again to contribute a little bit more?

Well, thanks, Don, and I'm glad you're able to join us today. The recoveries you're probably referring to are related to the silver recoveries, I'm assuming. Gold recoveries have been quite stable. But the [indiscernible] ore is -- the silver is not as recoverable as the Santa Elena ore. So you're probably used to seeing this silver recoveries at Santa Elena in the low 90s. And because the [indiscernible] ore is very heavy gold and somewhat lower grade silver, the recoveries are just simply lower on the silver. But the grade there is -- it's a lot of gold is coming out of that area. I'm not sure if that answers your question.

Yes, that answers my question. That's good to hear, looking at the silver in particular, although it is fairly gold weighted. And so looking at San Dimas, I mean if you get San Dimas lined up, then you kind of have this all 3 assets firing together. Looks like grades have been trending a little bit lower. Can you tell us -- can you give a little bit more color on the outlook or some of the challenges behind the lower grade?

Well, it's a transition now. San Dimas is going through a transition right now. We're going -- the primary production was really from the vein called Jessica. And that's -- we're dealing with mother nature, of course, right? So we're -- Jessica was a very robust, very large structure. It's been our primary feed for the mill for 5 years. And that vein is now coming to end of its life, and we're moving into a variety of other veins. Exploration is going extremely well, as you know by our previous announcement about a month ago on San Dimas, but we are not projecting higher grades at San Dimas at least for another couple of quarters. So look for similar grades that you've seen in this quarter. It's really a throughput issue. We still have some challenging issues on site with the union workforce, and we're working diligently to resolve that problem. We need to get more ore into the mill, and that's really what the biggest challenge is. It's not so much grade.

[Operator Instructions] While we wait for others to join, I'd like to pass the floor over to Mr. [indiscernible], Manager of Investor Relations at First Majestic Silver to take us through questions that have been submitted through the webcast.