FR: Poised to Post Aggressive EPS Numbers

Morgan Report/Silver Investor (12/23/2009)
"First Majestic has three producing mines: La Encantada, La Parrilla, and San Martin, and another two advanced-stage silver projects—the Del Toro and the recently acquired Real de Catorce. The company is on pace to produce about 4.3 million ounces of silver equivalent in 2009. That in itself is an important fact, as it clearly sets the company apart from its peer group in terms of production growth to date.

In our opinion, within its peer group the company has the most impressive growth profile. La Encantada has now become the flagship project, at least for some time going forward. Expansion should take production at this one mine to over 4 million oz of silver in 2010, which would roughly equal production for the whole company in 2009. Moreover, it should reduce production costs by shifting the end product from concentrate to doré bars. According to the company this should shave off $3/oz in smelting costs for all silver produced at this mine. That amounts to $12+ million in savings, which should become all profit to the company.

. . .There are two points of note here:
  1. First Majestic appears to have reached the stage where it can finance its operations, including expansions and organic growth from cash flow. This should curb further shareholder dilution. . .
  2. The company is turning profitable on an earnings basis and poised to post aggressive EPS numbers going forward.
These two factors put the company in a very good position and, dare we say it, a very attractive acquisition target.

. . .First Majestic is undervalued, and that fact was not lost on investors. . .the thing we like is the massive volume of shares bought this year, particularly in the last two months. It appears to us that there is heavy accumulation of shares in the company. Someone out there likes the prospects of First Majestic, and so do we."

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