After market closed, First Majestic Silver Corp (NYSE:AG) delivered a preliminary reserve & resource forecast and NI43-101 technical report for the La Guitarra mine. We rate First Majestic “Sector Perform” with a $7.00 12 months target price while risk assessment remains “High”.
The long-awaited technical report provides a comprehensive overview of the La Guitarra project that was originally acquired through the $175 million Silvermex transaction in July 2012. While prior operators had envisaged a combined OP & UG operation, First Majestic is planning only underground production targeting higher-grade Ag/Au zones.
Under the new seven-year mine plan, production is estimate at 520 tpd (190kt/yr) producing an average of 1.33 million oz Ag/yr with LoM avg grades of 226 g/t Ag (or 282 g/t Ag-eqv) with Ag recoveries of 85%. Production costs are forecasted at an average of $48/t with sustaining capex of $4.3 million /yr.
We have revised our financial model to incorporate the new mining parameters at La Guitarrra as outlined. The net effect of these changes sees a minor surge in our net asset value per share (to $3.85 versus $3.84 old). The La Guitarra project represents 10% of our net asset value.
Multiple contractions, commodity prices, technical and operational risks, and geopolitical risks are major risks to be considered while trading.