First Majestic Silver (TSX: FR) appears to be all but abandoning its Jerritt Canyon Gold Mine in Nevada. The firm this evening indicated that it is reducing investments and suspending mining activities at the mine in an effort to reduce overall costs.
Acquired in 2021 from Sprott Mining, First Majestic paid $470 million for the asset in the form of shares, plus an additional 5 million common share purchase warrants. The underground mine has been attempted to be ran at a rate of 3,000 tpd as a means of reaching the point of free cash flow, however the firm failed to reach that level at a steady rate.
In halting activity at the mine, the company credited contractor inefficiencies, high costs, inflation, low head grades and extreme weather events as reasons for the firm failing to meet its target.
“While mining activities have temporarily stopped, processing of the remaining surface stockpiles will occur for the next couple of months. 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,” commented Keith Neumeyer, CEO of First Majestic in conjunction with the closure.
A workforce reduction will be made in conjunction with the suspension of mining activities, although specific layoff figures were not provided.
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In making the announcement, the firm suspended 2023 guidance for the mine, while guidance for the firms Mexican operations are slated to be released in July.
Jerritt Canyon accounted for 21% of revenue for the company in 2022, producing 72,483 ounces during the fiscal year. Cash costs of production however came in at $2,323 per ounce for the year, while all-in sustaining costs amounted to $2,745 per ounce. The fourth quarter saw even worse operating results for the mine, with cash costs hitting $2,519 per ounce, and all-in sustaining costs coming in at $2,865 per ounce.
Previously issued guidance for 2023 suggested the mine would produce 119,000 to 133,000 ounces of gold at a cash cost of between $1,502 and $1,592 per ounce, while all-in sustaining costs were slated to be between $1,733 and $1,842 per ounce.
First Majestic last traded at $10.18 on the TSX.
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