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First Majestic Silver Corp. produced 7.7 million silver equivalent ounces in the second quarter, up 20% from the 2021 quarter.
Production included 2.8 million ounces of silver and 59,391 ounces of gold, with 18,632 of the gold ounces coming from Jerritt Canyon Mine north of Elko.
“In the second half of 2022, we anticipate a further 25% production increase in our total silver equivalent ounces. This increase is being propelled by significant growth at both the Santa Elena and Jerritt Canyon operations,” First Majestic’s president and chief executive officer, Keith Neumeyer, said in the July 20 production announcement.
He said in a July 21 conference call that he “expects 2023 to be exciting times for these two mines.”
“At Jerritt Canyon, we successfully restarted the West Generator Mine and expect to bring Saval II into production by October,” Neumeyer said. “These two mines, in addition to operational improvements at SSX, are expected to nearly double the amount of fresh ore to the plant, in addition to increasing the average head grades.”
Chief Operating Officer Steve Holmes said in a phone interview that the mine had been idle 17 years, and contractor Redpath won the bid to rehabilitate West Generator. The escapeway is full of rock, so that has to be cleaned up before actual mining can begin.
“We will probably start stripping ore next month,” he said.
There has been ore from West Generator already, but that was ore the contractor ran into while working on the mine, Holmes said, and mining cannot begin until the escapeway is ready.
Redpath won the bid for West Generator and for Saval II, and the contractor will be mining both mines, while Small Mine Development will continue mining at the Smith and SSX mines, he said.
Processing of lower grade ore continued from SSX in the quarter, which resulted in lower than planned ore grades processed in the plant, but the company stated that it expects gold grades to improve at SSX in the second half of the year as higher-grade ore pods are developed following recent exploration activities.
The company also said that the new ore feeds from West Generator and later from Saval II should increase the average head grade and nearly double the amount of fresh ore feed to the processing plant in the fourth quarter, while also reducing costs.
Holmes said in the conference call that West Generator and Saval II are expected to provide another 1,500 tons of ore per day to feed the processing plant, and the target for all of Jerritt Canyon is at least 3,000 tons per day. Jerritt Canyon production also comes from the Smith Mine, which has been connected underground to SSX.
He also said there is “tremendous exploration potential” between West Generator and the Murray Mine, another closed underground mine at Jerritt Canyon, and much of the 119 square miles of property has not been explored.
Gold production at Jerritt Canyon in the second quarter also was affected by a major failure in the oxygen plant to produce liquid oxygen that significantly reduced roasting capacity over a two-week period in May, Vancouver-based First Majestic reported.
Gold production from Jerritt Canyon for May and June of 2021 when First Majestic took over the mine totaled 18,762 ounces. Jerritt Canyon has been in operation since 1981 under several owners, and First Majestic acquired the property early in the second quarter of last year from Sprott Mining.
Neumeyer said that the improvements at Jerritt Canyon should reduce costs at the mine, and Holmes said in the call that the impact from inflation is felt most at Jerritt Canyon, compared with the mines in Mexico, because those mines have established contractors.
“The fixed cost structure at Jerritt Canyon is pretty high,” Holmes said, citing as an example increasing electricity costs from Nevada Power.
The outlook for the full year predicts all-in sustaining costs of between $1,739 and $1,861 per gold ounce at Jerritt Canyon and cost improvements in 2023.
Companywide, First Majestic’s silver equivalent production of 7.7 million ounces was up from 6.5 million silver equivalent ounces in the second quarter of 2021, primarily due to the acquisition of Jerritt Canyon and a successful ramp-up of the Ermitano Mine at Santa Elena in Mexico.
Strong ore production from Ermitano enabled Santa Elena to set an all-time new quarterly production record of 2.2 million gold equivalent ounces, and First Majestic said plans call for higher production rates from Ermitano in the second half of this year. Production from the Santa Elena complex is now estimated to be 28% higher this year at between 8.7 million and 9.2 million gold equivalent ounces.
Neumeyer said in the production call that Santa Elena is “just blooming away.”
First Majestic stated that construction of the natural gas power plant extension project and power line at Santa Elena continued tin the second quarter to provide low-cost, clean energy to the Ermitano Mine and the dual-circuit project at Santa Elena. The expanded power plant is expected to be in operation in the fourth quarter.
Santa Elena produced 384,953 ounces of silver and 22,309 ounces of gold in the second quarter, and the San Dimas gold and silver mine in Mexico produced nearly 1.53 million silver ounces and 18,354 gold ounces in the quarter. La Encantada Mine, also in Mexico, produced 863,510 silver ounces at 96 gold ounces.
First Majestic stated that the company is revising its production guidance for this year to reflect the increased production from Ermitano and improved milling efficiencies at Santa Elena, improved production and grades at Jerritt Canyon, and changes to metal price assumptions and production impacts from the first half of the year.
The company reported the silver price assumption for the second half of the year is now $20.50 per ounce, down from $22.50 per ounce, but the gold price assumption is still at $1,750 per ounce, resulting in an 85:1 silver to gold ratio.
The all-in sustaining costs are now forecast at $17.68 to $18.42 per silver equivalent ounce for all of 2022.
Production for 2022 is now expected to be 32.5 million to 34.6 million gold equivalent ounces, down slightly from between 32.5 and 35.8 million silver equivalent ounces announced earlier for this year. The new guidance includes 12.2 million to 13.5 million ounces of silver and 256,000 to 273,000 ounces of gold.
Jerritt Canyon is expected to produce between 96,000 and 103,000 ounces of gold in 2022, according to the guidance.
First Majestic also reported that 30 drill rigs were exploring in the second quarter, including 11 rigs at Jerritt Canyon.
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