First Majestic Silver (FR.TO) announced today it has decided to temporarily suspend all mining operations and lower its workforce at Jerritt Canyon Mine. This mine generated about 21% of First Majestic’s 2022 revenue.
The decision to halt mining activities is in sync with First Majestic’s aim to produce profitable ounces across all businesses.
The Company acquired Jerritt Canyon in 2021 and attempted to raise underground mining rates to sustainably feed the processing plant at a minimum of 3,000 tpd to generate cash flow. Unfortunately, mining rates remained below the target and cash costs per ounce remained high. Contractor inefficiencies, high costs, inflationary cost pressures, and extreme weather all played a role.
The remaining surface stockpiles will be processed over the next few months even though mining operations are being ceased. First Majestic will keep exploring near-mine and potential regional greenfield targets to expand Jerritt Canyon’s resources and potentially improve the economics for the eventual restart of operations. The company expects to continue the exploration activities throughout 2023.
During the suspension, First Majestic intends to explore new regional finds, and increase known reserves and resources. It plans to further analyze the optimization of bulk mining and cost-effective mining techniques.
First Majestic appeared like it confirmed a double bottom pattern with a breakout above $9.00 and the stock climbing above $10. But today’s news saw the stock gap down hard. At time of writing, First Majestic is down over 25%.
From a technical perspective, First Majestic is in danger of confirming a close below major support at $8.00. A breakdown is likely to be in play.
To come up with the next targets, we need to zoom out to the weekly timeframe. If we look at this timeframe, the recent upwards move just looks like a dead cat bounce in a downtrend. The next support comes in at $6.00.
The price of silver recently had a strong bounce at the important $20.50 support zone. However, resistance comes in above around the $23 zone. As long as silver remains below this price level, more lows are still in play. This could also lead to weakness on First Majestic and other silver stocks.
