These Silver Miners Keep Improving Costs


Nov. 20 2020, Updated 12:36 p.m. ET

Cost reduction

In a commoditized business such as mining, cost efficiency differentiates miners (RING), and the companies’ earnings premiums over unit costs usually outperform over the longer-term.

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Cost improvement continues

Hecla Mining (HL) reported AISC (all-in sustaining costs) of $9.97 per ounce in 2Q17, an impressive improvement of 22.0% over the same quarter last year. Hecla has one of the lowest cost structures among the primary silver producers. A large part of HL’s cost improvement was due to the reduction of capital spending at its Lucky Friday mine after the #4 Shaft project was completed.

Prior to the strike at Lucky Friday, Hecla had guided for AISC of $11.50 for 2017. This guidance now stands as suspended due to the ongoing industrial action at its Lucky Friday mine.

First Majestic and Coeur

First Majestic Silver’s (AG) also disappointed in 2Q17. It achieved AISC of $14.58 per ounce of silver equivalent production in 2Q17—an increase of 19% quarter-over-quarter and 33% YoY (year-over-year). A lower production and an increase in sustaining capital expenditure led to this increase in costs during the quarter. To reflect lower production guidance and weaker cost performance YTD (year-to-date), First Majestic increased its 2017 AISC guidance from $11.96–$12.88 per ounce to $14.4–$15.5 per ounce.

Coeur Mining (CDE) has been a high-cost producer historically, compared with its major peers (SIL). But it has now shifted its focus toward cost discipline, as its costs in 2Q17 disappointed investors. It reported AISC of $17.64 per silver equivalent ounce in 2Q17—an 18% YoY rise and 17% QoQ rise.

Pan American and Tahoe

Pan American Silver (PAAS) reported another quarter of improved costs, with AISC of $10.73 per ounce in 2Q17. This represents a YoY improvement of 5.1% and is close to the company’s lower end of its previous guidance range for 2017. Notably, PAAS lowered its AISC guidance for 2017 from $11.50–$12.90 per ounce to $10.50-$11.50 per ounce.

Tahoe Resources (TAHO) reported AISC for silver of $10.01 per ounce in 2Q17, compared with $8.11 per ounce in 1Q17 and $11.31 in 2Q16. While its costs were higher than in 1Q17, they were still strong, demonstrating the high-quality of its mines. Tahoe had guidance for AISC of $9.50–$10.50 in 2017, which now stands suspended, given the uncertainty surrounding its Escobal mine.


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