May 15, 2013 / 3:38 PM / 5 years ago

First Majestic cuts spending as silver prices fall

(Reuters) - Canada’s First Majestic Silver Corp FR.TO AG.N cut its 2013 capital expenditure estimate and warned of further cuts later this year as it looks to blunt the effects of falling prices of silver, sending its shares down to a two-year low.

Miners around the world have slashed spending in an effort to control runaway development budgets. The world’s No. 1 gold producer, Barrick Gold Corp ABX.TO, said in April it planned to further cut capital spending.

“If silver prices do not improve prior to the third quarter, further cuts in capital commitments will be made,” First Majestic said in a statement.

Silver prices have dropped 23 percent, while gold prices have fallen 15 percent this year.

Vancouver-based First Majestic cut its expenditure estimate by 16 percent to $162.3 million.

The company said the cut would not affect ongoing expansion projects, and backed its full-year production target of 11.1 million to 11.7 million silver ounces.

“We’re certainly not in panic mode,” said analyst Adam Graf of Cowen Securities.

Graf, who recommends buying precious metal stocks in the current environment, said miners are being conservative in their spending to counter any further drop in metal prices.

LACKLUSTER PROFIT

First Majestic reported a modest rise in first-quarter profit. Net income rose slightly to $26.5 million, or 23 cents per basic share, during the January-March quarter.

Revenue rose 16 percent to $67.1 million as production jumped 33 percent to 2.4 million ounces.

First Majestic, which operates five silver mines in Mexico, said average realized prices fell 10 percent to $29.63 per ounce. Silver prices fell about 8 percent in the quarter from a year earlier to average $30.08 per ounce.

Cash costs rose 6 percent to $9.49 per ounce.

Top U.S. silver miners Coeur d‘Alene Mines Corp CDE.N and Hecla Mining Co HL.N reported a fall in first-quarter profit last week due to lower silver prices.

First Majestic shares were down 8 percent at C$10.56 on the Toronto Stock Exchange on Wednesday. The company’s New York-listed shares fell 9 percent to $10.26.

Reporting by Krithika Krishnamurthy in Bangalore; Editing by Don Sebastian and Sriraj Kalluvila

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