What happened
After acquiring the Jerritt Canyon Gold Mine nearly two years ago, First Majestic Silver (AG 3.44%), a leading precious metals producer, has decided that the asset is not proving as profitable as management had first expected. Consequently, the company has decided to temporarily suspend mining operations at Jerritt Canyon.
Investors are not happy with the news, and as of 10:50 a.m ET, shares of First Majestic Silver have fallen 24.3%.
So what
After the market closed yesterday, First Majestic Silver announced that effective immediately, it's temporarily suspending mining activity and reducing the workforce at Jerritt Canyon. While the company had aspired to achieve a feed rate of 3,000 metric tons per day at the processing plant -- a rate that would help the company generate free cash flow at the asset -- the company has consistently faced challenges in meeting this target.
According to First Majestic Silver, a variety of factors have contributed to the company failing to achieve an adequate feed rate, including "contractor inefficiencies and high costs, inflationary cost pressures, lower than expected head grades and multiple extreme weather events affecting northern Nevada, which have compounded conditions and caused material headwinds for the operation."
Despite the suspension of mining activity, First Majestic Silver plans on processing about 45,000 metric tons of stockpiles through the processing plant as well as continuing exploration activities.
Now what
Although investors are disappointed with the news regarding Jerritt Canyon, it's important to recognize that this isn't the company's sole asset, and it remains one of the leading silver stocks available to investors. Potential investors, therefore, will likely want to see what the company provides in the way of updated mineral production guidance.
