Some folks, somewhere, clearly opted to sell some shares of First Majestic Silver (NYSE:AG) Tuesday morning. After the fast-growing silver miner released fourth-quarter and year-end 2012 earnings, the stock dipped by nearly 5% early in the session.
I don't know who they are, so I can't ask them what they were thinking. But let me try anyway (just in case): "Hey, all you traders out there who sold shares of First Majestic Silver Tuesday morning... What in the world were you thinking?"
Of all the bizarre and inexplicable price actions I've witnessed over the years within the highly volatile world of precious-metal miners, this egregious follow-on selling pressure heaped upon the shares of First Majestic Silver Tuesday morning takes at least a slice of the proverbial cake. But, if their short-sighted flight yields a more attractive entry point for long-term-minded Fools, then I welcome the market's occasional gift of a truly irrational share valuation.
First Majestic grew production by 20% in 2012 to yield 9.1 million silver-equivalent ounces, and defended its consolidated cost structure very effectively with speedy improvements to its recently acquired La Guitarra mine. In fact, the company performed an extraordinary feat by keeping its per-tonne costs even with the prior-year -- despite dramatic industrywide cost pressures -- at a peer-leading level of $28.50 per tonne!
While absorbing a 12% decline in the average realized price for silver, this top-notch mine operator managed to sustain exceptional bottom-line profitability with a net profit margin of 36% for the year! Let me convey this another way: First Majestic Silver and Pan American Silver (NASDAQ:PAAS) recorded nearly identical 2012 net income ($88.9 million and $87.5 million, respectively), yet Pan American required 3.75 times as much revenue to achieve that result. Silver Wheaton (NYSE:SLW) will always remain the most profitable name in silver on the basis of net profit margin, but where the miners are concerned, First Majestic enjoys a phenomenal track record of ensuring that major growth initiatives translate efficiently to the shareholder's bottom line. Plenty of now-ousted gold mining CEOs might have done well to learn a thing or two from the silver-studded dream team of First Majestic CEO Keith Neumeyer and COO Ramón Dávila.
With the newly completed Del Toro mine now embarking upon the silver industry's most exciting mine ramp-up -- and expansion projects nearing completion at both La Guitarra and San Martin -- First Majestic expects to deliver astonishing production growth of 35%-43% during 2013 alone (with further expansion to come during 2014!). I visited several of the company's operations for myself late last year, and observed firsthand just how beautifully positioned this company is to become the next household name among the senior miners of silver. Endeavour Silver (NYSE:EXK) and Alexco Resource (NYSEMKT:AXU) likewise top my current list of the clearest bargains in silver with the lowest downside risk, and First Majestic Silver makes that a powerful silver mining trio to consider amid the rubble of a dramatic sell-off for the industry at large.