SilverCrest Mines (TSE:SVL)(NYSE MKT:SVLC) posted Thursday second quarter metals production that declined year-on-year and quarter-on-quarter as expected, weighed down by the challenges of transitioning its Santa Elena mine from an open pit to an underground operation. 

But the company, who first warned about the lower output last month, stood by its full year output forecast, saying the second half of 2014 is expected to bring significantly higher recoveries and full production through its new mill. 

"As expected, Santa Elena's second quarter production was lower than the first quarter of 2014 as a result of closing the open pit ahead of schedule, phasing out production from the heap leach operation and starting up the new processing facility," said president and COO, N. Eric Fier, referring to SilverCrest's new 3,000 tonnes per day (tpd) milling facility that began commissioning activities in May. 

"There are always challenges when transitioning from an open pit, heap leach operation to an underground mine and milling circuit, but we are fortunate to have dedicated commissioning and operating teams that have consistently delivered steady progress towards full mill and underground production.

"Our current focus is to continue to address commissioning issues as they arise to assure the nameplate design capacity of 3,000 tpd continuous throughput is achieved by early August." 

For the second quarter, silver equivalent production came to 412,700 ounces, down 38 percent from the year-ago period and 37 percent from 653,801 ounces in the first quarter.

The company said pure silver production dropped 11 percent year-over-year, while gold output fell 46 percent. Lower production was mainly due to the closure of the open pit in early April, three months ahead of schedule.

The new 3,000 tpd mill, which is still expected to reach nameplate capacity by next month, started up in May, and is currently running at about 2,130 tpd on a continuous basis, according to the Vancouver, British Columbia-based company's statement.

The $100 million expansion plan at Santa Elena has been three years in the making, and is now nearly complete. After reaching nameplate capacity at the plant, SilverCrest plans to begin testing up to 4,000 tpd, with no additional capital requirements expected. 

The precious metals miner's redevelopment program is aimed at doubling annual silver production rates at its flagship Santa Elena mine in Mexico, with expectations that the new 3,000 tpd facility should recover an average annual rate of 1.5 million ounces of silver and 32,800 ounces of gold over the current reserve. 

SilverCrest is expecting full year production of 3.3 to 3.6 million silver equivalent ounces, with production in the second half of the year expected to rise on the back of the new mill, once commissioning is complete and underground stope production is underway. 

The company said preliminary recovery estimates for the new mill indicate that design recoveries of 92 percent for gold and 67.5 percent for silver will be reached as the circuit hits its 3,000 tpd throughput rate.

Full second quarter results will be released on August 14, the precious metals miner said.