First Majestic Set for 32M Silver Eq. Ounces in 2025 After Gatos Boost

Key Concepts

• Gato Silver Acquisition: First Majestic Silver's acquisition of Gato Silver, significantly increasing its silver production.
• Silver Price Surge: The recent and projected increase in silver prices, reaching near $50 USD per ounce and beyond.
• Triple-Digit Silver Prediction: Keith Neumier's long-standing prediction of silver prices reaching over $100 USD per ounce.
• Silver as a Critical Metal: The recognition of silver's importance in industrial applications and its inclusion on the US critical minerals list.
• Silver Deficit: The ongoing imbalance between silver supply and demand, leading to multiple years of deficits.
• Gold-Silver Ratio: The relationship between gold and silver prices, with a historical average around 60:1 and a current ratio of approximately 80:1.
• Mexican Mining Environment: The positive shift in the Mexican administration's approach to mining permits and foreign investment.
• Investor Appetite for Silver: The increasing interest and positive sentiment from investors towards the silver sector.

First Majestic Silver's Performance and Outlook Amidst Rising Silver Prices

This summary details the insights from an interview with Keith Neumier, President and CEO of First Majestic Silver, at the 2025 National Bank of Canada Capital Markets CEO Mining Conference. The discussion focuses on the impact of the Gato Silver acquisition, the current and projected silver market dynamics, and First Majestic's strategic plans.

Impact of Gato Silver Acquisition and Current Performance

• Strategic Timing: The acquisition of Gato Silver, completed at the beginning of the year, is highlighted as having "perfect timing" due to the subsequent surge in silver prices.
• Production Increase: The Gato Silver acquisition added approximately one-third to First Majestic's production portfolio.
• Projected Production: The company expects to produce around 32 million silver equivalent ounces in 2025, with Gato Silver being a significant contributor.
• Enhanced Margins and Cash Flow: The high silver price environment is generating attractive margins and exceeding initial cash flow projections.
• Shareholder Returns: First Majestic's dividend policy is to return 1% of revenues to shareholders. With increased cash flow, dividends are expected to increase, though this is still under determination.
• Stock Buybacks: The company has been actively buying back its stock, with recent activity as of the interview.
• Strongest Balance Sheet: Neumier states that First Majestic currently possesses its strongest balance sheet in the company's history, a result of 22 years of operation and strategic management.

Future Plans and Capital Allocation

• Increased Exploration Budget: With anticipated continued high silver prices into 2026, First Majestic plans to increase its exploration budget. Detailed guidance for 2026 will be released in January.
• Mill Expansions: Minor mill expansions are planned for the Santa Elena and La Encantada mines in 2026. The focus is on increasing Santa Elena's capacity to 3,500 tons per day and then to 4,000 tons per day.
• Capital Investment: The company is evaluating whether to bring forward sustaining capital investments due to increased capital availability, with mill expansions being a key priority.

Silver Price Predictions and Market Dynamics

• Triple-Digit Silver Thesis: Neumier reiterates his long-held belief that silver prices will reach triple digits ($100+ USD per ounce). He is "more bullish than ever" on this prediction, which he first articulated in 2012.
• Projected Price Trajectory: He anticipates new highs for silver in 2025 and again in 2026, with the triple-digit prediction potentially occurring around 2030, though acknowledging the unpredictability of metal prices.
• Supply-Demand Fundamentals: The strong supply-demand fundamentals in silver are cited as the primary driver for higher metal prices.
• Impact of High Silver Prices on the Sector:
  • Increased M&A Activity: Higher silver prices are expected to stimulate mergers and acquisitions within the silver sector.
  • Junior Financing: Junior exploration companies are likely to see improved financing opportunities, enabling them to develop their assets. First Majestic actively monitors these developments for future acquisition potential.
  • Financial Possibilities: Higher silver prices are opening up diverse financing options for companies, not just large ones but also juniors.
• Inflation-Adjusted Highs: While silver has hit historical nominal highs, Neumier believes it needs to reach $60-$65 USD per ounce on an inflation-adjusted basis to surpass its all-time high. He expresses no doubt that this level will be reached, potentially by the end of the current year or next year.
• Gold-Silver Ratio:
  • Current Ratio: The current gold-silver ratio is approximately 80:1, which is about 30% higher than the historical average of around 60:1.
  • Historical Context: In 2011, the ratio reached 30:1 when silver neared $50 and gold was at $1900.
  • Expected Convergence: Neumier expects the ratio to return to its historical average of 7:1, based on the mining ratio (7 ounces of silver mined for every 1 ounce of gold). He believes silver has outperformed gold marginally this year and expects this trend to continue in a bull market.

Silver's Critical Mineral Status and Demand Drivers

• US Critical Minerals List: The addition of silver to the US critical minerals list is seen as a significant signal of its importance.
• Industrial Demand: Silver is a critical metal with no replacement and is essential in numerous industrial applications, accounting for 70% of its consumption.
• Tight Market and Deficits: The silver market is described as "very, very tight" with multiple years of deficits (five years currently).
• Magnitude of Deficit: To meet the current five-year deficit, the equivalent of ten First Majestic companies would need to be created, highlighting the scale of the supply-demand imbalance.
• Nuclear Power Demand: The increasing demand for nuclear power, exemplified by Westinghouse's agreement to build 30 nuclear plants, is a significant potential driver for silver demand. Each plant is estimated to contain 5 million ounces of silver, though this requires further research.
• Need for Higher Prices: Higher silver prices are necessary to incentivize the mining sector to increase production and address the deficits.

Growth Opportunities and Acquisition Strategy

• Acquisition-Driven Growth: First Majestic has historically grown through acquisitions, having purchased and operated numerous mines over 22 years.
• Future Acquisitions: The company continues to actively search globally for the next acquisition, but the timing and success depend on identifying suitable assets.
• Focus on Production-Ready Assets: First Majestic's strategy is to acquire assets that are either in production or nearing production, as finding unpermitted assets is not their preferred approach.
• Junior Exploration Watch: The company closely monitors the progress of junior silver exploration companies for potential future opportunities.

Mexican Mining Environment

• Positive Shift: The current Mexican administration, led by Claudia Sheinbaum, is perceived as "very pro-business, pro-foreign investment, and pro-mining."
• Permitting Trends: Dozens of permits have been issued by the Mexican government in the last six months, a significant change from the prior administration. This indicates that open-pit mines are permissible, as demonstrated by Silver Tiger receiving its permits.
• Mexico as a Mining Hub: Mexico is returning to its roots as a mining hub, offering a favorable environment with skilled workforces and a mining culture.

Investor Sentiment and Expectations

• Silver as a Buzz: Silver has become a "buzz" in the investment community, leading to positive sentiment and "happy people" among investors and shareholders.
• Rising Expectations: Investors have high expectations in a rising market, with some predicting silver prices of $80 USD per ounce by the end of the year. This is compared to the speculative targets seen in other markets like Bitcoin.
• Human Nature: The tendency for people to set lofty targets in booming markets is acknowledged as human nature.

Outlook for First Majestic Silver in 2026

• Continued Cash Flow Generation: First Majestic anticipates further strong cash flow generation in 2026, building on the nearly $100 million in free cash flow generated in Q3 2025.
• Guidance Release: Detailed guidance for 2026 will be released in January.
• Financial Strength: Even if metal prices remain at current levels, the company is projected to end 2026 with approximately $1 billion in cash.
• Turnaround: This financial position represents a significant turnaround from a few years prior.

Conclusion

First Majestic Silver is experiencing a highly successful period, driven by the strategic acquisition of Gato Silver and the unprecedented surge in silver prices. The company is well-positioned to capitalize on the strong market fundamentals, with plans for increased exploration, mill expansions, and continued shareholder returns. The outlook for silver, supported by its critical mineral status, industrial demand, and ongoing deficits, remains exceptionally positive, with predictions of triple-digit prices and a return to historical gold-silver ratios. The improved mining environment in Mexico further enhances First Majestic's operational prospects. Investors are showing strong appetite for the silver sector, reflecting the company's robust financial performance and promising future.