First Majestic Silver Corp. Price & Performance (AG)

And the disclosure on non IFRS measures in our most recently filed MASSIMS as well as the risk factors set out in our most recently filed annual information form. As a reminder, these documents along with all of our continuous disclosure documents are available under the company's profiles on both CDOT plus and on EDGAR. Investors are cautioned against distributing undue certainty or reliance on any forward looking statements made during today's call. And the company does not intend or assume any obligation to update these forward looking statements or information Other than as required by law, With that, I will turn the call back to Keith.

Thanks, Sameer. In addition to Sameer and myself, Keith Newmar, CEO, Founder on the phone today, we have Daniel Kaffaji, who is our VP, Corporate Development Steve Holmes, who are our Chief Operating Officer also have Del Rey and then Joel felt to think to think Sargent online as well who run IR. So just getting into the quarter, nice to see the stock up today. For those out there who've been monitoring the shares. Obviously, we created quite a liquidity event for Gato's shareholders. They went from a very illiquid stock to obviously quite a liquid vehicle that trades tens of millions of shares a day. And I think it's created a situation where some investors have decided to pare down their positions unfortunately. And it's put some undue pressure on First and Jackal. [indiscernible] has created our underperformance over the last couple of weeks since closing. It does take time to get through that. And I think that unusually site today or unusually in the future when we get our Q1 numbers out, which will be pretty fantastic, including the Westcathouse transaction and your Q2 will be a full full quarter of all mines producing It will be pretty interesting 2025.

As the year evolves. But just focusing on the news release and then Q4 and 2024, We had record cash flow in Q4. I going to go through the usuals and read it all out to you for $68,000,000 and our cash flow pretty significant amazing safety record, all time low, reportable loss incidences, We met our 2024 guidance. 21,700,000 ounces of silver equivalent production. At all in sustaining First of 2,111. We had record production in Santelena for the first time ever breaking through 10,000,000 ounces of production. Which is really nice to see. It got close in 2023, but in 2024, it actually broke through 10,000,000 ounces, which is obviously a pretty good situation. Ended the year with a very, very strong cash balance of $3.00 $8,000,000 and then $364,000,000 in liquidity. That does not include Galos by the way, just for those there if you're wondering, that number will be reduced obviously as a result of our end of Q1 but we're in a very, very strong cash position very strong balance sheet, which is very nice to see. Cash costs were down by 8%. Compared to Q1 versus Q4. Share buyback program has been in place in the news release did show we bought back 50,000 shares, but that was only just basically First in December.

That share buyback program has continued through January and into February, and we expect to continue that program. These share prices pretty ridiculous in our opinion anyway. So we'll continue continue that program. We have the Navadad announced and the Sandimus announcements that have come out over the last few months. Regarding our exploration programs, both of those operations, Navadad being a those who don't know, but discoveries continue at Santelina, which is obviously a pretty nice situation. And we look at Los Gatos as almost a look alike asset the scaffolding 103,000 hectares in size and and Santelane being 102,000 hectares in size, these are two very large chunk land packages that have exploration upside that is hard to measure. It's both of these operations have mine lives currently of close to ten years and it's a nice place to be to have three assets including Sandin and have long mine lives and We don't have to be concerned about all well. We're minor, so we're always concerned about finding more ounces. But it's nice to have three solid assets in our portfolio. The mint has done well. We had a great Q4. The mint, as you can see, unusually today, over $9,000,000 in revenue from the Mint, those are profit allowances.

Which is fun and neat part of our business and something that is growing. And something that we're looking to extend going forward, Our production increase we put our guidance out, so you can see in our guidance that we're guiding around $29,000,000 that's the midpoint for 2025 silver equivalent.

About 53% of that percent is silver. About 30% some odd percent is gold. And the rest is in the form of lead and zinc.

And costs are looking to improve as well. We've got a very, very large exploration program planned for 2025. We got close to our target in 2024. I think we had a a plan of doing about 220,000 meters in 2024. We got about 180,000 completed, which is Nice. We'll be updating our our AIS in March, which will show the changes in resources, which I'm looking forward to seeing. But in 2025, we're actually planning to drill about 270,000 meters of drilling. It's a pretty darn big program.

And then of course, a big focus for the next several months is integrating Gatos. We went from 4,100 employees to 5,300 employees. There are a lot of similarities in what we do, but there's also some differences. And these synergies or these whole merger does take time, different technologies have to merge together and it does take time. There's cost effectiveness and that will occur as well in a variety of different departments and so we're looking to take advantage of some of the synergies to bring our costs down. Throughout the business and we're looking forward to working on that over the next couple of quarters and plans in place to do exactly thing. So look forward to good news going forward on the Gaffus acquisition. And that's really it for me. So why don't we go to questions if there are any?

Thank you, Keith. We will now proceed to the question and answer session.

And your first question today will come from Heiko Yle with H. C. Wainwright. Please go ahead.

Hey, Derek. Thanks for taking my questions and I see the stock a little bit green today.

So good to see.

Looking back at the cost guidance that was published last week, you've got properties, Latin equipment, sustaining capital at $51,000,000 The peso is obviously at 20.4% as of this morning when I wrote this up. That got me thinking what kind of long term rate even past 2025 an inflation factor is built into all of this. And more generally, what are you seeing with pricing for equipment down in Mexico? And maybe building on all of that, what are you seeing in regards to inflation in general? Well, thanks, Tycho. And I nice hearing from you and thanks for having the question for us. I'm going to pass that question on to Steve. Okay.

Thanks, Keith.

So right now, our guidance for next year we're using a 19.5 to one ratio on the peso. So we're in good shape there. As far as inflation factors, what we're seeing is about a 4% to 4.5% we've worked pretty hard on our programs to offset that inflation rate and the impact of the of the peso from last year. [indiscernible] We don't anticipate seeing any unusual inflation that might come from say government policy applications north of the border and those types of things. But that's that's the basis for our guidance.

Fair enough.

And then completely different question. Can you provide some color on your longer term margin expectations for the first First I mean, I assume the scale is reasonably well because at some point all the equipment is there.

And you're putting in silver at X and selling it at whatever 1.5 times the X. But I mean, can you maybe just provide some color on what you think you'll see maybe later this year and that's even if you have thought that far ahead. Well, regarding the mint, capital is still being spent up until really September, October of twenty twenty four. So we were still purchasing machines and I wouldn't say it was really up and running until really September, October, We had our inaugural celebration where everyone showed up and officially cut the ribbon and so on in September. So it has been operating since March and we've First we've been hiring people putting the right people in place and it's going it's a young business. The business is actually can only reach its one year anniversary next month. So it's hard to expect to see [indiscernible] such a new business. But it is doing quite well.

Where our ounces are generally being sold for about $3 a a spot. So we do have a cost of those ounces. We have to get them up It's our ounces coming from San Dimas that go through Asahi for refining, which has small costs there. And then those 1,000 ounce commercial bars armored card up to Las Vegas into the Mint. Where they get converted into a variety of different products and sold into the market place between $3 to $5 cost above spot depending on the different some products are produced with limited quantities, like the Trump borrowers only, I think we only produced 2,400 of them. Seventeen seventy six barrels, we only produced seventeen seventy six of them So those types of special runs, we charge $5 per spot and they sell quite well. [indiscernible] came out, the Dragon came out a couple of months ago, a little bit late, in the year. We worked on AquaWise some time unfortunately, but it finally came out. And there's no limited run on that one. We'll just keep making them as they sell. But it's selling quite well. The Buffalo has come along quite nicely as well and there's a couple of other products So we have three additional products that will be released in 2025.

We got about Let me think about 5% of our total overall production through the Mint in 2024, showing with those types of margins. Our goal in 2025 is to get 10% of our total production through the Mint and and we hope to continually grow that year after year. Fair enough. Yeah, I was on the website site earlier today and they do a great job displaying the Freedom Bar and the twentieth anniversary rooms being almost sold out. So that's pretty cool. Anyways, I'll get back in queue. Thanks for taking my questions. And your next question today comes from Charles Ottumman with Scotiabank.

Please go ahead. Thanks for taking my question. Hi, Manny and Tien.

I'm just asking here on behalf of all these. I think to make first question there would be how should we wait production and CapEx between the first half and second half of the year? Are you expecting it to be flattish, say for the closing of the Gatos acquisition? I know that supposed to impact production at CLG, but beyond that, should we expect like a flattish production I had a hard time understanding the question. Manny, do you want to jump on that one?

Yes, we're looking here. Yes, Chris, maybe just or sorry Charles, repeat the question if you don't mind.

We didn't hear it clearly. Okay. Very sure. I'm asking how do you expect production and CapEx to shake off in the first half and the second half of the year? Would it be flat or expecting I am second half of first half.

Yes. So it'll be relatively consistent. So H1 versus H2. Gasos is coming in early enough in the year, Jan sixteen, so we don't have a lot of a lot of delays integrating it.

So it's going to be relatively consistent Just generally in Q4, our exploration programs, that's the down. So you'll probably see a bit of a drop off in Q4 from exploration program. But for the most part, it's relatively consistent year over year.

Okay. Thank you. I'm just sticking with exploration here. Could you explain could you provide some details around what type of exploration work is being done at Jared Canyon?

Yes. So we have 18,000 meter program at Jared's it's really going to go back and target some of the targets that we were hoping to get in 2024, but we weren't able to First due to delays in permits and the underperformance of the contractor. So we're getting ahead of that getting set up just in time to really kick it off right on time. It's got to be it's really Greenfields exploration targeting areas that hasn't been explored before.

We have received affirmments at the end of twenty twenty three that really haven't in areas that hasn't been explored. So that's going to be the focus in 2025 is go back and test those targets.

Okay. And just on free cash flow, I mean, it's good to see the company generated about record free cash flow in Q4. And I think just based on our estimates and what the current spot price is saying, we should expect this to continue. So how should we think about your capital allocation priorities on a moving forward basis here?

I'll defer to Keith on the capital allocation. I know there's a lot of discussions internally, but we just thought our focus is obviously strengthening the balance sheet, but I'll turn it to Keith on that one. Yes, we put our budget out already on our expected capital expenditures for 2025. And I don't expect that's going to change. I think we are exploration program is already pretty aggressive. Our development program is also pretty aggressive. I'd really like to see treasury growth Any extra capital that we're producing that we're going to be gaining throughout the year I want to see gold go into the treasury and if we end the year with $500,000,000 in cash, in the treasury, I think that's a pretty good place to be. I can see that happening. Okay. Thank you. That's all for me. Okay. Thank you.

Your next question today will come from Don DeMarco with National Bank. Please go ahead.

Thank you, operator, and Keith, congratulations. A strong quarter, positive free cash flow. And that gas is acquisition, I mean, the price of silver is higher, notably higher since the deal. So the outlook for silver remains bullish. When you look at the The remaining single asset silver names out there What are your strategies at this point with regard to M and A?

Well, you guys are pretty close to the market and [indiscernible] We know all the players. We just had our board meeting or our quarterly board meeting First over the last couple of days. We've got a list of companies that we follow our due diligence team is made up of a handful of people that just follow the space and we gobble up all the news Different companies split out and we absorb it all and put it all in in Excel worksheets and we analyze everything and [indiscernible] rate everything and But we just bought Gatos, First? It's the largest transaction ever in history the company. They're basically $1,000,000,000 transaction. It's going to take a couple of quarters to get it fully integrated into the business. There's a lot of work to do there. So So I'd rather our team because some of the integration team is some of the same team that's doing the the pardon me, some of the M and A team, pardon me, some of the same team that's doing the integration. So So I'd rather our team focus on integration right now than worrying about other M and A. But there are names out there and we always got our eyes open, but it takes through the tango.

We're not in any rush to do it on the deal tomorrow.

Okay. Thanks for that, Keith. Well, that's all for me. And good luck with Q1. Thanks a lot, Todd. Your next question today will come from Chris Ewing, Private Investor.

Congratulations on your good work here in your purchase of Gattels. I was just wondering what silver price do you think that we will need till we get positive per share earnings in a follow-up question, would you ever consider in the future maybe when we get in a good place with these different assets integrated in the First Majestic maybe looking at dividends for shareholders in the future.

Thank you.

Well, the company already pays dividend. You should know that we do that. It was announced in the today's news release that the Board approved the dividend payment, That dividend has been paid, I think, for over two years. I actually forget what when we actually started it. When it comes to earnings, there's so much noise about earnings. Like we put out EBITDA we put out our cash flow, we put out our mine operating earnings All those numbers are positive. When it comes to bottom line earnings, like when you actually see on the bottom line a negative number, unfortunately, there's just so much stuff that goes into that. And the biggest issue for us It is the currency fluctuations. We have Under IFRS, we have to carry this very, very large tax liability and it's in Mexican pesos. And every single quarter, the next [indiscernible] and it can change the bottom line earnings number by significant amounts. [indiscernible] it is a little bit crazy, it's hard for investors to understand that and they look at it as a loss. Yes, but it's a movement in the value of the assets that are on our balance sheet. So we have something in the order US150 million dollars worth of pesos sitting on our book and those pesos are used to run the business.

And because we report in U. S. Dollars, those pesos move around and then it creates a loss or a gain. And it can be quite different from one quarter to another. And it does create a ton of confusion. The audit committee has this discussion with our auditors who are Deloitte on a regular basis on what we can do about this. And there's really nothing we can do. It's just the fact of running foreign business in Mexico which is a volatile currency and reporting U. S. Dollars. And it's just a lot of our money, half of our money is US dollars, half of our money pesos well, we've got Canadian dollars of course, we've got euros of course as well. But nevertheless, it's the pace that really drives [indiscernible] Profit on loss number. I'm not sure, Mandy, if you want to jump in and comment any further.

No, that's pretty much it. It's really the tax the tax losses pool that creates basically what's called a deferred income tax on our balance sheet and that gets revalued every quarter So when the peso weakens, it's great for us because it reduces our costs.

So you'll start seeing our cash First all in sustaining and all that coming down.

But the flip side is the balance sheet gets revalued and it triggers a non cash foreign exchange loss and that ends up hitting the P and L Unfortunately, in this case, put us in a negative But to your earlier points, what silver prices needed for positive earnings, I do think we're trend continues with gas coming in, we'll have no problem really showing continuous improvement quarter over quarter and yes, be on the lookout for Q1 and Q2.

Thank you very much. Appreciate your time.

I will now pass the floor over to Mr. Daryl Ray in Investor Relations at First Majestic Silver First take us through the questions that have been submitted today through the webcast.

Thanks, Nick. So we have a couple Keith, to wrap up. And we'll get more questions from the line if there are any. But might wrap with these. So Keith, what are your insights on how the current political landscape in Mexico might influence First Majestic Silver's operations and market position.

Yes. I think going back a couple of years, I think we were pretty negative on what was going on in Mexico. The previous government was just really not helpful. A lot of headline news, a lot of lot of rhetoric that was hitting the newspapers and very much just anti foreign investment. Not so much mining per se, Mind you, he was talking about increasing taxes for miners and they did slowdown the permitting process and and so on was frustrated many mining companies and but it was just basically a very kind of totalitarian and kind of anti business type environment in Mexico for the last five years, which is quite unusual because when we put the company together twenty one years ago, back was a pretty friendly place to be as a Canadian company. And we're able to build the business quite quickly, just because of the regulatory environment in Mexico over that fifteen year period and until this newer government came in, So now twenty one years in, we've got a new government. Schalbom, Claudia Schalbom, she seems to be pretty open much more pragmatic, much more business oriented, saying a lot of the right things, It's only been a couple of months, so it's hard to really point at any major events that or positive events that could be affecting the mining sector.

And I can tell the people who are listening today that there are permits that have been granted Several mining companies have received permits over the last month. For a variety of different projects and we're in line for a couple of permits as well, which are being told we're going to be getting as well. So the environment looks like it's changed a lot. So we're crossing our fingers that what we're hearing or what we're thinking is actually real and this current Mexican government is open for business and open for foreign investment. And we did make a decision to buy Gatos for a reason. We're We've got four producing mines in Mexico and then we've got 5,300 employees in the country. We've got a big stake in the country and obviously as positive we are about what what the future is for Mexico I don't think we had done the GATOS transaction.

There's one more question here. We're getting a few, but I'll put them all together. But one is your general thoughts with gold hitting all time highs we'll still catch up on that.

Can talk about this forever, Keith. But a little bit of outlook on the silver prices and what might happen in the medium term Yes.

Well, I get criticized constantly my triple digit silver call. So even recently, I just saw it somehow.

Throw some mud my way, but yes, it's look, I'm a big supply demand fundamentalist and I think that supply demand for silver is is at a point where we're in multiple year deficits and there's no reason why silver prices should not go higher. It's just a matter of time and there is obviously a lot of there is a huge paper derivative market that drives the price, which drives me crazy and drives a lot of other silver bulls crazy as well. These are the biggest banks in the world who have huge paper contracts in place that seem to be in the way of allowing silver to move to the price that it should be at and not that I don't like $33 silver, it's not a bad place to be. If you look at our lifetime, so there's only been over $30 three times in my life. And it's been over $30 for a good a good part of 2024. And is holding ground quite nicely and gold continually is seems to continue to want to drive higher. So, it's just silver will break out and when it does, it's going to rattle these banks, I'm sure, who have received paper contracts.

But that's just the way the market works. And once we get through this 35%, 38% range, I think are the two biggest resistant levels, You will slice through 40 and through 50 pretty quickly and I think it's going to be on its way to triple digits. And is it going to happen in 2025? Well, I don't have a crystal ball, but It's something we're going to we're going to see and I don't think it's that far away. Okay. That was the final question from the webcast. Back to you, Nick.

Showing no further audio questions, this will conclude our question and answer session. I would like to turn the conference back over to Keith for any closing remarks.

Well, thank you, everyone, for joining us today and obviously this has been recorded and will be available on the website if later in their free time. But for those who are online, thanks a lot for joining us today. If there are any further questions or comments, please contact any of our staff. You probably all know Manny or or Darryl or Joel, just any three of them always available to chat with. So and we'll see you at the PDAC for those of you calling from Toronto.