A Member of Pat McKeough’s Inner Circle recently asked for his advice on a miner focused on the acquisition, exploration, development, and production of silver and gold—primarily through its four producing underground mines in Mexico.
Pat likes the company’s huge revenue surge in the most recent quarter and its dramatic swing to profitability, all buoyed by its transformative Los Gatos acquisition, increased production, and exploration success. However, Pat notes that the firm’s growth by acquisition adds risk.
First Majestic Silver Corp. (Symbol AG on Toronto; www.firstmajestic.com) is a silver and gold producer with four operating mines in Mexico and several exploration and development properties in Mexico and the U.S.
The company’s four mines in Mexico are as follows: the San Dimas silver/sold mine, the Santa Elena silver/gold mine, the La Encantada silver mine and the Cerro Los Gatos underground silver mine in Chihuahua. It also owns the Jerritt Canyon gold project in northeastern Nevada.
First Majestic’s goal is to become the world’s largest primary silver producer. In January 2025, the company completed the acquisition of Vancouver-based Gatos Silver (symbol GATO on Toronto) for $970 million (all figures except share price and market cap in U.S. dollars) in stock.
Gato shareholders received 2.55 shares of First Majestic for each share they held in Gatos. First Majestic shareholders now own 62% of the combined entity, while Gatos shareholders own the rest.
The combined firms will produce between 30 million and 32 million ounces of silver equivalent (including gold) annually. That includes 15 million to 16 million ounces of silver. Gatos is expected to add $70 million in annual free cash flow.
Transformative acquisition boosts revenue and profitability
In the quarter ended June 30, 2025, First Majestic produced 3.7 million ounces of silver equivalent. That was up 75.9% from 2.1 million ounces a year earlier. Total silver production in the quarter included 1.5 million ounces of attributable silver production from Los Gatos. The company had strong results despite weather-related disruptions and power outages in the final days of June that impacted production at Los Gatos, San Dimas and La Encantada
First Majestic’s revenue in the latest quarter jumped 94.0%, to $264.2 million from $136.2 million a year earlier. The increase in revenue was driven by higher silver prices, as well as the much higher production.
Excluding one-time items, the company made $0.04 a share in the latest quarter. That’s compared to a loss of $0.07.
Growth by acquisition adds risk, especially with a purchase as big as Gatos Silver. However, First Majestic’s prospects for higher production and cash flow are positive.
Recommendation in Pat’s Inner Circle: First Majestic Silver Corp. is okay to hold.
