Title

Presentation

First Majestic Silver Corp. misses on earnings expectations. Reported EPS is $0.03 EPS, expectations were $0.05.

Operator: Thank you for standing by. This is the conference operator. Welcome to the First Majestic Silver 2024 Production and Results Financial Results and 2025 Guidance Conference Call. As a reminder, all participants are in a listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. Star and then zero. If you are participating through the webcast, you can submit a question in writing by using the form in the lower section of the webcast frame on your screen. I would now like to turn the conference over to Mr. Keith Neumeyer, President and Chief Executive Officer of First Majestic Silver. Keith, please go ahead.

Keith Neumeyer: Well, thank you, and welcome to everyone joining our call today to discuss the Q4 and year-end results and, of course, guidance as well, which was put out recently. Before I get into our discussion, we’re just gonna pass the call over to Sameer Patel, our general counsel, who will read our disclaimer. Thank you. Before we begin today’s call, I would like to remind you that we will be referring to certain non-IFRS measures, making certain statements regarding First Majestic’s operations that constitute forward-looking statements in accordance with applicable Canadian and US securities laws. All statements that are not historical facts, as statements regarding future estimates and plans, or expectations of future performance, constitute forward-looking statements that reflect the company’s current views with respect to future events.

These statements are necessarily based upon a number of assumptions and estimates that, while considered reasonable by the company, are inherently subject to a systematic of business, economic, competitive, political, and social uncertainties and contingencies. We encourage you to refer to the cautionary language included in our news release that was disseminated early this morning and the disclosure on non-IFRS measures in our most recently filed Management’s Discussion and Analysis, 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 SEDAR 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 statements or information other than as required by law. With that, I will turn the call back to Keith.

Keith Neumeyer: Thanks, Sameer. In addition to Sameer and myself, we have Daniel Kafaje, our VP of corporate development, Steve Holmes, our Chief Operating Officer, Del Rey, and Joel, who run IR. So just getting into the quarter. It’s nice to see the stock up today. For those out there who’ve been monitoring the shares, we created quite a liquidity event for Gatos shareholders, they went from a very illiquid stock to a liquid vehicle that trades tens of millions of shares a day. Some investors have decided to pare down their positions, unfortunately, and it’s put some undue pressure on First Majestic’s stock, creating our underperformance over the last couple of weeks since closing. It does take time to get through that, and I think that a news release today or in the future when we get actual numbers out, which will be pretty fantastic, including the Gatos transaction and Q2 will be a full quarter of all mines producing.

It’ll be pretty interesting in 2025 as the year evolves. But just focusing on the news release and Q4 and 2024, we had record cash flow in Q4. I’m not gonna go through the usuals and read it all out to you, but $68 million and then our cash flow was pretty significant, amazing safety record, all-time low reportable loss and incidents. We met our 2024 guidance, 21.7 million ounces of silver equivalent production at an all-in sustaining cost of $21.11. We had record production in Santa Elena for the first time ever breaking through 10 million ounces of production. It got close in 2023, but in 2024, it actually broke through 10 million ounces, which is obviously a pretty good situation. Ended the year with a very strong cash balance of $308 million and $364 million in liquidity.

That does not include Gatos, by the way. Just for those wondering, that number will be reduced obviously as a result of our end of Q1. But we’re in a very strong cash position, a 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, we did show that we bought back 50,000 shares, but that was only just basically in December. That share buyback program continued through January and into February, and we expect to continue that program. We have the Nevada announcement linked in the San Dimas announcements that have come out over the last few months regarding our exploration programs at both of those operations. Now with that being at Santa Elena, discoveries continue at Santa Elena, which is obviously a pretty nice situation.

We look at Los Gatos as almost a look-alike asset, Los Gatos being 103,000 hectares in size and Santa Elena being 102,000 hectares in size. These two very large chunky land packages that have exploration upside that is hard to measure. 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 San Dimas, to have long mine life. We don’t have to be 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 of the mint, as you can see unusually today. Over $9 million in revenue from the Mint. All those profit allowances, which is a 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 million, that’s the midpoint for 2025 and silver equivalent. About 53% of that is silver, about 30% is gold, and the rest is in the form of lead and zinc. And the costs are looking to improve as well. We’ve got a very large exploration program planned for 2025. We got close to our target in 2024. I think we had a plan of doing about 220,000 meters in 2024, we got about 180,000 completed, which is nice. We’ll be updating our AIS in March, which will show changes in resources, which I look 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. Now there are a lot of similarities in what we do, but there’s also some differences. And these synergies or this whole merger does take time, different technologies have to merge together and it does take time. There’s cost-effectiveness and that all occurs well in a variety of different departments and 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 with plans in place to do exactly that. So look forward to good news going forward on the Gatos acquisition.

And that’s really it for me. So, why don’t we go to questions if there are any?

Operator: Thank you, Keith. We will now open the call for questions. If you are participating through the webcast, you can submit a question in writing by using the form in the lower section of the webcast frame on your screen. Our first question comes from Heiko Ihle with H.C. Wainwright. Please go ahead.

Heiko Ihle: 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 property of Latin equipment, sustaining capital at $61 million. 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 exchange rate, even past 2025, an inflation factor is still going to all of this. And more generally, what are you seeing with pricing for equipment down in Mexico? And maybe building and all of that? What are you seeing in regards to inflation in general?

Keith Neumeyer: Well, thanks, Heiko, and nice hearing from you. And, you know, thanks for having the question for us. I’m gonna pass that question on to Steve.

Steve Holmes: Okay. Thanks, Keith. So right now, our guidance for next year, we’re using a 19.5 to 1 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% general inflation rate, and we’ve worked pretty hard on our programs to offset that inflation rate and the impact of the peso from last year. So 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 the basis for our guidance.

Heiko Ihle: Fair enough. And then completely different question. Can you provide some color on your longer-term margin expectations for the first mint? I mean, I assume the scale is reasonably well because at some point, all the equipment’s there. And you’re putting in silver at x and selling it at, you know, whatever 1.5 times the x. But, I mean, can you 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.

Keith Neumeyer: Well, regarding the mint, you know, capital is still being spent, you know, up until really September, October of 2024. 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 just been hiring people, putting the right people in place, and, you know, it’s a young business. You know, and the business is actually can only reach its one-year anniversary next month. Oh, you know, it’s hard to expect to see major profits under such a new business, but it is doing quite well. Our ounces are generally being sold for about $3 over spot.

So, you know, we do have a cost of those ounces. We have to get them up. It’s our ounces coming from San Dimas. They go through a sahee, you know, for refining, which has, you know, small cost there. And then those thousand-ounce commercial bars get armored card up to Las Vegas into the Mint. Where they get converted into a variety of different products and sold into the marketplace between, you know, a $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. The 1776 bar, we only produced 1,776 of them. So, you know, those types of special runs, we charge $5 over spot and they sell quite well. So the Lunar series, the Snake just came out.

The Dragon came out a couple of months ago, a little bit late in the year. We’ve worked on that for quite some time, unfortunately. But 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. Buffalo has come along quite nicely as well, and there’s a couple other products. So we have three additional products that will be released in 2025. You know, we got about, let me think, about 5% of our total overall production through the Mint in 2024. You know, showing with those types of margins. Our goal in 2025 is to get 10% of our total production through the Mint and we hope to continually grow that year after year.

Heiko Ihle: Fair enough. Yeah, I was on the website earlier today and they do a great job displaying, you know, the freedom bar and the twentieth anniversary rooms being almost sold out. That’s pretty cool. Anyways, I’ll get back in queue. Thanks for taking my questions.

Keith Neumeyer: Okay. Thanks, Heiko.

Operator: And your next question today comes from Charles Otterman with Scotiabank. Please go ahead.

Charles Otterman: Thanks for taking my question. Hi, Manny and Sue. I’m just asking here on behalf of Ovais. I think my first question there would I would should be with 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’s supposed to impact production at CLG. But beyond that, should we expect, like, a flattish production for this year?

Keith Neumeyer: I had a hard time understanding the question. Manny, do you wanna jump on that one?

Manny: Yeah. We’re looking here. Yeah. Chris, maybe, just or sorry, Charles, repeat the question if you don’t mind.

Charles Otterman: Sure. I’m asking, how do you expect production and CapEx to shake out in the first half and the second half of the year? Would it be flat or expecting a higher second half or first half?

Keith Neumeyer: Yeah. So it’ll be it’ll be relatively consistent. So H1 versus H2. You know, Gatos is just coming in early enough in the year, Jan 16, so we don’t have a lot of delays integrating it. So it’s gonna be relatively consistent. Just generally, in Q4, you know, our exploration programs do slow down. So you’ll probably see a bit of a drop-off in Q4 from the exploration program. But for the most part, it’s relatively consistent, Q over Q.

Charles Otterman: Okay. Thank you. I’m just speaking with exploration here. Could you explain could you provide some details around what’s type of some exploration work has been done at Jared Canyon?

Keith Neumeyer: Yeah. So we have an 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 just due to delays in permit and the underperformance of the contractor. We’re getting ahead of that. Getting set up just in time to really kick it off right on time. It’s gonna be it’s really greenfield exploration targeting areas that haven’t been explored before. We have received the permits at the end of 2023. That really haven’t been in areas that haven’t been explored. So that’s gonna be the focus in 2025 is to go back and test those targets.

Charles Otterman: 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?

Manny: I’ll defer to Keith on the capital allocation. You know? And I know there’s a lot of discussions internally, but we just thought it’s our focus is obviously strengthening the balance sheet, but I’ll turn it to Keith on that one.

Keith Neumeyer: Yeah. We put our budget out already on our expected capital expenditures for 2025, and I don’t expect that’s gonna change. I think our exploration program is already pretty aggressive. Our development program is also pretty aggressive. You know, I’d really like to see treasury growth. Any extra capital that we’re producing that we’re gonna be gaining throughout the year, you know, I wanna see gold go into the treasury and, you know, if we end the year with, you know, $500 million in cash, you know, in the treasury, I think that’s a pretty good place to be. I can see that happening.

Charles Otterman: Okay. Thank you. That’s all for me.

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

Don DeMarco: Thank you, operator. And Keith, congratulations. A strong quarter positive free cash flow. And that Gatos acquisition, I mean, the price of silver is higher, you know, notably higher since the deal. So you know, the outlook for silver remains bullish. You know, when you look at the remaining single asset silver names out there, what are your strategies at this point with regard to M&A?

Keith Neumeyer: Well, you guys are pretty close to the market, and you know, and thanks for your assistance, you know, throughout the process as well. And you know, we know all the players. You know, we just had our board meeting or our quarterly board meeting just over the last couple of days. You know, we’ve got a list of companies that we follow and our due diligence team is made up of a handful of people that, you know, just follow the space and, you know, we gobble up all the news that different companies put out and, you know, we absorb it all and put it all in, you know, Excel worksheets and we analyze everything and we categorize everything and rate everything. But, you know, look, we just bought Gatos. Right? It’s our largest ever in the history of the company.

You know, they’re basically a billion-dollar transaction. It’s gonna take, you know, a couple of quarters to get it fully integrated into the business. There’s a lot of work to do there. So, you know, I’d rather our team, because some of the integration team is just some of the same team that’s doing the well, pardon me, some of the M&A team, pardon me, and some of the same team that’s doing the integration. So, you know, I’d rather our team focus on integration right now than worrying about other M&A, but you know, there are names out there and now we’ve always got our eyes open, but you know, it takes two to tango. We’re not in any rush to do it on the deal tomorrow.

Don DeMarco: Okay. Thanks for that, Keith. Well, that’s all for me. And good luck with Q1.

Keith Neumeyer: Thanks a lot, Don.

Operator: Your next question today will come from Chris Ewing, Private Investor. Please go ahead.

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

Keith Neumeyer: Well, the company already pays a dividend. You should know that we do that. It was announced. And there’s today is usually that the board approved the dividend payment. That dividend’s been paid, I think, for over two years. I actually forget when we actually started it. You know, when it comes to earnings, there’s so much noise about earnings. We put out EBITDA. Yeah. 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 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 Mexican peso moves around and it can change the bottom-line earnings number by significant amounts. And it is a little bit crazy. It’s hard for investors to understand that. They look at it as a loss, but it’s a movement in the value of the assets that are on our balance sheet. So we have, you know, something in the order of $150 million US dollars worth of pesos sitting on our books. And those pesos are used to run the business. And because we report in US 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. You know, 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 a foreign business in Mexico which is a volatile currency and reporting US dollars. And it’s just, you know, a lot of our money half of our money is US dollars, half of our money is in pesos. Well, we’ve got Canadian dollars, of course. We got euros, of course, as well. But nevertheless, it’s the peso that really drives the profit and loss number. I’m not sure, Manny, if you wanna jump in and comment any further.

Manny: No. That’s pretty much it. It’s really the tax pool, 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 cost. So you’ll start seeing our cash cost, all-in sustaining, and all that coming down. But the flip side is the balance sheet gets revalued and it triggers a noncash foreign exchange loss, and that ends up hitting the P&L. Unfortunately, in this case, put us in a negative. But to your earlier points, what silver price is needed for positive earning, you know, I do think we’re good. Trend continues. We’ve got those coming in. We’ll have no problem really showing continuous improvement quarter over quarter, and yeah, be able to look out for Q1 and Q2.

Chris Ewing: Thank you very much. Appreciate your time.

Operator: Again, if you have a question, please press star, then one. Our next question comes from Daryl Ray, Investor Relations at First Majestic Silver, to take us through the questions that have been submitted today through the webcast.

Daryl Ray: Thanks, Nick. So we have a couple, Keith, and to wrap up and we’ll get more questions from the line if there are any, but we 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?

Keith Neumeyer: Yeah. I think going back a couple of years, I think we were pretty negative on what was going on in Mexico. You know, the previous government was just really not helpful. A lot of headline news, a lot of rhetoric that was hitting the newspapers and very much just anti-foreign investments. Not so much mining per se, mind you, you know, he was talking about increasing taxes for miners and they did slow down the permitting process and so on. It’s frustrated many mining companies, but it was just basically a very kind of totalitarian kind of anti-business type environment in Mexico for the last five years, which is quite unusual because when we put the company together, you know, twenty-one years ago, Mexico was a pretty friendly place to be as a Canadian company.

And, you know, we were able to build the business quite quickly, just because of the regulatory environment in Mexico over that fifteen-year period until, you know, this newer government came in. So now, you know, twenty-one years in, we’ve got a new government. Claudia Sheinbaum. She seems to be pretty open, much more pragmatic, much more business-oriented, saying a lot of the right things. You know, she’s only been in office for a couple of months, so it’s hard to really point at any major events 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 we’re being told we’re gonna 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 to foreign investment, and we did make a decision to buy Gatos for a reason. We’ve got four producing mines in Mexico, and then we’ve got 5,300 employees in the country. You know, we’ve got a big stake in the country and obviously if we weren’t as positive as we are about what the future is for Mexico, I don’t think we would have done the Gatos transaction.

Daryl Ray: There’s one more question here. We’re getting a few, but I’ll just put them all together. But one is your general thoughts with gold hitting all-time highs, you know, when will silver catch up? I know we could talk about this forever, Keith. But, you know, a little bit of outlook on the silver price and what might happen in the medium term.

Keith Neumeyer: Yeah. Well, you know, I get criticized constantly for my triple-digit silver calls. So she’s even reached me. I just saw it somehow. You know, throw some mud my way. But, yeah, look, I’m a big supply-demand fundamentalist, and I think that supply-demand for silver 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’s a huge paper derivative market that kind of 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.

Not that I don’t like $33 silver, you know, it’s not a bad place to be, you know. If you look at our lifetime, so it’s only been over $30 three times in my life. It’s been over $30 for a good part of 2024. And it’s holding ground quite nicely and gold continually seems to continue to want to drive higher. So it’s just silver will break out and when it does, it’s gonna rattle these banks. I’m sure whoever received 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 resistance levels, you know, it’ll slice through $40 and through $50 pretty quickly and think, you know, it’s gonna be on its way to triple digits. And is it gonna happen in 2025? Well, I don’t have a crystal ball, but it’s something we’re gonna see, and I don’t think it’s that far away.

Daryl Ray: Okay. That was the final question from the webcast. Back to you, Nick.

Operator: Thank you. 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.

Keith Neumeyer: Well, thank you everyone for joining us today. And obviously, this has been recorded and will be available on the website if anyone wants to have a listen to it 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, you can always contact any of our staff. You’re probably all know Manny or Daryl or Joel, you know, just any three of them are always available to chat with. So and we’ll see you at the PDAC for those of you calling from Toronto. Have a great day.

Operator: This will conclude today’s conference call. You may now disconnect your lines. Thank you for participating. And have a pleasant day.