First Majestic Silver Corp. AG has completed the previously announced acquisition of Gatos Silver, Inc. This deal solidifies First Majestic’s position as an intermediate primary silver producer.

Details of AG-Gatos Silver Deal

On Sept. 5, 2024, First Majestic announced that it has entered into an agreement to acquire Gatos Silver, under which AG will gain a 70% interest in the high-quality and long-life Cerro Los Gatos Silver underground mine.

On Tuesday, the companies announced they received the necessary shareholder approvals to close the deal. Gatos Silver has now become a fully owned First Majestic subsidiary. Per the terms of the agreement, Gatos Silver shareholders will receive 2,550 common shares of First Majestic for each common share of Gatos Silver held.

First Majestic’s Benefits From the Buyout

Gatos Silver is a silver-dominant producer with a 70% interest in the Los Gatos Joint Venture, which owns the Cerro Los Gatos silver mine in the mining-friendly state of Chihuahua, Mexico. It is a long-life, high-quality, low-cost, underground mine with further exploration potential and is free from any debt liability.

The Cerro Los Gatos mine, combined with First Majestic’s existing San Dimas Silver/Gold mine and the Santa Elena Silver/Gold mine, will boost AG’s annual production to 30-32 million ounces of silver equivalent. This includes silver ounces in the range of 15-16 million.

The combined entity, with a pro-forma market capitalization of around $3 billion, will have an enhanced production profile with a strong balance sheet and margins.

The acquisition is expected to immediately contribute an annual free cash flow of approximately $70 million to the combined entity. Meaningful synergies are expected through corporate cost savings and supply-chain and procurement efficiencies. Acceleration and optimization of internal projects and exploration programs are expected to deliver meaningful value creation for its shareholders.

AG’s Q4 & FY24 Preliminary Performance

The company recently announced that its total production reached 5.7 million silver equivalent (AgEq) ounces in the fourth quarter of 2024. The figure consists of 2.4 million silver ounces and 39,506 gold ounces.

AgEq ounces produced moved up 4% from the third quarter of 2024. The increase was driven by a 20% sequential rise in silver production and growth across all three operating mines.

Total production for 2024 came in at 21.7 million AgEq ounces, consisting of 8.4 million silver ounces and 156,542 gold ounces. The figure marked a 19% fall from the 2023 reported figure. However, the total production came within the company’s revised guidance of 21.4-22.6 million AgEq ounces.

First Majestic Stock Price Performance

AG shares have gained 19.8% in the past year compared with the industry's 57.5% growth.

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AG’s Zacks Rank & Stocks to Consider

First Majestic currently carries a Zacks Rank #5 (Strong Sell).

Some better-ranked stocks from the basic materials space are Carpenter Technology Corporation CRS, Fortuna Mining Corp. FSM and MAG Silver Corp. MAG. While CRS sports a Zacks Rank #1 (Strong Buy) at present, FSM and MAG carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.

Carpenter Technology has an average trailing four-quarter earnings surprise of 14.1%. The Zacks Consensus Estimate for CRS’ fiscal 2025 earnings is pegged at $6.61 per share. Its shares skyrocketed 207.1% last year.

Fortuna Mining has an average trailing four-quarter earnings surprise of 53.6%. The Zacks Consensus Estimate for FSM’s 2024 earnings is pegged at 48 cents per share. FSM’s shares gained 37.3% last year.

MAG Silver has an average trailing four-quarter earnings surprise of 17.1%. The Zacks Consensus Estimate for MAG’s 2024 earnings is pegged at 75 cents per share. MAG’s shares gained 66.8% last year.

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