Executive Summary / Key Takeaways

• Strategic Expansion and Record Performance: First Majestic Silver (NYSE:AG) is demonstrating robust growth, highlighted by record Q2 2025 revenues of $268 million, a 94% year-over-year increase, and a record cash position of $510 million, positioning the company for a potential $1 billion revenue year. This strong financial health is underpinned by strategic acquisitions like Gatos Silver (GATO) and aggressive exploration.
• Operational Optimization and Metallurgical Edge: The company's focus on continuous metallurgical process improvement, exemplified by enhanced silver purity at San Dimas and the planned roasting facility at La Encantada, drives higher metal recoveries and cost efficiencies, forming a critical operational moat against competitors.
• Aggressive Exploration Fuels Future Growth: With a planned 270,000 meters of drilling in 2025, First Majestic is actively expanding its resource base and developing new high-grade discoveries like Santo Niño and Navidad at Santa Elena, which are expected to significantly extend mine life and production potential.
• Pure-Play Silver Focus in a Bullish Market: Maintaining its position as the "purest silver company" with 55% silver production, First Majestic is well-positioned to capitalize on a market characterized by multi-year silver supply deficits and anticipated price appreciation beyond current resistance levels.
• Disciplined Capital Allocation and Risk Management: Despite significant growth investments, management prioritizes treasury growth and maintains a strong balance sheet with low-cost convertible debt. The company actively addresses operational, geopolitical, and currency risks, adapting to a more favorable Mexican political landscape.

The Silver Standard: First Majestic's Enduring Vision

First Majestic Silver Corp. (NYSE:AG) stands as a prominent North American precious metals producer, primarily focused on silver and gold extraction in Mexico. Since its inception in 1979 as First Majestic Resource Corp. and subsequent rebranding in 2006, the company has cultivated a distinct identity as a pure-play silver producer, a strategic differentiator in a market often dominated by diversified miners. This focus is evident in its current production profile, where silver accounts for 55% of its total output, a significantly higher proportion than many peers, including Hecla Mining (HL) (44%), Coeur Mining (CDE) (34%), and Pan American Silver (PAAS) (24%). This commitment to silver positions First Majestic to uniquely leverage the bullish fundamentals of a market facing multi-year supply deficits.

The company's overarching strategy is built on a foundation of aggressive exploration, strategic acquisitions, and continuous operational optimization. Its historical journey, marked by pivotal acquisitions like the San Dimas Silver/Gold Mine in 2018 and the recent "billion-dollar transaction" for Gatos Silver in January 2025, has consistently aimed at expanding its high-grade silver and gold portfolio. This growth is not merely acquisitive; it is deeply integrated with a commitment to enhancing efficiency and maximizing value from its assets.

Technological Edge: Refining Production and Maximizing Value

First Majestic's competitive advantage is significantly bolstered by its deep metallurgical expertise and a relentless pursuit of process optimization across its operations. This isn't about a single, groundbreaking invention, but rather a continuous, iterative approach to refining existing technologies like cyanide leaching and Merrill-Crowe precipitation to achieve superior results. The company's processing plants are dynamic environments where metallurgical testing and mineralogical investigations are routinely conducted to support ongoing performance optimization, even when current metrics meet expectations.

This commitment yields tangible benefits. At the San Dimas Silver/Gold Mine, for instance, process improvements, including the use of higher-purity zinc powder and optimized flux blends, have enabled doré purity to surpass 98% since March 2023. The Life of Mine (LOM) plan for San Dimas projects impressive metallurgical recoveries of 92.60% for silver and 95.60% for gold, a testament to the effectiveness of these ongoing refinements. Similarly, at the La Encantada Silver Mine, average annual silver recovery is projected to range from 60% to 68%. The company has also invested in a roasting facility at La Encantada, designed to increase recoveries, particularly from refractory high-manganese material. While currently inactive, studies are ongoing to commission this facility, with initial tests showing silver recoveries between 57% and 73% after roasting. This Phase 2 Roasting initiative, with an estimated capital upgrade cost of $20 million to $30 million, underscores the company's strategic intent to unlock further value from its ore bodies. These continuous improvements in metal recovery and product purity directly translate into enhanced profitability and a stronger market position, forming a crucial operational moat.

Strategic Growth and Operational Momentum

First Majestic's operational footprint spans four producing underground mines in Mexico: San Dimas, Santa Elena, Cerro Los Gatos, and La Encantada. The company also holds the Jerritt Canyon Gold Mine in Nevada, currently under temporary suspension to focus on exploration and optimization, and other non-material properties under care and maintenance. This diversified portfolio provides a robust platform for growth.

The integration of the Cerro Los Gatos Silver Mine, acquired in January 2025, has been notably smooth, described by CEO Keith Neumeyer as "one of smoothest integrations in the 23-year history of the company." Efforts are underway to accelerate mining and ramp development to consistently achieve 4,000 tonnes per day, matching the plant's capacity. Synergies from this acquisition include implementing First Majestic's strong reconciliation processes to reduce dilution and applying Los Gatos' lean-based business improvement processes across the broader organization. Significant cost savings have also been realized by integrating First Majestic's exploration contractors and leveraging its supplier network for consumables. The recent implementation of SAP at Los Gatos further enhances operational controls and supply chain integration.

Exploration remains a cornerstone of First Majestic's growth strategy. The company plans an aggressive 270,000 meters of drilling in 2025, a substantial investment categorized as "growth capital" expected to have a significant impact on future business performance. Recent successes include the "second significant discovery of vein-hosted gold and silver mineralization within a year at Santa Elena, the Santo Niño vein, and drilling results from the Navidad discovery." These new discoveries are believed to be "larger than Ermitaño," a testament to the district's untapped potential. Engineering work is actively progressing to determine the quickest timelines to bring these high-grade ore bodies into production, with a goal to increase Santa Elena's processing capacity to 3,500 tonnes per day.

Beyond mining, First Majestic has strategically diversified through its First Mint, LLC facility in Las Vegas, Nevada, launched in Q1 2024. This vertical integration allows the company to sell investment-grade silver bullion directly to customers, capturing higher margins. The Mint is profitable and aims to process 10% of the company's total silver production in 2025, up from approximately 5% in 2024, selling ounces at premiums of $3 to $5 over spot, depending on the product.

Financial Strength and Outlook

First Majestic's financial performance in Q2 2025 underscored its operational successes, with record quarterly revenue of $268 million, a 94% increase year-over-year, putting the company on track for a potential $1 billion revenue year. This was accompanied by a record EBITDA of $120 million and significant cash flows of approximately $115 million. The company boasts a "record cash position" of $510 million, which is expected to continue growing, with management aiming for a $500 million cash treasury by year-end 2025. This robust liquidity provides internal funding for growth, reducing reliance on external capital. The company's balance sheet is further strengthened by its $230 million convertible debt, which management views as equity due to its convertibility and its "super low carrying costs" of 0.375%, a historical low for mining companies.

For 2025, First Majestic is "on track to hit our guidance of between 30 and 31 and 32 million silver equivalent ounces." The midpoint of the production guidance is around 29 million silver equivalent ounces, comprising approximately 53% silver, 30% gold, and the remainder in lead and zinc. Cost guidance is also "within guidance," with management anticipating improvements over the year, despite a slight increase in Q2 due to typical Mexican mining sector expenses like union bonuses and tax payments, alongside general inflation. The company is factoring in a peso exchange rate of 19.5 to 1 and a general inflation rate of 4% to 4.5% for its 2025 cost projections, with programs in place to offset these inflationary pressures. Capital expenditures for 2025 were front-ended to accelerate exploration and development, reflecting a proactive approach to growth.

Competitive Landscape and Risk Considerations

First Majestic operates in a competitive precious metals mining industry. While it distinguishes itself as the "purest silver company," it faces competition from larger, more diversified players like Hecla Mining (HL), Pan American Silver (PAAS), Agnico Eagle Mines (AEM), and Newmont Corporation (NEM). Compared to these peers, First Majestic's focus on high-grade silver deposits and its diversified mine portfolio provide a qualitative advantage in risk mitigation and market positioning. Its continuous metallurgical optimization, as evidenced by improved purity and recovery rates, contributes to a stronger operational efficiency, which can be a differentiator against competitors.

However, the company is not without its vulnerabilities. Its stock exhibits a "very high beta to the price of silver," making it susceptible to significant market price fluctuations. Inflationary pressures, particularly in Mexico, can impact operating costs. Currency volatility, specifically the Mexican peso's movements against the U.S. dollar, can create "a ton of confusion" for investors by generating non-cash foreign exchange losses on peso-denominated tax liabilities, impacting reported net earnings despite strong operational performance. Geopolitical risks in Mexico, while showing signs of improvement under the new government, remain a factor. The Mexican federal government recently increased royalty rates on special mining and environmental duties, impacting revenues. Operational risks, such as energy disruptions and potential work stoppages, also require constant management.

Conclusion

First Majestic Silver Corp. presents a compelling investment thesis rooted in its strategic commitment to silver production, aggressive growth initiatives, and a disciplined approach to operational excellence. The company's record financial performance in Q2 2025, coupled with a robust balance sheet and significant cash reserves, provides a strong foundation for its ambitious exploration and development programs. Its continuous technological refinement in metallurgical processes, alongside strategic acquisitions like Los Gatos and the vertical integration of First Mint, enhances its competitive standing and drives future value.

While exposed to inherent industry risks such as commodity price volatility and geopolitical factors, First Majestic's proactive management, evidenced by its adaptable capital allocation and focus on cost efficiencies, positions it favorably. The positive shift in the Mexican political landscape further de-risks its significant operational footprint in the country. For investors seeking exposure to a pure-play silver producer with a clear growth trajectory, a strong financial position, and a proven ability to optimize its assets, First Majestic Silver offers a potent combination of operational momentum and strategic foresight in a fundamentally bullish silver market.