Release Date: February 20, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- First Majestic Silver Corp (AG, Financial) reported record cash flow of $68 million in Q4 2024.
- The company achieved a record production milestone at Santinana, surpassing 10 million ounces for the first time.
- First Majestic Silver Corp (AG) ended the year with a strong cash balance of $308 million and $36 million in liquidity.
- The company successfully reduced cash costs by 8% from Q1 to Q4 2024.
- A significant exploration program is planned for 2025, with 270,000 meters of drilling anticipated.
Negative Points
- The integration of Gatos is expected to take several quarters, which may delay realizing full synergies.
- The company experienced underperformance in stock due to liquidity events and investor sell-offs.
- Currency fluctuations, particularly with the Mexican peso, continue to impact reported earnings.
- There are ongoing challenges with inflation and equipment pricing in Mexico.
- The company faces complexities in merging different technologies and operations post-acquisition.
Q & A Highlights
Q: What long-term exchange rate and inflation factors are considered in your cost guidance, and what are you seeing with pricing for equipment in Mexico?
A: Steve Holmes, COO, stated that they are using a 19.5:1 peso to dollar ratio for next year's guidance. They are seeing a general inflation rate of about 4% to 4.5% and have worked to offset this inflation and the impact of the peso from last year. They do not anticipate any unusual inflation from government policies.
Q: Can you provide some color on your longer-term margin expectations for the First Majestic Mint?
A: Steve Holmes, COO, explained that the mint is still young, having only reached its one-year anniversary. They are selling silver at about $3 over spot, with some special products selling at $5 over spot. The goal for 2025 is to process 10% of total production through the mint, up from 5% in 2024.
Q: How should we weight production and CapEx within the first and second half of the year, especially with the Gatos acquisition?
A: Mani Alkhafaji, VP of Business Planning and Procurement, mentioned that production will be relatively consistent between the first and second halves of the year. The Gatos acquisition is integrated early enough to not cause significant delays.
Q: What type of exploration work is being done at Jerritt Canyon?
A: Mani Alkhafaji stated that they have an 18,000-meter program targeting areas that haven't been explored before due to previous delays in permits and contractor performance. The focus for 2025 is to test these new targets.
Q: What are your capital allocation priorities moving forward, given the record free cash flow in Q4?
A: Keith Neumeyer, CEO, emphasized the focus on strengthening the balance sheet. They aim to grow the treasury, potentially ending the year with $500 million in cash.
Q: What are your strategies regarding M&A, considering the bullish outlook for silver?
A: Keith Neumeyer explained that while they are aware of potential opportunities, the focus is currently on integrating the Gatos acquisition. They are not in a rush to pursue another deal immediately.
Q: What silver price is needed for positive per-share earnings, and would you consider dividends in the future?
A: Keith Neumeyer noted that the company already pays a dividend. The main issue affecting earnings is currency fluctuations, particularly with the Mexican peso. They expect continuous improvement with the integration of Gatos.
Q: How might the current political landscape in Mexico influence First Majestic Silver's operations?
A: Keith Neumeyer expressed optimism about the new government in Mexico, which appears more business-friendly. Permits are being granted, and the environment seems to have improved, which was a factor in the decision to acquire Gatos.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
