First Majestic Silver Corp Q4 FY2025 Earnings Call

Thank you for standing by. This is the conference operator. Welcome to the First Majestic Silver 2025 Q4 Financial Results Conference Call. Operator instructions were provided. The conference is being recorded. Operator instructions were provided. I would now like to turn the conference over to Mr. Keith Neumeyer, Chief Executive Officer of First Majestic Silver. Keith, please go ahead.

Well, welcome, everyone, to an excellent day for the company, and nice to see our analysts coming out with some good reports today on an update in silver prices, which is obviously nice to come out with fantastic results on an update in metals. So thanks everyone for joining us today to discuss our fourth quarter and our year-end financial statements. And I hope that you've all read the news release prior to today's call. We have a full room here in Vancouver. We have Mani Alkhafaji, President and Chief Corporate Development Officer, here with us today; David Soares, our Chief Financial Officer; Steve Holmes, our Chief Operating Officer; Samir Patel, our General Counsel and Corporate Secretary. We also have Darren Fernandes, Director of Finance. We also have Darrell Rae and Joel Faltinsky in Investor Relations on our team here. So if there are any questions, we will be passing the questions on to the relevant staff that are currently present today in the room. And I'd like to pass the call over to Samir Patel before we continue.

Thanks, Keith. Before we begin today's call, I would like to remind you that we will be referring to certain non-IFRS measures when making certain statements regarding First Majestic Silver and its operations that constitute forward-looking statements in accordance with applicable Canadian and U.S. securities laws. All statements that are not historical facts, such 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 significant 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 earlier 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 on SEDAR+ and on EDGAR. Investors are cautioned against attributing 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-looking statements or information, other than as required by law. With that, I will turn the call back to Keith.

Thanks, Samir. We do have a presentation that's available. It will be put on our website. But for those online today, you can see it as we go through the presentation. I'm going to pass the call on to Mani, who will be going through the presentation. So take it away.

Great. Thanks, Keith. Again, good morning, everyone. I appreciate you taking the time to join us. I'm going to start with the slide with the highlights. We did have a wonderful year. 2025 was transformational. We set some key milestone stretch targets, and we came through with a wonderful end to the year and a great year overall. We produced 4.2 million pure silver ounces in the quarter, just over 15 million for the year. From a silver equivalent stance, we came in with just over 31 million silver equivalent ounces. We'll touch on that in the next slide, but that came in higher than our revised guidance, which is great to see. Revenues were a big milestone. We broke $1.2 billion, almost $1.3 billion this year. That gives us obviously a lot of financial strength that we see trickling down to the bottom line. Again, you would have seen that in the news release. Our realized price for the quarter came in higher than the average, which is a testament to our strategies. Q4 average was just under $59 and for the year was $41.52. Interesting to see as well, our Mint, that's our new addition to the business, had record quarters throughout the year and ended the year on a wonderful note. We generated just under $23 million from that operation in Q4. Cash flows, again, combined with the metal prices and the production, no surprise to see record cash flows coming into the business and hitting these milestones. Our exploration program was quite aggressive at the start, and we came in nicely with that — over 250 kilometers of drilling, great results that we've disclosed throughout the year and which will be reflected in our annual information form at the end of this quarter. Just a quick second on that bar that you see on the slide. That's a very important KPI to First Majestic. We are the purest silver producer among our peers. For the year, purity was 58 percent, and this number continues to improve; in Q4 it was actually north of 60 percent. So as silver prices continue to improve, our leverage materializes. Okay. Moving on to the next slide. Another big milestone for us is our free cash flow. You can see over the last few quarters it's been steadily increasing, but in Q4 2025 it was a step change for the company, again due to operational discipline, metal improvement and cost containment. We're very pleased with the performance. This gives us a lot of flexibility in capital allocation, investing back into the business, whether it's exploration or plant expansion, which we can touch on a bit later. It's a wonderful trend to see, and we look forward to continuing this. Moving on to the next slide. Our guidance: if you recall, we did update our guidance. We set up the preliminary guidance in January of 2025, and halfway through the year we revised it upward. We've increased the production targets and improved costs. Nice to see that we came in at or better than guidance on both silver and gold. Silver equivalent came in right in the middle. One thing I do want to highlight that impacted our silver equivalent as well as our all-in sustaining costs is the conversion of byproduct metal to silver. The silver equivalent ratio did collapse towards the end, which is wonderful for silver, telling us that silver outperformed gold and base metals, but it did result in about a 1.4 million silver equivalent ounce reduction in our reported production and about a $1 increase in our all-in sustaining costs. Without that, our all-in sustaining costs would have been in the $20s, which would have been right in the middle toward the lower end of the guidance, had we used the guidance assumptions. Okay. Moving on to the next slide, which is our 2026 guidance. Similarly, we are investing heavily and continuing with robust production for the year. We're targeting about 13 million to 14 million pure silver ounces and about 110,000 to 130,000 ounces of gold, with the balance being lead and zinc. We did change things a little for 2026. We have locked in the conversion ratio to 75:1 to avoid the noise that we saw in 2025. That should — we're going to lock in the assumed ratios on the metal prices so we're less susceptible to external factors. The next slide: some operational highlights. Throughout the year we have been providing updates, but it's nice to look back on the accomplishments. Gatos was a key highlight for the business. We closed that transaction in January of 2025, and we spent about half the year integrating the asset and it could not have gone any better. Smooth transition, smooth integration, and we're pleased to say that it's fully completed at this point, and it's nice to enjoy the dividends we're getting from this operation. Beautiful assets, massive land position and lots of opportunities. We're still targeting a lot of low-hanging fruit in terms of cost reduction and near-mine reserve and resource growth, so look for more news on that. Santa Elena has been the gift that keeps on giving. We say this almost every news release and every now and then we still have exciting news. In the 10 years that First Majestic has owned Santa Elena, we've had four new discoveries, and these are massive achievements. The map on the right gives you a sense of what they are. We've had the Ermitaño mine that we're currently producing from, we've had Luna, and the more recent discoveries are Navidad and Santo Niño. We put out a maiden resource at the end of last year on Navidad. Plenty of drilling and results have come through throughout the year, and that will be reflected in our 2025 annual information form, which will be published before the end of the quarter. We are also investing in plant expansion at Santa Elena. We see a lot of value and growth opportunities in this operation. It is a massive district — 102,000 hectares — and with the exploration success we've seen, it gives us confidence in investing. We're taking the plant from about 3,100–3,200 tonnes per day to 3,500 at a sustainable level. We're expecting to get to this level in the second half of 2026. I touched on Gatos; we're also expanding throughputs at that operation. We have a contractor engaged since the end of last year and continue with that, targeting mine throughput of about 4,000 tonnes per day at a sustainable level from about 3,500. San Dimas is the same: massive district, plenty of exploration success that we'll be discussing in our annual reserve and resource updates. La Encantada has been an exciting turnaround for the portfolio. It is our smallest mine but our purest silver producer — essentially 100 percent silver. It had a strong Q4, producing about 1 million ounces, which is nice to see this operation turning around after the water challenges and haulage issues we experienced. We are internalizing haulage there, so we anticipate further cost improvements and operational efficiencies. Okay. Moving on to the next slide. We focus on safe production, and it's nice to see our TRIFR and LTIFR numbers for the year, putting us in world-class measures. Safe production enables the production milestones we're getting, so we continue with that. Financials: a couple of things to note. We did hold some inventory at year-end that wasn't reflected in our revenue. That becomes part of raw material for the Mint or is just a timing difference that will be flushed out in Q1. The Mint had a wonderful year and quarter. For the year, Mint revenue was just under $50 million, with profitability about $24 million. One thing that's not reflected in our income statement but is important to recognize is the marketable securities that we hold; they had an impressive movement during the year and in the quarter. For the year, our position increased by about $140 million. That's not included in our income statement but is reflected in our balance sheet. We did recognize the provision that was disclosed at the end of Q3 results. We took a provision in the income statement; important to recognize this amount has not been paid as we continue conversations with SAT, and we're cautiously optimistic about where things are going there. A couple of things to highlight again: being in Mexico there are some cash payments that will hit us in Q1 and be delivered in Q2 related to 2025. We had a wonderful year in 2025 and there are some cash true-up payments that will be made before the end of the quarter, so that will be reflected. Moving on to financial strengths: the slide speaks for itself. Cash flow is trickling into the treasury, which is wonderful to see. We're sitting with just under $940 million in the bank between unrestricted and restricted cash positions. Our working capital is $733 million; that includes some marketable securities. We've done very well with those and we're pleased to be shareholders of those companies. We closed convertible notes on some of the best terms in the mining industry in December; the coupon rate on this is 0.125 percent, which is excellent. We're glad to have that market support. Moving on to our dividend policy: we did declare dividends for Q4, but it's important to recognize we're confident in our balance sheet and cash flow to the point that we have declared an increase. We've effectively doubled our dividend policy effective 2026, which will be reflected on revenue earned for Q1 of 2026. So that goes from 1 percent of top-line revenue to 2 percent of top-line revenue. Lastly, some catalysts: we're blessed to have three world-class districts in our portfolio, and we see a lot of value in drill results. We have declared 266 kilometers of drilling across operations, which we're excited about; plenty of targets to chase. Our updated reserve and resource will reflect the success we had in 2025 and will likely be released before March 31. Continued strengthening of the balance sheet — metal prices are better than they were in Q4. Q4 was strong; you can imagine what Q1 and hopefully the rest of 2026 will look like for First Majestic. With that, that concludes our prepared slide deck. We'd like to open it up for Q&A.

Well, thanks, Mani, for doing that. And anyone who wants to ask any questions, we're available.

Thank you, Keith. Operator instructions were provided. The first question today will come from Heiko Ihle with HC Wainwright.

Keith and team, congratulations on a good quarter here.

Thanks, Heiko.

We're close to two-thirds through Q1 right now, or at least we're in the second half of the quarter. Metal prices have obviously been extremely volatile; these are somewhat unprecedented times. I heard that some refineries have been postponing taking products from some sellers for capacity reasons. Cost-wise, obviously, there are some changes. Is there anything quantifiable that you're willing to point out on this call that you encountered this quarter related to costs or shipments or anything unexpected that maybe we don't yet account for in our models?

Well, the refineries have suspended financing, and that's really the biggest issue. If you're a small retail store in Miami, for example, and you're used to people walking in and selling you silver, that small retail store would collect a certain amount of ounces over a period of a few days. It's a cash flow issue. They would then phone up the refinery they normally use to buy that metal from them to melt into other products, and they would get financing for that. That kept that business operating and cash flow coming in. What's happened is because of the tightness and volatility in the market, the refineries have told everyone they're no longer financing. That has really hurt retail buyers of metal because they simply can't buy metal anymore; they have to wait 30, 45 days and sometimes even longer, depending on the quality of the metal they're buying. For us, it doesn't affect us in any way. We don't finance our metal. If you're a smaller producer, you may be affected because you need the cash flow to finance your business. For us, we don't have to do that; we wait for outturn. So yes, it doesn't affect us.

Fair enough. And just to clarify, you have 266,000 meters of exploration planned this year. Just the costs that you're seeing and availability of rigs — I assume that's no issue?

Yes. The beauty of that is we have a contractor who does most of our drilling under long-term contracts, so our costs are relatively contained. Being First Majestic with a big footprint in Mexico, we're able to access resources and rigs. So there's no concern on availability.

The next question will come from Alex Terentiew with National Bank.

Nice quarter. Nice to see your cash jump as much as it did, which kind of leads me to my question. It's a nice problem to have — or you can debate whether it's a problem — but cash is going up. I know you guys are spending a bit more on development this year and keeping exploration strong. How are you thinking about the cash and what to do with it at these silver prices? Your free cash flow should be strong again in 2026. Are there thoughts for additional capital returns to investors? And obviously Jerritt Canyon might play into this as well, so maybe wrap Jerritt Canyon into this question as well.

Sure, Alex, and thanks for the report today — it was quite good to see. Capital allocation: there is a tax issue that is still pending, and the market is well aware of that. The team is actively discussing it to solve it, and we hope 2026 will be the final year that issue is behind us. That issue dates back to 2012 and we inherited it in 2018. We haven't done any share buybacks in Q4, but we always have that option. We did increase the dividend. There will be some news on Jerritt Canyon over the next couple of months, so I would suggest people wait for that. Being CEO for about 23 years, it's kind of nice to see $1 billion in cash. We're not about to spend it anytime soon.

Okay. Fair enough. One little accounting question: realized silver price came in at about $59 while the average price in the quarter I think was around $54. I'm guessing part of that could be timing of sales, but do you factor in final settlement adjustments on provisional pricing into the realized price? If there's a positive adjustment, do you factor that into the quarter's realized price? How does that accounting work?

Yes, that's one part of it, Alex, due to the concentrate sales and provisional pricing. Also, we have an advantage others don't really have: the Mint. The Mint recognized a higher average price — about $69 — and that accounts for the overall number. About 12 percent of our doré production went to the Mint in Q4.

I will now pass the floor over to Mr. Darrell Rae, Investor Relations at First Majestic Silver, to take us through questions submitted through the webcast.

Yes. We just have a few more, team. One relates to a couple of questions on this: congrats on the solid results at the Mint. Do you have any plans to expand First Mint? Can you elaborate for us?

Yes. Keep in mind, the Mint is less than a year old, so the ramp-up has been exciting and quick. The answer is yes, we do plan on expanding. The facility is capable of further expansion. We're working diligently on marketing to get the name out there, and it has been effective. We'll keep working on that.

Okay. Then we had a few questions along the lines of congrats on the strong average selling price versus COMEX in the quarter. Are you hedging prices? Would you consider direct-to-market selling in the future?

Interestingly enough, we've been contacted by direct buyers over the last month or so. We did assist one U.S. buyer with some ounces in Q4. It's not a strategy we normally follow; it doesn't make a lot of sense for us to do that regularly, and we don't hedge. We're fully exposed. I think our shareholders would not appreciate us hedging, so we simply don't do that.

Okay. And probably the last question: nice to see your silver purity at 60 percent. Do you have any plans to buy a late-stage developer, or what are your plans to maintain your focus on silver?

As Mani said in the presentation, silver purity is very important to us. It's a major KPI. It's nice to have gold — gold is a very stable metal — but we'll maintain as much silver purity as possible. Silver mines are hard to come by and rare, so we're always looking for the next acquisition. Stay tuned.

That's great. Okay. And I know we're getting close to the top of the hour. Maybe one last one: any update on Jerritt Canyon, when a restart may happen or any general update on Jerritt?

Yes. Keith touched on that earlier. We're going to put out a stand-alone update on Jerritt Canyon once we have the plans and numbers finalized. We're hoping for the end of the quarter; that's still the plan. You can imagine First Majestic's management team is focused on Jerritt Canyon now that Gatos is integrated and closed, so we're putting a lot of attention on it and we'll share details once ready.

Okay. That's it from the Q.

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.

Thanks everyone for joining us today. If there are additional questions, please feel free to contact us. Darrell, Joel, Mani and myself are always available. We'll be at PDAC coming up in the next few weeks as well and hope to see you at an important event on Monday evening for further contact or questions.

This brings today's conference call to a close. You may now disconnect your lines. Thank you for participating, and have a pleasant day.