First Majestic Silver Corp (AG) Q1 2026 Earnings Call Transcript

Thank you for standing by. This is the conference operator. Welcome to the first Majestic Silver 2026 Q1 Financial Results Conference Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star, then 1 on your telephone keypad. 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. Should you need assistance during the conference call, you may reach an operator by pressing star then zero. I would now like to turn the conference over to Mr. Keith Neumeier, Chief Executive Officer of First Majestic Silver. Keith, please go ahead.

Well, thank you and welcome everyone to our Q1 Highlights conference call with investors and shareholders. Today, obviously, myself is president. I'm in Europe right now. Manny Alcavagi, president and chief corporate development officer, is in Vancouver. David Souraz, our chief financial officer, is also in Vancouver. David Howe, chief operating officer, who just was newly appointed on May the 4th, which we'll talk about a little bit further in the next couple of slides. but uh david comes with us after you know quite a long search for a replacement to steve uh steve told me last summer that he would like to retire and we put a an effort in place to find his replacement and uh we're successful in getting uh dave howe who's uh you know a well-known mining executive so we're happy to have dave on board steve will be effectively working until june 30th assisting Dave in anything that Dave might request of Steve over the next month or so. We also have Samir Patel, General Counsel and Corporate Secretary, present in Vancouver, and also Dara Ray and Joel Feltynsinski from Investor Relations, also present today. Before I go any further, I'll need to pass the call over to Samir. Samir, for the disclaimer.

Thanks, Keith. Before we begin today's call, I would like to remind you that we will be referring to certain non-IFRS measures and 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 for 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 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 on CEDA plus 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 four different statements or information, other than as required by law. With that, I will turn the call back to Keith.

Okay, thanks, Samir. Just a couple of things on our management changes. Steve Holmes has been with the company for six years, and he's been extremely instrumental in positioning the company where it is today. Much of the improvements that the business has experienced over the last few years has been a result of Steve's efforts. And we're sad to see him go, but at the same time, it's time for him to retire. And we wish him best in his future travel experiences with his wife and family. So obviously we'll be staying in touch with Steve. But Dave Howe is now the new chief operating officer and he brings a wealth of experience in the industry. and Latin America held a number of key executive roles and we're really excited for him to help lead the First Majestic team to the next phase. Further description is available in today's news release if you wish to read a little bit about his history. We're also quite pleased to announce a hiring that took place on April 20th. We were able to find a great leader for the Jarrett Canyon Restart. We've brought on Alex Thompson, and Alex is a seasoned and strategic mining executive with experience in building and operating mines all over the world and will be a key part of the restart plan for Jarrett Canyon, which we'll be excited about talking further about as developments continue. So going to slide three of the presentation, which I'm assuming some of you online have access to, you're just going back in time if you go back over the last 20 years you know q1 is generally a kind of a soft quarter you know you get everyone coming back from holidays and then you've got to remobilize all the contractors and usually you you could lose up to two or three weeks in q1 it's not that that unusual and we've experienced that many many times over the life of the business but this q1 was exceptionally good we didn't experience that same kind of dip and we ended up producing 3.5 million ounces of silver, which shows 26% of 2026 midpoint guidance. So that's pretty good at being ahead of guidance. And gold production was at 28% of midpoint guidance. So both silver and gold are above our current guidance, or at least midpoint guidance, which is fantastic to start the year off on such a positive note. The average realized silver price was $86.35. compared to 33.10 last Q1, 2025. So pretty impressive there. Revenues were record revenues of 477 million, up 95% compared to a year ago. And we did hold back some silver and gold as well. And so this was not included in revenue. We did hold back 676,000 ounces of silver, also 2,700 ounces of gold held in inventory. at the end of the quarter, and the value of that inventory is $63 million. So if we'd sold it, that obviously would have improved our revenue and also improved our profitability. But we elected to hold on to it for higher prices, and we're expecting that's going to be a good strategy for us. We've really got our eyes on margins, and as the price of silver goes up, Costs also go up, and we'll address that in the next couple of slides. But one thing I think the analysts or the investors should really pay attention to is actually the expanding margins, which is pretty impressive. I've got a couple of more comments coming up on that topic. We've already been focused on efficiency and keeping our costs in check, and it's really paying off. We've had operating cash flows in Q1 of $311 million, 63 cents a share. And our silver purity is 66%. You know, that compares to 60% in Q4 of 2025. Our dividend is our largest dividend ever, about 1.71 cents for shareholders of record on May 15th. The dividend is basically four times the size of last year's dividend. You know, with the revenue doubling and us changing our policy, increasing our dividend from 1% to 2% effective January 1st, 2026, you know, has made a big impact. And so shareholders will be getting, you know, the highest dividend that they've ever received in the company's history. So that'll be fun to see all those checks arriving in people's mailboxes. Going on to slide four. so the cash cost and all the sustaining cost per ounce are aligned with plans there's really no big surprises there uh per ounce costs you know increased when compared to q1 as it shows on this slide there the main drivers of the increase um as we've mentioned to um uh you know the analysts before you know it is we have changed our ratios which which has a big impact which i'll talk about shortly but our production costs did go up a little bit mostly due to higher throughput you know because we have reduced the cutoff grades you know due to price so you know we could mine a lot lower grade ore and and still get the same ounces but it does affect your cost your cost to go to go up as a result of that method of mining but it does improved life of mine as well at the same time. So it has a big benefit. And the revenues that we're getting, even though the grades are slightly lower, far outpaces the increase in cost, which is really nice to see. Other things I said, the price ratio, that had a $3 impact. If we use the same price ratio as we did in 2025 and 90 to 1, our own sustaining cost would be basically $3 less and what we're showing in Q1 of 2026, but we did fix the ratio at 75 to 1 and do the volatility of silver and gold, and that 75 to 1 ratio will be held throughout the quarter, or pardon me, throughout the year. Profit sharing, you know, is also up, and I've got another comment later on that, but profit sharing, you know, is close to $2 an ounce. Smelting and royalties obviously go off is with silver prices going up so um you know everyone's you know obviously making a little bit more money which is great to see um important to note notice you know as i said about margins um you know the margins have increased almost four times so um um our margins a year ago in q1 were 13 an ounce our margins in q1 of 2026 was 52 an ounce so quite a game change so you know any Any increase in costs that we're experiencing is easily taken with the increase in margins. Our cost per ton, $170, which if you look at that chart on that slide, slide four, you'll see that it's the lowest for a while. That shows you quite clearly that we're having a true impact on keeping our costs in line with our expectations and a bit of a side note we've got calls from analysts and others you know about our exposure to diesel with the you know with the happenings are going on in the middle east right now most of you probably know that we converted three of our minds over to liquid natural gas over the last few years and one of our minds is on the grid so our total exposure to diesel in our cost is only 5%. So we rely on diesel very little. Most of the energy is created by renewable sources. Going on to slide 5, we produced $311 million in operating cash flow from the four operating mines. Each of them, a notable year-over-year improvements in profitability. Notably, Lincantata, where it had a bang-up quarter. Lincantata actually profited $30 million in Q1. I don't actually remember the last time it made that much money, but it's obviously going quite well there. So it's nice to see that mine finally hitting its stride after some difficulty that it had over the last couple of years. corporate why this translates into 224 million in free cash flow even accounting for a very large tax payment that was made in in January as a result of our 2025 income taxes that you know just simply do the profitability of the business the Mexican government's paid 95 million dollars you know which obviously came out of our cash flow so the chart shows you know the increase in cash flow being generated you know operating discipline of course are over our four mines is key gosh it's gosh efficiency and uh obviously the increase in silver prices um you know having a huge uh impact on the business uh we're very flexible for future growth you know the size of our treasury um you know over over you know 1.1 billion obviously pretty impressive you know our development and exploration programs are very aggressive and on track and i've got a couple more comments later on the exploration programs. Operational expansions, you had to build San Helena and Lissagatos is coming along quite nicely. I'll address that as well going forward. And we just keep pushing other permits and the development of the San Helena new ore bodies, which we'll discuss as these topics become more relevant. And we'll be discussing those via news releases in the coming months as these developments occur. So going to slide six, okay. So we continually have exploration success at San Dimas and Santelina and Los Gatos. We're expanding the Santelina mill. We're expanding the Los Gatos mine development. At Los Gatos, our work is to mine 4,000 tons a day. We have brought in a contractor to assist in getting up to those levels. We're actually pretty close right now. The mill itself can handle that. It's not a bottleneck at the mill. It's always been a bottleneck at the mine, and that's what we're resolving by bringing on some assistance from a third-party contractor, which seems to be working quite well. We're making good progress at Santa Elena, getting that mill expanded. As I think most of you know, we're expanding that mill to 3,500 tons a day from 3,200 tons a day, and we should reach that objective by age two, 2026. Exploration is just going wonderfully. Navidad and Santinino discoveries are obviously really paying off. We've put out some numbers on those two ore bodies already, but we continually advance studies and then work on those two ore bodies because we want to get them into the mill as soon as we can so that work is underway and as we get more information and more timelines associated with getting San Antonio and Navidad up and running we'll be putting more additional news out on timelines and how that's going to affect future production at Santa Elena. So always, you know, always looking for, you know, enhancing adjustments, you know, productivity, that's always a focus, not just at Santa Elena, but also in all the mines. Ligantata, I think most of you likely know as well, we decided about a year ago to go to self hauling. We were having challenges with the contractors that, you know, were assisting in getting ore to the mill. And after the, you know, a couple of contractors, we decided just to do ourselves so we bought a dozen trucks which took almost a year to get delivered and they're all now on site and they're all now operational and i would expect you're going to start to see costs come down a little bit as a result of that but also we're already noticing the increased throughput at the mill the mill can handle it there's no problem with that then this mill ran at 5 000 tons a day back back you know years ago so it's just really the the mine and um and uh we're resolving that by having this truck fleet and uh and so on so it's it's uh in early early days but um it's looking pretty good uh going to jerry canyon um you know we're obviously very excited about um the announcement of hiring alex thompson as a managing managing director uh we really needed a leader there to really get a hold of this thing you know alex has 20 years experience probably primarily at php but he's really taken control of this operation and he's uh very well liked by the team down on site and uh we'll be putting obviously um a bunch of new people in place you know to just um you know get this operation up and running uh we're investing 75 million in 2026 and filling in the talent base as I've mentioned. We are preparing a feasibility study or pre-feasibility study I should say. Hopefully that'll be out in early 2027. We're prepping the underground. We've got people on site right now underground prepping the area, planning on development. The plant upgrading is not quite started yet. We're just in the order of our process of ordering a bunch of different equipment a bunch of peels have gone out and several more peels will be going out over the next two weeks as as you know items become obviously required or we identify items that we need and some of the items are longer needed than others and so we're trying to get all those items necessary for the underground and the plant ordered and in the system and, you know, get these pieces of equipment on site as soon as possible. And we'll share updates as we, you know, progress over the next year. We are still targeting for production to commence in age two, 2027. And so far we're on track. I did want to bring something up, you know, because we had a false news release that went out out of Mexico it was regarding a collapse at Los Gatos and I looked at the photograph myself and I read the article myself and you know I don't know we actually don't even know where that mine is it was definitely not a commercial operation it was some little hole in the side of a mountain that was probably just you know artisanal mining or maybe owned by a Mexican mining company or something I have no idea but it was definitely not a modern operation but we did have a small collapse and there was a 10 meter section of the ramp that collapsed and we were down two and a half days and you know back on back on track is very normal was not material in any way at all that's why we didn't say anything about it we didn't usually say because it was just you know you know things happen in mining and you know being down for two days is you know nothing so we decided not to comment on it but I know that a number of analysts did phone the company and asked about it and asked about that story. So I just wanted to address it on this call just so everyone's clear that everything is hunky-dory and there's no issues that remain. It's going to slide seven. So the solid balance sheet and cash flows, we're investing in our world-class district scale operations. As you know, these are big, big, chunky land packages. And we're increasing the mining rates of Los Gatos to get that operation up to 4,000 tons a as we've said already and you know the plan we want to get this Santelina obviously expansion completed as well so a lot of focus is going on on those two operations you know we have a very very large exploration program where it's 266,000 meters of exploration over over the sites this year and that does not include an additional 42,000 meters that Jarrett Canyon which we've just recently announced with the opening, reopening news release on Jarrett Canyon. So, you know, we're drilling over 300,000 meters of drilling this year, which is, you know, quite a, obviously a very, very large program. So pretty exciting. We've updated our resources and reserves in March. I'm not sure if you've seen the AIF that went out in March, but it's all there for people that want to go look at it. It's on CDAR and it's also on our website. And the Santa Elena, you know, we had a 90 million ounce increase, which is pretty amazing. That was basically due to Santa Nino and Navidad discoveries. And we continue to upgrade those assets. And I think that number is actually going to improve over the next year. Jarrah Canyon, you know, with the including some of the underground, we kind of redeveloped that, you know, based on the gold prices today, all those open pits that were you know being mined back in the 80s and 90s are pretty well now economic so we're going to be we've uh working on a plan to include the underground and open pit in the same mine plan you know obviously blending and so on but uh we're now at 7.8 million ounces of gold in jerry canyon which is you know pretty pretty impressive compared to um you know our prior disclosure a couple years ago uh restart still scheduled as i said for age two um uh and uh i guess that's really about it you know continually strengthen our cash flow balance sheet uh you know look for you know continued increase in our treasury now obviously we're quite leveraged to the price of silver as you can see in our share of volatility over the last couple of days but um you know that's something that we've gotten used to over time so um anyways I am done with my presentation. We will now go to questions.

Thank you Keith. We will now proceed to the Q&A session. Once again, to join the question queue, you may press star then 1 on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then 2. If you're participating today 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. The first question comes from Heiko Ile with HC VanRite. Please go ahead.

Hi there. Thanks for taking my questions, and congratulations to Alex and Dave, who I know quite well from his time back at Endeavor. Hey, Keith, you focused quite a bit on the margins earlier on this call, and obviously It's quite impressive what has been happening and what's been accomplished the last few quarters. And I assume the answer is no. But do you think there comes a point when and if commodity prices keep rising or even staying at these levels where people are more so trying to get their peace, be it labor, governments, other stakeholders? Have there been any conversations? What have you seen? I mean, you're much closer to the pulse than I am.

Maybe just a bit of color. well on the government you can never predict right so um there's no rumors or there's no discussions that the government is going to be changing anything um you know you have to remember at these prices and the profitability of the mexican miners the government's you know getting a windfall um right on their their tax income from mining is accelerating quite dramatically and so i'm pretty sure the government's pretty happy so i'm not sure why they'd want to kill the you know goose or whatever um the unions again the same thing you know these union members their their bonuses are tied to the silver price so you know we've just gone through a couple of negotiations with the national union and they're very quiet you know quite happy obviously um negotiations negotiations went very smoothly um yeah so there's really no issues there but they are getting paid more so you know the you know our almost sustaining cost has increased as a result of you know higher taxes and and higher bonuses so that you know can be expected um you know other things you know if we go back to uh the last bull market 2011 you know when silver hit 50 you know we saw you know the sand bits of the world um um you know increase prices by 15 to 25 percent um we've not seen that uh we're we're just in the process of uh um uh signing an agreement with Sampic, and it's looking like we're going to get pretty reasonable pricing on this new purchase that we're being put in. We haven't seen big increases in cyanide or ammonia. We don't rely on diesel that much. So, no, we haven't really seen the inflation that maybe some would be expecting.

All right. Fair enough. Moving on to Jarrett Canyon. I mean, obviously, I'm excited to see the site re-enter production. I don't know if we got Alex on board now, but on a grander scale, I mean, I went through your April 2nd release again this morning, and you mentioned the $75 million to spend this year. Seven and a half of that is work versus nothing. When do you think hiring for the site should really start ramping up? I assume this is, you know, a second half or even fourth quarter kind of thing. And then building on all of that, once Jared is in full operations, I don't think you'll have any issues getting workers to site, given the proximity to talent. What are you seeing, you know, with the labor pool? Because, I mean, you're probably going to take up a decent amount of the workforce in the local area, no?

Well, I think all of it will come from the local area. And, you know, maybe some of the turmoil at Newmont right now might assist. You know, hopefully, we don't know for a fact, but, you know, we have a list of positions that need to be filled. You know, it's very extensive and detailed. And, you know, I think I don't have the exact number in front of me, but, you know, we've hired a handful of people just in the last couple of weeks. And, you know, for key management positions, and we're looking to hire, you know, several more key people over the next week or two. And then at that point, we'll start going down into the business deeper and targeting more labor intensive type individuals. And we should be well manned by fall and having to look at adding the underground workforce and so on in the early part of 2027. But don't forget, Jared is only 45 minutes away from town, Elko. And so it's the closest mine to Elko. So if you, you know, rather than having to drive to one of the other neighboring mines that will take you an hour and a half both ways, you know, you're on the road for three hours a day. You know, working at Jarrett, you're only on the road for one and a half hours on a day. So it's a big, big difference. And it's a well-known site. And I think the community at Elko is pretty excited about it. And, you know, we're getting approached by people regularly, you know, to, you know, come on, come on as employees.

Yeah, that's someone who's been on the ground to Jared Kenney. I mean, this site is just gargantuan. It's huge. So anyways, on that note, I'll get back to you. Thank you very much.

Once again, if you have a question, please press star, then one. The next question comes from Eric Windmill with Scotiabank. Please go ahead.

Oh, hi, Keith and team. Thanks for taking my question. Maybe just continuing on Jarrah Canyon. So in addition to the hiring plans, any other critical path items or milestones beyond the PFS we should be looking for throughout this year and the next year?

Well, the two most critical things is the oxygen plant and the underground fleet. So we're working right now on defining all of that and defining costs and defining timelines. And we're still a little bit early, but we will be putting an order in for some of the underground fleet in the next couple of weeks, which, you know, have, you know, 10 to 12 month lead times. We're just working with a group on the auction and plant right now. And I can't really give you a whole bunch of details because it's just kind of a moving, you know, moving thing. But, you know, once we know more, we'll, you know, we'll be putting more information out to the market.

Okay. Thank you. Appreciate that. And maybe just some of the other expansions you're working on, Los Gatos or Santa Elena. Any critical items there we should be keeping an eye on?

No, no, just time and money. There's nothing critical.

Okay, appreciate that. Just one more from me, if you don't mind. In terms of M&A, what are you guiding to the market? Are you happy with the size of the portfolio or any changes you want to make or assets you might look to add down the road?

Well, we're always looking for ways to grow. I can't talk too much about it, But, yeah, look, we have, you know, our group, you know, continually scours the planet and looking for good silver projects. And they're, you know, they're kind of a rare animal and they're hard to find. And but we continue to look.

OK, appreciate that. I'll hop back in the queue, but thanks very much for the detail.

Yeah, you too.

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

Okay, thanks, Ashia. Yeah, just a few here. One is just getting a general First Mint update, I'd say. There are a few questions in here. What percentage of your total revenue came from First Mint business? And just talk about the first quarter.

Yeah, I'm going to pass this question over to Manny.

Yeah. Thanks, Keith. Yeah, the mint continues to operate quite nicely. Q1 was another record for us. You know, it is very, very retail driven. So obviously when we see the metal prices are running up, the orders are coming in nicely. So we had a nice uptick throughout the quarter which was great to see uh the operationally is going quite well and we're staffed quite nicely and we do have plans for further expansion um we'll be pulling the trigger on this uh in due course but all i know is going you know quite nicely and building other moments and though we have from last year okay and the last one we have from the queue is just um uh picking up on keith your comments and elaborating on the strategy about the lower cutoff grade and that seemingly increasing mine life?

Just a little clarification question.

Yeah, you know, I would maybe use 20%. I should talk to our QP before I throw that number out, but that's kind of my guess is, yeah, mine life does increase as a result of the lower cutoff grade. You know, historically, well, previously, I should say, you know, you're in an underground and you're mining, you know, three four meters of rock uh and uh you know you're leaving behind you know the low grade material on the walls of that tunnel uh because it's deemed un-economic so you just leave it behind and that's just common mining practice um uh today you know we can widen those mining stopes you know by a couple of meters and then still you know and pull all this rock out and still make money, even though the grade is lower. So yes, it does. So you're mining slower or you're advancing slower and you're mining wider. So that has an impact on your life of mine. And it's obviously a positive impact.

And that's it from the webcast, Bashia.

This concludes the question and answer session.

I would like to turn the conference back over to keith for any closing remarks please go ahead yeah i think i covered everything um um you know obviously impressive quarter um you know q2 is looking pretty darn good as well so we hope to you know um have a another great quarter back to back but we'll have you know much more things to talk about as we advance through this year it's an exciting year with the large capital expenditure going into exploration development and mill and mine expansion. So we're pretty excited about what we're seeing in the company and also with metal prices, you know, the way they are today, assuming they stay in these levels, you know, it's just going to be a bang-up record year again. And I just want to – Manny, is there anything that you would like to add before we go?

No, just be on the lookout for more updates throughout the year, but a lot of exciting stuff.

Okay. Well, very good. Well, thanks, everyone, for joining us.

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