First Majestic Silver Corp. ($AG)

Thank you for standing by. This is the conference operator. Welcome to the First Majestic Silver 2026 Q1 Financial Results Conference Call. [Operator Instructions] 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, thank you, and welcome, everyone, to our Q1 highlights conference call with investors and shareholders. Today, obviously, myself, President, I'm in Europe right now. Mani Alkhafaji, President and Chief Corporate Development Officer is in Vancouver. David Soares, our Chief Financial Officer, is also in Vancouver; David How, Chief Operating Officer, who just was newly appointed on March -- or May 4, which we'll talk about a little bit further in the next couple of slides. But David comes with us after quite a long search for a replacement to Steve. . Steve told me last summer that he would like to retire and we put an effort in place to find his replacement. And we are successful in getting Dave -- how who's a well-known mining executive. So we're happy to have Dave on board. Steve will be effectively working until June 30, assisting Dave in anything that Dave might request Steve, over the next month or so. We also have Samir Patel, General Counsel and Corporate Secretary, President in Vancouver and also Dara and Joel Singen -- sorry about to from Investor Relations also present today. Before I go any further, I'll need to pass the call over to 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 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 clients. 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 new 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.

Okay. Thanks, Samir. Just a couple of things on our management changes. Steve Holmes has been with the company for 6 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 efforts. And we're set a see go, but at the same time, it's time for him to retire. And we wish him best as a future travel experiences with his wife and family. So Obviously, we'll be stay 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 need 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 20, we were able to find a great leader for the Jerry Canyon restart. We've brought on Eric Alex Thompson, and Alex has a seasoned and strategic buying executive with experience in building and operating mines of the world and will be a key part of the restart plan for Jerry Canyon, which we'll be excited about talking further about as developments continue. So going to Slide 3 of the presentation, which I'm assuming some of you online have access to, just going back in time, if you go back over the last 20 years, Q1 is generally a kind of a soft quarter. You get everyone coming back from holidays and then you've got to remobilize all the contractors, and usually, you could lose up to 2 or 3 weeks in Q1. It's not 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 was 26% of 2026 guidance -- midpoint guidance. So that's pretty good being ahead of guidance. And gold production was at 28% of midpoint guidance. So both silver and gold are above our current guidance, which is our midpoint guidance, which is fantastic to start the year off. such a positive note. The average realized silver price was $86.35 compared to $33.10 last Q1 2025. so pretty impressive there. Our revenues were a 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 sold it, that obviously would have improved our revenue and also improved our profitability. But we elected to hold onto 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 1 thing I think the analysts or the investors should really pay attention to is actually be expanding margins, which is pretty impressive. And then I've got a couple of more comments coming up on topic. We've already been focused on efficiency and keeping our costs in check and is really paying off. We've had operating cash flows in Q1 of $311 million, $0.63 a share. And our silver purity is 66%. That compares to 60% in Q4 of 2025. Our dividend is our largest dividend ever at $0.0171 for shareholders of record on May 15. The dividend is basically 4x the size of last year's dividend. With revenue doubling and us changing our policy, increasing our dividend from 1% to 2% effective January 1, 2026, has made a big impact. And -- so our shareholders will be getting the highest dividend that they've ever received in the company's history. So that will be fun to see all those checks arriving in people's mailboxes. Going on to Slide 4. So the cash cost and all-in sustaining cost per ounce are aligned with plans. There's really no big surprises there. per ounce cost. It increased when you compare to Q1 as it shows on the slide there. The main drivers of the increase, as we've mentioned to the analysts before it is we haven't changed our ratios, which has a big impact, which I'll talk about shortly. But our production costs could go up a little bit mostly due to higher throughput because we have reduced the cutoff grades due to price. So we could mine a lot lower grade ore and still getting the same ounces, but it does affect your cost, your cost go up as a result of that method of mining. But it does improve 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 our all-in sustaining costs will be basically $3 less than what we're showing in Q1 of 2026. But we did fix the great at 75:1 and do the volatility of silver and gold, and that 75:1 ratio will be held throughout the quarter -- or pardon me, throughout the year. Profit sharing is also up, and I've had another comment later on that, but profit sharing was close to $2 an ounce. Smelting and royalties obviously go up with silver prices going up. So everyone's obviously make a little bit more money, which is great to see. Important to notice, as I said about margins, the margins have increased almost 4x. So our margins a year ago in Q1 were $13 an ounce. Our margins in Q1 of 2026 is $52 an ounce. So quite a game change. So 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 4, you'll see that as the lowest for a while. So 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 about our exposure to diesel but the happenings that are going on in the Middle East right now. Most of you probably know that we converted 3 of our mines over to liquid natural gas over the last few years, and one of mines are on the grid. So our total exposure to diesel our cost is only 5%. So it's -- 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 4 operating mines. Each of them not year-over-year improvements in profitability notably than CANTATA where it had a bang-up quarter. Ligand actually profited $30 million in Q1. I don't actually remember the last made that much money. But it's obviously going quite well there. So it's nice to see that mine finally hitting a stride after some difficulty that it had over the last couple of years. Property, this translates into $224 million in free cash flow, even accounting for a very large tax payment that was made in January. As a result of our 2025 income taxes that just simply due to the profitability of the business, the Mexican government has paid $95 million, which obviously came out of our cash flow. So the chart shows the increase in cash flow being generated. Operating discipline, of course, over our 4 mines is key, cash efficiencies and obviously increases silver prices having a huge impact on the business. We're very flexible for future growth, the size of our treasury, over $1.1 billion obviously pretty impressive. Our development and exploration programs are very aggressive and on track, and I've got a couple of more comments later on the exploration programs. Operational expansions, both San Jens 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 Santa and 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 6, so we continually have exploration success at San Dimas and Santa Lena and Muscato. We're expanding the Sandlin mill. We're expanding the Lascatos mine development. At Los Gatos, our work is to mine 4,000 tonnes a day. And we have brought in a contractor to assist in getting up to those levels. We're actually pretty closely now. The middle itself can handle that. It's not a bottleneck at the mill. It's always been a pollock 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 San Elena, getting that mill expanded. As I think most of you know, we're expanding that mill to 3,500 tonnes a day from 3,200 tonnes a day, and we should reach that objective by H2 2026. Exploration is just going wonderfully, Navidad and Santino discoveries are obviously really paying off. We've put out some numbers on those 2 ore parties already, but we continually advance studies and then work on those 2 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 time lines associated with getting Sandino and noting that up and run, we'll be putting more additional news out on time lines and how that's going to affect future production at Santillana. So always looking for enhancing adjustments productivity, there's always a focus not just at Santillana, but also in all the mines. Lingotada, I think most of you likely know as well. We've decided about a year ago to go to self-hauling. We were having challenges with contractors that we're assisting in getting ore to the mill. And after 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 increased throughput at the mill. The mill can handle it is no problem with that. This mill ran at 5,000 tonnes a day back years ago. So it's just really the mine and we're resolving that having this truck fleet and so on. So it's in early days, but it's looking pretty good. Going to Jerry Canyon. We're obviously very excited about the announcement of hiring Alex Thomson as our Managing Director. We really needed a leader there to really get a hold of thing. Alex has 20 years' experience, primarily at BHP, but he's really taken control of this operation, and he's very well liked by the team down on site, and we'll be putting, obviously, a bunch of new people in place to get this operation up and running. We're investing $75 million in 2026 and filling in the talent basis, as I've mentioned. We are preparing a feasibility study or pre-feasibility side, I should say. Hopefully, that will be out in the early 2027. We were prepping the underground. We've got people on site right now underground, preparing the area, planning on development. The plant upgrading is not quite started yet. We're just in the order of -- process of ordering a bunch of different equipment, a bunch of deals have gone out and several more appeals will be going out over the next 2 weeks as items become obviously required or we identify items that we need. And some of the items are longer than others. And so we're trying to get all those items necessary for the underground and the plant ordered in the system and get these pieces of equipment on site as soon as possible. And we'll share updates as we progress over the next year. We are still targeting for production to commence in H2 2027. And so far, we're on track. I did want to bring something up because we had a false news release that went out of Mexico. It was regarding a collapse at Las Gatos. And I looked at the full graph myself, and I read the article myself. And 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 artisanal mining or may be 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's a 10-meter section of the ramp that collapsed and we were down 2.5 days, 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 it -- because it was just things happen in mining and being down for 2 days is nothing. So we decided not to comment on it, but I know that a number of analysts did phone the company asked about it and asked about that story. So I just want to address it on this college just so everyone is clear that, everything is hunting, there's no issues that remain. Just going to Slide 7. So with a solid balance sheet and cash flows, we are 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 tonnes a day, as we've said already, and we want to get the Santina obviously, expansion completed as well. So a lot of focus is going on in those 2 operations. We have a very, very large exploration program. It's 266,000 meters of exploration over the sites this year, and that does not include an additional 42,000 meters at Jack Canyon, which we just recently announced with the opening or reopening news release on Jerry Canyon. So we're drilling over 300,000 meters of drilling this year, which is quite obviously a very large program. So pretty exciting. We've updated our resources and reserves in March and 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 CR and it's also on our website. The Santillina, we had a 90 million-ounce increase, which is pretty amazing. That was basically due to Sagonino and Navidad discoveries. So we continue to upgrade those assets. And I think that number is actually going to improve over the next year. Jerry Canyon with the -- including some of the underground, we've kind of redeveloped it. Based on the gold prices today, all those open pits that were being mined back in the '80s and '90s are pretty well now economic. So we're going to be -- we're working on a plan to include the underground and open pit in the same mine plant, obviously blending and so on, but we're now at 7.8 million ounces of gold at Jerry Canyon, which is pretty impressive compared to our prior disclosure a couple of years ago. Restart still scheduled, as I said for H2. And I guess that's really about continuing to strengthen our cash flow balance sheet, to look for continuing to increase our treasury. Obviously, we're quite leveraged to the price of silver, as you can see in our share of volatility of on couple of days, but that's something that we've got used to over time. So I have done with my presentation. We will now go to questions.

Thank you, Keith. We will now proceed to the Q&A session. [Operator Instructions] First question comes from Heiko Ihle with H.C. Wainright.

Congratulations to Alex and Dave, who I know quite well from his time back at Endeavor. Hey, if you focus 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 if commodity prices keep rising or even staying at these levels where people are more so trying to get their peas, 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 there's no rumors or there's no discussions that the government is going to be changing anything. You have to remember at these prices and the profitability of the Mexican miners, the government is getting a windfall right on their tax income from mining is accelerating quite dramatically. So I'm pretty sure the government is pretty happy. So I'm not sure why they want to kill it goose or whatever. The union is, again, the same thing. These end members, they're their bonuses are tied to the silver price. So we've just gone through a couple of negotiations with the National Union and they're very quiet quite happy, obviously. Negotiations went very smoothly. Yes, so there's really no issues there. But they are getting paid more. So our all-in sustaining cost has increased as a result of higher taxes and higher bonuses. So that can be expected. Other things, if we go back to the last bull market 2011 when silver hit $50. We saw the Sandvik of the world increased prices by 15% to 25%. We've not seen that. We're just in the process of signing an agreement with Santek, and we're looking -- 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 Jared Canyon. I mean, obviously, I'm excited to see the site render production I don't know we got Alex on board now, but on a grander scale. I mean I went through your April 2nd release again this morning, you mentioned the $75 million you spent this year. $7.5 of those is workforces, nothing. When do you think hiring for the site should really start ramping up? I assume this is like second half or even fourth quarter kind of thing? And then building on all of that, once Chartis in full operations I don't think you'll have any issues getting workers to site given the proximity to talent. And what are you seeing with the labor pool? 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 maybe some of the turmoil at right now might assist. Hopefully, we don't know for a fact, but we have a list of -- pardon me, a list of positions that need to be filled. It's very extensive and detailed. And I think I don't have the exact number in front of me, but we've hired a handful of people just in the last couple of weeks and for key management positions, and we're looking to hire 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 then 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, LCO. And so it's the closest mine telco. So if you're rather than having to drive to one of the other neighboring mines that it will take you 1.5 hours both ways, you're on the road for 3 hours a day working on car, you're only on the road for 1.5 hours on a day. So it's big, big difference. And it's a well-known site. And I think the community at Alco is pretty excited about it, and we're getting approached by people regularly to come on as employees.

Yes. who's building on the ground at Jared. I mean, the size is just gargantuan it's huge. So anyway. On that note, I'll get back to you.

[Operator Instructions] The next question comes from Eric Winmill with Scotiabank.

Keith and team. Maybe just continuing on Jerry Canyon. So in addition to the hiring plans, any other critical path items or milestones beyond the we should be looking for throughout this year and the next year? .

Well, the 2 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 time lines. And then 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 have 10- to 12-month lead times. We're just working with the 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 thing. But once we know more, we'll be putting more information out to the market.

Appreciate that. And maybe just some of the other expansions you're working on Goskato or Santana, any critical items that we should be keeping on.

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

Maybe just one more for 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'd like to look to add down the road?

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

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

Okay. Thanks, Ayesia. Yes. 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 Ferstman business and just talk about the first quarter.

Yes, I'm going to pass the question over to Mani.

Yes. Thanks, Keith. Yes, the it continues to operate point nicely. Q1 was another record for us. 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. Operationally is going quite well. We're set quite nicely, and we do have plans for further expansion. We'll be pulling the trigger on this in due course. But all in all is going quite nicely and building on the momentum that we had from last year.

Okay. And the last 1 we have from the queue is just picking up on your comments and elaborating on the strategy about the lower cutoff grade and that seemingly increasing mine life. Just a little clarification question.

Yes. 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, yes, mine life does increase as a result of the lower cut rate we historically -- well, previously, I should say. You're in an underground and you're mining 3, 4 meters of rock, and you're leaving behind the low-grade material on the walls of that tunnel because it's teamed on economics, easily behind and that's just common mining practice. Today, we can widen those mining stopes by a couple of years and still pull all this rock out and still make money even though the grade is lower. So yes, it does. So you're mining slower -- 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.

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.

Yes. I think I covered everything. Obviously, an impressive quarter. Q2 is looking pretty darn good as well. So we hope to have another great quarter back to back, but we'll have much more things to talk about as we advance through this year. It's an exciting year with a 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 the way they are today, assuming they stay in these levels. It's just going to be a bang-up record year again and I just want to -- Mani, is there anything that you would like to add before we go?

No, just one to look out for more updates throughout the year, but a lot of exciting stuff.

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

That brings us to close of conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.