First Majestic Silver Corp. (AG) Earnings Call Transcript & Summary

Thank you for standing by. This is the conference operator. Welcome to the First Majestic Silver Q2 2026 Financial Results Conference Call. The conference is being recorded. [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.

Thank you, and welcome, everyone, to our Q2 conference call to discuss today's or this morning's news release. Hopefully, you've all read it by now. Before I get into introducing Samir, I'd like to introduce the people in the room with me here today. Mani Alkhafaji, our President and Chief Corporate Development Officer; we have Dave Howe, our Chief Operating Officer, who's new to the company. He joined us about 3 months ago; and Samir Patel, General Counsel, Corporate Secretary; Darrell Rae; and Joel Faltinsky from Investor Relations; Darren Fernandez from our financial leadership team and our new CFO, Neil Beaumont, who's just recently joined us a couple of weeks ago. And we did put a news release out on that and his files there is with Canada Pension Plan and KPMG and BHP and has added a lot of depth to the financial world, which we're quite pleased about. So I'm just going to pass this on to Samir for comments.

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, 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 on 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 to 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 have a presentation showing on the screen. Some of you hopefully can see it. You've got full control over it. We'll go through it slide by slide on our end. I won't read the entire slides as I'm hoping most people on the call have already gone through our news release, but another strong quarter for us. Big revenue number, $416 million, up 53% year-over-year, 3.8 million ounces of silver produced in the quarter, bringing our H1 production numbers up to 7.3 million ounces, which is basically 50% of our revised guidance that we put out in July, which is obviously, as you probably know, about 10% increase from our guidance that we put out in January. So we're looking forward to a strong H2 going forward. EBITDA of $252 million, up 110%, strong cash flows of $0.50 a share. Exploration is continuing at a robust pace. We did 94,000 meters across the portfolio in Q2. In the full first 6 months of the year, we did 160,000 meters of drilling. We're very, very pleased to see the permits coming from Mexico on our Santo Niño and Navidad portals. Those 2 discoveries have been well laid out to the public in the form of several news releases over the last couple of years. These 2 portals, we are actually projecting them to come into development in about 12 to 14 months, we've now started development at Santo Niño the last few weeks we're looking forward to doing first blasting there in the next week or so. So Santo Niño is over a year ahead of schedule, which will hopefully bring ore into the mill towards the end of 2027 from that. And slightly later, probably about 18 months after that, we'll probably see Navidad starting to add ore to the mill at Santo Niño. So those are 2 very exciting things that are developing at Santo Niño, looking for extended mine life there as a result of these 2 new discoveries that were discovered about 2 years ago now. So we did revise our guidance, as I did say already. We did declare our dividend as well a 270% increase in our dividend year-over-year, which is obviously nice for our shareholders. We did do substantial share buybacks in the quarter. We bought 1.2 million shares during the period. That program was there for us to use at any time. Whether or not we do that going forward, I expect that we likely will, but look for further news on that. We ended with a strong treasury at the end of June 30, $1.25 billion in the treasury, which is obviously a pretty nice place to be. So I'm going to jump to the next slide. That was on Slide 3. So on Slide 4. looking at the all-in sustaining costs, as everyone knows, listening to this webinar, our analysts are quite familiar with this. There is inflation, of course, as a result of quite large bonuses going to the workforce, which is quite nice for them. And you can -- you probably imagine how happy the workforce is these days because their bonuses are tied to silver prices. So it's really paying off for the communities in the areas that we're active in. So that's really nice to see from our perspective. We're keeping our costs in line. As you can see on that graph there, our cost per tonne are $107, pretty well compared to the last 4 years. So, we are keeping our costs in line on a daily basis as we on the efforts that are currently underway. So, jumping to the next slide. Operating cash flows, obviously, quite good. You see the Q2 number there of $248 million, slightly down from Q1, and that's all price driven. As we all know, what happens in the gold and silver prices, we are affected by those prices as we are completely unhedged at all times as our shareholders virtually demand that we remain unhedged, which I'm a firm believer of that. And -- but still strong cash flows and still adding cash to our treasury, which is obviously very nice to see. Free cash flow, a strong $195 million as well in the quarter. Moving along. At Los Gatos, we're working to continually reached the 4,000 tonnes per day. We actually exceeded that number. As you can see, we hit a record of 4,070 tonnes per day in June, which is great. We're on track to have continuous throughput. A Los Gatos at 4,000 tonnes a day, which is important for that operation. Santa Elena continues to perform extremely well. We now have our throughput getting close to 3,500 tonnes a day now. We expect to have daily throughput at 3,500 tonnes a day throughout H2. And again, the permits at Santo Niño and Navidad for that asset going forward. San Dimas had a pretty good quarter. There was some labor disruptions. It's quite common at that mine as most of our shareholders are aware. But nevertheless, -- the union is getting paid a lot of money these days, and there -- I can tell you they're quite happy and they're working hard and some of the development rates that we're seeing out of the workforce there are quite good compared to the last couple of years. La Encantada, we had our own fleet now of trucks doing our own ore transport to the mill. That's a changeover from what we did over the last several years. We bought our own fleet, and it's really paying off and adding to the throughput, and we're starting to hit record throughput levels at La Encantada as we speak, which is really nice to see for that operation. So both La Encantada and Santa Elena are performing above budget, which is quite nice to see. Jumping to the next slide. Jerritt Canyon, we continually get a bunch of questions on Jerritt. We're pretty excited about it. current gold prices, it's going to be a big cash flow generator for us. And we have initiated underground development and rehabilitation, drilling is continuing. I don't have the number in front of me, but we had substantial meters of drilling in the quarter, and we'll continue to do that to prove up the mine plan and get ready for mining next year. A variety of consultants have been hired to initiate production there. We're on track. We're within budget and all a bunch of the key equipment has now been ordered. There's a couple of components that are still being worked on to get orders in the system. But as I said, we're on track to see production at Jerritt Canyon like Q3 of 2027, a pretty exciting event for all of us, including our shareholders. So, jumping along to future catalysts this page or Slide 8 for those of you who are following us. Exploration is really key for us this year and last year. You can see that we're adding ounces to our resource base. We had a nice increase in our numbers that we put out in March of this year, and we continually discover new structures and new ore bodies. And just recently, we've had some good news on San Dimas, which is really nice to see. And the drilling in Santo Niño and Navidad are continuing. We continually see nice extensions of the Santo Niño ore body, and we will be updating our resources over the coming quarters. We're likely to be putting out a 43-101 on Los Gatos in the next quarter or so, and we'll likely be following that up with Santa Elena 43-1 with 101 coming out later this year or early next year. So look for further news on exploration, look for further news on the Jerritt Canyon restart and look for the continued cash flow and cash generation and building our treasury because that's really one of our key focuses right now, really getting ready for the future, and we think we have a very bright future ahead with all the great things going on within the company. And that's it for the presentation. We'll open the call up for questions.

[Operator Instructions] Our first question is from Heiko Ihle with H.C. Wainwright.

Two quick ones here. Your finished goods inventory, I mean, obviously, over 1 million ounces of silver, close to 5,000 ounces of gold as of the end of last month. Do you want to give a little bit of color on where that stands today and what the new baseline is? And if I want to go out on a live here, maybe even where you see this at the end of this quarter and maybe even at the end of the year, just so we can incorporate that into our model?

Yes, sure. The mid needs around 400,000 ounces in the vault at all times to keep that business operating sufficiently. So that should be kind of, I think, your base. Last quarter, we ended up with a little over 600,000 ounces, you're right. This quarter, we're over 1 million. And the reason really for that is just the precipitous drop in the silver price during a very, very short period of time. And we didn't want to be caught selling silver in the low $50 range, and I felt that there was going to be a bounce, and we are seeing that now. And I don't want to give you numbers or false expectations, but I would suggest that, that inventory number will drop during the quarter.

Okay. Fair enough. And then a completely different one. I mean, Jerritt Canyon, it seems like things are really starting to happen there. And frankly, they need to, given that we're at this point, with 17 months away at the very longest of the timeline here with the second half of next year. How many people are working there now? And maybe if you would like a little bit of an inkling of a clue of quarter-by-quarter capital spend at the site?

Yes. We haven't put the details out on that yet. We did put the number of $75 million out in February. We're well in line with that number. The standard, for example, the deposits have been made and other key components, deposits we made. There's a couple of other key components that are being ordered in the next 30 days and deposits will be made on those orders as well. So, a lot of that money is back ended. We will be putting out additional capital requirements likely in January of 2027 once we get through the 2027 budget. But we don't really expect that $75 million is going to change in 2026, unless there are some changes currently that potentially we may decide to buy additional equipment or something along those lines. So, nothing currently is anticipated regarding that. And on the staffing, there was about 40 people that have been there over the last couple of years, and they were there for care and maintenance purposes. We had 45 individual -- 45 positions that we needed to fill from the time we decided to start to when we started building out the workforce. Of those 45 individuals, 80% of those positions have now been filled.

The next question is from Eric Winmill with Scotiabank.

Just wondering here, Cant Nino and Navidad, any comments here in terms of critical path items or sort of sequencing over the next 12 or 18 months as you ramp up the production there?

Let me pass that question on to our Chief Operating Officer, Dave Howe.

No, I don't -- I really don't see any issues. I think we're actually trying to speed some of the ore access up. So we're looking about now revising our mine plan.

Does that answer your question, Eric? Or would you like more specifics?

Yes. Anything you can share there in terms of what we should be looking for here on the works program here through the balance of this year and the next?

I think our first blast should be around 15th of August, and we'll just be pushing ahead. We've got all of our ground control items ordered and then we'll just push down spring down. But I don't see any issues going forward with the development.

Okay. Great. That's helpful. And in terms of San Dimas or any other mines, any major works programs underway beyond the expansions you talked about?

Dave, did you get that?

Right now, we're just pushing ahead with our development, doing very well. As Keith mentioned earlier, our union work is doing very well with the long hauling development. So, we don't see any issues at all.

Okay. Great. That's helpful. And maybe just more of a strategy question, but obviously, cash balance is building. Any thoughts here on capital allocation when it comes to M&A or dividends and buybacks? Any thoughts for the rest of this year?

Well, in the quarter, we spent $22 million on share buybacks, which is, I think, the most we've ever spent in the history of the company on share buybacks. I can't commit to you on what we're going to be doing for the rest of the year, but it obviously is on our list of things to do with our cash. The dividends were upgraded, doubled in January for 2026, and that was really nice to see. It's still a relatively low dividend. I'd like to see it increase further. But I'd like to see the treasury build even more. I know it's a lot of money, $1.25 billion, and it's a lot, and it is growing, which is really nice to see. There is a couple of cash items that are on our list that could be large, and that's the tax settlement in Mexico with Primero San Dimas, with all our shareholders, and I'm sure you're aware of that or Eric. So, once we get that off our play, which we hope will be resolved by the end of the year. And then with Jerritt Canyon also, we don't know what the spend is going to be in 2027. We've got some numbers that we're expecting to make public, as I said, in January '27 to get that finally up and running by the third quarter. But once we get those 2 big spends out behind us, then we'll look at further capital allocations.