First Majestic in deal to acquire Gatos Silver

First Majestic Silver Corp. [AG-TSX, AG-NYSE, FMV-Frankfurt] has agreed to acquire all of the outstanding shares of Gatos Silver Inc. [GATO-TSX, NYSE].

Gatos is a silver-dominant producer with a 70% interest in the Los Gatos Joint Venture, which owns the producing Cerro Los Gatos underground silver mine in Chihuahua, Mexico.

Under the agreement, Gatos shareholders will receive 2.550 common shares of First Majestic for each common share of Gatos held, implying a total offer value of US$13.49 per share, based on the closing price of First Majestic’s common shares on the New York Stock Exchange on September 4, 2024, and a 16% premium based on each company’s closing prices on the 20-day volume weighted average prices on the NYSE ending September 4, 2024. The proposed transaction implies a total equity value of US$970 million.

First Majestic said the deal would consolidate three world-class, producing silver mining districts in Mexico under one banner: They include Cerro Los Gatos, San Dimas and Santa Elena, collectively providing for the foundation of a diversified, intermediate primary silver producer.

The proposal will also deliver combined annual production of 30-32 million ounces of silver, equivalent, including 15-16 million ounces of silver at an all-in-sustaining cost of US$18.00 to US$20 per silver equivalent ounce.

“The acquisition of Gatos Silver is a highly compelling and transformative transaction that meaningfully enhances First Majestic’s operating platform through the addition of 70% of Cerro Los Gatos – a high quality, long-life, unencumbered, free cash flow-generating asset in the mining-friendly state of Chihuahua, Mexico,’’ said First Majestic President and CEO Keith Neumeyer.

First Majestic shares were virtually unchanged on the news, easing 0.14% or $0.01 to $7.14. The shares trade in a 52-week range of $11.58 and $5.67.

At the market open on Thursday, Gatos shares were unchanged at $15.75 and trade in a 52-week range of $19.74 and $5.99.

First Majestic is a Mexico and United States-focused mining company. It owns and operates the San Dimas silver-gold mine, the Santa Elena silver-gold mine and the Le Encantada silver mine as well as a portfolio of development and exploration projects, including the Jerritt Canyon gold project in Nevada. Production from these mines amounted to 26.9 million silver equivalent (AgEq) ounces in 2023, consisting of 10.3 million ounces of silver and 198,921 ounces of gold.

Revenue in 2023 was $573.8 million, compared to $624.2 million in 2022. The drop in revenue was mainly due to the temporary suspension of mining activity at Jerritt Canyon in March, 2023.

First Majestic was in the news recently when it announced the completed commissioning and the start of bullion sales from its 100%-owned and operated “First Mint” minting facility in Nevada.