Key Highlights

● Revenue and Earnings rose on stronger metal prices

● Output was lower

● Labour dispute has suspended San Dimas since September

● San Dimas annual guidance was withdrawn

First Majestic Silver Corp. (NYSE:AG), one of the silver-focused metals and Mining companies listed in New York, reported third-quarter financial results that showed the contrast between strong metal prices and a difficult operating period. Revenue rose by more than a third from the prior-year quarter, while silver production fell by about a tenth and gold production fell by about a sixth, according to the release furnished to the US Securities and Exchange Commission.

Silver accounted for the majority of revenue and gold for more than a quarter. Mine operating earnings rose strongly from the prior-year period, EBITDA climbed sharply, and net earnings attributable to owners more than doubled. Earnings Per Share improved as well, and adjusted net earnings came in higher than the reported figure because of a one-time charge explained below.

Free Cash Flow was the exception to the general improvement, declining modestly from the prior-year quarter. The decline followed a large outflow for cash income taxes and settlements, including payments to resolve tax reassessments tied to legacy forward silver purchase agreements. Operating Cash Flow before Working Capital and taxes, by contrast, rose by about half.

The Dispute at San Dimas

The largest operational issue remains San Dimas, the Mexican silver and gold mine where operations have been suspended since a labour disruption began on the eighteenth of September. The dispute centres on the income tax treatment of an annual production bonus. The company said the disruption cost a meaningful number of operating days within the quarter and was the main reason for lower consolidated output.

The dispute escalated after the quarter closed. The National Union called a strike in early October, and First Majestic challenged its legality. A ruling is expected in the second half of November, according to the release. Pending visibility on a restart, the company has withdrawn San Dimas' annual production and cost guidance.

Chief Executive Officer Keith Neumeyer framed the disruption in the context of the wider portfolio. “While resolving the labour disruption at San Dimas is a priority, the Company remains financially strong,” he said, pointing to the performance of the other producing operations against budget. He added: “This operational diversity and financial strength position the Company to easily withstand the current disruption.” He also said the company remains committed to good-faith talks with its union partners.

Mine-by-Mine Performance

The production release issued in October had already shown how uneven the quarter was across the portfolio. San Dimas silver output dropped from the prior-year quarter by well over a third and gold output by about a quarter, as the dispute slowed the throughput of fresh ore and reduced grades. Santa Elena recorded lower silver and gold output as well, with both down by a low double-digit rate.

La Encantada moved in the opposite direction. Silver output there rose by more than half, which Market commentary attributed to more ore processed and higher silver grades. The final results release added that silver ounces sold increased sharply at La Encantada and modestly at Santa Elena. Costs at La Encantada, however, were affected by higher maintenance and energy spending, including the temporary rental of diesel generators.

Los Gatos, in which First Majestic holds a controlling joint venture interest and reports on an attributable basis, was the largest single silver contributor in the period and also produced zinc, lead and a small amount of copper. The company said some high-grade Los Gatos production was deferred into the final quarter. The Los Gatos cash cost per silver equivalent ounce was the lowest among the operating mines.

More Tonnes, Less Metal

Consolidated tonnes milled actually rose by a high single-digit rate from the prior-year quarter, which shows that the production shortfall was not simply a matter of less material moving through the mills. Grades and mine mix played a large part. At San Dimas, the October release said the labour dispute slowed the throughput of fresh ore, and mill tonnage there slipped only slightly even as metal output fell far more steeply. Silver and gold recoveries at the mine were reported at high levels.

Total production cost per tonne increased by a single-digit rate, a much smaller rise than the increase in cost per silver equivalent ounce. That comparison supports the company's explanation that a substantial part of the per-ounce increase reflects fewer reportable ounces rather than costs alone. Exploration also continued during the period, with extensive drilling reported at San Dimas for the quarter, and spending on exploration slightly below the prior-year level.

The base metals output at Los Gatos, including zinc and lead in meaningful volumes, adds a further dimension to the revenue mix. Silver and gold made up the great bulk of revenue, but the remaining portion shows that the company's results are not entirely tied to precious metal prices alone.

Why Unit Costs Climbed

Cash costs and all-in sustaining costs per silver equivalent ounce both rose substantially from the prior-year quarter. Part of that rise is a matter of arithmetic. Silver outperformed gold, so the conversion ratio used to express gold as silver equivalent ounces fell, and fewer reportable ounces raise the cost attributed to each one.

The company said that using the prior-year conversion assumptions would have reduced both cash costs and all-in sustaining costs by a modest proportion. That leaves real cost pressures as well. A stronger Mexican peso, higher direct costs at Los Gatos for maintenance, explosives, reagents and dewatering, and higher worker participation costs linked to rising metal prices all contributed. Sustaining development spending and Lease payments added further to the all-in figure.

Stronger realized prices still left margins wider. The realized silver price rose from the prior-year quarter by well over half, and the realized gold price rose by nearly a quarter. As a result, the All-In Sustaining Cost Margin per silver equivalent ounce expanded considerably from the prior-year level. Year-to-date all-in sustaining costs remained within the revised guidance range, the company said.

Cost Spread Across the Portfolio

Mine-level figures show a wide spread. On an all-in sustaining basis, Los Gatos was the lowest-cost operation, followed by Santa Elena, while San Dimas and La Encantada sat at the upper end of the group. La Encantada carried the highest cash cost per silver equivalent ounce, despite its production gain, reflecting the maintenance and energy expenses mentioned earlier.

That spread matters more than usual while San Dimas is out of service. The mine had been a higher-cost producer in the quarter, in part because the disruption reduced output, so its absence removes a meaningful Volume of metal while also removing some cost. The release does not quantify the financial effect of a continued stoppage, nor does it estimate the cost of restarting operations once the dispute ends.

Neumeyer's comment that the remaining operations are performing “at or above budget” therefore carries weight in the company's account of the quarter. The release gives no separate budget figures against which to test that statement, but the mine-level production and cost data offer a partial cross-check over the coming quarters.

Clearing Up Legacy Tax Matters

Net earnings were reduced by a one-time settlement with Mexico's tax authority, known as SAT, over a historic dispute involving Minera La Encantada. The matter was tied to a prior forward silver purchase agreement and a tax reassessment from several years ago. First Majestic said all assessments on silver sales under those prior agreements are now resolved and paid, pending certain administrative steps by the authority.

A separate legacy issue remains open. It concerns an advance pricing agreement previously obtained by Primero Empresa Minera. The parties recently agreed in principle to a multi-step framework for settling that matter, according to the release, which refers to an earlier company announcement for more detail but does not lay out the steps.

The settlement activity helps explain the gap between adjusted and reported earnings, as well as the softness in free cash flow during a period of strong prices. It also removes one category of uncertainty from the company's disclosures, while the release continues to name the unresolved SAT matter among its forward-looking risks. Any further cash cost tied to the remaining framework was not specified in the release.

Treasury, Dividend and Share Repurchases

The company ended the quarter with a treasury about a third higher than at the end of last year, when cash and restricted cash are combined. Working capital reached a record, and liquidity, defined as working capital plus undrawn Credit lines, was also substantial. Inventory of finished silver and gold, valued separately, was excluded from third-quarter revenue and represents potential future sales.

First Majestic declared a dividend that was nearly triple the level of a year earlier, in line with a policy that targets a small proportion of net quarterly revenue, with Los Gatos counted only at the company's attributable share. The Record Date falls in mid-November, with payment on or about the end of that month. Future dividends remain at the board's discretion.

Share repurchases were modest in the quarter. The buyback program was renewed in October, and the production release said it allows purchases up to a small portion of the outstanding shares over the next year, through the Toronto Stock Exchange and Canadian alternative trading systems, with repurchased shares cancelled.

Jerritt Canyon Spending Accelerates

Attributable Capital Expenditure more than doubled from the prior-year quarter, with spending on property, plant and equipment, underground development and exploration all contributing. Major project outlays included the restart of the Jerritt Canyon gold mine in Nevada and work on the Santo Niño and Navidad portals at Santa Elena. Attributable capital spending for the year to date has passed well over half of the guidance midpoint.

The October production release said the company remained on track to begin production from Jerritt Canyon in the second half of next year. It described a vertical roller mill from Metso Loesche expected on site in the first half of next year, along with extensive underground rehabilitation by contractor Cementation and an active drilling program during the quarter. The latest financial release confirms the spending but gives no updated restart timeline.

First Majestic's mining operations are concentrated in Mexico, and Jerritt Canyon adds a United States asset to the portfolio. The company also owns First Mint, LLC, an online seller of bullion and coins. The events at San Dimas show why jurisdictional and operational Diversification carries weight in management's description of the company.

Listings and Past Buyback Use

First Majestic trades on the New York Stock Exchange, the Toronto Stock Exchange and the Frankfurt Stock Exchange under its various symbols, and the financial results are reported in US dollars. Its repurchase activity is conducted in Canadian markets. Purchases in the quarter were small, and average prices paid fell from the level seen earlier in the year, based on the figures in the release.

The prior repurchase program also shows how selectively the company has used that authority. The October release said it bought back only a fraction of the shares that the Toronto Stock Exchange had approved under the program that expired that month. The renewed program carries a smaller ceiling, along with a daily purchase limit tied to average trading volume over the preceding months.

Guidance Math and Peer Comparison

Year-to-date silver output, as a share of the revised guidance midpoint disclosed in the release, sits somewhat behind a straight-line pace, while gold is close to that pace. With a suspended mine and its guidance withdrawn, the silver figure now requires a careful reading. The release refers to the revised guidance but does not state any additional changes to it other than the San Dimas withdrawal.

Peer data offers some perspective. In October, Endeavour Silver's silver production rose by about a fifth, helped by the addition of the Kolpa operation, whereas First Majestic's output fell. It also reported that First Majestic's shares had risen over the past year by more than the mining-silver industry group, based on its measurement at that time.

The results therefore present a pair of separate stories. Metal prices and financial strength have carried the income statement and the treasury, while operating delivery at a major mine depends on a pending legal ruling and labour negotiations. The company's stated risks, which include labour relations, Commodity prices, peso movements, grade variability, and permitting and financing delays, reflect both sides of that picture.