First Majestic Silver (AG): The honest skeptic's read.

The note · Principal

The note

First Majestic is the hardest of our three watchlist names to own honestly, and that is exactly why it is on the desk. Silver is a narrative metal. The company has had more operational resets than closes at a new high. The 2025 revenue print was spectacular and the stock responded, but the interesting question, the Halvren question, is not whether the metal went up. It is whether per-share value was actually created, or whether we have simply watched a torque-machine do its thing while the share count quietly tells a different story. That question has a real answer, and it is uncomfortable for both bulls and bears.

The business, in one paragraph

First Majestic is a silver-focused primary producer with a portfolio concentrated in Mexico (San Dimas, Santa Elena, La Encantada, La Parrilla legacy, and the Los Gatos JV interest via the 2024 Gatos Silver acquisition) and Nevada via the Jerritt Canyon gold operation acquired in 2021. The company was founded by Keith Neumeyer in 2002 and has been built through a long string of acquisitions aimed at scaling primary silver production, a deliberately counter-positioned strategy in a metal that most majors have de-emphasized. The business proposition is torque: when silver moves, revenues move more than linearly. The business challenge is that the torque works symmetrically, and primary silver is a structurally difficult place to create per-share value.

What FY 2025 actually said

Record revenue of US$1.26B (+124%) was driven by two things in roughly equal measure: a 50% increase in payable silver-equivalent ounces sold, and a 47% increase in the realized average selling price to US$41.52/AgEq oz. Those are real numbers against a real tape. The per-share story is more nuanced: the 2024 Gatos acquisition was equity-funded, so the ounce growth is substantially inorganic, and the share count is materially higher coming into 2026 than it was in 2023.

AISC of US$21.17 per AgEq ounce is essentially flat year-over-year, which, in a year when realized prices rose 47%, is a revealing data point. The cost curve does not reward you for a strong year; it only punishes you for a weak one. FY 2025's AISC leaves First Majestic comfortably profitable at realized prices, uncomfortably close to breakeven at a US$22–24 environment, and in real trouble at anything approaching US$18. That asymmetry is what Pillar I question 2 asks about, and it is not solved by a good year.

Three things we are reading carefully

1. The real cost curve, not the guidance print

First Majestic's reported AISC is an accounting number. The more honest read is the all-in cash operating cost per ounce after by-product credits from gold, lead, and zinc at mid-cycle assumptions, which is what a real cost curve looks like to a silver investor. On that basis, First Majestic sits in the second quartile of primary silver producers globally, and the differential between reported AISC and “real” AISC can be several dollars depending on metal price assumptions. The guidance language around metal-price assumptions and the gold-to-silver ratio in 2025 disclosure is particularly worth reading slowly; the company's explanation of how AgEq ounces are calculated when the ratio compresses is, in plain English, an admission that “ounces produced” moves around meaningfully depending on which metal is the denominator.

2. The Mexico tax and royalty overhang

First Majestic has been in an ongoing tax dispute with the Mexican government (Servicio de Administración Tributaria) for several years regarding transfer pricing on historical San Dimas production. The company has accrued a substantial liability in the range of US$200M+ depending on how the dispute resolves, and the broader Mexican fiscal environment for mining, including recent royalty and water-permit changes under the Sheinbaum administration, has been trending less friendly to foreign operators. This is a Pillar III question that the sell-side often footnotes. It is not a footnote. A worst-case resolution of the historical dispute meaningfully reshapes the balance sheet. We track the Mexican legal and fiscal headlines weekly because, on this one, the headlines are the data.

3. Per-share value versus production growth

This is the single most important question on First Majestic, and it is the one most silver bulls skip. Over the last eight years, production has roughly tripled while the share count has roughly doubled, and the relevant per-share metric, silver-equivalent ounces per share, reserves per share, cash flow per share at a constant silver deck, has moved far less than production has. Acquisitions financed with equity work when the acquired asset is acquired below the acquirer's own intrinsic value per share; they destroy per-share value when it is the other way around. We have not yet convinced ourselves that Gatos was accretive on per-share metrics ex the silver tailwind. We are withholding judgment for two more quarters of integration data and a consolidated reserve and resource update.

What we are watching into FY 2026

• AISC guidance for 2026 against a more normalized metal-price assumption, and whether the company discloses an explicit real-AISC or by-product-adjusted number.
• Mexico tax dispute resolution or settlement, any directional news moves the thesis materially.
• Per-share AgEq reserves and resources post-Gatos integration. This is the cleanest read on whether the acquisition actually created value.
• Share count trajectory, any further equity issuance is a red flag at current prices.
• Jerritt Canyon economics now that the gold segment is a meaningful contributor; the company's willingness to divest if returns disappoint will be a Pillar II signal.

Sometimes the most useful output of research is “not yet.” First Majestic is on the desk, not in the book. That distinction is the whole job.