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First Majestic (AG) Inks Deal to Sell La Guitarra Silver Mine

Zacks Equity Research
·4 min read

First Majestic Silver AG recently announced that the company has entered into an agreement to sell its fully-owned past producing La Guitarra Silver Mine in Mexico to Sierra Madre Gold & Silver Ltd. in an all-share deal worth $35 million.

The total consideration of $35 million consists of 69,063,076 Sierra Madre shares at a deemed price of 65 cents per Sierra Madre share. The closing of the transaction, which is expected in the second half of the year, is subject to the approval of the TSX Venture Exchange and other customary closing conditions. Upon closing, First Majestic will hold approximately 47% of the outstanding shares in the Sierra Madre. This will be subject to a statutory holding period of four months and one day after the date of closing and contractual resale restrictions. AG will be granted a 2% net smelter return royalty ("NSR") on all mineral production from the La Guitarra concessions, with the NSR subject to a 1% buy-back option for $2 million.

First Majestic currently has three operating mines in Mexico — San Dimas, Santa Elena and La Encantada and four of its mines are currently in care and maintenance. These include the San Martin Silver Mine, the Del Toro Silver Mine, the La Parrilla Silver Mine and the La Guitarra Mine.

Located in the Temascaltepec mining district, the La Guitarra Silver Mine covers 39,714 hectares of mining claims and has a 500 tons per day (tpd) flotation processing plant, buildings and related infrastructure. In 2017, the mine produced 611,705 ounces of silver and 5,553 ounces of gold. It was placed under care and maintenance by First Majestic in August 2018 as the company wanted to reallocate capital and resources to projects that had better economics and internal rates of return.

The company recently reported an adjusted loss per share of 2 cents in first-quarter 2022, which compared unfavorably with the Zacks Consensus Estimate of earnings of 6 cents. The company had reported earnings of 3 cents per share in the year-ago quarter. First Majestic's revenues improved 56% year over year to $157 million in the quarter. The upside was primarily driven by the acquisition of the Jerritt Canyon mine and initial production from the Ermitaño mine at Santa Elena.

Shares of the company have fallen 53.8% in the past year compared with the industry's decline of 45.3%.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Zacks Rank & Stocks to Consider

First Majestic currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the basic materials space are Allegheny Technologies Inc. ATI, Nutrien Ltd. NTR and Cabot Corporation CBT.

Allegheny has a projected earnings growth rate of 869.2% for the current year. The Zacks Consensus Estimate for ATI's current-year earnings has been revised upward by 27.3% in the past 60 days.

Allegheny's earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 128.9%. ATI has gained around 6.5% in a year. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

Nutrien has a projected earnings growth rate of 161.9% for the current year. The Zacks Consensus Estimate for NTR's current-year earnings has been revised 26.9% upward in the past 60 days.

Nutrien's earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, while missing in one, the average surprise being 5.8%. NTR has appreciated 60% in a year. The company flaunts a Zacks Rank #1.

Cabot, currently sporting a Zacks Rank #2 (Buy), has an expected earnings growth rate of 21.5% for the current year. The Zacks Consensus Estimate for CBT's earnings for the current year has been revised 5.2% upward in the past 60 days.

Cabot's earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 16.2%. CBT has gained around 11.6% over a year.


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