First Majestic Silver (TSX:AG) Q2 2026 Earnings Call

0:00 Thank you for standing by. This is the conference operator. Welcome to the First Majestic Silver Q2 twenty twenty six Financial Results Conference Call. As a reminder, all participants are in listen only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask

0:40 I session. Would now like to turn the conference over to Mr. Keith Neumeyer, Chief Executive Officer of First Majestic Silver. Keith, please go ahead. Well, 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 Sameer, I'd like to introduce the people in the room with me here today. Emmanuel Kovaggi, 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 three months ago. And Samir Patel, General Counsel, Corporate Secretary. Doctor. Ray and Joe Velticinski 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 and he's with Canada Pension Plan and KPMG and BHP and has added a lot of depth to the finance role which we're quite pleased about.

1:52 So I'm just going to pass this on to Sameer

1:56 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 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 upon a number of assumptions and estimates that, while considered reasonable by the company, 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.

2:55 As a reminder, these documents along with all of our continuous disclosure documents are available on SEDAR plus 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 or 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, Sameer. We have a presentation showing on the screen. Some of you hopefully can see it.

3:28 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 $416,000,000 up 53% year over year 3,800,000 ounces of silver produced in the quarter bringing our H1 production numbers up to 7,300,000 ounces which is basically 15% 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 $252,000,000 up 110%, strong cash flow of $0.50 a share.

4:20 Exploration is continuing at a robust pace. We did 94,000 meters across the portfolio in Q2. The first six 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 Nino and Navidad portals. Those two discoveries have been well laid out to the public in the form of several news release over the last couple of years. These two portals we are actually projecting them to come into development in about twelve or fourteen months. We've now started development at Santo Nino in the last few weeks. We're looking forward to doing first blasting there in the next week or so. So San Dimino is over a year ahead of schedule which will hopefully bring ore into the mill towards the end of twenty twenty seven from that and slightly later probably about eighteen months after that we'll probably see Navidad sorry to add ore to the mill at Santa Elena. So those are two very exciting things that are developing at Santa Elena and looking for extended mine life there as a result of these two new discoveries that were discovered about two years ago now.

5:38 So we did revise our guidance as I did say already. We did declare our dividend as well into 270% increase in our dividend year over year, which is obviously nice for shareholders. We did do substantial share buybacks in the quarter. We bought 1,200,000 shares during the period. That program was there for us to use at any time. Whether or not we do that going forward, expect that we like it will, but you'll look for further news on that. We ended with a strong treasury at the end of June thirty. We'll have $1,250,000,000 in the treasury, which is obviously a pretty nice place to be. So I'm going to jump to the next slide. That was all slide three. So on slide four, we're looking at the all in sustaining costs and as everyone knows of 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. You can't you probably imagine how happy the workforce is these days because their bonuses are tied to silver prices.

6:54 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 ton are 107 pretty well compared to the last four years. So we are keeping our costs in line on a daily basis as a result of strong performance efforts are currently underway. So jumping to the next slide, operating cash flows, obviously quite tight quite good. You see the Q2 number there of $248,000,000 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're completely unhedged at all times as our shareholders virtually demand that we remain on hedge which I'm a firm believer of that and it's still a bit strong cash flows and still adding cash to our inventory which is obviously very nice to see. Free cash flow, the strong $195,000,000 as well in the quarter.

8:08 Moving along.

8:12 The Edelas gas hose we're working to continually reach the 4,000 tons per day. We actually exceeded that number as you can see. We hit a record of 4,078 tons per day in June, which is great. We're on track to have continuous throughput. Atlas Gathos at 4,000 tons a day which is important for that operation. Santa Elena continues to perform extremely well. We now have our throughput where we are getting close to 3,500 tons a day. Now we expect to have daily throughput at 3,500 tons a day throughout H2 and again this permits at San Dimino and Navidad are key for that asset going forward.

9:02 San Dimas had a pretty good quarter. There was some labor disruptions is 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 they're 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. In Gattata, we had our own fleet now of trucks that are doing our own ore transport to the mill. That's the 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 Gantana as we speak which is really nice to see about operations.

9:54 So both La Gantana and Santa Elena are performing above budget which is quite nice to see.

10:03 Jumping to the next slide, Jared Canyon, we continually get a bunch of questions on Jared. We're pretty excited about it. Our 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 have 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 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 Jarek Canyon likely in Q3 of

11:00 twenty twenty seven, which will be a pretty exciting event for all of us including our shareholders. So jumping along to future catalysts on its page or Slide eight for those of you who are following us.

11:18 Exploration is really key for us this year and last year. We 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 then new ore bodies. Just recently we've had some good news on San Dimas which is really nice to see and the drilling in Santo Nino and Navidad are continuing. We're continually seeing nice extensions of the Santo Nino ore body and we will be updating our resources

11:51 over the coming quarters. We're likely to be putting out a 40 three-one 101 on Los Gatos in the next quarter or so and we'll be likely be following that up with Santa Elena 40 Three-one, Newfoundland out later this year or early next year. So look for further news on exploration, look for further news on New Jericho Canyon restart and look for the continued cash flow and then cash generation and building our treasury because that's really one of our key focuses right

12:22 now, really getting ready for the future and we think we have a very bright future ahead of all the great things going on within the company. And that's it for the presentation. We'll open the call up for questions. Thank you, Keith. We will now proceed to the question and answer session. You.

13:12 Our first question is from Heiko Ihle with H. C. Wainwright. Please go ahead. Hey, morning, Keith and team. How are you? How are you? Hey, two quickie ones here. Your finished goods inventory, I mean, obviously over 1,000,000 ounces of silver, close to 5,000 ounces of gold as of the end of last month.

13:33 You want to give a little bit of color or where that stands today? What the new baseline is?

13:39 And if I want to go out on a limb 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 mint 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 off a little over 600,000 ounces. You're right, this quarter we're over $1,000,000 And the reason really for that is just the precipitous drop in the silver price during a very short period of time. And we didn't want to be caught selling silver in the low $50 range and I

14:21 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. Fair enough. And then completely different one. I mean, Jared Canyon, it seems like things are really starting to happen there. And frankly, they need to have given that we're at this point, what, seventeen 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 spent at the site?

15:05 Yes, we haven't put the details out on that yet. We did put the number of $75,000,000 out in February. We're well in line with that number. The Sandberg fleet for example, the deposits have been made and other key components deposits have made. There's a couple of other key components that are being ordered in the next thirty days and deposits will be made on those orders as well. So a lot of that money is back ended.

15:34 We will be putting out additional capital requirements likely in January 2027 once we get through the 2027 budget. But we don't really expect that $75,000,000 is going change in 2026 unless there's some changes currently that potentially we may decide to buy additional equipment or something along those lines. But nothing currently is anticipated regarding that.

16:04 And on the staffing, there was about 40 people that have been there over the last couple of years and they're there for care and maintenance purposes. We had a 45 individual or 45 positions that we needed to fill from the time we decided to start

16:27 to when we started building out the workforce. Of those 45 individuals, 80% of those positions have now been filled. Okay. That's good. Very helpful. I'll get back in queue. Thank you guys. Thank you. The next question is from Eric Windmill with Scotiabank. Please go ahead. Great. Hi, Keith and team. Thanks for taking my question. Just wondering here, Centenino and Navidad, any comments here in terms of critical path items or sort of sequencing over the next twelve or eighteen months as you ramp up to production there?

17:10 Let me pass that question on to our Chief Operating Officer, Dave Powell. No, I don't see any good morning, but 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 at that now revising our mine plan.

17:29 Does that answer your question, Eric? Or would you like more specifics?

17:33 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?

17:41 Well, I think the our first blast should be around August 15 and then we'll just be pushing ahead. We've got all of our ground control items ordered and then we'll just push down spiraling down. But I don't see any issues going forward with the development. Okay, great. That's helpful. Thank you very much. And in terms of San Dimas or any other mines, any major works programs underway beyond the expansions you talked about?

18:15 David, you can comment. Well, now, we're just pushing ahead of 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.

18:33 Okay, great. That's helpful. Thank you. Maybe just more of a strategy question, but obviously, cash balance is building. Any thoughts here on capital allocation when it comes to M and A or dividends and buybacks?

18:48 Any thoughts for the rest of this year?

18:50 Well, in the quarter, we spent $22,000,000 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's obviously is on our list of things to do with our cash. The dividends are updated, 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 building even more. I know it's a lot of money, 1,250,000,000 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,

19:44 Dimas. As all our shareholders and I'm sure you're aware about so or Erica. So we now once we get that off our play, which we hope will be resolved by the end of the year and then with Cherry Canyon also, we don't know what the spend is going to be in 2027. We bought 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 two big spends out behind us then we'll look at further capital allocations.

20:28 Okay. Fantastic. Appreciate the added color. I'll hop back in the queue. Thank you. Cheers. Thank you. The next question is from Alex Tarantu with National Bank. Please go ahead. Hey, guys. Thanks for taking my questions here. Wanted to follow-up just on Santo Nino sorry, well Santolina rather. Keith, you made a comment and I think I apologize if I think I may have missed it here, but you're saying Santo Nino targeting to get that first ore from there end of twenty twenty seven, was that right?

21:05 And then, Navidad maybe about eighteen months after. Just wanted to confirm that's kind of what you're targeting at the moment. Yes. No, that's exactly right, Alex. Okay. All right. Good. And then I know maybe can you just can you remind me actually when it comes to metallurgy, know that Hermitano ore, lot of stuff you're putting through now, gold recovery is good, but silver recovery is a little bit lighter. What's the expectation for Santo Nino ore? Is that same as Hermitano? Or are we seeing something a bit better there? Dave, you want to grab that one? The recoveries at Santo Nino. Santo Nino, this should be very good. Don't know we're looking at I'll pass it on to Danny. He's got the numbers.

21:52 Santo Nino is behaving similarly to the original Santo Elena. So we're seeing mid-90s. The metallurgical testing for both Navidad and Santo Nino is showing 95 plus for both gold and silver with higher silver grade as well. So we're expecting more contribution of silver in both of them. Perfect. That's what I was looking to hear. Okay, great. And just my last question on capital spending. I think you guys are a little bit light, well, at least tracking so far for this year. First half of the year is a bit I think it was around 37% of your annual guidance. I guess that implies obviously the second half this year is going to be heavier. But I'm just curious, is there any projects maybe falling behind a little bit just from a timing perspective or permitting or anything like that? Or really just we should expect a lot more spending to pick up in the second half this year?

22:48 Yes, it is very much back ended and there's really no issues anywhere there except maybe close to that's a little bit behind on development. It's not materially behind, but it is slightly behind budget. The other mines are well within budget, but most of the effect is most of the effects are timing. Perfect. All right. That's it for me. Thank you. If there's anyone else I was just going to say, I'll now pass the floor over to Mr. Daryl Ray, Investor Relations at First Majestic Silver to take us through questions submitted through the webcast. Okay.

23:38 Thanks, Gaylene. Yes, there's a lot of questions that are very similar Keith to ones that you've already answered a lot on capital allocation, the dividend stock buybacks, we'll do that. Maybe a little bit that we haven't talked about is our holdings in other junior mining companies. There's a question here on what are your thoughts and what are your plans for the holdings in these companies such as Silver Storm and Sierra Madre? Our plan is to continually help those companies evolve and hopefully much larger businesses. So we could make substantial profits on those investments. That's why we sold those assets to those groups. We're confident that those groups can continually build and we have sold some of the Sierra Madre shares over the last few quarters, just take a little bit of money off the table, but we've now added a larger position as a result of the sale of Del Toro. So we're actually up on that from on a per share basis anyways or number of share basis.

24:44 Silver Storm, we just lent them $5,000,000 last week. We did that same structure with Sierra Madre as well about two years ago. Sierra Madre just paid the balance of their loan back to us last quarter in Q2, which was really nice to see. So Sierra Madre came through with their commitment and paid back the loan. So the loan to Silver Storm is the same structure and we're working with them to build out their team in Mexico and we're very supportive shareholders of both those companies. Okay. Thanks, Keith. That's it from the queue for us, Gaylene. All right. I'd like to hand the call back to Keith for any closing remarks.

25:35 Okay. Well, thanks everyone for your time today and dialing into our call. I understand this will be also on the website for people to have a listen to it a little bit later. If there are any other questions or comments that anyone on the call or anyone going to be listening to the webcast after the call please contact our Investor Relations department for any further answers to any questions that you may have. Thanks again. This brings to a close today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.