What happened

Silver prices were fairly range bound in November, but that didn't stop shares of First Majestic Silver (AG -4.60%) from tumbling 17.2% during the month, according to data provided by S&P Global Market Intelligence.

More often than not, precious metal stocks react more strongly to company-specific events such as earnings than to metal prices, and that's exactly what happened with First Majestic Silver last month. Ironically, though, the company's numbers were far from discouraging, and there's clearly a bigger concern looming that's making investors wary.

So what

Here's a quick look at the key numbers , all year over year, from First Majestic's third quarter, as reported on Nov. 7, 2018.

  • Silver equivalent production: Up 69%, hitting a record of 6.7 million ounces.
  • Revenue: Up 43% to $88.5 million.
  • All-in-sustaining cost: Down 2% to $15.12 per ounce of silver.
  • Net earnings of $5.9 million versus a loss of $1.3 million.

What's not to like? In four words: adjusted earnings per share. You see, First Majestic incurred an adjusted loss of $0.03 per share in Q3 compared with no-profit-no-loss in Q3 2017. That's because the miner's net earnings were primarily driven by a one-time tax benefit. Otherwise, First Majestic not only realized 14% lower silver prices but also saw its administrative expenses shoot up during the quarter thanks to its recent acquisition of Primero Mining. The market, of course, wasn't happy and decided to dump the stock.

First Majestic shares, however, recovered nearly all lost ground before crashing again after Nov. 21. Blame news from Mexico. 

A red arrow on a red stock graph depicting a fall.

Image source: Getty Images.

Now, Mexico is the world's largest-silver producing country, but opposition and protests by locals have gathered significant ground in recent years. In late November, Mexico's new congress initiated several bills calling for tougher mining regulations that would give indigenous communities and government greater say in mining approvals. Shares of Mexican miners tanked soon after, and First Majestic Silver was one of them.

Now what

First Majestic took a big, bold growth step with the acquisition of Primero in May, which included its prized silver-gold San Dimas mine. With San Dimas's annualized silver production capacity of 5.8 million to 6.4 million ounces, First Majestic should become the largest pure-play silver company in the world. I see strong potential in First Majestic, but as an investor, you need to keep track of any developments in Mexico that could hurt the miner's prospects.