In late 2024, First Majestic Silver (AG +6.67%) made a bold move. It agreed to acquire Gatos Silver in a $970 million deal. The transaction, which closed early last year, gave it a 70% interest in the Los Gatos Joint Venture, which owns the Cerro Los Gatos silver mine in Mexico. The transaction made it a much larger-scale silver producer.
That deal has paid big dividends as silver prices spiked. It has made First Majestic a leading silver stock investment option.
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A transformational year
First Majestic Silver produced an average of 4.2 million silver ounces in the fourth quarter of last year, a 77% increase compared to the fourth quarter of 2024. Las Gatos was a major driver, as the mine produced 1.5 million ounces of silver during the period. That drove its annual total to 15.4 million ounces, a new company record, and an 84% increase from 2024. In addition to the production from Los Gatos, the company delivered higher silver output from its San Dimas (19%) and La Encantada (18%) mines.
Meanwhile, the company's total production (which includes silver, gold, zinc, lead, and copper) reached 31.1 million silver equivalent ounces last year. The company exceeded or met its original and upwardly revised production guidance, driven by solid operating results across its mining portfolio.
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Key Data Points
Cashing in on higher pricing
The uptick in production came at an opportune time. It enabled the company to cash in on higher precious metals prices. During the third quarter, First Majestic Silver achieved record quarterly revenues of $285.1 million, a 95% increase from the prior year and its third consecutive quarter of record revenues. Meanwhile, its cash flow from operations increased by $101.6 million to $141.3 million, while its free cash flow rose by $67.5 million to a record $98.8 million. As a result, the company ended that period with a record cash position of $568.9 million.
That was just the third quarter. The company's financial results are likely to set another record in the fourth quarter, given where precious metals prices were during the period. To put its financial results into perspective, First Majestic Silver initially expected that the Gatos Silver acquisition would boost its annual free cash flow to around $70 million. It far exceeded that total in the third quarter alone.
First Majestic's robust cash flows and record cash position are enabling it to return more money to shareholders. The company recently announced plans to increase its dividend per share from 1% to 2% of its net quarterly revenue, starting in 2026. If silver prices remain elevated, First Majestic will pay significantly higher dividends in 2026 compared to last year's level. That will enable investors to cash in on higher silver prices.
A well-timed deal
First Majestic Silver's acquisition of Gatos Silver last year couldn't have come at a more opportune time. The deal significantly increased its silver output just as silver prices began spiking, enabling the company to generate substantially more free cash flow than it anticipated. That's allowing it to reward shareholders by paying out more of its revenue as dividends, enabling them to reap even more of the rewards of higher silver prices.
