First Majestic Silver May Still Be Cheap After Q2: 61% EBITDA Margins and $1.25B Cash Leave a Re-Rating Gap

First Majestic may still be viewed more like a silver proxy than a cash generator

Investors often look at silver miners through a simple lens: treat them as a bet on the metal and stop there. That can be misleading when operating results are improving faster than the stock is being revalued.

Strong margins and liquidity are harder to dismiss

First Majestic has now posted two consecutive strong quarters. In Q2, it reported Q2 EBITDA of $252 million and a 61% EBITDA margin. Free cash flow reached $195 million, and the company ended the quarter with a $1.25 billion treasury position.

That followed Q1, when revenue rose 95% year over year even with $63.6 million of silver and gold bullion held back. Q2 revenue also grew strongly, rose 57% year-over-year to $416 million. The pattern suggests First Majestic is not only benefiting from higher metal prices, but also becoming more effective at converting that exposure into cash.

The operating leverage case: higher throughput is amplifying silver volumes

Half-year output is already meaningful

Investors tend to focus on the silver price and treat production as secondary. Yet First Majestic has already generated H1 revenue of $892 million from 7.3 million silver ounces, meeting 50% of its revised annual guidance. That matters because it means the company is more than halfway through the year with a solid production base already in hand. For context, Q1 alone produced 3.5 million silver ounces.

Why the margin profile matters more than the headline price

In Q2, First Majestic reported cash costs of $18.06 per AgEq ounce, AISC of $25.68, and an AISC margin improved to $40.27 per AgEq ounce. Those figures point to a key feature of the business: because costs are relatively contained, a larger share of higher silver volumes flows through profit.

The operational driver is straightforward. First Majestic said throughput rates increased by 12%, enabling the company to optimize lower marginal cut-off grades. The company also noted that overall profitability improved across all mine sites, even though reported per-ounce costs can look less favorable when metal prices rise. In other words, the stronger margins are not just a pricing effect; they are also tied to how the mines are being run.

If second-half production holds near the first-half pace, profit growth could continue to outstrip revenue growth. That is the operating-leverage story that can be easy to miss when the stock is being evaluated primarily as a silver-price chart.

Capital returns and project optionality may be under-credited

A stronger balance sheet changes the range of choices

The remaining discount may persist because investors find it easier to underwrite current metal prices than future options. But First Majestic now has the financial cushion to do more than simply absorb commodity swings. The company ended Q2 with a $1.25 billion treasury position and $1.04 billion in available liquidity.

That matters for shareholder returns. In Q2, management increased the dividend 217% year-over-year to $0.0152 per share and 1.2 million shares were repurchased for $22.7 million. It also said the dividend policy is anchored to 2% of net quarterly revenues. That makes the payout framework more rule-based than discretionary.

Sales timing still deserves a closer read

Bulls should still acknowledge one nuance: sales timing can blur the picture. Q1 revenue was reported even with $63.6 million of silver and gold bullion being held back, so one quarter alone does not settle the full story.

Still, project optionality is not just narrative. First Majestic has a definitive agreement to sell the San Martin Silver Mine for total proceeds of US$90 million, and the company also highlighted Construction Permits for Santo Niño and Navidad. If the market continues to treat those items as side notes rather than embedded value, it leaves room for a broader re-rating over time.

What would support a re-rating, and what would challenge it

This setup looks more interesting as a watchlist-into-position trade than as a blind silver-beta bet. First Majestic has $1.25 billion in treasury and AISC of $25.68, so the bull case does not require heroic metal prices. It mainly requires the market to give more credit to the cash-generation profile behind the silver exposure.

Signals to watch

• Further updates that maintain the pace already delivered in the first half.
• Cost discipline if silver softens somewhat; the margin buffer matters with AISC at $25.68.
• Continued shareholder returns, including the dividend and buybacks already reported in Q2.
• Whether construction permits for Santo Niño and Navidad keep translating into de-risked future development.

What could invalidate the thesis

• A noticeable drop in silver production relative to revised guidance.
• Liquidity weakening faster than expected without a clear operating rationale.
• Capital returns becoming less consistent, making the revenue-linked dividend policy look more theoretical than real.