First Majestic Silver Corp.: Leveraging Acquisitions and Exploration to Outperform in 2025

First Majestic Silver Corp. (AG:TSX; AG:NYSE) has delivered a strong second-quarter performance, bolstered by the integration of its Gatos Silver acquisition and high-grade discoveries at core mines like Santa Elena and San Dimas. The company's revised 2025 production guidance, announced on July 8, signals a strategic shift toward scaling operations while maintaining cost discipline—a critical advantage as silver prices hover near $25/oz and gold approaches $2,800/oz. This analysis explores how First Majestic's operational execution and exploration success position it to outperform broader metal price movements, while assessing risks to its dividend sustainability and growth trajectory.

The Gatos Silver Acquisition: A Catalyst for Production Growth

The Los Gatos Silver Mine, acquired in late 2024, has already become a linchpin of First Majestic's production resurgence. In Q2 2025, Los Gatos contributed 2.4 million silver equivalent (AgEq) ounces, including its first zinc and lead shipments—a diversification milestone. The mine's throughput is on track to reach 4,000 tonnes per day by year-end, leveraging synergies from integration with First Majestic's existing infrastructure.

The acquisition's strategic value is underscored by its 76% year-over-year (YoY) silver production boost and its role in pushing First Majestic's total silver output to 3.7 million ounces in Q2. This outperformance has enabled the company to raise its full-year silver guidance by 6% to 14.8–15.8 million ounces, with Los Gatos alone accounting for 9.1–9.7 million AgEq ounces in 2025.

Exploration Success: High-Grade Discoveries Drive Long-Term Value

Beyond Los Gatos, First Majestic's exploration teams have delivered critical wins at Santa Elena and San Dimas. At Santa Elena, higher gold grades and recoveries have pushed 2025 gold guidance up 2% to 135,000–144,000 ounces, despite a temporary dip in Q2 production due to lower grades. Meanwhile, San Dimas's 17% YoY increase in AgEq ounces reflects improved mill performance and ore processing.

The May 2025 announcement of the Santo Niño high-grade silver discovery at Santa Elena further underscores the company's exploration prowess. With resources like this, First Majestic aims to extend mine lives and reduce dilution risks—a key factor in sustaining production growth beyond 2025.

Cost Management: Efficiency Gains Amid Scaling Operations

First Majestic's cost metrics are a standout achievement. Cash costs per AgEq ounce have been slashed to $13.94–$14.37 (down from prior guidance of $14.10–$14.86), driven by higher production volumes and operational efficiencies. All-In Sustaining Costs (AISC) remain steady at $20.02–$20.82, with synergies at Los Gatos and Santa Elena offsetting inflationary pressures.

The company's capital expenditure (CapEx) rise to $193 million—up 7%—reflects investments in underground development (+24% to 44,000 meters) and critical plant upgrades at Santa Elena. While exploration drilling has been trimmed by 6%, the focus on high-potential zones like Los Gatos's Navidad discovery ensures capital is allocated to high-impact projects.

Dividend Sustainability: Balancing Growth and Shareholder Returns

First Majestic's dividend history is a key draw for income-focused investors. With cash costs below $15/AgEq oz and AISC under $21/AgEq oz, the company's margins remain robust, even if silver prices weaken to $25/oz. The dividend payout ratio, currently at ~20%, leaves room for reinvestment in growth while maintaining quarterly payouts.

However, investors should monitor the company's debt levels. While manageable at $170 million (as of Q1 2025), rising interest rates could pressure interest expenses. AISC stability and production growth should mitigate this risk, but shareholders should track free cash flow generation closely.

Near-Term Catalysts and Long-Term Growth Drivers

• Q2 Earnings Call (August 14): Management will provide operational updates and address weather-related disruptions, which impacted three mines in June.
• Los Gatos Throughput Expansion: Achieving 4,000 tpd by year-end could unlock further cost efficiencies.
• Exploration Milestones: Drilling at Santo Niño and Navidad could add material resources by late 2025.

Long-term, First Majestic's focus on high-grade assets and diversified production (now including zinc and lead) creates a resilient revenue stream. With global silver demand forecast to grow 3% annually through 2030—driven by EV and solar tech adoption—First Majestic is well-positioned to capitalize on structural trends.

Investment Thesis and Risks

First Majestic presents a compelling investment case for those bullish on precious metals and operational execution. Its revised guidance reflects confidence in scaling production while controlling costs, which should amplify earnings if metal prices hold near current levels.

Risks include:
1. Weather and Operational Hiccups: The June power outages highlight vulnerability to external factors.
2. Metal Price Volatility: Silver's price elasticity could dampen margins if prices dip below $20/oz.
3. Regulatory and Permitting Delays: Expansion projects like Navidad require timely approvals.

Conclusion: A Strategic Buy with Upside Potential

First Majestic's Q2 results and revised guidance demonstrate a company executing on its growth strategy. The Los Gatos acquisition and exploration successes at Santa Elena/San Dimas provide clear levers for outperforming silver price movements. With costs under control and a disciplined capital allocation strategy, First Majestic offers a balanced blend of growth and income potential. Investors should consider initiating a position ahead of the August earnings call, with a price target of $3.50–$4.00/share by year-end 2025.

Rating: Buy
Target Price Range: $3.50–$4.00/share
Risks to Watch: Weather impacts, metal price declines, project delays.