First Majestic Acquires Gatos Silver For $970M, Puts 3 Major Mexico Assets Under One Banner

First Majestic Silver Corp. AG  has announced an all-stock acquisition of Gatos Silver GATO valued at approximately $970 million. The transaction will bolster First Majestic’s position as a leading silver producer and expand its operations in Mexico.

Under the agreement, Gatos shareholders will receive 2.55 shares of First Majestic for each share of Gatos held, translating to a total offer value of $13.49 per Gatos share. Based on the companies’ recent stock prices, this represents a 16% premium, with Gatos shareholders set to own approximately 38% of First Majestic's shares on a fully diluted basis.

“The acquisition of Gatos Silver is a highly compelling and transformative transaction that meaningfully enhances First Majestic’s operating platform through the addition of 70% of Cerro Los Gatos—a high-quality, long-life, unencumbered, free cash flow generating asset in the mining-friendly state of Chihuahua, Mexico,” First Majestic's president and CEO, Keith Neumeyer said in an announcement noting operational synergies and potential to deliver significant value to shareholders.

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Gatos Silver is a silver-focused mining company. Its most notable asset is a 70% stake in the Los Gatos Joint Venture (with Dowa Metals & Mining), which operates the Cerro Los Gatos underground mine in Chihuahua, Mexico. The mine is the company's primary asset and one of the industry's highest-grade silver mines. Per the 2023 estimate, its reserves were around 96 million ounces of silver, with the potential for continued growth through further exploration.

With this deal, all three major silver-producing assets in Mexico will be under one banner: Cerro Los Gatos, San Dimas, and Santa Elena. The annual production is expected to be between 30 million and 32 million ounces of silver equivalent, including 15 million to 16 million ounces of pure silver.

The all-in-sustaining costs (AISC) are projected to be between $18 and $20 per silver-equivalent ounce, strengthening First Majestic’s production profile and operational efficiencies.

The deal also promises to bolster free cash flow generation, with Gatos expected to immediately contribute around $70 million annually to the combined entity. First Majestic sees additional upside through exploration, noting that the combined company's land package will cover approximately 350,000 hectares of highly prospective mining territory.

This potential includes 103,000 hectares at Cerro Los Gatos, which is unencumbered by material royalties or streams and offers significant discovery prospects. This land package will join First Majestic's existing 245,000 hectares across San Dimas, Santa Elena, and other properties, which have historically yielded strong exploration results.

The boards of both companies have unanimously approved the deal, and a special committee of independent directors from Gatos has also recommended it. Gatos' largest shareholder, the Electrum Group, which holds approximately 32% of the company's common shares, has signed a voting agreement to support the transaction. If all conditions are met, Gatos will become a wholly-owned subsidiary of First Majestic, and its shareholders will transition into becoming shareholders of First Majestic.

The transaction is expected to close in early 2025, pending regulatory and other approvals.

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