First Majestic Silver, a Canadian precious-metals producer, is acquiring Gatos Silver, a Canadian explorer and developer, in a stock-based deal worth $970m (C$1.31bn).
Gatos holds a 70% stake in the Los Gatos joint venture and operates the Cerro Los Gatos underground silver mine in Chihuahua, Mexico. This acquisition will give First Majestic access to high-quality silver deposits in the region.
According to the agreement, Gatos’ shareholders will receive 2.550 common shares of First Majestic for each Gatos share they own. This offer equates to a total value of $13.49 per common share of Gatos, based on the closing price of First Majestic’s common shares on the New York Stock Exchange on 4 September 2024.
Once the transaction is finalised, current Gatos shareholders will hold approximately 38% of the fully diluted First Majestic shares.
Keith Neumeyer, president and CEO of First Majestic, said: “The acquisition of Gatos Silver… 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.”
The deal brings together three top-tier, operational silver mining areas in Mexico: Cerro Los Gatos, San Dimas and Santa Elena. First Majestic says these areas form the basis of a diversified, mid-sized primary silver producer under a single entity.
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The project would also enhance First Majestic’s annual production output to 30–32 million ounces (moz) of silver equivalent. This includes 15–16moz of silver at all-in-sustaining costs ranging from $18–20 per silver-equivalent ounce.
The deal also adds concessions covering approximately 103,000 hectares of unencumbered land at Cerro Los Gatos, with significant exploration potential supported by a large mineral reserves and resources base.
Gatos’ stocks surged by 7.5% to $12.49 in premarket trading, while First Majestic’s stocks fell by 5.1% to $5.02, as reported by Reuters. The report mentioned that the price of silver has increased by nearly 21% this year in line with the trend in gold prices and driven by robust demand from sectors like solar panels and electronics.
The price of gold surpassed $2,500/oz for the first time on 20 August.
