First Majestic Silver (AG) - 2024 Q1 - Quarterly Report

Condensed Interim Consolidated Financial Statements Condensed Interim Consolidated Statements of Earnings (Loss) The company reported a significant decrease in revenue to $106.0 million in Q1 2024 from $157.0 million in Q1 2023, primarily due to the suspension of the Jerritt Canyon mine. The net loss for the period narrowed to $13.6 million from $100.7 million year-over-year, largely because the prior year's results included a substantial $125.2 million impairment charge on the Jerritt Canyon asset Q1 2024 vs Q1 2023 Earnings Summary | Metric | Q1 2024 (in thousands USD) | Q1 2023 (in thousands USD) | Change | | :--- | :--- | :--- | :--- | | Revenues | $106,014 | $156,952 | -32.5% | | Mine operating loss | ($321) | ($6,423) | Improved | | Operating loss | ($19,243) | ($144,224) | Improved | | Net loss for the period | ($13,563) | ($100,660) | Improved | | Loss per common share (Basic & Diluted) | ($0.05) | ($0.37) | Improved | - The significant improvement in net loss year-over-year is primarily attributed to the absence of a major impairment charge in Q1 2024. In Q1 2023, the company recorded a $125.2 million impairment of a non-current asset related to the Jerritt Canyon mine[8] Condensed Interim Consolidated Statements of Comprehensive Income (Loss) The company's total comprehensive loss for Q1 2024 was $20.7 million, which was greater than the net loss of $13.6 million. This difference was driven by a $7.1 million other comprehensive loss, primarily from unrealized losses on investments in marketable securities Q1 2024 vs Q1 2023 Comprehensive Loss Summary | Metric | Q1 2024 (in thousands USD) | Q1 2023 (in thousands USD) | | :--- | :--- | :--- | | Net loss for the period | ($13,563) | ($100,660) | | Other comprehensive (loss) income | ($7,125) | $2,479 | | Total comprehensive loss | ($20,688) | ($98,181) | Condensed Interim Consolidated Statements of Cash Flows In Q1 2024, the company generated $12.4 million in cash from operating activities, a significant turnaround from the $4.7 million used in Q1 2023. However, cash used in investing activities was $28.2 million, and cash used in financing activities was $7.7 million, resulting in a net decrease in cash and cash equivalents of $23.4 million for the quarter Q1 2024 vs Q1 2023 Cash Flow Summary | Activity | Q1 2024 (in thousands USD) | Q1 2023 (in thousands USD) | | :--- | :--- | :--- | | Cash generated by (used in) operating activities | $12,434 | ($4,670) | | Cash (used in) investing activities | ($28,152) | ($52,297) | | Cash (used in) provided by financing activities | ($7,678) | $8,430 | | Decrease in cash and cash equivalents | ($23,396) | ($48,537) | | Cash and cash equivalents, end of the period | $102,069 | $104,774 | Condensed Interim Consolidated Statements of Financial Position As of March 31, 2024, the company's financial position remained stable with total assets of $1.96 billion and total liabilities of $615.8 million. Total equity decreased slightly to $1.34 billion from $1.36 billion at the end of 2023. Cash and cash equivalents stood at $102.1 million Financial Position Summary | Metric | March 31, 2024 (in thousands USD) | December 31, 2023 (in thousands USD) | | :--- | :--- | :--- | | Total current assets | $279,413 | $309,057 | | Total assets | $1,955,708 | $1,976,355 | | Total current liabilities | $119,862 | $120,138 | | Total liabilities | $615,754 | $618,235 | | Total equity | $1,339,954 | $1,358,120 | Condensed Interim Consolidated Statements of Changes in Equity Total equity decreased by $18.2 million during Q1 2024, from $1.358 billion to $1.340 billion. The decline was primarily driven by the net loss of $13.6 million and an other comprehensive loss of $7.1 million, partially offset by share-based payments Q1 2024 Equity Movement | Description | Amount (in thousands USD) | | :--- | :--- | | Balance at December 31, 2023 | $1,358,120 | | Net loss for the period | ($13,563) | | Other comprehensive loss | ($7,125) | | Share-based payments | $3,901 | | Dividend declared and paid | ($1,379) | | Balance at March 31, 2024 | $1,339,954 | Notes to Condensed Interim Consolidated Financial Statements General This section outlines the company's core business, the basis of financial statement preparation, and key accounting policies. First Majestic is focused on silver and gold production in North America, with three producing mines in Mexico. The financial statements are prepared in accordance with IAS 34 and IFRS, and the accounting policies are consistent with the 2023 annual report Note 1. Nature of Operations The company's core business involves the production, development, exploration, and acquisition of silver and gold mineral properties in North America, operating three mines in Mexico - The company's business involves the production, development, exploration, and acquisition of mineral properties, with a focus on silver and gold in North America[19] - First Majestic owns three producing mines in Mexico: San Dimas, Santa Elena, and La Encantada. The Jerritt Canyon Gold Mine in Nevada, USA, was placed on temporary suspension in March 2023[19] Note 2. Basis of Presentation The interim financial statements are prepared in accordance with IAS 34 and presented in thousands of United States dollars - The condensed interim consolidated financial statements are prepared in accordance with International Accounting Standard (IAS) 34, "Interim Financial Reporting"[21] - All financial data is presented in thousands of United States dollars unless otherwise specified[22] Note 3. Material Accounting Policy Information, Estimates and Judgments Accounting policies and estimates remain consistent with the prior year's annual report, with no material impact from new IFRS standards adopted in 2024 - The accounting policies, critical judgments, and estimates applied are consistent with those disclosed in the audited consolidated financial statements for the year ended December 31, 2023[26] - The adoption of new and amended IFRS standards effective January 1, 2024, did not have a material impact on the company's financial statements[28] Statements of Earnings (Loss) Details This section provides detailed breakdowns of key items from the income statement. It highlights that the Santa Elena mine was the largest contributor to mine operating earnings in Q1 2024. Revenue was primarily driven by gold (57%) and silver (43%). Mine holding costs increased significantly due to the suspension of the Jerritt Canyon mine Note 4. Segmented Information This note details the financial performance of the company's operating segments, highlighting the addition of First Mint LLC and significant customer concentration Q1 2024 vs Q1 2023 Segment Performance (Mine Operating Earnings/Loss) | Segment | Q1 2024 (in thousands USD) | Q1 2023 (in thousands USD) | | :--- | :--- | :--- | | San Dimas | ($7,718) | $8,861 | | Santa Elena | $15,604 | $12,918 | | La Encantada | ($5,902) | $2,364 | | Jerritt Canyon | ($1,585) | ($31,332) | | Total Mine Operating Loss | ($321) | ($6,423) | - As of January 1, 2024, the company has added First Mint LLC as a significant operating segment, which includes the bullion store and minting facility in Nevada[39] - In Q1 2024, two customers accounted for 99% of sales revenue, with one major metal broker accounting for 94% of total revenue[43] Note 5. Revenues This note provides a breakdown of revenue by metal, showing gold as the primary contributor in Q1 2024 Q1 2024 vs Q1 2023 Revenue Breakdown by Metal | Metal | Q1 2024 Revenue (in thousands USD) | % of Total | Q1 2023 Revenue (in thousands USD) | % of Total | | :--- | :--- | :--- | :--- | :--- | | Silver | $45,627 | 43% | $61,065 | 39% | | Gold | $60,932 | 57% | $96,537 | 61% | | Gross Revenue | $106,559 | 100% | $157,602 | 100% | Note 6. Cost of Sales This note details the components of cost of sales, noting the absence of Jerritt Canyon standby costs in Q1 2024 Q1 2024 vs Q1 2023 Cost of Sales Breakdown | Component | Q1 2024 (in thousands USD) | Q1 2023 (in thousands USD) | | :--- | :--- | :--- | | Labour costs | $40,844 | $66,245 | | Consumables and materials | $19,453 | $29,715 | | Energy | $8,966 | $13,916 | | Total Cost of Sales | $80,489 | $123,868 | - Q1 2023 cost of sales included $5.1 million in one-time standby costs related to the temporary suspension of the Jerritt Canyon mine. No such costs were incurred in Q1 2024[56] Note 7. General and Administrative Expenses This note provides a breakdown of general and administrative expenses, including corporate administration and salaries Q1 2024 vs Q1 2023 G&A Expenses | Component | Q1 2024 (in thousands USD) | Q1 2023 (in thousands USD) | | :--- | :--- | :--- | | Corporate administration | $2,278 | $2,030 | | Salaries and benefits | $4,447 | $4,023 | | Audit, legal and professional fees | $1,833 | $1,674 | | Total G&A | $9,240 | $8,448 | Note 8. Mine Holding Costs This note details the mine holding costs, with Jerritt Canyon contributing significantly due to its temporary suspension Q1 2024 vs Q1 2023 Mine Holding Costs | Mine | Q1 2024 (in thousands USD) | Q1 2023 (in thousands USD) | | :--- | :--- | :--- | | Jerritt Canyon | $4,370 | $— | | Santa Elena | $1,082 | $775 | | Del Toro | $638 | $656 | | San Martin | $207 | $639 | | Total | $6,297 | $3,789 | Note 9. Investment and Other Income (Loss) This note explains the shift from investment income to a loss, primarily due to silver futures derivatives - The company recorded an investment and other loss of $0.4 million in Q1 2024, compared to an income of $3.2 million in Q1 2023. The change was primarily due to a loss from silver futures derivatives in 2024 versus a gain in 2023[61] Note 10. Finance Costs This note details the increase in finance costs, mainly driven by higher debt-related expenses - Finance costs increased to $7.1 million in Q1 2024 from $5.6 million in Q1 2023, mainly due to higher costs related to debt facilities and accretion of decommissioning liabilities[62] Note 11. Earnings or Loss per Share This note provides the calculation of basic and diluted loss per share for the period Loss Per Share Calculation | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net loss for the period (in thousands USD) | ($13,563) | ($100,660) | | Weighted average shares outstanding - basic | 287,210,710 | 274,220,112 | | Loss per share - basic and diluted | ($0.05) | ($0.37) | Statements of Financial Position Details This section details the components of the company's balance sheet. Key items include mining interests of $1.0 billion and property, plant, and equipment of $400.3 million. Debt facilities stood at $222.0 million, primarily consisting of convertible debentures. The notes also detail the divestiture of two mines in 2023 and the significant impairment charge taken on the Jerritt Canyon asset in Q1 2023 Note 12. Inventories This note provides a detailed breakdown of the company's inventory categories, including materials, silver coins, and finished goods Inventory Breakdown | Category | March 31, 2024 (in thousands USD) | December 31, 2023 (in thousands USD) | | :--- | :--- | :--- | | Materials and supplies | $38,399 | $39,204 | | Silver coins and bullion | $8,497 | $8,360 | | Stockpile | $7,418 | $5,055 | | Finished goods - doré | $6,980 | $3,529 | | Work-in-process | $6,394 | $7,542 | | Total | $67,688 | $63,690 | Note 14. Divestitures This note details the company's divestiture of the La Guitarra and La Parrilla silver mines in 2023 - On March 29, 2023, the company completed the sale of the La Guitarra Silver Mine to Sierra Madre Gold and Silver Ltd., recording a loss on disposition of $1.4 million[72] - On August 14, 2023, the company completed the sale of the La Parrilla Silver Mine to Silver Storm Mining Ltd., recording a loss on disposition of $1.6 million[76] Note 18. Impairment of Non-Current Asset This note explains the significant impairment charge recognized in Q1 2023 related to the Jerritt Canyon mine suspension - Following the temporary suspension of operations at the Jerritt Canyon Gold mine on March 20, 2023, the company recognized an impairment charge of $125.2 million during Q1 2023[109][113] - No impairment or impairment reversal was recognized during the three months ended March 31, 2024[113] Note 21. Debt Facilities This note details the company's debt structure, primarily consisting of convertible debentures and a revolving credit facility Debt Facilities as of March 31, 2024 | Facility | Balance (in thousands USD) | | :--- | :--- | | Convertible Debentures | $201,549 | | Revolving Credit Facility | $20,422 | | Total | $221,971 | - The company has $230 million of unsecured senior convertible debentures maturing in January 2027, with an interest rate of 0.375% per annum[122] - The company's senior secured revolving credit facility has a limit of $175.0 million and matures in June 2026. As of March 31, 2024, the undrawn portion was $124.6 million[131][135] Note 23. Share Capital This note outlines changes in share capital, including ATM program sales and dividend declarations - During Q1 2023, the company sold 1.7 million common shares under its ATM program for net proceeds of $14.4 million. No shares were sold under the program in Q1 2024[145] - A quarterly dividend of $0.0048 per common share was declared on February 21, 2024[164] Other Items This final section covers financial risk management, supplemental cash flow data, significant legal and tax contingencies, and events that occurred after the reporting period. The company faces material contingencies related to tax reassessments from Mexico's tax authority (SAT), which it is disputing through domestic and international channels. Subsequent to the quarter-end, the company raised $28.5 million through its ATM program Note 24. Financial Instruments and Related Risk Management This note describes the company's exposure to various financial risks, including credit, liquidity, currency, commodity price, and interest rate risks - The company is exposed to various financial risks, including credit risk, liquidity risk, currency risk (primarily Canadian dollar and Mexican peso), commodity price risk (silver and gold), and interest rate risk[179] Net Financial Exposure to Foreign Currencies (March 31, 2024) | Currency | Net Assets (Liabilities) Exposure (in thousands USD) | Effect of +/- 10% Change in Currency (in thousands USD) | | :--- | :--- | :--- | | Canadian Dollar | $6,523 | $652 | | Mexican Peso | $118,797 | $11,880 | Note 26. Contingencies and Other Matters This note details significant tax disputes with Mexico's SAT, including the APA nullification and VAT refund denials, which the company is vigorously disputing - The company is in a significant dispute with Mexico's tax authority (SAT) regarding the retroactive nullification of an Advance Pricing Agreement (APA) for its San Dimas Mine, with reassessments totaling hundreds of millions of dollars[202][203][204] - The company has initiated arbitration claims against Mexico under NAFTA for both the APA dispute and the denial of VAT refunds. No liability has been recognized as the company believes its tax filings were compliant[211][217][219] - The SAT has also issued significant tax reassessments for other operations, including La Encantada, San Martin, La Parrilla, and Del Toro, which the company is vigorously disputing[221][224][225][226] Note 27. Subsequent Events This note reports events occurring after the reporting period, including a dividend declaration and further share sales under the ATM program - On May 7, 2024, the Board of Directors declared a quarterly dividend of $0.0037 per share[230] - Subsequent to March 31, 2024, the company sold 4,000,000 common shares under its ATM program at an average price of $7.13 per share, for gross proceeds of $28.5 million[231]