First Majestic's Bullion Sales Surge Highlights Silver Leverage but Overlooks Key Risks

What happened

First Majestic reported a nearly 150% surge in First Mint bullion sales in Q4 2025, driven by elevated silver prices and robust demand. This aligns with the company's record FY2025 silver production of 15.4 Moz, largely fueled by the Los Gatos acquisition and higher output at other mines. However, the DeepValue report notes that the stock's current valuation at $23.20 embeds high expectations, with a P/E of 65.4 and EV/EBITDA of 17.2, leaving limited margin of safety. Key risks persist, including Mexico tax disputes with over $250M in accruals and frozen VAT, and the need for Los Gatos to achieve sustained 4,000 tpd throughput in 2H26 to support operational leverage. Thus, while the sales momentum is positive, the investment thesis maintains a 'WAIT' rating pending confirmation on dividend durability and tax resolution over the next 3-6 months.

Implication

Investors should view the bullion sales growth as a confirmation of operational strength but not a fundamental shift in the investment case. The revenue boost supports the new dividend framework targeting 2% of net quarterly revenue, which is a near-term catalyst expected in May/June 2026. However, with elevated capex and Mexico tax overhangs totaling over $250M, cash flow sustainability for dividends remains uncertain and discretionary. Near-term events like the Del Toro sale approvals by end-April 2026 and Los Gatos ramp-up progress are more critical for stock performance than one-off sales spikes. Overall, caution is warranted as the stock appears fully valued, and any disappointment in operational execution or tax outcomes could trigger significant downside, aligning with the report's bear scenario of $15.

Thesis delta

The news of strong bullion sales reinforces the positive momentum from higher silver prices and operational performance, potentially boosting near-term revenue. However, it does not alter the core investment thesis, which remains hinged on resolving Mexico tax risks and achieving Los Gatos ramp-up, with the stock still in a 'WAIT' zone due to valuation concerns and lack of margin of safety.