BC Business
By buying Gatos Silver, Vancouver miner First Majestic Silver becomes the stock most closely aligned with the semi-precious metal
The stock: Gold has sucked all the air out of the precious-metals space this year with its 33-percent rise to new record-high prices. But some argue its poor cousin silver, which has risen 45 percent, has more upside. Over the past quarter century, gold has averaged 68 times the price of silver per ounce; currently, the ratio is 80 times, suggesting that silver could play some catch-up. Plus, among other things, silver is used to make solar panels, a growth sector.
If you’re going to go deep on silver, you shouldn’t ignore Vancouver-based First Majestic Silver Corp. Not only does it own the talismanic ticker symbol AG, it’s in the process of acquiring its downstairs neighbour, Gatos Silver (TSX, NYSE:GATO)—the two companies operate out of the same building on West Georgia Street—to create a regional powerhouse in northern Mexico’s silver belt.
The drivers: As mining companies go, First Majestic has been a middling performer this year, up 19.8 percent as of Tuesday’s (Nov. 5) close at $9.56 on the Toronto Stock Exchange. (Gatos is up a more impressive 164 percent.) But management from both companies insist the merger of operations will light a fire under AG’s hitherto lacklustre performance. It will add the Cerro Los Gatos mine to First Majestic’s existing San Dimas, Santa Elena and La Encantada pits in northwestern Mexico, allowing the optimization of equipment and personnel.
With shareholder votes still to come, the US$970-million deal is expected to close in the first quarter of 2025. Assuming it passes, First Majestic will become the closest thing to a pure-play silver producer on the markets, with more than half its revenues derived from the semi-precious metal. (Silver mines tend to also produce lead, zinc and/or gold.) On a pro forma basis, the combined operation is projected to produce 31 million ounces of silver and silver equivalents this year, placing it solidly in the ranks of mid-tier mining companies.
Word on the street: Morningstar gives First Majestic a fair value of $10.71, suggesting the shares are somewhat undervalued. The consensus 12-month target among analysts covering the stock is $14.16.
Coming and going: On October 29, Anthem Properties Group completed a unique, $82-million public offering of units in the Anthem Citizen Real Estate Development Trust, created to help finance the 66-storey Citizen mixed-use project in Burnaby’s Metrotown neighbourhood. Though the unlisted units themselves were priced at $10, CIBC World Markets, sole agent for the offering, required a minimum investment of $10,000.