We Expect Silver to Outperform Any Asset Over Next 2 to 3 Years. Run For Your Life from First Majestic Silver

1. Silver is on the Brink of Extinction

2. Shanghai Silver vaults tumbled by 35 tons this week to 699 tons or 22.75 m ounces

3. They have not been this low since Jan 2016 (industrial demand tripled since then)

Run for the Fire Exits from the Disaster called First Majestic Silver

First Majestic is down 38% while Silver is up 65% since 2020

First Majestic Silver: Destroying Shareholder Value Through Poor Decisions 

First Majestic Silver Corp (AG) has long been a darling of the silver investing community. Under the leadership of CEO Keith Neumeier, the company built a reputation as a pure-play silver miner with significant growth potential. However, a series of poor decisions over the past few years has led to substantial shareholder dilution and a plummeting share price. This article will analyze the missteps that First Majestic's management has made and how it has negatively impacted shareholders. 

Overpromising and Underdelivering on Production 

A core part of First Majestic's investment thesis has been its potential to significantly grow silver production over time. Management has consistently put out ambitious production targets, yet has routinely failed to meet these goals. 

For example, in 2012 First Majestic guided for silver equivalent production of 9.1 million ounces. The actual result was 8.3 million ounces, a miss of almost 10%. In 2021, the company projected total production of 32.1 to 35.8 million silver equivalent ounces. The actual result was 26.9 million ounces, a massive shortfall2. 

Most recently in 2022, First Majestic guided for total production of 32.2 to 35.6 million silver equivalent ounces. However, they only managed to produce 31.3 million ounces, yet another miss. This continual overpromising and underdelivering on production targets destroys management's credibility with investors. 

The Disastrous Jerritt Canyon Acquisition 

In 2021, First Majestic spent $470 million to acquire the Jerritt Canyon gold mine from Sprott Mining. At the time, CEO Keith Neumeier hailed the mine as a "cornerstone asset" that would "enhance our operating platform." 

In reality, Jerritt Canyon has proven to be an unmitigated disaster. The mine has lost over $200 million since the acquisition. In 2022 alone, Jerritt Canyon lost $92.3 million with all-in sustaining costs of $2,745 per ounce, more than $1,000 above the gold price.

First Majestic has had to take massive write-downs on the mine, negatively impacting the company's earnings. The huge capital spent on Jerritt Canyon has yielded no return for shareholders while diverting funds from First Majestic's core silver business. 

Excessive Shareholder Dilution 

To fund capital expenditures and acquisitions like Jerritt Canyon, First Majestic's management has relied heavily on diluting shareholders. Between December 2019 and December 2022, the company's shares outstanding ballooned by 30%, from 201.6 million shares to 263 million shares.

In other words, existing shareholders now own 30% less of the company compared to just three years ago. This massive dilution destroys shareholder value and is unacceptable, especially considering the lack of return on invested capital to show for it. Even worse, much of the money raised from dilution has been wasted on disasters like Jerritt Canyon. Shareholders are getting less of the company while management makes poor decisions with the money that dilution provides. 

Misleading Messaging Around Stock Buybacks 

In March 2022, First Majestic announced a $10 million share buyback program to return capital to shareholders7. However, what management failed to mention is they issued $180 million worth of shares in 2021 and 2022 alone.

Spending $10 million on buybacks after diluting by $180 million is the height of hypocrisy and misleading messaging. The paltry buybacks are a fig leaf to cover the enormous dilution shareholders have endured under CEO Keith Neumeier's leadership. 

The Collapse of First Majestic's Share Price 

As a result of production misses, disastrous acquisitions, excessive dilution, and misleading messaging, First Majestic's share price has collapsed in recent years. The stock has plunged from $24 in September 2020 to around just $5 today, destroying immense shareholder value. 

Once a market darling, First Majestic is now severely out of favor with investors due to management's missteps. Until there is a change of strategy and leadership, one cannot have confidence the stock will regain its former highs.

Conclusion: Avoid First Majestic Until There is Accountability 

Under CEO Keith Neumeier, First Majestic Silver has failed shareholders through overpromising on production, value-destroying acquisitions, extreme dilution, and misleading communications. Investors should avoid or sell the stock until there is accountability and a change of course. 

There remain valuable assets within First Majestic's portfolio, specifically its core Mexican silver mines. However, the potential of these assets is being squandered by poor leadership decisions that destroy shareholder value. 

First Majestic requires a management team willing to focus on efficient operations, margin expansion, and value creation rather than empire building and excessive dilution. Until leadership changes, shareholders will likely continue suffering from poor decisions that devastate the share price.