First Majestic Silver Corp. (NYSE:AG) (TSX:AG) (FSE:FMV) (“First
Majestic”) and Gatos Silver, Inc. (“Gatos”) (NYSE:GATO) (TSX:GATO)
are pleased to announce they have entered into a definitive merger
agreement (the “Definitive Agreement”) pursuant to which First
Majestic will acquire all of the issued and outstanding common
shares of Gatos (the “Transaction”). Gatos is a silver dominant
producer with a 70% interest in the Los Gatos Joint Venture, which
owns the producing Cerro Los Gatos underground silver mine in
Chihuahua, Mexico.
Under the terms of the Definitive Agreement,
Gatos shareholders will receive 2.550 common shares of First
Majestic for each common share of Gatos held. The consideration
implies a total offer value of US$13.49 per common share of Gatos
based on the closing price of First Majestic’s common shares on the
New York Stock Exchange (the “NYSE”) on September 4, 2024, and
represents a 16% premium based on each company’s closing prices and
20-day volume weighted average prices (“VWAP”) on the NYSE ending
September 4, 2024. The proposed Transaction implies a total equity
value for Gatos of approximately US$970 million. Following
completion of the Transaction, existing Gatos shareholders will own
approximately 38% of First Majestic shares on a fully-diluted
basis.
TRANSACTION HIGHLIGHTS
-
Consolidates three world-class, producing silver mining
districts in Mexico under one banner: Cerro Los Gatos, San
Dimas and Santa Elena collectively provide the foundation of a
diversified, intermediate primary silver producer
- Enhances
production profile with strong margins: Combined annual
production of 30-32 million ounces of silver-equivalent, including
15-16 million ounces of silver at all-in sustaining costs of
US$18.00-US$20.00 per silver-equivalent ounce1
- Bolsters
free cash flow generation: Gatos expected to immediately
contribute annual free cash flow of approximately US$70 million to
the combined entity2
-
Leverages a highly experienced combined team with a strong
track record of value creation in Mexico: Over 20 years of
experience operating in Mexico, with an emphasis on socially
responsible mining, community engagement and value creation
-
Maintains peer-leading exposure to silver: Over
50% of pro forma revenue derived from silver compared to an average
of ~30% for intermediate silver producing peers
- Creates
a 350,000 hectare highly prospective land package which has yielded
a history of exploration success and economic discoveries:
Cerro Los Gatos contributes approximately 103,000 hectares of
unencumbered land with significant new discovery potential to an
existing package of approximately 245,000 hectares across San
Dimas, Santa Elena, and other First Majestic properties, which has
yielded a history of exploration success and economic
discoveries
- Results
in a larger company with a strengthened balance sheet, leading
trading liquidity and improved capital markets profile:
Pro forma market capitalization approaching US$3 billion, average
daily trading liquidity of approximately US$49 million3, and
well-positioned to deliver increased shareholder value
- Realizes
meaningful synergies: Corporate cost savings, supply chain
and procurement efficiencies, cross-pollination of expertise, and
acceleration and optimization of internal projects and exploration
programs all expected to deliver meaningful value creation for all
shareholders
Keith Neumeyer, President & Chief Executive
Officer of First Majestic, commented, “The acquisition of Gatos
Silver is a highly compelling and transformative transaction that
meaningfully 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. Mexico is a country
that First Majestic has operated in for over 20 years, and we are
extremely excited to deploy our operating expertise within these
mining districts to deliver operational synergies and exploration
success for our shareholders. We look forward to working with the
operating team at Cerro Los Gatos and with our new joint venture
partner Dowa Metals & Mining Co., Ltd. (“Dowa”), and we are
pleased to welcome all Gatos shareholders as they transition into
being shareholders of First Majestic going forward.”
Dale Andres, Chief Executive Officer of Gatos,
commented, “We are pleased to enter into this transaction with
First Majestic, as it provides our shareholders an attractive
immediate premium and the opportunity to retain exposure to the
high quality, long-life Cerro Los Gatos asset, now within a
well-established intermediate primary silver producer. This
transaction also provides our shareholders with the benefits of
First Majestic’s enhanced capital markets presence, liquidity and
balance sheet, while combining its local Mexican expertise and
history of operations with our history of successful performance. I
want to thank the Cerro Los Gatos operating team for its
dedication. I am confident that the combination of our strong
operating teams will create an opportunity to generate significant
value for all shareholders.”
BENEFITS TO FIRST MAJESTIC
SHAREHOLDERS
- Adds a third
cornerstone, long-life, low-cost, producing underground mine with
exploration potential to the First Majestic portfolio
- Bolsters
anticipated annual attributable production by approximately 6
million ounces of silver and 9 million ounces of silver-equivalent
based on Gatos’ 2024 production guidance
- Cerro Los Gatos
generates significant free cash flow and enhances portfolio
diversification
- Accretive on all
key metrics including NAV, cash flow, production, and Mineral
Reserves to First Majestic shareholders
- Adds concessions
covering approximately 103,000 hectares of unencumbered (no
material royalties or streams) land at Cerro Los Gatos, with
significant exploration potential and supported by a large base of
Mineral Reserves and Resources
- Builds upon
First Majestic's strengths in Mexico and underground mining
expertise
- Enhances scale
and capital markets presence, and solidifies position as an
intermediate primary silver producer
BENEFITS TO GATOS
SHAREHOLDERS
- Attractive
immediate premium of 16% on a spot and 20-day VWAP basis
- Meaningful
equity participation in an intermediate primary silver producer
with a highly diversified portfolio, including three world-class
mining districts
- Unique
opportunity to gain production diversification while combining
Cerro Los Gatos with complementary, high-quality assets
- Combination
provides enhanced capital markets presence and trading
liquidity
- Superior
financial strength and flexibility to support advancement of
continued margin improvement, growth projects and exploration
programs
- Combined land
package of approximately 350,000 hectares with significant
exploration potential
- Ability to
leverage First Majestic's long-term good standing with local
governments, unions and community
TRANSACTION SUMMARY
The Transaction will be effected by way of a
reverse triangular merger under Delaware law, whereby a
wholly-owned Delaware subsidiary of First Majestic will merge with
and into Gatos, with Gatos surviving the merger as a direct,
wholly-owned subsidiary of First Majestic. Under the terms of the
Definitive Agreement, Gatos’ shareholders will receive 2.550 common
shares of First Majestic for each common share of Gatos held as of
the effective date of the Transaction. At closing, First Majestic
will issue an aggregate of approximately 177 million common shares
to Gatos shareholders, and following completion of the Transaction,
existing Gatos shareholders will own approximately 38% of the
issued and outstanding common shares of First Majestic on a
fully-diluted basis.
The Transaction is expected to close in early
2025, subject to the satisfaction of customary closing conditions,
including approvals of the shareholders of First Majestic and
Gatos, clearance under Mexican anti-trust laws, and approval of the
listing of the First Majestic common shares to be issued under the
Transaction on both the Toronto Stock Exchange and the NYSE. The
Definitive Agreement and the Transaction have been unanimously
approved by the board of directors of each of First Majestic and
Gatos, and in the case of Gatos, on the unanimous recommendation of
a special committee of independent directors of Gatos.
All directors and certain executive officers of
Gatos, as well as the Electrum Group, which owns approximately 32%
of the issued and outstanding common shares of Gatos, have entered
into voting support agreements with First Majestic pursuant to
which they have agreed, subject to the terms of such agreements, to
vote their Gatos shares in favour of the Transaction.
ADVISORS AND COUNSEL
National Bank Financial acted as exclusive
financial advisor to First Majestic. TD Securities provided a
fairness opinion to the board of directors of First Majestic.
Bennett Jones LLP and Dorsey & Whitney LLP acted as legal
advisors to First Majestic.
BofA Securities acted as exclusive financial
advisor to Gatos. GenCap Mining Advisory Ltd. provided a fairness
opinion to the Special Committee of the Gatos board of directors.
White & Case LLP and McCarthy Tetrault LLP acted as legal
advisors to Gatos.
CONFERENCE CALL DETAILS
First Majestic and Gatos will host a joint
conference call and webcast on Thursday, September 5, 2024,
at 8:00 a.m. (PT) / 11:00 a.m. (ET) to discuss the
Transaction.
To participate in the conference call, please
use the following dial-in numbers:
Canada & USA Toll-Free: |
+1-844-763-8274 |
Outside of Canada & USA: |
+1-647-484-8814 |
Toll-Free Germany: |
+49-69-1741-5718 |
Toll-Free UK: |
+44-20-3795-9972 |
Participants should dial-in at least 10 minutes
prior to the start of the call to ensure placement into the
conference on time.
A live webcast of the call will be accessible
through the “September 5, 2024 Webcast Link” on the First Majestic
home page at www.firstmajestic.com and on Gatos’ website at
www.gatossilver.com. A webcast archive will be available
approximately one hour after the end of the event and will be
accessible for three months through the same link as the live
event.
A recording of the conference call will be
available for telephone replay approximately one hour after the end
of the event by calling:
USA Toll-Free: |
+1-877-344-7529 |
Canada Toll-Free: |
+1-855-669-9658 |
Outside of Canada & USA: |
+1-412-317-0088 |
Access Code: |
4670537# |
The telephone audio replay will be available for
seven days following the end of the event.
ABOUT FIRST MAJESTIC
First Majestic is a publicly traded mining
company focused on silver and gold production in Mexico and the
United States. First Majestic presently owns and operates the San
Dimas Silver/Gold Mine, the Santa Elena Silver/Gold Mine, and the
La Encantada Silver Mine, all located in Mexico, as well as a
portfolio of development and exploration assets, including the
Jerritt Canyon Gold project located in northeastern Nevada,
U.S.A.
First Majestic is proud to own and operate its
own minting facility, First Mint, LLC, and to offer a portion of
its silver production for sale to the public. Bars, ingots, coins
and medallions are available for purchase online at
www.firstmint.com, at some of the lowest premiums available.
Investors and Media Contact:Darrell RaeInvestor Relations
info@firstmajestic.com (604) 688 3033
ABOUT GATOS
Gatos is a silver dominant exploration,
development and production company that discovered a new silver and
zinc-rich mineral district in southern Chihuahua State, Mexico. As
a 70% owner of the Los Gatos Joint Venture (the “LGJV”), the
Company is primarily focused on operating the Cerro Los Gatos mine
and on growth and development of the Los Gatos district. The LGJV
consists of approximately 103,000 hectares of mineral rights,
representing a highly prospective and under-explored district with
numerous silver-zinc-lead epithermal mineralized zones identified
as priority targets.
Investors and Media Contact:André van NiekerkChief Financial
Officerinvestors@gatossilver.com(604) 424 0984
Important Information for Investors and
Shareholders about the Transaction and Where to Find
It
This news release is not intended to and
does not constitute an offer to sell or the solicitation of an
offer to subscribe for or buy or an invitation to purchase or
subscribe for any securities of First Majestic or Gatos or the
solicitation of any vote or approval in any jurisdiction, nor shall
there be any sale, issuance or transfer of securities of First
Majestic or Gatos in any jurisdiction in contravention of
applicable law. This news release may be deemed to be soliciting
material relating to the Transaction.
In connection with the proposed transaction
between First Majestic and Gatos pursuant to the Definitive
Agreement and subject to future developments, First Majestic will
file with the U.S. Securities and Exchange Commission (the “SEC”) a
registration statement on Form F-4 that is expected to include a
Proxy Statement of Gatos that will also constitute a Prospectus of
First Majestic (the “Proxy Statement/Prospectus”) and other
documents. First Majestic will also file a management proxy
circular in connection with the transaction with applicable
Canadian securities regulatory authorities. This news release is
not a substitute for any registration statement, proxy statement,
prospectus or other document First Majestic or Gatos may file with
the SEC or Canadian securities regulatory authorities in connection
with the pending Transaction. Gatos plans to mail to the Gatos
stockholders the definitive Proxy Statement/Prospectus in
connection with the transaction and First Majestic will deliver its
proxy circular to First Majestic shareholders. INVESTORS AND
SECURITY HOLDERS OF GATOS AND FIRST MAJESTIC ARE URGED TO READ THE
PROXY STATEMENT/PROSPECTUS AND MANAGEMENT PROXY CIRCULAR,
RESPECTIVELY, AND ANY OTHER RELEVANT DOCUMENTS FILED OR TO BE FILED
WITH THE SEC OR CANADIAN SECURITIES REGULATORY AUTHORITIES
CAREFULLY IN THEIR ENTIRETY IF AND WHEN THEY BECOME AVAILABLE
BEFORE MAKING ANY VOTING OR INVESTMENT DECISION WITH RESPECT TO THE
TRANSACTION BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT
FIRST MAJESTIC, GATOS, THE TRANSACTION AND RELATED MATTERS.
Investors and security holders will be able to obtain free copies
of the Proxy Statement/Prospectus (when available), the filings
with the SEC that will be incorporated by reference into the Proxy
Statement/Prospectus and other documents filed with the SEC by
First Majestic and Gatos containing important information about
First Majestic or Gatos and the Transaction through the website
maintained by the SEC at www.sec.gov. Investors will also be able
to obtain free copies of the management proxy circular and other
documents filed with Canadian securities regulatory authorities by
First Majestic, through the website maintained by the Canadian
Securities Administrators at www.sedarplus.com. In addition,
investors and security holders will be able to obtain free copies
of the documents filed by First Majestic with the SEC and Canadian
securities regulatory authorities on First Majestic’s website at
www.firstmajestic.com or by contacting First Majestic’s investor
relations team. Copies of the documents filed with the SEC by Gatos
will be available free of charge on Gatos’s website or by
contacting Gatos’ investor relations team.
Participants in the Merger
Solicitation
First Majestic, Gatos and certain of their
respective directors, executive officers and employees may be
considered participants in the solicitation of proxies in
connection with the proposed Transaction. Information regarding the
persons who may, under the rules of the SEC, be deemed participants
in the solicitation of the shareholders of First Majestic and the
stockholders of Gatos in connection with the Transaction, including
a description of their respective direct or indirect interests, by
security holdings or otherwise, will be included in the Proxy
Statement/Prospectus described above and other relevant documents
when it is filed with the SEC and Canadian securities regulatory
authorities in connection with the Transaction. Additional
information regarding First Majestic’s directors and executive
officers is also included in First Majestic’s Notice of Annual
Meeting of Shareholders and 2024 Proxy Statement, which was filed
with the SEC and Canadian securities regulatory authorities on
April 15, 2024, and information regarding Gatos’s directors and
executive officers is also included in Gatos’s Annual Report on
Form 10-K for the year ended December 31, 2023 filed with the SEC
on February 20, 2024, as amended by Amendment No. 1 to such annual
report filed with the SEC on May 6, 2024 and Gatos’ 2024 Proxy
Statement for its 2024 Annual Meeting of Stockholders, which was
filed with the SEC on April 25, 2024. These documents are available
free of charge as described above.
Non-GAAP Financial Measures
This news release includes reference to certain
financial measures which are not standardized measures under the
parties’ respective financial reporting frameworks. These measures
include all-in sustaining costs (or “AISC”) per payable silver
equivalent ounce and free cash flow. The parties believe that these
measures, together with measures determined in accordance with GAAP
or IFRS, provide investors with an improved ability to evaluate the
underlying performance of First Majestic. These measures are widely
used in the mining industry as a benchmark for performance but do
not have any standardized meaning prescribed under IFRS, and
therefore they may not be comparable to similar measures disclosed
by other companies. The data is intended to provide additional
information and should not be considered in isolation or as a
substitute for measures of performance prepared in accordance with
IFRS. For a complete description of how First Majestic calculates
such measures and a reconciliation of certain measures to GAAP
terms please see “Non-GAAP Measures” in First Majestic’s most
recent management discussion and analysis filed on SEDAR+ at
www.sedarplus.ca and EDGAR at www.sec.gov/edgar.
For a complete description of how Gatos
calculates such measures and a reconciliation of certain measures
to GAAP terms, please see “Non-GAAP Measures” in Gatos’s Annual
Report on Form 10-K for the year ended December 31, 2023 filed with
the SEC on February 20, 2024, as amended by Amendment No. 1 to such
annual report filed with the SEC on May 6, 2024 at
www.sec.gov/edgar.
Cautionary Note Regarding Forward Looking
Statements
This news release contains "forward‐looking
statements" within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended, which are intended to be covered by the safe
harbor created by such sections and other applicable laws and
“forward-looking information” under applicable Canadian securities
laws (collectively, "forward‐looking statements"). These statements
relate to future events or the future performance, business
prospects or opportunities of First Majestic and/or Gatos that are
based on forecasts of future results, estimates of amounts not yet
determinable and assumptions of management of First Majestic and/or
Gatos made in good faith in light of management's experience and
perception of historical trends, current conditions and expected
future developments. Forward‐looking statements in this news
release include, but are not limited to, statements with respect
to: closing of the Transaction and the terms and timing related
thereto; the anticipated benefits of the Transaction to First
Majestic, Gatos and their respective shareholders including
increased shareholder value; the timing and receipt of required
shareholder, stock exchange and regulatory approvals; satisfaction
of the conditions to completion of the Transaction; the anticipated
timing of mailing proxy statements and circulars regarding the
Transaction; liquidity, enhanced value and capital markets profile
of First Majestic; cash flow and revenue estimates; future growth
potential for First Majestic, Gatos and their respective
businesses; life of mine estimates; estimates regarding the future
price of silver and other metals, asset quality and geographic
spread, the estimation of mineral reserves and resources, the
realization of mineral reserve estimates, and the timing and amount
of estimated future production, recovery rates, costs of production
and all-in sustaining costs, capital expenditures, the costs and
timing of the development of new deposits and exploration programs
and expected listing of shares on the New York Stock Exchange and
the Toronto Stock Exchange. Assumptions may prove to be incorrect
and actual results may differ materially from those anticipated.
Consequently, guidance cannot be guaranteed. As such, investors are
cautioned not to place undue reliance upon guidance and
forward‐looking statements as there can be no assurance that the
plans, assumptions or expectations upon which they are placed will
occur. All statements other than statements of historical fact may
be forward‐looking statements. Statements concerning proven and
probable mineral reserves and mineral resource estimates may also
be deemed to constitute forward‐looking statements to the extent
that they involve estimates of the mineralization that will be
encountered as and if the property is developed, and in the case of
measured and indicated mineral resources or proven and probable
mineral reserves, such statements reflect the conclusion based on
certain assumptions that the mineral deposit can be economically
exploited. Any statements that express or involve discussions with
respect to predictions, expectations, beliefs, plans, projections,
objectives or future events or performance (often, but not always,
using words or phrases such as "seek", "anticipate", "plan",
"continue", "estimate", "expect", "may", "will", "project",
"predict", "forecast", "potential", "target", "intend", "could",
"might", "should", "believe" and similar expressions) are not
statements of historical fact and may be "forward‐looking
statements".
Actual results may vary from forward‐looking
statements. Forward‐looking statements are subject to known and
unknown risks, uncertainties and other factors that may cause
actual results to materially differ from those expressed or implied
by such forward‐looking statements, including but not limited to:
satisfaction or waiver of all applicable closing conditions for the
Transaction on a timely basis or at all including, without
limitation, receipt of all necessary shareholder, stock exchange
and regulatory approvals or consents and lack of material changes
with respect to First Majestic and Gatos and their respective
businesses, all as more particularly set forth in the Definitive
Agreement and the timing of the closing of the Transaction and the
failure of the Transaction to close for any reason; the outcome of
any legal proceedings that may be instituted against First Majestic
or Gatos and others related to the Transaction; unanticipated
difficulties or expenditures relating to the Transaction; risks
relating to the value of the consideration to be issued in
connection with the Transaction; the diversion of management time
on pending Transaction-related issues; the synergies expected from
the Transaction not being realized; business integration risks;
fluctuations in security markets; the duration and effects of the
COVID‐19, and any other pandemics on operations and workforce, and
the effects on global economies and society; general economic
conditions including inflation risks; actual results of exploration
activities; conclusions of economic evaluations; changes in project
parameters as plans continue to be refined; commodity prices;
variations in ore reserves, grade or recovery rates; availability
of sufficient water for operating purposes; actual performance of
plant, equipment or processes relative to specifications and
expectations; accidents; labour relations; relations with local
communities; changes in national or local governments; changes in
applicable legislation or application thereof; delays in obtaining
approvals or financing or in the completion of development or
construction activities; exchange rate fluctuations; requirements
for additional capital; government regulation; environmental risks;
reclamation expenses; risks related to international operations;
risks related to joint venture operations; outcomes of pending
litigation; changes in taxation, controls and political or economic
developments; operating or technical difficulties in connection
with mining or development activities; risks and hazards associated
with the business of mineral exploration, development and mining
(including environmental hazards, industrial accidents, unusual or
unexpected formations, pressures, cave-ins and flooding); risks
relating to the credit worthiness or financial condition of
suppliers, refiners and other parties with whom First Majestic or
Gatos does business; limitations on insurance coverage; inability
to obtain adequate insurance to cover risks and hazards; and the
presence of laws and regulations that may impose restrictions on
mining, including those currently enacted or pending in Mexico,
whether or not currently in force; employee relations;
relationships with and claims by local communities and indigenous
populations; availability and increasing costs associated with
mining inputs and labour; the speculative nature of mineral
exploration and development, including the risks of obtaining or
maintaining necessary licenses, permits and approvals from
government authorities; diminishing quantities or grades of mineral
reserves as properties are mined; First Majestic’s and Gatos’ title
to properties, changes in climate conditions and extreme weather
events, as well as those factors discussed in (a) the section
entitled “Description of the Business ‐ Risk Factors” in First
Majestic’s most recently filed AIF, available under its profile on
SEDAR+ at www.sedarplus.ca, and as an exhibit to its most recently
filed Form 40‐F available on EDGAR at www.sec.gov/edgar or on First
Majestic’s website and (b) the Gatos’ Annual Report on Form 10-K
for the year ended December 31, 2023, available on EDGAR at
www.sec.gov/edgar or on Gatos’s website. First Majestic is not
affirming or adopting any statements or reports attributed to Gatos
(including prior mineral reserve and resource declaration) in this
news release or made by Gatos outside of this news release. Gatos
is not affirming or adopting any statements or reports attributed
to First Majestic (including prior mineral reserve and resource
declaration) in this news release or made by First Majestic outside
of this news release. In addition, the failure of a party to comply
with the terms of the Definitive Agreement may result in that party
being required to pay a fee to the other party, the result of which
could have a material adverse effect on the paying party’s
financial position and results of operations and its ability to
fund growth prospects and current operations. Although First
Majestic and Gatos have attempted to identify important factors
that could cause actual results to differ materially from those
contained in forward‐looking statements, there may be other factors
that cause results not to be as anticipated, estimated or
intended.
First Majestic and Gatos believe that the
expectations reflected in these forward-looking statements are
reasonable, but no assurance can be given that these expectations
will prove to be correct and such forward-looking statements
included herein should not be unduly relied upon. These statements
speak only as of the date hereof. First Majestic and Gatos do not
intend, and do not assume any obligation, to update these
forward-looking statements or forward-looking information, except
as required by applicable laws.
______________________
1 Based on First Majestic and Gatos 2024 production guidance,
adjusted for First Majestic metal price assumptions and shown on an
attributable basis2 Based on analyst consensus estimates for 20243
Based on each company’s average daily value traded over the last
twelve months
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