First Majestic Announces Agreement to Acquire Gatos Silver
First Majestic Announces Agreement to
Acquire Gatos Silver
Vancouver, British Columbia--(Newsfile Corp. - September 5, 2024) - First Majestic Silver Corp. (NYSE:
AG) (TSX: AG) (FSE: FMV) ("First Majestic") and Gatos Silver, Inc. (NYSE: GATO) (TSX: GATO)
("Gatos") 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 ounce
1
Bolsters free cash flow generation:
Gatos expected to immediately contribute annual free cash
flow of approximately US$70 million to the combined entity
2
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 million
3
, 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 Rae
Investor Relations
(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 Niekerk
Chief Financial Officer
(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
basis
2
Based on analyst consensus estimates for 2024
3
Based on each company's average daily value traded over the last twelve months
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