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First Majestic (AG) Closes Sale of Royalty Portfolio to Metalla

First Majestic Silver AG announced that it has closed the previously announced sale of the portfolio of its eight precious metals royalties to Metalla Royalty & Streaming Ltd. for $20 million.

The divested portfolio includes one producing gold royalty on AG’s La Encantada gold operation, four development silver royalties (Del Toro, La Guitarra, San Martin, La Parrilla), and three advanced exploration silver royalties (Plomosas, La Joya, La Luz).

The companies announced the sale on Nov 28. The sale was completed following the receipt of approval from the TSX Venture Exchange as well as the completion of other customary closing conditions.

First Majestic received 4,168,056 shares of Metalla at a deemed price of $4.7984 per share (based on a 25-day volume-weighted average price on the NYSE). First Majestic will now own 8.5% of the outstanding shares in Metalla. These shares have a statutory hold period of four months and one day (after the closing date) as well as specific contractual resale limitations.

Metalla will get a 100% gross value royalty (limited to 1,000 ounces annually) on the gold produced at AG’s La Encantada mine. Located in Coahuila, Mexico, the La Encantada mine is one of AG’s largest producing silver mines, having produced 3.2 Moz of silver and 460 ounces of gold production in 2021.

The three advanced silver royalties, namely Plomosas, La Joya and La Luz, are located in Sinaloa, Durango, and San Luis Potosi, respectively. Plomosas is a permitted project, owned and operated by GR Silver, whereas La Joya is currently owned by Silver Dollar. La Luz project is fully owned by First Majestic. AG agreed to 2% NSR of each of these assets to Metalla.
Located in Zacatecas, Mexico State, Jalisco and Durango, respectively, the four development silver royalties are Del Toro, La Guitarra, San Martin and La Parrilla. All these royalties are owned and operated by First Majestic except La Guitarra, which is subject to a binding purchase agreement with ‎Sierra Madre. Metalla will hold a 2% NSR of all these royalties. The company has recently entered into an agreement to sell its fully-owned past-producing La Parrilla Silver Mine to Golden Tag Resources Ltd. for $33.5 million. The silver, gold, lead and zinc operation had been placed under care and maintenance by AG in September 2019.

In the third quarter of 2022, First Majestic reported a loss of 9 cents per share, missing the consensus mark of a loss of 3 cents due to lower metal prices. AG reported a loss per share of 7 cents for the third quarter of 2021.

Revenues for the quarter were $160 million, up 28% from the prior-year comparable quarter’s level. Higher production at San Dimas and Santa Elena, partially offset by a decrease in the average price per silver equivalent ounce sold, drove revenues. Earnings declined year over year due to higher costs of sales and lower metal prices.
The Zacks Consensus Estimate for AG’s bottom line is currently pegged at a loss of 21 cents for the current year. First Majestic had delivered earnings per share of 2 cents a year ago. The same for revenues stands at $640 million, suggesting a 9.6% increase from the year-ago reported figure.

Price Performance

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Shares of First Majestic have fallen 24.3% in the past year compared with the industry’s 19.4% decline.

Zacks Rank & Stocks to Consider

First Majestic currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the basic materials space are Bunge Limited BG, Sociedad Quimica y Minera de Chile S.A. SQM and Reliance Steel RS. While BG and SQM currently sport a Zacks Rank #1 (Strong Buy), RS holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Bunge Limited has an expected earnings growth rate of 7.4% for the current year. Its earnings estimates for 2022 are pegged at $13.89 per share. BG’s earnings estimates have been revised 9.3% upward in the past 60 days. It has a trailing four-quarter average surprise of 18.7%. The stock has gained 8.4% in a year.

The Zacks Consensus Estimate for Sociedad’s 2022 earnings per share is $13.13, suggesting 540.5% growth from the year-ago reported figure. Earnings estimates have moved 1.5% north in the past 60 days. SQM has a trailing four-quarter earnings surprise of 37.4%, on average. Its shares have surged 72% in the past year.

The Zacks Consensus Estimate for Reliance Steel’s earnings is at $28.71 for the current year, indicating year-over-year growth rate of 29.8%. The consensus estimate for RS’ earnings for the current year has been revised 0.06% upward in the past 60 days. It has a trailing four-quarter average surprise of 13.6% on average. RS has gained 28% in a year.

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