First Majestic Silver (TSX:FR,NYSE:AG) announced plans on Thursday (September 5) to acquire Gatos Silver (TSX:GATO,NYSE:GATO) in a stock-based transaction valued at about US$970 million.
The new entity’s anticipated annual production is 30 million to 32 million silver equivalent ounces.
If approved, the deal will see First Majestic absorb Gatos’ assets, including its 70 percent interest in the Los Gatos joint venture, which operates the Cerro Los Gatos silver mine in Chihuahua, Mexico.
This mine, along with First Majestic’s existing operations at San Dimas and Santa Elena, will consolidate First Majestic’s portfolio into three major silver-producing districts in Mexico.
Under the terms of the agreement, First Majestic will acquire all outstanding shares of Gatos, while the latter’s shareholders will receive 2.55 common shares of First Majestic for each Gatos share they hold.
This consideration translates to a value of US$13.49 per Gatos share based on the closing price of First Majestic shares on the NYSE on Wednesday (September 4). The transaction represents a 16 percent premium based on the closing prices and 20 day volume-weighted average prices of the two companies’ shares.
“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,” Keith Neumeyer, president and CEO of First Majestic, said in the company’s press release.
The company aims to use its operational expertise to enhance the development of Cerro Los Gatos and integrate it with its existing assets to improve efficiencies and expand exploration opportunities.
Dale Andres, CEO of Gatos, expressed enthusiasm for the deal with First Majestic as well.
“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,” he said, highlighting First Majestic’s status as a well-established silver producer.
The transaction is expected to close in early 2025, subject to conditions and to approval from both companies’ shareholders, as well as clearance on both the New York and Toronto stock exchanges.
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Securities Disclosure: I, Giann Liguid, hold no direct investment interest in any company mentioned in this article.
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