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AG First Majestic Silver Corporation

5.4601
0.0101 (0.19%)
21 Dec 2024 - Closed
Delayed by 15 minutes
Share Name Share Symbol Market Type
First Majestic Silver Corporation NYSE:AG NYSE Common Stock
  Price Change % Change Share Price High Price Low Price Open Price Shares Traded Last Trade
  0.0101 0.19% 5.4601 5.66 5.435 5.53 13,564,024 01:00:00

Form 6-K - Report of foreign issuer [Rules 13a-16 and 15d-16]

20/12/2024 11:06am

Edgar (US Regulatory)


 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form 6-K

 

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 OF

THE SECURITIES EXCHANGE ACT OF 1934

For the month of December 2024

Commission File Number: 001-34984

 

 

First Majestic Silver Corp.

(Translation of registrant’s name into English)

 

 

Suite 1800 – 925 West Georgia Street

Vancouver, B.C. V6C 3L2

Canada

(Address of principal executive offices)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F ☐     Form 40-F ☒

 

 

 


DOCUMENTS INCORPORATED BY REFERENCE

Exhibit 99.1 to this Report on Form 6-K is hereby incorporated by reference as an Exhibit to the Registration Statement on Form F-10 of First Majestic Silver Corp. (File No. 333-273734), and incorporated by reference into (i) the Registration Statement on Form S-8 of First Majestic Silver Corp. (File No. 333-258124), and (ii) the Registration Statement on Form F-4 of First Majestic Silver Corp. (File No. 333-282627).

DOCUMENTS FILED AS PART OF THIS FORM 6-K

 

Exhibit    Description
99.1    Material Change Report dated December 19, 2024

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

    FIRST MAJESTIC SILVER CORP.
Date: December 19, 2024      
    By:  

/s/ Samir Patel

    Name:   Samir Patel
    Title:   General Counsel & Corporate Secretary

Exhibit 99.1

FORM 51-102F3

MATERIAL CHANGE REPORT

 

ITEM 1:

NAME AND ADDRESS OF COMPANY

First Majestic Silver Corp. (“First Majestic” or the “Company”)

Suite 1800 – 925 West Georgia Street

Vancouver, British Columbia V6C 3L2

 

ITEM 2:

DATE OF MATERIAL CHANGE

December 19, 2024

 

ITEM 3:

NEWS RELEASE

A news release announcing the material change referred to in this report was disseminated on December 19, 2024 through the newswire services of Newsfile and a copy of the news release was subsequently filed on SEDAR+.

 

ITEM 4:

SUMMARY OF MATERIAL CHANGE

On December 19, 2024, First Majestic announced that Gatos Silver, Inc. (“Gatos”) had advised the Company that it had amended and restated its agreements (the “Amended Agreements”) with Dowa Metals & Mining Co., Ltd. (“Dowa”) regarding the Los Gatos Joint Venture (the “LGJV”). The Amended Agreements, which become effective on January 1, 2025, expand Gatos’ management rights within the LGJV and result in the financial statements of the LGJV being fully consolidated. The Amended Agreements do not affect the respective ownership interests of Gatos and Dowa in the LGJV, which remain unchanged at 70% and 30%, respectively. The terms of the Amended Agreements are described more fully below.

As a result of the Amended Agreements, First Majestic has updated the unaudited pro forma condensed combined financial information (the “Pro Forma Financial Information”) that was previously prepared by the Company and that was included in its management information circular (the “Circular”) for the upcoming January 14, 2025 special meeting of First Majestic’s shareholders to reflect full consolidation of the LGJV in the Pro Forma Financial Information (as opposed to accounting for Gatos’ 70% interest in the LGJV using the equity method of accounting, which is reflected in the Pro Forma Financial Information set out in the Circular). The updated Pro-Forma Financial Information is attached to this report as Exhibit A.


ITEM 5:

FULL DESCRIPTION OF MATERIAL CHANGE

On December 19, 2024, Gatos, Dowa, Minera Plata Real, S. de R.L. de C.V. (“MPR”) and Operaciones San José de Plata, S. de R.L. de C.V. (“OpCo”) entered into an amended and restated joint venture agreement (the “Amended and Restated Joint Venture Agreement”) regarding the LGJV in respect of the Cerro Los Gatos Mine (“CLG”) in northern Mexico. The Amended and Restated Joint Venture Agreement amends and restates the Unanimous Omnibus Partner Agreement dated January 1, 2015, as amended, among Gatos, Dowa, MPR, Servicios San José De Plata, S de R.L. de C.V. (“SSJ”, which merged into MPR, effective July 15, 2021) and OpCo. In addition, on December 19, 2024, OpCo and Dowa entered into an amended and restated offtake agreement (the “Amended and Restated Offtake Agreement”) regarding Dowa’s purchase of the zinc concentrates produced at CLG. The Amended and Restated Offtake Agreement amends and restates the Zinc Offtake Agreement dated July 15, 2019, as amended, among OpCo and Dowa. Also on December 19, 2024 Gatos, MPR, SSJ and OpCo entered into an amended and restated services agreement (the “Amended and Restated Services Agreement”) regarding the provision of services by OpCo to MPR. The Amended and Restated Services Agreement amends and restates the Services Agreement dated January 1, 2015, as amended, among Gatos, MPR and OpCo.

The Amended and Restated Joint Venture Agreement: (i) establishes certain obligations of Gatos to cause MPR and OpCo to use commercially reasonable efforts to meet certain quality criteria for zinc concentrates and to maintain certain levels of production; (ii) reduces supermajority voting requirements within the LGJV (the effect of which will be to provide Gatos with control over a variety of ordinary-course operational, budgeting and planning decisions); (iii) provides a new sole-funding right to Gatos for mine or plant modifications or expansions, allowing Gatos to require that the same be undertaken and to dilute Dowa’s interest in the LGJV if Dowa elects not to participate; and (iv) modifies transfer restrictions of shares or participating interests in MPR or OpCo, among other amendments.

The Amended and Restated Offtake Agreement: (i) sets new target specification ranges for the zinc concentrates; (ii) establishes a new procedure to determine the annual offtake volume; (iii) definitively sets certain commercial terms previously subject to annual negotiation regarding metal payment and price, treatment charge and escalators/de-escalators, quotational period and settlement; and (iv) establishes Dowa’s offtake rights on new production from the Los Gatos District , among other amendments.

The Amended and Restated Services Agreement: (i) establishes a new role for Gatos in overseeing OpCo by providing instructions, guidelines and strategic direction; and (ii) establishes new information rights for Dowa, among other amendments. OpCo will remain the “Operator” of the LGJV.

The foregoing descriptions of the Amended and Restated Joint Venture Agreement, the Amended and Restated Offtake Agreement and the Amended and Restated Services Agreement are qualified in their entirety by the terms of such agreements, which have been filed by Gatos under its EDGAR profile at www.sec.gov/edgar.

As a result of the Amended Agreements, Gatos’ investment in the LGJV, which has to date been reported on an unconsolidated basis under the equity method of accounting, will be accounted for on a consolidated basis effective January 1, 2025. In particular, the changes to the supermajority requirements under the Amended and Restated Joint Venture Agreement will provide Gatos with sufficient control over the LGJV to enable consolidation. Gatos’ economic interest in the LGJV remains unchanged and Dowa’s interest, which is also unchanged, will be reported as a minority interest.


First Majestic has updated the Pro Forma Financial Information that was previously prepared by the Company and that was included in its Circular for the upcoming January 14, 2025 special meeting of First Majestic’s shareholders to reflect full consolidation of the LGJV in the Pro Forma Financial Information (as opposed to accounting for Gatos’ 70% interest in the LGJV using the equity method of accounting, which is reflected in the Pro Forma Financial Information set out in the Circular). The updated Pro Forma Financial Information is attached to this report as Exhibit A.

 

ITEM 6:

RELIANCE ON SUBSECTION 7.1(2) OF NATIONAL INSTRUMENT 51-102

Not applicable.

 

ITEM 7:

OMITTED INFORMATION

Not applicable.

 

ITEM 8:

EXECUTIVE OFFICER

For further information, please contact Samir Patel, the Company’s General Counsel & Corporate Secretary, at 604-688-3033.

 

ITEM 9:

DATE OF REPORT

This Material Change Report is dated December 19, 2024.

Forward-Looking Statements

This report 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 report include, but are not limited to, statements with respect to the anticipated timing of the First Majestic shareholder meeting and the timing for the Amending Agreements becoming effective. 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. 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. Although First Majestic has 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 believes 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 does not intend, and does not assume any obligation, to update these forward-looking statements or forward-looking information, except as required by applicable laws.


EXHIBIT A

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The following unaudited pro forma condensed combined financial information (the “unaudited pro forma financial information”) has been prepared based on the historical audited and unaudited consolidated financial statements of First Majestic Silver Corp. (“First Majestic” or the “Company”) and Gatos Silver Inc. (“Gatos”), as indicated below, adjusted to give effect to the Consolidation (as defined below) and the acquisition of Gatos by First Majestic (the “Transaction”) as if it had consummated at said dates below. The following unaudited pro forma financial information has been prepared in accordance with Article 11 of Regulation S-X to depict the accounting for the Consolidation and the Transaction (“Transaction Accounting Adjustments”), which reflects the application of the accounting in accordance with the International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”), including adjustments to align Gatos’ and the Los Gatos Joint Venture’s (the “LGJV”) historical accounting

policies under U.S. GAAP (as defined below) to First Majestic’s significant accounting policies under IFRS, as further discussed below.

The following unaudited pro forma condensed combined statements of financial position as at September 30, 2024 (the “unaudited pro forma statement of financial position”), assume the Consolidation and the Transaction occurred on September 30, 2024. The unaudited pro forma condensed combined statements of earnings (loss) for the nine months ended September 30, 2024 and for the year ended December 31, 2023 (together, the “unaudited pro forma statements of loss”) assumes that the Consolidation and the Transaction occurred on January 1, 2023. On December 19, 2024, Gatos amended its existing agreements (the “Amended Agreements”) regarding the LGJV with Dowa Metals & Mining Co., Ltd. (“Dowa”) and the other parties thereto. The Amended Agreements, which will be effective on January 1, 2025, modify certain decision making rights, including eliminating the requirements for approval from both LGJV partners on activities which significantly affect LGJV’s returns, the effect of which will be to provide Gatos with control over a variety of decisions that significantly affect LGJV’s returns. As a result, Gatos will consolidate the financial results of the LGJV when the Amended Agreements becomes effective (the “Consolidation”).

The unaudited pro forma financial information has been presented for illustrative purposes only and is not intended to be indicative of the combined entity’s financial condition or results of operations that would have actually occurred had the Consolidation and the Transaction occurred on the dates indicated. Further, the unaudited pro forma financial information also may not be useful in predicting the future financial condition and results of operations of the combined entity. The actual financial position and results of operations of the combined entity may differ from the pro forma amounts reflected herein due to a variety of factors.


The unaudited pro forma financial information was derived from and should be read in conjunction with:

 

   

The accompanying notes to the unaudited pro forma financial information;

 

   

The audited consolidated financial statements and the accompanying notes of First Majestic as at and for the year ended December 31, 2023, filed as Exhibit 99.2 to First Majestic’s Annual Report on Form 40-F filed with the Securities and Exchange Commission (“SEC”) on April 2, 2024;

 

   

the unaudited condensed interim consolidated financial statements and the accompanying notes of First Majestic as at and for the nine months ended September 30, 2024, included as Exhibit 99.1 to First Majestic’s Form 6-K filed with the SEC on November 7, 2024;

 

   

The audited consolidated financial statements and the accompanying notes of Gatos as at and for the year ended December 31, 2023, included in Gatos’ Annual Report on Form 10-K, as amended by Gatos’ Annual Report on Form 10-K/A filed with the SEC on May 6, 2024;

 

   

the unaudited condensed interim consolidated financial statements and the accompanying notes of Gatos as at and for the nine months ended September 30, 2024, included in Gatos’ Form 10-Q filed with the SEC on November 12, 2024; and

 

   

The audited combined financial statements and the accompanying notes of the LGJV as at and for the year ended December 31, 2023, included in Gatos’ Annual Report on Form 10-K, as amended by Gatos’ Annual Report on Form 10-K/A filed with the SEC on May 6, 2024.

Description of the Transaction

On September 5, 2024, First Majestic and Gatos entered into a definitive merger agreement (the “Merger Agreement”) pursuant to which First Majestic will acquire all of the issued and outstanding common shares of Gatos. Gatos is a silver 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 Merger Agreement, Gatos shareholders will receive 2.55 common shares of First Majestic for each common stock of Gatos held.


Unaudited Pro Forma Condensed Combined Statement of Financial Position

As at September 30, 2024

(in thousands of US dollars)

 

     First Majestic     Gatos (Note 2)
[post-
Consolidation]
     Transaction
Accounting
Adjustments
    Notes     Pro Forma
Combined
 

Current Assets

           

Cash and cash equivalents

     154,730       150,616        (24,103     4 (a)      281,243  

Trade and other receivables

     18,080       13,646        —          31,726  

Value added taxes receivable

     41,044       14,064        —          55,108  

Income tax receivables

     —        9,296        —          9,296  

Inventories

     68,268       16,180        —          84,448  

Other financial assets

     63,994       3,445        —          67,439  

Prepaid expenses and other

     9,478       558        —          10,036  
  

 

 

   

 

 

    

 

 

     

 

 

 

Total Current Assets

     355,594       207,805        (24,103       539,296  

Non-Current Assets

           

Mining interests

     1,028,578       1,676,960        —          2,705,538  

Property, plant and equipment

     383,591       159,220        —          542,811  

Right-of-use assets

     22,480       348        —          22,828  

Deposits on non-current assets

     6,511       —         —          6,511  

Non-current restricted cash

     103,866       —         —          103,866  

Non-current value added taxes receivable

     11,098       —         —          11,098  

Deferred tax assets

     65,777       921        —          66,698  
  

 

 

   

 

 

    

 

 

     

 

 

 

Total Assets

     1,977,495       2,045,254        (24,103       3,998,646  
  

 

 

   

 

 

    

 

 

     

 

 

 

Current Liabilities

           

Trade and other payables

     92,266       45,545        —          137,811  

VAT payable

     —        11,873        —          11,873  

Unearned revenue

     782       —         —          782  

Current portion of debt facilities

     607       —         —          607  

Current portion of lease liabilities

     15,840       132        —          15,972  

Income tax payable

     7,875       11,752        —          19,627  
  

 

 

   

 

 

    

 

 

     

 

 

 

Total Current Liabilities

     117,370       69,302        —          186,672  

Non-Current Liabilities

           

Debt facilities

     206,190       —         —          206,190  

Lease liabilities

     10,884       342        —          11,226  

Decommissioning liabilities

     158,239       —         —          158,239  

Other liabilities

     6,025       —         —          6,025  

Asset retirement obligation

     —        12,245            12,245  

Non-current income tax payable

     20,323       —         —          20,323  

Deferred tax liabilities

     81,154       355,915        —          437,069  
  

 

 

   

 

 

    

 

 

     

 

 

 

Total Liabilities

     600,185       437,804        —          1,037,989  

Equity

           

Share capital

     1,976,695       556,167        562,372       4 (b)      3,095,234  

Equity reserves

     102,745                      102,745  

Accumulated deficit

     (702,130     600,983        (586,475     4 (a) (b)      (687,622

Non-controlling interest

     —        450,300            450,300  
  

 

 

   

 

 

    

 

 

     

 

 

 

Total Equity

     1,377,310       1,607,450        (24,103       2,960,657  
  

 

 

   

 

 

    

 

 

     

 

 

 

Total Liabilities and Equity

     1,977,495       2,045,254        (24,103       3,998,646  
  

 

 

   

 

 

    

 

 

     

 

 

 

See the accompanying notes to the unaudited pro forma condensed combined financial information.


Unaudited Pro Forma Condensed Combined Statement of Earnings (Loss)

For the Nine Months Ended September 30, 2024

(in thousands of US dollars)

 

     First Majestic     Gatos (Note 2)
[post-
Consolidation]
    Transaction
Accounting
Adjustments
    Notes     Pro Forma
Combined
 

Revenue

     388,267       260,255       —          648,522  

Mine operating costs

       —        —          —   

Cost of sales

     255,279       95,613       —          350,892  

Cost of sales – standby costs

     —        —        —          —   

Depletion, depreciation and amortization

     89,325       228,692       (17,298     4 (c)      300,719  
  

 

 

   

 

 

   

 

 

     

 

 

 
     344,604       324,305       (17,298       651,611  
  

 

 

   

 

 

   

 

 

     

 

 

 

Mine operating earnings (loss)

     43,663       (64,050     17,298         (3,089

General and administrative expenses

     28,186       37,883       —          66,069  

Share-based payments

     10,895       —        3,853       4 (d)      14,748  

Mine holding costs

     18,173       —        —          18,173  

Foreign exchange loss

     15,824       36       —          15,860  
  

 

 

   

 

 

   

 

 

     

 

 

 

Operating (loss) income

     (29,415     (101,969     13,445         (117,939

Investment and other income

     4,086       3,545       —          7,631  

Finance costs

     (21,277     (1,503     —          (22,780
  

 

 

   

 

 

   

 

 

     

 

 

 

(Loss) income before income taxes

     (46,606     (99,927     13,445         (133,088

Income taxes

          

Current income tax expense

     16,707       31,887       —          48,594  

Deferred income tax expense (recovery)

     25,094       (59,847     —          (34,753
  

 

 

   

 

 

   

 

 

     

 

 

 
     41,801       (27,960     —          13,841  
  

 

 

   

 

 

   

 

 

     

 

 

 

Net (loss) income for the period

     (88,407     (71,967     13,445         (146,929
  

 

 

   

 

 

   

 

 

     

 

 

 

Loss per common share

 

       
  

 

 

         

 

 

 

Basic

     (0.30           (0.27
  

 

 

         

 

 

 

Diluted

     (0.30           (0.27
  

 

 

         

 

 

 

Weighted average shares outstanding

          
  

 

 

         

 

 

 

Basic

     293,440,674             473,559,748  
  

 

 

         

 

 

 

Diluted

     293,440,674             473,559,748  
  

 

 

         

 

 

 

See the accompanying notes to the unaudited pro forma condensed combined financial information.


Unaudited Pro Forma Condensed Combined Statement of Earnings (Loss)

For the year Ended December 31, 2023

(in thousands of US dollars)

 

     First Majestic     Gatos (Note 2)
[post-
Consolidation]
    Transaction
Accounting
Adjustments
    Notes     Pro Forma
Combined
 

Revenue

     573,801       268,671       —          842,472  

Mine operating costs

       —        —       

Cost of sales

     410,057       112,629       —          522,686  

Cost of sales – standby costs

     13,438       —        —          13,438  

Depletion, depreciation and amortization

     124,664       327,269       (30,395     4 (c)      421,538  
  

 

 

   

 

 

   

 

 

     

 

 

 
     548,159       439,898       (30,395       957,662  
  

 

 

   

 

 

   

 

 

     

 

 

 

Mine operating earnings (loss)

     25,642       (171,227     30,395         (115,190

General and administrative expenses

     38,709       40,657       6,529       4 (a)      85,895  

Share-based payments

     13,177       —        5,137       4 (d)      18,314  

Mine holding costs

     22,088       —        —          22,088  

Write down on asset held-for- sales

     7,229       —        —          7,229  

Restructuring costs

     6,883       —        —          6,883  

Impairment of non-current asset

     125,200       —        —          125,200  

Loss on sale of mining interest

     3,024       —        —          3,024  

Foreign exchange (gain)

     (11,884     (2,580     —          (14,464
  

 

 

   

 

 

   

 

 

     

 

 

 

Operating (loss) income

     (178,784     (209,304     18,729         (369,359

Investment and other income

     9,149       2,150       —          11,299  

Legal settlement loss

     —        (1,500     —          (1,500

Gain

     —        765,300       —        4 (e)      765,300  

Finance costs

     (26,280     (2,484     —          (28,764
  

 

 

   

 

 

   

 

 

     

 

 

 

(Loss) income before income taxes

     (195,915     554,162       18,729         376,976  

Income taxes

          

Current income tax expense

     14,005       8,261       —          22,266  

Deferred income tax (recovery)

     (74,808     (88,858     —          (163,666
  

 

 

   

 

 

   

 

 

     

 

 

 
     (60,803     (80,597     —          (141,400
  

 

 

   

 

 

   

 

 

     

 

 

 

Net (loss) income for the period

     (135,112     634,759       18,729         518,376  
  

 

 

   

 

 

   

 

 

     

 

 

 

Loss per common share

          
  

 

 

         

 

 

 

Basic

     (0.48           1.09  
  

 

 

         

 

 

 

Diluted

     (0.48           1.03  
  

 

 

         

 

 

 

Weighted average shares outstanding

          
  

 

 

         

 

 

 

Basic

     282,331,106             462,450,180  
  

 

 

         

 

 

 

Diluted

     282,331,106             489,879,902  
  

 

 

         

 

 

 

See the accompanying notes to the unaudited pro forma condensed combined financial information.


Notes to Unaudited Pro Forma Condensed Combined Financial Information

 

1.

Basis of Presentation

The preparation of the unaudited pro forma financial information is based on the historical financial statements of First Majestic, Gatos and LGJV. Gatos and LGJV historically reported their financial statements in U.S. dollars and in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). For the purposes of the unaudited pro forma condensed combined financial information, the Gatos and LGJV financial statements have been adjusted to align Gatos’ and LGJVs’ historical accounting policies under U.S. GAAP to First Majestic’s significant accounting policies under IFRS.

All dollar amounts presented are in U.S. dollars unless otherwise specified.

The unaudited pro forma financial information has been prepared using statements derived from and should be read in conjunction with, the following:

 

   

The audited consolidated financial statements of First Majestic as at and for the year ended December 31, 2023;

 

   

The unaudited condensed interim consolidated financial statements of First Majestic as at and for the nine months ended September 30, 2024;

 

   

The audited consolidated financial statements of Gatos as at and for the year ended December 31, 2023;

 

   

The unaudited condensed consolidated financial statements of Gatos as at and for the nine months ended September 30, 2024; and

 

   

The audited combined financial statements of the LGJV as at and for the year ended December 31, 2023.

The unaudited pro forma financial information does not give effect to any anticipated synergies, operating efficiencies, tax saving or cost saving that may be associated with the Transaction.

Anticipated Accounting Treatment of Consolidation and the Transaction

The unaudited pro forma financial information reflects the impact of two separate transactions.

On December 19, 2024 Gatos entered into the Amended Agreements regarding the LGJV, effective on January 1, 2025. The Amended Agreements, which will be effective on January 1, 2025, modify certain decision making rights, including eliminating the requirements for approval from both LGJV partners on activities which significantly affect LGJV’s returns, the effect of which will be to provide Gatos with control over a variety of decisions that significantly affect LGJV’s returns. As a result, Gatos will consolidate the financial results of the LGJV when the Amended Agreements becomes effective. The Gatos financial information included in the unaudited pro forma financial information has been adjusted to reflect the impact of the Consolidation. Refer to Note 2 of the pro forma financial information.


The impact of the Consolidation and the Transaction are reflected in the pro forma financial information.

The Consolidation and the Transaction are within the scope of IFRS 3, Business Combinations (“IFRS 3”) because each of the LGJV and Gatos meets the definition of a business in accordance with IFRS 3. As a result, the Consolidation and the Transaction is accounted for as a business combination in the unaudited pro forma financial information.

Under IFRS 3, First Majestic is considered the accounting acquirer of Gatos and the preliminary purchase price is allocated to the underlying assets acquired and liabilities assumed based on their respective fair market values. As of the date hereof, First Majestic has not completed the detailed valuation study necessary to arrive at the required final estimates of (i) the fair value of the Gatos assets to be acquired and liabilities to be assumed and (ii) the fair value of the interest in the LGJV, nor has it identified all adjustments necessary to align Gatos’ and LGJV’s historical audited financial policies under U.S. GAAP to First Majestic’s significant accounting policies under IFRS. A final determination of the fair value of Gatos’ assets and liabilities will be based on the actual assets and liabilities of Gatos that exist as of the effective date of the Consolidation and closing date of the Transaction and, therefore, cannot be made prior to the acquisition date. In addition, the value of the consideration to be paid by First Majestic upon the consummation of the Transaction will be determined based on the closing price of First Majestic’s common shares on the acquisition date. As a result of the foregoing, the Transaction Accounting Adjustments are preliminary and are subject to change as additional information becomes available and as additional analysis is performed. The preliminary Transaction Accounting Adjustments have been made solely for the purpose of providing the unaudited pro forma financial information presented herein. First Majestic has estimated the fair value of Gatos’ assets and liabilities based on discussions with Gatos’ management, preliminary valuation studies, due diligence and information presented in Gatos’ filings with the SEC. Until the Transaction is completed, both companies are limited in their ability to share certain information. Upon completion of the Transaction, a final determination of relative fair values of Gatos’ assets and liabilities will be performed. The final accounting for the Consolidation and the Transaction may be materially different than that reflected in the unaudited pro forma financial information presented herein.


Purchase Consideration

The total preliminary estimated purchase price of approximately $1,157,150 was determined as of November 11, 2024 based on First Majestic common shares to be issued to Gatos shareholders in exchange for Gatos’ issued and outstanding common stock and equity awards outstanding at September 30, 2024 under Gatos’ incentive compensation plans that will be exchanged on or after the closing of the Transaction, and First Majestic’s share price on November 11, 2024. As part of the closing of the Transaction, outstanding RSUs, PSUs, and DSUs, of Gatos that are vested or become vested in connection with the Transaction will be exchanged into First Majestic common shares using the same exchange ratio outlined above. In addition, the outstanding and unexercised Gatos stock options will be converted into stock options of First Majestic based on the exchange ratio. The aggregate purchase price will be based on the actual closing price per First Majestic’s common shares on the closing date, which could differ materially from the assumed value disclosed in the notes to the unaudited pro forma financial information. Further, no effect has been given to any other new Gatos common stock or other equity awards that may be issued or granted subsequent to the date hereof and before the effective date for the Consolidation or the closing date of the Transaction. In all cases in which First Majestic’s closing share price is a determining factor in arriving at the final purchase consideration, the share price assumed for the total preliminary purchase price is the closing price of First Majestic’s common shares on November 11, 2024 ($6.21 per share), which was the share price used to prepare the unaudited pro forma financial information contained in First Majestic’s Registration Statement on Form F-4 that became effective on December 2, 2024.

 

Purchase Consideration (in thousands of US dollars)

 

Gatos outstanding common stock at September 30, 2024

     69,352,645  

Total outstanding Gatos RSUs, DSUs, and PSUs at September 30, 20241

     1,282,286  
  

 

 

 

Total Gatos outstanding common stock to be exchanged

     70,634,931  
  

 

 

 

Exchange ratio

     2.55  
  

 

 

 

Total First Majestic shares to be issued

     180,119,074  
  

 

 

 

First Majestic share price2

   $ 6.21  
  

 

 

 

Share consideration (rounded)

   $ 1,118,539  
  

 

 

 

Stock options exchanged for Gatos stock options (rounded)

   $ 21,037  
  

 

 

 

Transaction Costs (rounded) (Note 4a)

   $ 17,574  
  

 

 

 

Total consideration (rounded)

   $ 1,157,150  
  

 

 

 

 

1 

All outstanding Gatos RSUs, DSUs, and PSUs that are vested or that will vest in connection with the Transaction will be exchanged for First Majestic common shares in accordance with the exchange ratio.

2 

First Majestic’s common share price on November 11, 2024


Sensitivity Analysis

First Majestic determined that a price volatility of as much as 10% in First Majestic’s common shares trading price on the closing date of the Transaction from the common share price assumed in this unaudited pro forma financial information is reasonably possible based upon the recent history of the price of First Majestic common shares. A change of this magnitude would increase or decrease the consideration expected to be transferred by approximately $111,854, which would be reflected in these unaudited pro forma financial information as an increase or decrease to mining interests.

 

Total First

Majestic

outstanding

common share

to be issued

   Share Price      Impact on mining
interests
 

180,119,074

   $ 6.83      $ 111,854  

180,119,074

   $ 5.59      $ (111,854

Preliminary Purchase Price Allocation

The table below summarizes the preliminary allocation of the purchase price to the assets acquired and the liabilities assumed for the purposes of the unaudited pro forma financial information as if the Consolidation and the Transaction occurred on September 30, 2024.

 

Assets acquired and liabilities assumed (in thousands of U.S. dollars)

 

Cash and cash equivalents

   $ 150,616  

Receivables

   $ 13,646  

Inventories

   $ 16,180  

Value added taxes receivable

   $ 14,064  

Income tax receivables

   $ 9,296  

Prepaid expense and other

   $ 558  

Other current assets

   $ 3,445  

Mining interests

   $ 1,676,960  

Property, plant and equipment, net

   $ 159,220  

Deferred tax assets

   $ 921  

Other non-current assets

   $ 348  
  

 

 

 

Total assets

   $ 2,045,254  

Accounts payable and accrued liabilities

   $ 45,545  

Value added taxes payable

   $ 11,873  

Income tax payable

   $ 11,752  

Current lease liability

   $ 132  

Lease liability

   $ 342  

Asset retirement obligation

   $ 12,245  

Deferred tax liabilities

   $ 355,915  
  

 

 

 

Total liabilities

   $ 437,804  

Non-controlling interests

   $ 450,300  
  

 

 

 

Total Preliminary Purchase Price

   $ 1,157,150  


2.

Gatos Historical Financial Statements

Gatos’ historical balances were derived from Gatos’ historical audited consolidated financial statements as described above and are presented under U.S. GAAP and are in U.S. dollars. On December 19, 2024, Gatos entered into the Amended Agreements regarding the LGJV. The Amended Agreements, which will be effective on January 1, 2025, modify certain decision making rights, including eliminating the requirements for approval from both LGJV partners on activities which significantly affect LGJV’s returns, the effect of which will be to provide Gatos with control over a variety of decisions that significantly affect LGJV’s returns. As a result, Gatos will consolidate the financial results of the LGJV when the Amended Agreements becomes effective. As a result, Gatos will consolidate the financial statements of the LGJV when the Amended Agreements become effective. The Gatos unaudited pro forma financial information has been adjusted to reflect the impact of gaining control of the LGJV as if the Consolidation occurred on September 30, 2024 for the unaudited pro forma combined balance sheet and on January 1, 2023 for the Gatos unaudited pro forma combined statements of operations and comprehensive income. Gatos has applied acquisition accounting to reflect the acquisition of control. The fair value of the LGJV used in the adjustments was estimated based on the preliminary purchase price shown in Note 1 above, adjusted for any working capital and other assets and liabilities held by Gatos. For the purpose of the unaudited pro forma financial information, First Majestic have estimated that the fair value of the LGJV will equal the preliminary purchase price shown in Note 1 because the Consolidation and the Transaction are assumed to occur on January 1, 2023. No additional consideration was transferred as part of the Consolidation. As such, a gain is expected to be recognized reflecting the difference between the fair value and the carrying value of LGJV. This gain will not be recognized by First Majestic in its financial statements as the Consolidation is expected to take place prior to the closing of the Transaction.


     Gatos Silver Inc.
Unaudited Pro Forma Consolidated Balance Sheet
As of September 30, 2024
(in thousands of United States dollars)
 
     Gatos
Historical
Amount
    LGJV
Historical
Amount
     Acquisition
Adjustment
    Consolidation
Adjustment
    Notes     Gatos
post-
Consolidation
 

Assets

             

Current Assets

             

Cash and cash equivalents

   $ 116,732     $ 33,884            $ 150,616  

Receivables

     —        13,646              13,646  

Inventories

     —        16,180              16,180  

VAT receivables

     —        13,417              13,417  

Income taxes receivable

     —        9,296              9,296  

Related party receivable

     292       —           (292     a     —   

Other current assets

     1,215       3,435              4,650  
  

 

 

   

 

 

      

 

 

     

 

 

 

Total current assets

     118,239       89,858          (292       207,805  

Non-current Assets

             

Investment in affiliates

     285,454       —         (285,454       b     —   

Mine development

     —        231,060        1,445,900         c     1,676,960  

Property, plant and equipment, net

     —        159,220              159,220  

Deferred tax assets

     222       699              921  

Other non-current assets

     348       —               348  
  

 

 

   

 

 

    

 

 

       

 

 

 

Total non-current assets

     286,024       390,979        1,160,446           1,837,449  
  

 

 

   

 

 

    

 

 

   

 

 

     

 

 

 

Total Assets

   $ 404,263     $ 480,837        1,160,446       (292     $ 2,045,254  
  

 

 

   

 

 

    

 

 

   

 

 

     

 

 

 

Liabilities and Stockholders’ Equity

             

Current Liabilities

             

Accounts payable and other accrued liabilities

   $ 12,226     $ 33,999            $ 46,225  

VAT payables

     —        11,873              11,873  

Income taxes payable

     —        11,204              11,204  

Related party payable

     —        270          (270     a     —   
  

 

 

   

 

 

      

 

 

     

 

 

 

Total current liabilities

     12,226       57,346          (270       69,302  

Non-current Liabilities

             

Lease liabilities

     187       155              342  

Asset retirement obligation

     —        12,245              12,245  

Deferred tax liabilities

     —        4,974        350,941         d     355,915  
  

 

 

   

 

 

    

 

 

       

 

 

 

Total non-current liabilities

     187       17,374        350,941           368,502  

Stockholders’ Equity

             

Common stock

     117       —               117  

Capital contributions

     —        360,638        (360,638       b     —   

Paid-in capital

     556,050       18,186        (18,186       b     556,050  

Accumulated deficit

     (164,317     27,293        738,007         b     600,983  

Non-controlling interests

     —        —         450,300         b     450,300  
  

 

 

   

 

 

    

 

 

       

 

 

 

Total stockholders’ equity

     391,850       406,117        809,483           1,607,450  

Total Liabilities and Stockholders’ Equity

   $ 404,263     $ 480,837        1,160,424       (270     $ 2,045,254  


Gatos Silver Inc.

Unaudited Pro Forma Consolidated Statements of Operations and Comprehensive Income

For the Nine Months Ended September 30, 2024

(in thousands of United States dollars)

 

     Gatos
Historical
Amount
     LGJV
Historical
Amount
    Acquisition
Adjustment
    Consolidation
Adjustment
    Notes     Gatos
post-
Consolidation
 

Revenue

   $ —       $ 260,255         —        $ 260,255  

Expense

             

Cost of sales

     —         93,931         —          93,931  

Royalties and duties

     —         1,682         —          1,682  

Exploration

     219        4,577         —          4,796  

General and administrative

     25,270        12,317         (4,500     e)       33,087  

Amortization

     11        58,901       169,780         g)       228,692  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

   $ 25,500      $ 171,408       169,780       (4,500     $ 362,188  

Other income (expense)

             

Equity income in affiliates

   $ 39,985        —      ($ 39,985       f)     $ —   

Accretion expense

     —       ($ 652       —          (652

Interest expense

     —         (851       —          (851

Interest income

     3,206        892         —          4,098  

Other income (expense)

     4,582        (635       (4,500     e)       (553

Foreign exchange gain (loss)

     —         (36           (36
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other income (loss)

   $ 47,773      ($ 1,282     (39,985     (4,500     $ 2,006  

Income (loss) before taxes

   $ 22,273      $ 87,565       (209,765     —        $ (99,927

Income tax expense (recovery)

     701        31,186         —          31,887  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Deferred income tax (recovery)

          (59,847       g)       (59,847
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) and comprehensive income

   $ 21,572      $ 56,379       (149,918     —        $ (71,967
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 


Gatos Silver Inc.

Unaudited Pro Forma Consolidated Statements of Operations and Comprehensive Income

For the Year Ended December 31, 2023

(in thousands of United States dollars)

 

     Gatos
Historical
Amount
    LGJV
Historical
Amount
    Acquisition
Adjustment
    Consolidation
Adjustment
    Notes     Gatos
post-
Consolidation
 

Revenue

   $ —      $ 268,671         —        $ 268,671  

Expense

            

Cost of sales

     —        111,266         —          111,266  

Royalties and duties

     —        1,363         —          1,363  

Exploration

     26       2,875         —          2,901  

General and administrative

     25,688       18,068         (6,000     e)       37,756  

Amortization

     79       75,110       252,080         g)       327,269  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

   $ 25,793     $ 208,682       252,080       (6,000     $ 480,555  

Other income (expense)

            

Equity income in affiliates

   $ 33,622     $ —      ($ 33,622       f)     $ —   

Accretion expense

     —        (1,145       —          (1,145

Legal settlement loss

     (1,500     —          —          (1,500

Interest expense

     (679     (660       —          (1,339

Interest income

     1,332       1,567         —          2,899  

Other income (expense)

     5,992       (741       (6,000     e)       (749

Gain

     —        —        765,300       —        h)       765,300  

Foreign exchange gain (loss)

     —        2,580         —          2,580  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other income

   $ 38,767     $ 1,601       731,678       (6,000     $ 766,046  

Income before taxes

   $ 12,974     $ 61,590       479,598       —        $ 554,162  

Income tax expense

     114       8,147             8,261  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Deferred income tax (recovery)

         (88,858     —        g)       (88,858  

Net (loss) income and comprehensive income

   $ 12,860     $ 53,443       568,456       —        $ 634,759  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 


a)

To eliminate intercompany balances.

b)

To reflect the Consolidation, the investment in affiliate is derecognized and the share capital and accumulated deficit balances are eliminated, and a non-controlling interest is recognized at fair value to reflect the participating interest owned by Dowa Metals & Mining Co., Ltd in the LGJV. The accumulated deficit balances include the gain of $765,300.

c)

The adjustment to this balance mainly reflects the allocation of the consideration to the Cerro Los Gatos mine. The incremental fair value of the acquisition of $1,445,900 is preliminary allocated to the carrying value of mine development. There has not been an allocation of the fair value between mine development and property, plant and equipment for the purpose of the unaudited pro forma financial information.

d)

The adjustment reflects the deferred tax liability impact on the fair value adjustment on LGJV’s identifiable assets, and liabilities as part of the Consolidation.

e)

To eliminate the management and administrative services fees paid by LGJV to Gatos.

f)

To eliminate equity income recognized by Gatos relating to the LGJV.

g)

The adjustment of $252,080 and $169,780 for the year ended December 31, 2023, and the nine-month period ended September 30, 2024, respectively, reflects a total adjustment of $421,860 to represent the before tax additional depletion that has taken place from the start of 2023 to the end of September 2024 which relates to the incremental cost of acquisition described above. The adjustment of $88,858 and $59,847 for the year ended December 31, 2023, and the nine-month period ended September 30, 2024, respectively, reflects the deferred income tax recovery related to the additional depletion described above.

h)

To reflect the gain recognized for the Consolidation. The purchase consideration is estimated to be $1,050,754 (estimated based on purchase consideration determined for the Transaction (Note 1) and excluding any working capital and other assets and liabilities held by Gatos). The carrying value of investment in LGJV is $285,454 and as a result, there is a gain of $765,300 recognized.


The historical balances also reflect certain reclassifications of Gatos’ unaudited pro forma consolidated statements of operations and comprehensive income and unaudited pro forma consolidated balance sheets categories to conform to First Majestic’s presentation in its consolidated statements of earnings (loss) and the consolidated statement of financial position. Further review may identify additional reclassifications that could have a material impact on the unaudited pro forma financial information of the combined company. The reclassifications identified and presented in the unaudited pro forma financial information are based on discussions with Gatos’ management, due diligence and information presented in Gatos’ filings with the SEC. Until the Transaction is completed, both companies are limited in their ability to share certain information. As of the date hereof, First Majestic is not aware of any additional reclassifications that would have a material impact on the unaudited pro forma financial information that are not reflected in the pro forma adjustments.

The reclassifications are summarized below:

Gatos Financial Statement Line

 

     Gatos
post-
Consolidation
     Reclassification      Gatos post-
Consolidation
reclassified
Amount
     First Majestic
Statement Line
 
(in thousands of United States dollars)                            

Unaudited Pro Forma Combined Statements of Operations and Comprehensive Income for the Nine months ended September 30, 2024

           

Revenue

   $ 260,255      $ —       $ 260,255        Revenue  

Cost of sales

     93,931        1,682        95,613        Cost of sales  

Royalties and duties

     1,682        (1,682      —         Cost of sales  

Exploration

     4,796        (4,796      —        
General and
administrative
 
 

General and administrative

     33,087        4,796        37,883       
General and
administrative
 
 

Amortization

     228,692       

(228,692

228,592


 

    

— 

228,692

 

 

    

Depletion,
depreciation and
amortization
 
 
 

Accretion expense

     (652      652        —         Finance cost  

Interest expense

     (851      (652      (1,503      Finance cost  

Interest income

     4,098        (553      3,545       
Investment and
other income
 
 

Other income (expense)

     (553      553        —        
Investment and
other income
 
 

Foreign exchange gain (loss)

     (36      —         (36     
Foreign exchange
gain (loss)
 
 

Income tax expense (recovery)

     31,887        —         31,887       
Current income tax
expense
 
 

Deferred income tax (recovery)

     (59,847      —         (59,847     
Deferred income tax
expense (recovery)
 
 
  

 

 

    

 

 

    

 

 

    

Net loss

   $ (71,967    $ —       $ (71,967   


Unaudited Pro Forma Combined Statements of Operations and Comprehensive Income for the year ended December 31, 2023

           

Revenue

   $ 268,671        $ —       $ 268,671        Revenue  

Cost of sales

     111,266        1,363        112,629        Cost of sales  

Royalties and duties

     1,363        (1,363      —         Cost of sales  

Exploration

     2,901        (2,901      —        
General and
administrative
 
 

General and administrative

     37,756        2,901        40,657       
General and
administrative
 
 

Amortization

     327,269        (327,269      —      
        327,269        327,269       

Depletion,
depreciation and
amortization
 
 
 

Accretion expense

     (1,145      1,145        —         Finance cost  

Legal settlement loss

     (1,500      —         (1,500     
Legal settlement
loss
 
 

Interest expense

     (1,339      (1,145      (2,484      Finance cost  

Interest income

     2,899        (749      2,150       
Investment and
other income
 
 

Other income (expense)

     (749      749        —        
Investment and
other income
 
 

Gain

     765,300        —         765,300        Gain  

Foreign exchange gain (loss)

     2,580        —         2,580       
Foreign exchange
gain (loss)
 
 

Income tax expense (recovery)

     8,261        —         8,261       
Current income tax
expense
 
 

Deferred income tax (recovery)

     (88,858      —         (88,858     
Deferred income tax
expense (recovery)
 
 
  

 

 

    

 

 

    

 

 

    

Net Income

   $ 634,759      $ —       $ 634,759     


Unaudited Pro Forma Combined Balance Sheets as of September 30, 2024

           

Assets

           

Current Assets

           

Cash and cash equivalents

   $ 150,616      $ —       $ 150,616       
Cash and cash
equivalents
 
 

Receivables

     13,646        —         13,646       
Trade and other
receivables
 
 

Inventories

     16,180        —         16,180        Inventories  

VAT receivables

     13,417        647        14,064       
Value added taxes
receivable
 
 

Income taxes receivable

     9,296        —         9,296       
Income taxes
receivable
 
 

Other current assets

     4,650        (1,205      3,445       
Other financial
assets
 
 
        558        558       
Prepaid expense
and other
 
 

Total Current Assets

     207,805        —         207,805     

Non-Current Assets

           

Mine development

     1,676,900        —         1,676,900        Mining interests  

Property, plant and equipment, net

     159,220        —         159,220       
Property, plant and
equipment
 
 

Deferred tax assets

     921        —         921        Deferred tax assets  

Other non-current assets

     348        —         348        Right-of-use assets  
  

 

 

    

 

 

    

 

 

    

Total Non-current Assets

     1,837,449        —         1,837,449     
  

 

 

    

 

 

    

 

 

    

Total Assets

   $ 2,045,254         $ 2,045,254     


Liabilities and Stockholder’ Equity

           

Current Liabilities

           

Accounts payable and other accrued liabilities

   $ 46,225       

(680

132


 

   $

 

45,545

132

 

 

    


Trade and other
payables

Current portion of
lease liabilities

 
 

 
 

           

VAT payable

     11,873        —         11,873       
Value added taxes
payable
 
 

Income taxes payable

     11,204        548        11,752        Income taxes payable  
  

 

 

    

 

 

    

 

 

    

Total Current Liabilities

     69,302        —         69,302     

Non-Current Liabilities

           

Lease liabilities

     342        —         342        Lease liabilities  

Asset retirement obligation

     12,245        —         12,245       
Asset retirement
obligation
 
 

Deferred tax liabilities

     355,915        —         355,915        Deferred tax liabilities  
  

 

 

    

 

 

    

 

 

    

Total Non-Current Liabilities

     368,502        —         368,502     

Stockholders’ Equity

           

Common stock

     117        556,050        556,167        Share capital  

Paid-in capital

     556,050        (556,050      —         Share capital  

Accumulated deficit

     600,983        —         600,983        Accumulated deficit  

Non-controlling interests

     450,300        —         450,300       
Non-controlling
interests
 
 
  

 

 

    

 

 

    

 

 

    

Total Stockholders’ Equity

     1,607,450        —         1,607,450     
  

 

 

    

 

 

    

 

 

    

Total Liabilities and Stockholders’ Equity

   $ 2,045,254      $ —       $ 2,045,254     
  

 

 

    

 

 

    

 

 

    


3) U. S. GAAP to IFRS Adjustments

a) Impairment of long-lived assets

Under both U.S. GAAP and IFRS, long-lived assets are tested for impairment when events or changes in circumstances indicate that the carrying amounts may be impaired. Under U.S. GAAP, the asset group is first tested for recoverability by determining if its carrying amount exceeds the expected future cash flows from the asset group on an undiscounted basis. If the asset group is determined to not be recoverable, an impairment expense is recorded for the excess of the asset group’s carrying amount over its fair value. Further, future reversal of a previously recognized impairment loss is prohibited.

Under IFRS, when an impairment indicator is determined to exist, an impairment expense is recorded for the excess of the cash generating unit carrying amount over the greater of its fair value less costs of disposal and its value in use. Impairment expense previously recorded is reversible in subsequent periods under certain conditions.

In the fourth quarter of 2021 Gatos recorded an impairment loss of $80,348 related to the carrying value of the investment in the LGJV. The unaudited pro forma financial information does not separately reflect any potential reversal of this historical impairment that would otherwise have been taken by Gatos given all assets and liabilities of LGJV have been recognized at fair value to reflect the effect of the Consolidation as explained in Note 2 and any such impairment reversal would have been included in the gain as reflected in Note 2.

b) Other considerations

First Majestic has performed a preliminary assessment of the potential U.S. GAAP to IFRS differences for exploration and evaluation expenditures, asset retirement obligations, impairment of receivables, and leases and have determined that the differences are not material. As such, these adjustments have not been reflected in the unaudited pro forma financial information.

4) Transaction Accounting Adjustments

The following adjustments have been made to the unaudited pro forma financial information to reflect certain preliminary purchase price accounting and other pro forma adjustments. Further review may identify additional adjustments that could have a material impact on the unaudited pro forma financial information of the combined company.


a) Transaction costs

The total estimated cash transaction costs are $24,103 incurred by First Majestic and Gatos which includes the estimated aggregate fee for BofA Securities, Inc. in connection with the merger. The transaction costs of $17,574 incurred by Gatos are expected to be included in the total cost of the acquisition. The transaction costs of $6,529 are costs to be incurred by First Majestic, which have been recognized as expense in the unaudited pro forma condensed combined statement of earnings for the year ended December 31, 2023 and as a reduction to retained earnings in the unaudited pro forma condensed combined statement of financial position as of September 30, 2024.

 

b)

Shareholder Equity

This adjustment reflects a net increase to share capital of $562,372 to reflect the issuance of First Majestic shares to effect the Transaction and the consideration attributable to First Majestic stock options issued to replace Gatos stock options, which is measured based on the fair value of Gatos shares acquired as described in Note 1 under “Purchase Consideration”, and to eliminated Gatos accumulated deficit of $600,983.

 

c)

Depletion expense

The adjustment is to align Gatos depletion accounting policy to First Majestic’s depletion accounting policy under IFRS. The adjustment will reduce the depletion expense by $30,395 and $17,298 for the year ended December 31, 2023 and the nine months ended September 30, 2024 respectively, because First Majestic’s depletion policy includes 50% of inferred resources in the depletion calculation.

 

d)

Share-based payments

In conjunction with the Transaction, First Majestic will issue First Majestic stock options to Gatos employees as replacements for their Gatos stock options. The incremental fair value of the replacement First Majestic stock options over the existing Gatos stock options will be expensed over the remaining vesting period. The incremental expense is estimated to be $5,137 and $3,853 for the year ended December 31, 2023 and the nine months ended September 30, 2024 respectively.


e)

Gain

The pro forma condensed combined statement of earnings (loss) for the year ended December 31, 2023 includes the gain arising from the Consolidation (Note 2), which would be consummated prior to the Transaction and will not be included in the First Majestic consolidated financial statements prepared under IFRS when the Transaction closes.

5) Unaudited Pro Forma Condensed Combined Financial Information per Share Data

The following table presents, for the periods presented in the unaudited pro forma financial information, the unaudited pro forma income per share and the unaudited pro forma weighted average shares outstanding of the combined entity.

The following table assumes the issuance of approximately 180 million shares of First Majestic in connection with the Transaction assuming the Transaction occurred on September 30, 2024 and based on the number of outstanding Gatos common stock and outstanding RSUs, PSUs, and DSUs as at September 30, 2024. As discussed herein, the actual number of shares of First Majestic issuable under the Transaction will be adjusted based on the number of Gatos common shares outstanding at the completion of the Transaction. The pro forma data in the table assumes that the Transaction occurred on January 1, 2023 for income statement purposes.

 

     Pro Forma Combined  
     For the year
ended
December 31,
2023
     For the nine
months ended
September 30,
2024
 

Income (loss) from operations per common share

     

Basic

     1.09        (0.27

Diluted

     1.03        (0.27

Shares used in calculating basic and diluted income (loss) from operations per common share

     

Basic

     462,450        473,560  

Diluted

     489,880        473,560  


     First Majestic Combined  
     For the year
ended
December 31,
2023
     For the nine
months ended
September 30,
2024
 

Weighted average shares outstanding

     

Actual weighted average number of shares outstanding for the period

     282,331        293,441  

Shares issued

     180,119        180,119  

Pro forma weighted average number of shares outstanding

     462,450        473,560  

Dilutive instruments

     27,430        —   

Pro forma weighted average diluted number of shares outstanding

     489,880        473,560  

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