First Majestic (AG) Q2 2026 earnings review
Historic Metal Prices Mask Stagnant Production and Rising Costs
First Majestic delivered massive year-over-year growth, with Net Income jumping 108% to $109.4M and Free Cash Flow surging to $194.6M. However, this financial windfall was driven almost entirely by skyrocketing commodity prices—realized silver jumped 90% to $63.98/oz and gold climbed 40% to $4,347/oz. Beneath the surface, operational performance was sluggish: silver production edged up just 3%, and All-In Sustaining Costs (AISC) inflated by 22% to $25.68/oz. While the $1.25B treasury provides an incredible safety net, the company is highly vulnerable to margin compression if metal prices revert to historical means.
🐂 Bull Case
Operating cash flow hit $248.3M (+116% YoY), fortifying the treasury to a record $1.25B. This provides enormous optionality for M&A, aggressive exploration, or capital returns.
Management withheld roughly 1 million ounces of silver and 4.7K ounces of gold (fair value $78M) from Q2 sales. If metal prices continue their upward trajectory, this strategic stockpiling will amplify future quarter earnings.
🐻 Bear Case
Despite the perfect macro environment for miners, production only grew 3% for silver and 2% for gold. The company is extracting more cash from the same ounces, not growing its underlying output.
AISC accelerated 22% YoY to $25.68/oz. Driven by a stronger Mexican peso, higher royalties, and localized disruptions, these sticky costs will crush margins if the $63/oz silver price bubble pops.
⚖️ Verdict: ⚪
Neutral. The balance sheet is a fortress and free cash flow is exceptional, but the complete reliance on macro price leverage rather than operational volume growth makes this a high-beta bet on sustained $60+ silver.
Key Themes
Unprecedented Realized Metal Prices
Accelerating. The entire narrative of this quarter is written by the commodity tape. Realized silver prices hit an astronomical $63.98/oz (+90% YoY), while gold realized $4,347/oz (+40% YoY). This allowed the company to expand its AISC margin by $26.67 per ounce, turning flat production into record-breaking cash flow.
AISC Inflation Driven by FX and Royalties
Decelerating margin quality. AISC climbed to $25.68/oz (up 22% YoY). A significant portion of this is macro-driven: the Mexican peso was 11% stronger YoY against the USD, and higher metal prices triggered higher worker participation costs, royalties, and production taxes. Even when adjusting for the altered AgEq conversion ratio (75:1 vs 98:1), AISC would still have been up 8%.
Operational Hiccups at Key Sites
Production costs were elevated by two specific disruptions: a rockfall event on the main ramp at the Los Gatos Silver Mine and labour disruptions at San Dimas. While management claims both are now resolved, these incidents highlight the fragility of the supply chain when operating at near-peak capacity.
Los Gatos Remains the Crown Jewel
Stable. The integration of the Los Gatos joint venture continues to pay off. It is by far the lowest-cost asset in the portfolio, boasting an AISC of $16.82/oz (compared to Santa Elena's $27.36). It carried the quarter's volume, producing 1.28M oz of silver and serving as the primary anchor for profitability.
Strategic Inventory Build
The company actively withheld inventory from the market, ending the quarter with 1,007,450 silver ounces and 4,730 gold ounces in finished goods (fair value: $78.0M). While this depressed reported Q2 revenue slightly, it functions as a coiled spring if management intends to liquidate these physical assets into even higher spot prices in Q3.
First Mint - Bullion Direct-to-Consumer Model
Stable. The company continues to leverage its in-house minting facility, 'First Mint', to sell bullion directly to the public. While small relative to total wholesale output (management previously noted it processed ~6% of production), it captures retail premiums and provides a unique downstream hedge in the precious metals ecosystem.
Lagging Assets Dragging the Average
Santa Elena and La Encantada are severely lagging in cost efficiency. Santa Elena's AISC hit $27.36/oz, and San Dimas reported a shockingly high Total Production Cost per Tonne of $180.74 (compared to $106.05 at Los Gatos). If prices normalize, these assets will quickly become cash-flow negative.
Other KPIs
Accelerating. Cash and equivalents swelled by 34% since the end of 2025. This massive liquidity pool includes $159.4M in restricted cash (mostly tied to legacy SAT tax disputes) but leaves roughly $1.1B in unrestricted firepower. This essentially de-risks the balance sheet entirely against cyclical downturns.
Stable. CapEx grew a modest 16% YoY. The disciplined capital allocation ($26.3M underground development, $14.5M exploration, $20.0M PP&E) contrasts sharply with the 116% surge in operating cash flow, indicating management is not letting record cash flows spur reckless spending.
Accelerating. Up 105% YoY from $125.3M in Q2 2025. Stripping out the noise of mark-to-market concentrate adjustments and historic tax dispute settlements ($10.1M related to a forward silver purchase agreement), core cash profitability is expanding flawlessly alongside commodity prices.
Guidance
The Board declared a Q2 dividend of $0.0152 per share (up 217% YoY). Moving forward, the policy explicitly targets a payout equal to 2% of the company's net quarterly revenues (adjusted for the 70% Los Gatos ownership). This creates a direct, floating yield tied to metal prices.
The company repurchased 1.2M shares in Q2 for $22.7M (average CAD$26.18/share). With a current authorization expiring in October 2026 allowing for up to 24.5M shares, management has significant room to aggressively buy back stock using its $1.25B treasury.
Key Questions
Inventory Liquidation Strategy
Finished goods inventory ballooned to over 1 million ounces of silver. What is the specific price trigger or strategic rationale for holding this back, and should we expect a mass liquidation in Q3?
Cost Stickiness
AISC surged 22%, heavily influenced by the strong Mexican peso and worker participation costs linked to high metal prices. If silver corrects back to $35/oz, how quickly will these variable costs adjust downward, or are these higher baselines now locked in?
San Dimas Operational Efficiency
San Dimas recorded a total production cost of $180.74 per tonne, the highest in the portfolio by a wide margin. Beyond the recent labour disruption, what structural changes are needed to bring this asset's unit economics in line with Los Gatos?
Jerritt Canyon Restart Timeline
With gold holding firmly above $4,000/oz in your realized prices, what are the exact remaining hurdles preventing the immediate restart of the suspended Jerritt Canyon operation?