First Majestic reports Q1 silver production of 3.5M ounces

First Majestic reported Q1 2026 production of 3.5M oz silver and 34,341 oz gold (silver down from 3.7M oz YoY and representing 26% of the 2026 guidance midpoint); La Encantada silver rose 48% YoY. The company beat expectations in Q4 FY2025 (EPS $0.30 vs $0.18; revenue $463.9M vs $403.7M) and reported FY2025 revenue of $1.26B with net earnings $164.9M; analysts forecast FY2026 EPS of $1.23. Management announced a $75M restart of Jerritt Canyon targeting H2 2027 with ~42,000m planned drilling, while the stock is up ~253% Y/Y and received an upgrade (BMO) and a $30 price target (H.C. Wainwright).

Analysis

Management’s deliberate lowering of cut‑off grades to feed more tonnage is a tactical play that buys near‑term metal exposure while sacrificing grade quality; this increases operational leverage to metal prices and raises the probability of a sharp operational swing if silver/gold reverse. Expect higher throughput to stress inputs (power, consumables, tolling capacity) and potentially widen realized treatment charges across concentrates if peers follow the same playbook. The restart capex program and accelerated drilling create asymmetric optionality — if exploration converts to resources, equity re-rating is possible, but the financing and execution burden amplifies downside if base metal and precious metal realizations compress.

Near‑term catalysts are concentrated: the upcoming Q1 financial release and the dividend decision are likely to be binary for shares within days–weeks, while the Jerritt Canyon restart and pre‑feasibility milestones are multi‑quarter to multi‑year drivers. Tail risks cluster around a metal price pullback (prompting a re‑tightening of cut‑off grades), concentrate logistics bottlenecks, and execution slippage on restart timelines — any combination can quickly invert current sentiment. From a market structure angle, the large share run already prices in continued commodity resilience; idiosyncratic operational setbacks will therefore have amplified equity downside versus the peer basket.

Key Decisions for Investors

• AG — Construct a funded collar today: buy the shares, buy a 12‑month put ~25% OTM and sell a 6‑month call ~30% OTM to finance ~60–80% of the put. R/R: limits downside to roughly -25% (plus cost) while capping upside at ~+30% over next 6–12 months; use position sizing = 1–2% of book.
• AG vs SIL (or GDX) pair — Short AG outright and go long SIL/GDX in equal dollars for 3–6 months to strip idiosyncratic execution risk and retain metal exposure. R/R: expects 10–20% relative downside for AG on mean reversion; risk is a metal rally that lifts miners broadly (hedge by reducing short size to 50% of long).
• SLV (or SI futures) — Buy a 6‑month call spread: buy a nearer‑OTM call (20–30% OTM) and sell a further‑OTM call (40–60% OTM) to keep cost low. R/R: low cost, asymmetric upside to a metal rebound that would re‑rate higher‑beta miners without tying capital to AG’s execution risk.
• AG tactical accumulation rule — If AG declines >30% on the next negative operational/metal print, scale into a 12–24 month position (buy up to 50% of target allocation) to capture restart optionality at materially reduced valuation; stop out if adverse metal trend persists beyond 6 months.