On Thursday, September 5, Canadian precious metals producer First Majestic Silver (TSX:FR, NYSE:AG) announced plans to acquire Canadian explorer and developer Gatos Silver (TSX:GATO, NYSE:GATO) in a stock-based transaction valued at approximately USD 970 million (CAD 1.31 billion). Once merged, the new company’s annual production is expected to increase to 30 million to 32 million silver equivalent ounces.
Gatos holds a 70% stake in the Los Gatos joint venture and operates the Cerro Los Gatos underground silver mine in Chihuahua, Mexico. First Majestic owns its gold and silver mines in San Dimas and Santa Elena, Mexico. If the acquisition is approved, the company will integrate Gatos’ assets and silver deposits, expanding its footprint in Mexico.
Under the agreement terms, First Majestic will acquire all of Gatos’ outstanding shares, with Gatos shareholders receiving 2.55 common shares of First Majestic for each share of Gatos they hold. Based on the closing price of First Majestic common stock on the NYSE on Wednesday, September 4, this equates to a total consideration of $13.49 per Gatos share. Additionally, the transaction offers a 16% premium based on the closing prices and 20-day volume-weighted average prices of the two companies’ shares. Once completed, existing Gatos shareholders will own approximately 38% of First Majestic’s fully diluted shares.
Keith Neumeyer, President and CEO of First Majestic, stated that the company has been operating in Mexico for over 20 years. Acquiring Gatos Silver, particularly the 70% interest in Cerro Los Gatos, will strengthen the company’s operational platform, integrating three top-tier silver mining districts in Mexico, thus enhancing efficiency and expanding exploration opportunities. This will position the company as a diversified, mid-sized primary silver producer.
Gatos CEO Dale Andres also expressed optimism about the deal, noting that First Majestic is a well-established silver producer. He stated that the transaction would benefit their shareholders through First Majestic’s capital market influence, liquidity, and enhanced balance sheet while achieving operational and technical synergies.
The transaction is expected to be completed in early 2025, pending approval from the shareholders of both companies and regulatory clearance from both the New York and Toronto stock exchanges.
