First Majestic Silver Corp. AG has entered into a letter of intent (LOI) with Apollo Gold to divest its Mexico-based Jalisco Group of Properties. Per the deal, Apollo Gold can exercise the option at a payment of C$750,000 ($552,449) and issue shares to First Majestic in tranches over a three-year period.
The Jalisco Group of properties consists of six properties, totaling 52.4 sq. km, (32 miles), including 15 highly prospective claims. First Majestic owns 100% shares in 13 of these and holds a 45% stake in the remaining.
Apollo Gold has committed to exploration expenditure of at least C$1.25 million ($0.92 million) on the Jalisco gold-silver prospective claims. Even though the LOI is non-binding, Apollo Gold and First Majestic intend to enter into a definitive agreement.
First Majestic has inked a separate LOI with Silver Dollar Resources to sell its La Joya property in Mexico. The deal states that Silver Dollar can exercise its first option to acquire 80% interest in La Joya property. Silver Dollar will pay First Majestic $1.3 million in cash over a period of four years and issue shares equivalent to 19.9% of Silver Dollar’s then-outstanding common shares within a year. Silver Dollar will incur $1 million of exploration expenditures within the first five years, and grant First Majestic a net smelter returns royalty of 2%.
Silver Dollar will exercise its second option and purchase the remaining 20% interest of the La Joya property by providing notice to First Majestic within 30 days of earning the initial 80% interest and issuing it additional shares equal to 5% of Silver Dollar’s then-outstanding shares within five years. Silver Dollar and First Majestic will enter into a joint venture if the former does not issue any such notice.
During the March-end quarter, First Majestic produced consolidated silver equivalent ounces of 6,195,057, down 1% from the prior-year quarter. The company’s consolidated gold production was 32,202 ounces compared with the year-ago quarter’s 32,037 ounces. Consolidated silver production declined 6% year over year to 3,151,980 ounces.
The company’s operations at San Dimas, Santa Elena and La Encantada mines were temporarily suspended in April, in compliance with the Mexican Ministry of Health’s decree to mitigate the risks associated with COVID-19. However, these mines are resuming operations steadily. The coronavirus pandemic is likely to hurt First Majestic’s near-term production.Silver prices have started to gain momentum triggered by anticipations of an economic recovery in the second half of the year. This is anticipated to revive demand for silver given its wide industrial usages.
Price Performance
Shares of the company have gained 17.6% over the past year, compared to the industry’s growth of 23%.
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Zacks Rank & Stocks to Consider
First Majestic currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Basic Materials sector are AngloGold Ashanti Limited AU, Barrick Gold Corporation GOLD and Harmony Gold Mining Company Limited HMY, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
AngloGold has an estimated earnings growth rate of 109.9% for the current year. The company’s shares have surged 63.4% in the past year.
Barrick Gold has an expected earnings growth rate of 54.9% for the ongoing year. Its shares have appreciated 58.1% in the past year.
Harmony Gold has a projected earnings growth rate of 28.6% for fiscal 2020. The company’s shares have gained 60.2% in the past year.
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