First Majestic Silver: End of the tax dispute in Mexico?
First Majestic Silver is one of the most popular silver stocks in the German-speaking world. This is largely also due to its charismatic founder and current CEO, Keith Neumeyer. Yet a dark shadow from Mexico City has been hanging over the company for some time. In 2018, First Majestic Silver acquired the San Dimas mine as part of its full takeover of Primero Mining. However, as the legal successor, the company also inherited a tax dispute with the then Mexican government. Mexico’s new leadership wants to settle this and many other tax disputes. First Majestic Silver has now announced that it intends to suspend the arbitration proceedings initiated before an international tribunal back in 2021 until the end of the year and, if necessary, even longer. Apparently, an agreement in principle has been reached with Mexico. The proceedings will therefore not continue during the negotiations.
The market is discussing the amount agreed upon. It is likely not the USD 500 million once reported. Other sources suggest significantly less. The final agreement will reveal whether this is the case. An agreement would dispel the shadows hanging over the stock. President Mani Alkhafaji expects that more institutional investors would then also show interest, as he told investors in the spring. This tax dispute has deterred quite a few investors.
A reasonable agreement would certainly benefit the stock. It is currently testing its late-July low of around USD 16. The formation of a bottom and a higher silver price could provide fresh momentum.
Lahontan Gold: Convincing PEA for Santa Fe
Lahontan Gold is preparing to bring the historic Santa Fe gold mine in Nevada back into operation. The company intends to make the final investment decision on this as early as 2027. The company has only recently presented a new resource estimate. Even more important for investors, however, is the preliminary economic assessment (PEA).
According to this, the planned mine has an after-tax NPV of around USD 820 million. This is roughly eight times the company’s current market capitalisation. The IRR, or return on equity, stands at a solid 40.1% and, like the entire PEA, is based on a gold price of USD 3,600 per ounce. Based on the study, Lahontan Gold currently expects a mine life of 11 years, with the entire property covering around 28.3 km² and still offering plenty of scope for exploration and, therefore, production expansion.
Production is expected to average 91,000 ounces of gold equivalent per year, rising to 112,500 ounces of gold equivalent per year from year 4 onwards. The assessors expect cash costs of USD 1,909 per ounce and all-in sustaining costs (AISC) above USD 2,250 per ounce.
With these figures, the mine should generate net cash flow of USD 1.32 billion over its life. Construction costs are currently estimated at around USD 172 million and include a contingency of around 13%. Lahontan benefits from low construction costs thanks to Nevada’s strong mining infrastructure, the hotspot of US gold production.
With the current gold price significantly higher, actual figures could improve considerably during production. This PEA was based on the resource estimate published in August, which assumes a total resource of over 2.385 million ounces of gold equivalent.
Surprisingly, Lahontan Gold’s shares initially reacted negatively to the study’s publication. Apparently, short-term investors used the publication as an opportunity to exit. For long-term investors, this offers an opportunity to buy a few shares at a lower level.
SSR Mining: Acquisition in Nevada could prove a lucky break
Explorers often develop projects near large mines, particularly in the gold sector. This is often used as a marketing argument with investors, but these bets rarely pay off. For Roxmore, however, this strategy has now paid off. Behind the company is the experienced group that once sold Roxgold to Fortuna Mining.
SSR Mining is now acquiring Roxmore, offering a price of USD 464 million in cash. That is about CAD 6.75 per share, and a handsome profit for investors who bought in at the summer low. The 40% premium to the current share price is also considerable.
However, this acquisition could also pay off for SSR Mining. This is because it gives SSR the Converse project, located less than 10 km from SSR’s Marigold mine. The company now wants to build a mining district from this, as the industry often calls it. Converse currently has a resource of 2.2 million ounces of gold in the “indicated” category. An additional 3 million ounces are in the lower “inferred” category. SSR has so far been planning production of 231,000 ounces of gold at Marigold. In the long term, the mine life should be extended, and annual production could be increased.
Conclusion
SSR Mining is securing a strategically astute deal in Nevada, although the market apparently does not like the price. With the PEA, Lahontan Gold reaches the next milestone on its way to becoming a gold producer. At First Majestic, the hinted-at agreement in the tax dispute with Mexico could prove to be a breakthrough for the stock.
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