I would now like to turn the conference over to Mr. Keith Neumeyer, Chief Executive Officer of First Majestic Silver. Keith, please go ahead.
Well, thank you, and welcome everyone to our Q1 highlights conference call with investors and shareholders. Today obviously myself is present. I'm in Europe right now. Mani Alkhafaji, President and Chief Corporate Development Officer, is in Vancouver. David Soares, our Chief Financial Officer, is also in Vancouver. David Howe, Chief Operating Officer, who just was newly appointed on March or May 4th, which we'll talk about a little bit further in the next couple of slides. David comes with us after, you know, quite a long search for a replacement to Steve.
Steve told me last summer that he would like to retire, and we put an effort in place to find his replacement, and we were successful in getting Dave Howe, who's, you know, a well-known mining executive. We're happy to have Dave on board. Steve will be effectively working till June 30th, assisting Dave in anything that Dave might request of Steve over the next month or so. We also have Samir Patel, General Counsel and Corporate Secretary, present in Vancouver, and also Darrell Rae and Joel Faltinsky, sorry about that, Joel, from Investor Relations, also present today. Before I go any further, I'll need to pass the call over to Samir. Samir, for the disclaimer.
Thanks, Keith. Before we begin today's call, I would like to remind you that we will be referring to certain non-IFRS measures and making certain statements regarding First Majestic Silver and its operations that constitute forward-looking statements in accordance with applicable Canadian and U.S. securities laws. All statements that are not historical facts, such as statements regarding future estimates and plans or expectations of future performance, constitute forward-looking statements that reflect the company's current views with respect for future events. These statements are necessarily based upon a number of assumptions and estimates that, while considered reasonable by the company, are inherently subject to significant business, economic, competitive, political, and social uncertainties and contingencies.
We encourage you to refer to the cautionary language included in our news release that was disseminated early this morning and the disclosure on non-IFRS measures in our most recently filed management's discussion and analysis, as well as the risk factors set out in our most recently filed annual information form. As a reminder, these documents, along with all of our continuous disclosure documents, are available on SEDAR+ and on EDGAR. Investors are cautioned against attributing undue certainty or reliance on any forward-looking statements made during today's call. The company does not intend or assume any obligation to update these forward-looking statements or information other than as required by law. With that, I will turn the call back to Keith.
Okay. Thanks, Samir. Just a couple of things on our management changes. Steve Holmes has been with the company for six years, he's been extremely instrumental in, you know, positioning the company where it is today. Much of the improvements that the business has experienced over the last few years has been a result of Steve's efforts. We're sad to see him go, but at the same time, it's, you know, time for him to retire and we wish him best in his future travel experiences with his wife and family.
Obviously, we'll be staying in touch with Steve, but Dave Howe is now the new Chief Operating Officer, and he brings a wealth of experience in the industry and Latin America, held a number of key executive roles, and we're really excited for him to help lead the First Majestic team to the next phase. Further description is available in today's news release if you wish to read a little bit about his history. We're also quite pleased to announce a hiring that took place on April 20th. We were able to find a great leader for the Jerritt Canyon restart. We've brought on Alex Thompson.
Alex is a seasoned and strategic mining executive with experience in building and operating mines all over the world and will be key part of the restart plan for Jerritt Canyon, which we'll be excited about talking further about as developments continue. Going to slide three of the presentation, which I'm assuming some of you online have access to. You're just going back in time. If you go back over the last 20 years, you know, Q1 is generally a kind of a soft quarter. You know, you get everyone coming back from holidays and then you gotta re-mobilize all the contractors. Usually you could lose up to two or three weeks in Q1. It's not that unusual. We've experienced that many times over the life of the business. This Q1 was exceptionally good.
We didn't experience that same kinda dip. You know, we ended up, you know, producing 3.5 million ounces of silver, which shows 26% of 2026 guidance, midpoint guidance. That's pretty good being ahead of guidance. Gold production was at 28% of midpoint guidance. Both silver and gold are above our current guidance, which is our, at least midpoint guidance, which is fantastic to start the year off on such a positive note. The average realized silver price is $86.35 compared to $33.10 last Q1 in 2025. Pretty impressive there. Revenues were record revenues of $477 million, up 95% compared to a year ago. We did hold back some silver and gold as well.
This was not included in revenue. We did hold back 676,000 ounces of silver, also 2,700 ounces of gold held in inventory at the end of the quarter. The value of that inventory is $63 million. If we'd sold it, that obviously would have improved our revenue and also improved our profitability. We elected to hold on to it for higher prices and, you know, we're expecting that's going to be a good strategy for us. You know, we've, we really got our eyes on margins and, you know, as the price of silver goes up, costs also go up, and we'll address that in the next couple of slides.
One thing I think the analysts or the investors should really pay attention to is actually the expanding margins, which is pretty impressive. I've got a couple of more comments coming up on that topic. You know, we've really been focused on efficiency and keeping our costs in check, and it's really paying off. We've had operating cash flows in Q1 of $311 million, you know, $0.63 a share, and our silver purity is 66%. You know, that compares to 60% in Q4 of 2025. Our dividend is our largest dividend ever at $0.0171 for shareholders of record on May 15th. The dividend is basically 4 x the size of last year's dividend.
You know, with revenue doubling and us changing our policy, increasing our dividend from 1% - 2%, effective January 1st, 2026, you know, has made a big impact. Shareholders will be getting, you know, the highest dividend that they've ever received in the company's history. That'll be fun to see all those checks arriving in people's mailboxes. Going on to slide four. The cash costs and all-in sustaining costs per ounce are aligned with plans. There's really no big surprises there. Per ounce costs, you know, increased when compared to Q1 as it shows on this slide there.
The main drivers of the increase, as we've mentioned to, you know, the analysts before, you know, it is we have changed our ratios, which has a big impact, which I'll talk about shortly. Our production costs did go up a little bit, mostly due to higher throughput, you know, because we have reduced the cut off grades, you know, due to price. You know, we could mine a lot lower grade ore and still get the same ounces. It does affect your cost. Your costs do go up as a result of that method of mining. It does improve life of mine as well at the same time. It has a big benefit.
The revenues that we're getting, even though the grades are slightly lower, far outpaces the increase in costs, which is really nice to see. Other things as I said, you know, the price ratio, that had a $3 impact. You know, if we use the same price ratio as we did in 2025 at 90 to one, our all-in sustaining costs would be basically $3 less than what we're showing in Q1 of 2026. We did fix the ratio at 75 to one due to the volatility of silver and gold, and that 75 to one ratio will be held throughout the quarter or, pardon me, throughout the year. Profit sharing, you know, is also up, and I've got another comment later on that.
Profit sharing, you know, is close to $2 an ounce. Smelting and royalties obviously go up as with silver prices going up. You know, everyone's, you know, obviously making a little bit more money, which is great to see. Important to notice, you know, as I said about margins, you know, the margins have increased almost 4x . Our margins a year ago in Q1 were $13 an ounce. Our margins in Q1 of 2026 is $52 an ounce. Quite a game change. You know, any increase in costs that we're experiencing is easily taken with the increase in margins.
Our cost per ton, you know, $170, which if you look at that chart on that slide four, you'll see that it's, you know, the lowest for a while. You know, that shows you quite clearly that we're having a true impact on keeping our costs in line with our expectations. On a bit of a side note, we've got calls from analysts and others, you know, about our exposure to diesel with the happenings that are going on in the Middle East right now. Most of you probably know that we converted three of our mines over to liquid natural gas over the last few years, and one of our mines is on the grid.
Our total exposure to diesel in our cost is only 5%. We rely on diesel very little. Most of the energy is created by renewable sources. Going on to slide five. We produced $311 million in operating cash flow from the four operating mines. Each of them a notable year-over-year improvements in profitability. Notably, La Encantada, where it had a bang-up quarter. La Encantada actually profited $30 million in Q1. I don't actually remember the last time we made that much money, but it's obviously going quite well there. It's nice to see that mine finally hitting its stride after, you know, some, you know, difficulty that it had over the last couple of years.
Corporate-wide, this translates into $224 million in free cash flow, even accounting for a very large tax payment that was made in January as a result of our 2025 income taxes that, you know, just simply due to the profitability of the business, the Mexican government's paid $95 million, you know, which obviously came out of our cash flow. The chart shows, you know, the increase in cash flow being generated. You know, operating discipline, of course, are over our four mines is key. Cost efficiencies and obviously the increase in silver prices, you know, having a huge impact on the business. We're very flexible for future growth, you know, the size of our treasury, you know, over $1.1 billion, obviously pretty impressive.
You know, our development and exploration programs are very aggressive and on track, I've got a couple more comments later on the exploration programs. Operational expansions at both Santa Elena and Los Gatos is coming along quite nicely. We'll address that as well going forward. We just keep pushing, you know, other permits and the development of the Santa Elena new ore bodies, which we'll discuss, you know, as these topics become more relevant, and we'll be discussing those via news releases in the coming months as those developments occur. Going to slide six. Okay. We continually have exploration success at San Dimas and Santa Elena, Los Gatos. You know, we're expanding the Santa Elena mill. We're expanding the Los Gatos mine development.
At Los Gatos our work is to mine 4,000 tons a day. We have brought in a contractor to assist in getting up to those levels. We're actually pretty close right now. The mill itself can handle that. It's not a bottleneck at the mill. It's always been a bottleneck at the mine, and that's what we're resolving by bringing on some assistance from a third-party contractor, which seems to be working quite well. We're making good progress at Santa Elena, getting the mill expanded. As I think most of you know, we're expanding that mill to 3,500 tons a day from 3,200 tons a day, and we should reach that objective by H2 2026. Exploration is just going wonderfully.
Navidad and Santo Niño discoveries are, you know, obviously really paying off. We've put out some numbers on those two ore bodies already, but we continually advance studies and then work on those two ore bodies 'cause we wanna get them into the mill as soon as we can. That work is underway. As we get more information and more timelines associated with getting Santo Niño and Navidad up and running, we'll be putting more additional news out on timelines and how that's gonna affect future production at Santa Elena. Always, you know, always looking for, you know, enhancing adjustments, you know, productivity, that's always a focus, not just at Santa Elena, but also in all the mines.
La Encantada, I think most of you likely know as well, we decided about a year ago to go to self-hauling. We were having challenges with the contractors that, you know, were assisting in getting ore to the mill. After the, you know, couple of contractors, we decided just to do it ourselves. We bought a dozen trucks, which took almost a year to get delivered. They're all now on site, they're all now operational. I would expect you're gonna start to see costs come down a little bit as a result of that. Also, we're already noticing the increased throughput at the mill. The mill can handle it. There's no problem with that. This mill ran at 5,000 tons a day back, you know, years ago.
It's just really the mine and, we're resolving that by having this truck fleet and so on. It's in early days, but it's looking pretty good. Going to Jerritt Canyon, you know, we're obviously very excited about the announcement of hiring Alex Thompson as our Managing Director. We really needed a leader there to really get a hold of this thing. You know, Alex has 20 years experience primarily at BHP, but he's really taken control of this operation, and he's very well-liked by the team down on site. We'll be putting obviously a bunch of new people in place, you know, to just, you know, get this operation up and running.
We're investing $75 million in 2026 and filling in the talent base as I've mentioned. We are preparing a feasibility study or pre-feasibility study, I should say. Hopefully that'll be out in early 2027. We're prepping the underground. We've got people on site right now underground, prepping the area, planning on development. The plant upgrading is not quite started yet. We're just in the order of or process of ordering a bunch of different equipment. A bunch of POs have gone out, and several more POs will be going out over the next two weeks, as, you know, items become obviously required or we identify items that we need. Some of the items are longer lead than others.
So we're trying to get all those items necessary for the underground and the plant, ordered and in the system and, you know, get these pieces of equipment on site as soon as possible. We'll share updates as we, you know, progress over the next year. We are still targeting for production to commence in H2 2027 and so far we're on track. I did wanna bring something up, you know, because we had a false news release that went out in Mexico. It was regarding a collapse at Los Gatos. You know, I looked at the photograph myself, and I read the article myself and, you know, We actually don't even know where that mine is. It was definitely not a commercial operation.
It was some little hole in the side of a mountain that was probably just, you know, artisanal mining or maybe owned by a Mexican mining company or something. I have no idea. But definitely was not a modern operation but we did have a small collapse and there was a 10-meter section of the ramp that collapsed and we were down 2.5 days and, you know, back on track. It's very normal. Was not material in any way at all. That's why we didn't say anything about it. We didn't news release it 'cause it was just, you know, things happen in mining and, you know, being down for two days is, you know, nothing.
We decided not to comment on it, but I know that a number of analysts did phone the company and asked about it and asked about that story. I just wanted to address it on this call just so everyone's clear that everything's hunky dory and there's no issues that remain. Let's go into slide seven. The solid balance sheet and cash flows, we are investing in our world-class district scale operations. As you know, these are big chunky land packages. We're increasing the mining rates at Los Gatos, you know, to, you know, get that operation up to 4,000 tons a day, as we've said already. You know, the plan we wanna get the Santa Elena obviously expansion completed as well. A lot of focus is going on those two operations.
You know, we have a very, very large exploration program. It's 266,000 meters of exploration over the sites this year, That does not include an additional 42,000 meters at Jerritt Canyon, which we've just recently announced with the opening or reopening news release on Jerritt Canyon. You know, we're drilling over 300,000 meters of drilling this year, which is, you know, quite a, obviously a very large program. Pretty exciting. We've updated our resources and reserves in March. I'm not sure if you've seen the AIF that went out in March, but it's all there for people that wanna go look at it. It's on SEDAR, and it's also on our website.
The Santa Elena, you know, we had a 90 million ounce increase, which is pretty amazing. That was basically due to Santo Niño and Navidad discoveries, and we continue to upgrade those assets, and I think that number is actually gonna improve over the next year. Jerritt Canyon, you know, with the including some of the underground, we kinda redeveloped that. You know, based on gold prices today, all those open pits that were, you know, being mined back in the 1980s and 1990s are pretty well now economic. We're gonna be working on a plan to include the underground and open pit in the same mine plan, you know, obviously blending and so on.
We're now at 7.8 million ounces of gold at Jerritt Canyon, which is, you know, pretty impressive compared to, you know, our prior disclosure a couple years ago. Restart's still scheduled, as I said, for H2. I guess that's really about it. You know, continually strengthening our cash flow, balance sheet, you know, look for, you know, continued increase in our treasury. Obviously we're quite leveraged to the price of silver, as you can see in our share volatility over the last couple of days, but, you know, that's something that we've gotten used to over time. Anyways, I am done with my presentation. We will now go to questions.
Thank you, Keith. We will now proceed to the Q&A session. Once again, to join the question queue, you may press star then one on your telephone keypad. You will hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then two. If you're participating today through the webcast, you can submit a question in writing by using the form in the lower section of the webcast frame on your screen. The first question comes from Heiko Ihle with H.C. Wainwright. Please go ahead.
Hi there. Thanks for taking my questions, and congratulations to Alex and Dave, who I know quite well from his time back at Endeavour . Hey, Keith Neumeyer, you focused quite a bit on the margins earlier on this call, and obviously it's quite impressive what has been happening and what's been accomplished the last few quarters. I assume the answer is no, but do you think there comes a point when and if commodity prices keep rising or even staying at these levels where people are, you know, more so trying to get their piece, be it, you know, labor, governments, other stakeholders? Have there been any conversations? What have you seen? I mean, you're much closer to the pulse than I am. Maybe just a bit of color.
Well, on the government, you can never predict, right? There's no rumors or there's no discussions that the government is gonna be changing anything. You know, you have to remember, at these prices and the profitability of the Mexican miners, the government's, you know, getting a windfall.
Right.
You know, their tax income from mining has accelerated quite dramatically. I'm pretty sure the government's pretty happy, so I'm not sure why they'd wanna kill the, you know, goose or whatever. The unions, again, the same thing. You know, these union members, their bonuses are tied to the silver price. So, you know, we've just gone through a couple of negotiations with the national union, and they're very quiet, you know, quite happy, obviously. Negotiations went very smoothly. Yeah, there's really no issues there. They are getting paid more, so, you know, our all-in sustaining costs has increased as a result of, you know, higher taxes and higher bonuses. That, you know, can be expected.
You know, other things, you know, if we go back to the last bull market, 2011, you know, when silver hit 50%, you know, we saw, you know, the Sandviks of the world, you know, increase prices by 15%-25%. We've not seen that. We're just in the process of signing this agreement with Sandvik, and, you know, it's looking like we're gonna get pretty reasonable pricing on this new purchase that we're being put in. We haven't seen big increases in cyanide or ammonia. You know, we don't rely on diesel that much. No, we haven't really seen the, you know, the inflation that maybe some would be expecting.
All right. Fair enough. Moving on to Jerritt Canyon. I mean, obviously, I'm excited to see the site reenter production. I don't know we got Alex on board now, but on a grander scale, I mean, I went through your April 2nd release again this morning, and you mentioned the $75 million to spend this year. 7.5 of that is workforce and staffing. When do you think hiring for the site should really start ramping up? I assume this is, you know, like second half or even fourth quarter kinda thing. Building on all of that, once Jerritt is in full operations, I don't think you'll have any issues getting workers to site, given the proximity to town. What are you seeing, you know, with the labor pool?
'Cause I mean you're probably gonna take up a decent amount of the workforce in the local area, no?
Well, I think all of it will come from the local local area. You know, maybe some of the turmoil at Newmont right now might assist, you know, hopefully. We don't know for a fact. You know, we have a list of positions that need to be filled. You know, it's very extensive and detailed and, you know, I think, I don't have the exact number in front of me, but, you know, we've hired a handful of people just in the last couple weeks and, you know, for key management positions, and we're looking to hire, you know, several more key people over the next week or two.
Then at that point, we'll start going down into the business deeper and, you know, targeting, you know, more labor intensive type individuals and, you know, we, you know, should be well manned, you know, by fall. Then, you know, happy to, you know, look at adding the underground workforce and so on in early part of, you know, 2027. Don't forget, Jerritt is only 45 minutes away from town, Elko. It's the closest mine to Elko. If you're, you know, rather than having to drive to one of the other neighboring mines, that will take you 1.5 hours both ways, you know, you're on the road for three hours a day.
You know, working at Jerritt, you're only on the road for 1 .5 hours on a day. It's a big difference. It's a well-known site, and I think the community at Elko is pretty excited about it. You know, we're getting approached by people regularly, you know, to come on as employees.
Yeah, and as someone who's been on the ground at Jerritt Canyon, I mean, the site is just gargantuan. It's huge. Anyways, on that note, I'll get back into you. Thank you very much.
Okay. Thanks, Heiko.
Once again, if you have a question, please press star then one. The next question comes from Eric Winmill with Scotiabank. Please go ahead.
Hi Keith and team. Thanks for taking my question. Maybe just continuing on Jerritt Canyon. In addition to the hiring plans, any other critical path items or milestones beyond the PFS we should be looking for throughout this year and the next year?
Well, the two most critical things is the oxygen plant and the underground fleet. We're working right now on defining all of that and, you know, defining costs and defining timelines. It's still a little bit early, but, you know, we will be putting an order in for some of the underground fleet in the next couple weeks, which, you know, have, you know, 10 - 12 month lead times. We're just working with a group on the oxygen plant right now, and I can't really give you a whole bunch of details because it's just kind of a moving, you know, moving thing. Once we know more, we'll be putting more information out to the market.
Okay. Thank you. Appreciate that. Maybe just some of the other expansions you're working on, Los Gatos or Santa Elena, any critical items there we should be keeping an eye on?
No, no, just time and money. There's nothing critical.
Okay. Appreciate that. Maybe just one more from me, if you don't mind. In terms of M&A, you know, what are you guiding to the market? Are you happy with the size of the portfolio or any changes you wanna make or assets you'd like to look to add down the road?
Well, we're always looking for ways to grow. You know, I can't talk too much about it, but, yeah, look, our group, you know, continually scours the planet and looking for good silver projects, and they're, you know, they're kind of a rare animal, and they're hard to find. We continue to look.
Okay, appreciate that. I'll hop back in the queue, but thanks very much for the detail. Cheers.
Yeah, you too. Thanks.
I will now pass the floor over to Mr. Darrell Rae, investor relations at First Majestic Silver, to take us through questions submitted through the webcast.
Okay, thanks, Nashia. Yeah, just a few here. One is just getting a general First Mint update, I'd say. There are a few questions in here. What percentage of your total revenue came from First Mint business? Just talk about the first quarter.
Yeah, I'm gonna pass this question over to Mani.
Yeah, thanks, Keith. Yeah, the Mint continues to operate quite nicely. Q1 was another record for us. You know, it is very, very retail driven, obviously when we see the metal prices are running up, the orders are coming in nicely. We had a nice uptick throughout the quarter, which was great to see. The operationally is going quite well. You know, we worked staffed quite nicely, we do have plans for further expansion. We'll be pulling the trigger on this in due course. All in all, it's going, you know, quite nicely and building on the momentum that we had from last year.
Okay. The last one we have from the queue is just picking up on, Keith, your comment and elaborating on the strategy about the lower cut-off grade and that seemingly increasing mine life. Just a little clarification question.
Yeah, I, you know, I would maybe use 20%. I should talk to our QP before I throw that number out, but that's kind of my guess is, yeah, mine life does increase as a result of the lower cut-off grade. You know, we're an underground, and you're mining, you know, three, four meters of rock, and, you know, you're leaving behind, you know, the low-grade material on the walls of that tunnel, because it's deemed uneconomic, so you just leave it behind, and that's just common mining practice.
Today, you know, we can widen those mining stopes, you know, by a couple of meters and still, you know, pull all this rock out and still make money even though the grade is lower. Yes, it does. You're mining slower or you're advancing slower, and you're mining wider. That has an impact on your life of mine, and it's obviously a positive impact.
That's it from the webcast, Nashia.
This concludes the question-and-answer session. I would like to turn the conference back over to Keith for any closing remarks. Please go ahead.
You know, I think I covered everything. You know, obviously impressive quarter. You know, Q2 is looking pretty darn good as well. We hope to, you know, have another great quarter back-to-back , but we'll have, you know, much more things to talk about as we advance through this year. It's an exciting year with a large capital expenditure, you know, going into exploration, development, and mill and mine expansion. You know, we're pretty excited about what we're seeing in the company and also with metal prices, you know, the way they are today, assuming they stay in these levels. You know, it's just gonna be a bang-up record year again. I just wanna, Mani, is there anything that you would like to add before we go?
Nope. Just be on the lookout for more updates throughout the year, but a lot of exciting stuff.
Okay. Well, very good. Well, thanks everyone for joining us.
This brings to a close today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.