First Majestic Silver Corp. (AG)

[goforthebet]

First Majestic Silver: More Upside Than You Think

Sep. 6, 2016 6:01 AM ET| About: First Majestic Silver Corp. (AG)

http://seekingalpha.com/article/4004273-first-majestic-silver-upside-think?auth_param=bvkmd:1bst4vp:f44d4f5f4f93b0dfdafd439594f5e4a5&uprof=51

Summary

Only lower silver prices can push it lower.

More upside potential than most people realize.

Economic conditions that make it attractive.

Strong management team, with a solid record of execution.

Profitable with low cash costs, and growing production.

Last week someone posted an article on Seeking Alpha (First Majestic Silver Corp.: Valuation Up In The Clouds, But No Silver Lining) that claimed First Majestic Silver (NYSE:AG) is outrageously overvalued. They suggested it was going to crash 70-80%. I was very familiar with First Majestic and was a bit upset at the analyst's approach. They implied that the only reason First Majestic was valued with at $12 share price was because of relentless self promotion. They even made several references to the CEO's past as a stock promoter.

While promotion has always been a part of First Majestic's marketing strategy (and is common in the mining industry), that's not why the stock exploded in value in 2016. First Majestic is in fact one of the elite silver producers, with low cash costs (around $8 per oz.) and a pristine balance sheet with zero debt. They will produce about 12 million ounces of silver in 2016 with all-in costs around $15 per oz (free cash flow), adding to their $60 million cash balance. Thus, this is a very solid company, led by one of the best CEO's in the business (Keith Neumeyer).

I've followed this company since around 2005 and bought shares in 2009 (I still have them). Neumeyer has done an excellent job building First Majestic from scratch into a silver producing powerhouse that continues to grow. In fact, they plan to increase production to 18 million ounces in the next 3 to 5 years (see chart below). For this reason, not only do I have no plans to sell, but I expect to make a lot more money holding on to my shares.