First Majestic to acquire Gatos Silver for $13.49 per share

First Majestic Silver Corp. (AG) and Gatos Silver (GATO) have entered into a definitive merger agreement pursuant to which First Majestic will acquire all of the issued and outstanding common shares of Gatos. Gatos is a silver dominant producer with a 70% interest in the Los Gatos Joint Venture, which owns the producing Cerro Los Gatos underground silver mine in Chihuahua, Mexico. Under the terms of the Definitive Agreement, Gatos shareholders will receive 2.550 common shares of First Majestic for each common share of Gatos held. The consideration implies a total offer value of $13.49 per common share of Gatos based on the closing price of First Majestic’s common shares on the New York Stock Exchange) on September 4, 2024, and represents a 16% premium based on each company’s closing prices and 20-day volume weighted average prices on the NYSE ending September 4, 2024. The proposed Transaction implies a total equity value for Gatos of approximately $970 million. Following completion of the Transaction, existing Gatos shareholders will own approximately 38% of First Majestic shares on a fully-diluted basis. TRANSACTION HIGHLIGHTS: Consolidates three world-class, producing silver mining districts in Mexico under one banner: Cerro Los Gatos, San Dimas and Santa Elena collectively provide the foundation of a diversified, intermediate primary silver producer; Enhances production profile with strong margins: Combined annual production of 30-32 million ounces of silver-equivalent, including 15-16 million ounces of silver at all-in sustaining costs of $18.00-$20.00 per silver-equivalent ounce; Bolsters free cash flow generation: Gatos expected to immediately contribute annual free cash flow of approximately $70 million to the combined entity; Leverages a highly experienced combined team with a strong track record of value creation in Mexico: Over 20 years of experience operating in Mexico, with an emphasis on socially responsible mining, community engagement and value creation; Maintains peer-leading exposure to silver: Over 50% of pro forma revenue derived from silver compared to an average of ~30% for intermediate silver producing peers; Creates a 350,000 hectare highly prospective land package which has yielded a history of exploration success and economic discoveries: Cerro Los Gatos contributes approximately 103,000 hectares of unencumbered land with significant new discovery potential to an existing package of approximately 245,000 hectares across San Dimas, Santa Elena, and other First Majestic properties, which has yielded a history of exploration success and economic discoveries; Results in a larger company with a strengthened balance sheet, leading trading liquidity and improved capital markets profile: Pro forma market capitalization approaching $3 billion, average daily trading liquidity of approximately $49 million, and well-positioned to deliver increased shareholder value; Realizes meaningful synergies: Corporate cost savings, supply chain and procurement efficiencies, cross-pollination of expertise, and acceleration and optimization of internal projects and exploration programs all expected to deliver meaningful value creation for all shareholders. The Transaction will be effected by way of a reverse triangular merger under Delaware law, whereby a wholly-owned Delaware subsidiary of First Majestic will merge with and into Gatos, with Gatos surviving the merger as a direct, wholly-owned subsidiary of First Majestic. Under the terms of the Definitive Agreement, Gatos’ shareholders will receive 2.550 common shares of First Majestic for each common share of Gatos held as of the effective date of the Transaction. At closing, First Majestic will issue an aggregate of approximately 177 million common shares to Gatos shareholders, and following completion of the Transaction, existing Gatos shareholders will own approximately 38% of the issued and outstanding common shares of First Majestic on a fully-diluted basis. The Transaction is expected to close in early 2025, subject to the satisfaction of customary closing conditions, including approvals of the shareholders of First Majestic and Gatos, clearance under Mexican anti-trust laws, and approval of the listing of the First Majestic common shares to be issued under the Transaction on both the Toronto Stock Exchange and the NYSE. The Definitive Agreement and the Transaction have been unanimously approved by the board of directors of each of First Majestic and Gatos, and in the case of Gatos, on the unanimous recommendation of a special committee of independent directors of Gatos. All directors and certain executive officers of Gatos, as well as the Electrum Group, which owns approximately 32% of the issued and outstanding common shares of Gatos, have entered into voting support agreements with First Majestic pursuant to which they have agreed, subject to the terms of such agreements, to vote their Gatos shares in favour of the Transaction.