First Majestic Silver Corp. (NYSE: AG) (TSX: AG) (FSE: FMV) and Gatos Silver, Inc. (NYSE: GATO) (TSX: GATO) are pleased to announce they 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 US$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 US$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 US$18.00-US$20.00 per silver-equivalent ounce¹
• Bolsters free cash flow generation: Gatos expected to immediately contribute annual free cash flow of approximately US$70 million to the combined entity²
• 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 US$3 billion, average daily trading liquidity of approximately US$49 million³, 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

Keith Neumeyer, President & Chief Executive Officer of First Majestic, commented, “The acquisition of Gatos Silver is a highly compelling and transformative transaction that meaningfully enhances First Majestic’s operating platform through the addition of 70% of Cerro Los Gatos – a high quality, long-life, unencumbered, free cash flow generating asset in the mining-friendly state of Chihuahua, Mexico. Mexico is a country that First Majestic has operated in for over 20 years, and we are extremely excited to deploy our operating expertise within these mining districts to deliver operational synergies and exploration success for our shareholders. We look forward to working with the operating team at Cerro Los Gatos and with our new joint venture partner Dowa Metals & Mining Co., Ltd. and we are pleased to welcome all Gatos shareholders as they transition into being shareholders of First Majestic going forward.”

Dale Andres, Chief Executive Officer of Gatos, commented, “We are pleased to enter into this transaction with First Majestic, as it provides our shareholders an attractive immediate premium and the opportunity to retain exposure to the high quality, long-life Cerro Los Gatos asset, now within a well-established intermediate primary silver producer. This transaction also provides our shareholders with the benefits of First Majestic’s enhanced capital markets presence, liquidity and balance sheet, while combining its local Mexican expertise and history of operations with our history of successful performance. I want to thank the Cerro Los Gatos operating team for its dedication. I am confident that the combination of our strong operating teams will create an opportunity to generate significant value for all shareholders.”

BENEFITS TO FIRST MAJESTIC SHAREHOLDERS

• Adds a third cornerstone, long-life, low-cost, producing underground mine with exploration potential to the First Majestic portfolio
• Bolsters anticipated annual attributable production by approximately 6 million ounces of silver and 9 million ounces of silver-equivalent based on Gatos’ 2024 production guidance
• Cerro Los Gatos generates significant free cash flow and enhances portfolio diversification
• Accretive on all key metrics including NAV, cash flow, production, and Mineral Reserves to First Majestic shareholders
• Adds concessions covering approximately 103,000 hectares of unencumbered (no material royalties or streams) land at Cerro Los Gatos, with significant exploration potential and supported by a large base of Mineral Reserves and Resources
• Builds upon First Majestic’s strengths in Mexico and underground mining expertise
• Enhances scale and capital markets presence, and solidifies position as an intermediate primary silver producer

BENEFITS TO GATOS SHAREHOLDERS

• Attractive immediate premium of 16% on a spot and 20-day VWAP basis
• Meaningful equity participation in an intermediate primary silver producer with a highly diversified portfolio, including three world-class, mining districts
• Unique opportunity to gain production diversification while combining Cerro Los Gatos with complementary, high-quality assets
• Combination provides enhanced capital markets presence and trading liquidity
• Superior financial strength and flexibility to support advancement of continued margin improvement, growth projects and exploration programs
• Combined land package of approximately 350,000 hectares with significant exploration potential
• Ability to leverage First Majestic’s long-term good standing with local governments, unions and community

TRANSACTION SUMMARY

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.

ADVISORS AND COUNSEL

National Bank Financial acted as exclusive financial advisor to First Majestic. TD Securities provided a fairness opinion to the board of directors of First Majestic. Bennett Jones LLP and Dorsey & Whitney LLP acted as legal advisors to First Majestic.

BofA Securities acted as exclusive financial advisor to Gatos. GenCap Mining Advisory Ltd. provided a fairness opinion to the Special Committee of the Gatos board of directors. White & Case LLP and McCarthy Tetrault LLP acted as legal advisors to Gatos.

ABOUT FIRST MAJESTIC

First Majestic is a publicly traded mining company focused on silver and gold production in Mexico and the United States. First Majestic presently owns and operates the San Dimas Silver/Gold Mine, the Santa Elena Silver/Gold Mine, and the La Encantada Silver Mine, all located in Mexico, as well as a portfolio of development and exploration assets, including the Jerritt Canyon Gold project located in northeastern Nevada, U.S.A.