Silver: Eric Sprott Bets Big on First Majestic (AG)

After market close today (September 10th) First Majestic Silver (NYSE:AG, TSX:FR) announced a $78 million dollar bought deal at a price of CDN $15.60 with a sole investor – billionaire Eric Sprott.

Sprott will own 2.3% of First Majestic’s outstanding shares, the deal was done at a nominal premium (1%) to the closing price on Thursday.

In the press release Sprott stated the following bullish take on silver:

“We believe there has been a lack of appreciate of First Majestic’s equity in 2020 and we are happy to align ourselves with Keith (CEO) who recognizes the mispricing of silver in the marketplace and has been a stalwart for silver”

As we highlighted in our Silver Insights Series on July 20th, First Majestic has been an significant underperformer versus it’s silver mining peers.

At that time we identified that First Majestic screened well vs. its peer group, the company had a higher proportion of its revenue coming from silver (60%) with a price-to-cashflow multiple inline with it’s silver peers.

Sprott’s significant investment in First Majestic could be the catalyst for a stock that has had a challenging year-to-date in the the backdrop of a very bullish precious metals tape.

The Global X Silver Miners ETF (NYSE:SIL) is up 44% year-to-date while First Majestic is down 4%.  There could be a very powerful catch-up trade here for a company with an above average exposure to silver metals revenue.