First Majestic's Q3 Test: Will A Million Ounces Of Stockpiled Silver Finally Hit The Market?

First Majestic heads into its third-quarter report with an unusual lever in its hands. Last quarter, management chose to sit on more than a million ounces of finished silver rather than sell into a price slide into the low $50s, nearly doubling the roughly 600,000 ounces held a quarter earlier. That decision protected value on paper but trimmed operating cash flow. The November 5 release, due before the open, should reveal whether the bet paid off and whether that working-capital drag has started to unwind as management promised.

The Street is looking for earnings of $0.19 a share, a 171% jump from the $0.07 earned a year ago but a step down from the $0.21 posted last quarter. That framing matters. The year-over-year comparison reflects how dramatically the business has scaled, with second-quarter revenue of $415.5 million running well ahead of the $285.1 million booked in the year-ago third quarter. The sequential dip in expected profit, however, suggests analysts are baking in softer realized prices and continued cost creep rather than another leg higher. A company that is selling down inventory into any price recovery could clear that bar with room to spare, while one that keeps hoarding metal may struggle to show the revenue lift needed.

Operationally, the narrative from the last call was one of acceleration. Silver guidance for the year had already been raised about 10% versus the January plan, and first-half production of 7.3 million ounces put the company roughly halfway to that higher target. Holding that pace in the third quarter is the baseline for credibility. Throughput is the detail to check: Los Gatos hit a record 4,070 tonnes per day in June, clearing its 4,000 tonne target, and Santa Elena was closing in on 3,500. Sustaining those rates through a full quarter, rather than a single strong month, would confirm the gains are structural. Any production shortfall at San Dimas, where recurring labor disruptions have been a nagging issue, would challenge the story.

Costs and spending are the other swing factors. All-in sustaining costs have been drifting higher because bonuses and royalties are tied to the silver price, which means margins do not expand as cleanly as investors might assume in a rising market. Capital spending, meanwhile, was running at only about 37% of annual guidance through the first half, so a heavier third-quarter bill is likely. Management called the San Dimas development lag a timing issue; a visible catch-up in spending, alongside progress at San Domingo, now underway about a year early with first ore targeted for late 2027, and the Jarrett Canyon restart slated for the second half of 2027, would support that explanation. The unresolved Mexican tax dispute remains a background risk, with a provision booked but not paid.

The market's mood has cooled noticeably. Sentiment has swung from mildly bullish heading into the last report to mildly bearish now, and the shares have gained just 1.8% since then, trailing the S&P 500 by nearly three points. At $15.64, the stock sits well below its 200-day moving average of $20.08 and close to the bottom of its post-earnings range of $14.11 to $22.19. That positioning implies modest expectations, which arguably lowers the hurdle for a positive surprise given a $1.25 billion treasury and a dividend now pegged at 2% of revenue.

Ultimately, the quarter hinges on whether First Majestic can prove that last quarter's softness was purely about price. Steady production at the raised run rate, a meaningful drawdown of stockpiled silver and costs that rise no faster than realized prices would keep the improving narrative intact. Another inventory build or slipping throughput would suggest the problem runs deeper than the silver tape.

This earnings preview was originally published on Earnings Whispers.

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