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First Majestic Silver Soars On Strong Fundamentals


First Majestic Silver is one of the world’s greatest primary silver miners. It has built a fantastic portfolio of mining operations in Mexico, silver mining’s epicenter for centuries.

First Majestic concentrates on producing silver at low costs, which enabled it to easily weather the severe testing of last year’s deep secular silver lows.

First Majestic’s operating profits are exploding this year as silver recovers and mean reverts higher. Its already-low costs are plunging due to surging byproduct credits from higher gold prices.

First Majestic Silver has been one of the world's best-performing stocks in 2016, nearly quintupling at best in recent months. This outstanding Canadian silver miner runs extensive operations in Mexico, and is one of this metal's purest producers. Despite its blistering run this year, First Majestic remains incredibly well-positioned to greatly leverage silver's mean reversion higher. Investors should take a look.

First Majestic Silver (NYSE:AG) trades on the NYSE under the awesome symbol AG. That is of course the chemical symbol for silver on the periodic table of elements, deriving from the ancient Latin word for silver argentum. Founded in 2002 by its current CEO Keith Neumeyer, First Majestic has steadily grown into one of the world's elite powerhouse silver miners. And that's no mean feat, silver mining is a tough industry.

The geology and economics of silver mining are very challenging, making major primary silver producers a rare breed. The great majority of the world's known silver deposits were formed mixed in with gold or base metals. And the revenues derived from mining these other metals usually dwarf those from silver, relegating it to mere byproduct status. Indeed most of the world's silver production is simply a byproduct.

The venerable Silver Institute gathers the best global fundamental data available on silver. Its highly-anticipated report on silver supply and demand in 2015 was just released in early May. Last year, a staggering 70% of world silver mine supply came as a byproduct from mining other metals! Less than a third of the 886.7m ounces of silver mined last year came from primary silver mines, let alone primary silver miners.

Most of those primary silver mines are owned by companies that aren't primary silver miners. Though they sometimes have "silver" in their names, the majority of their revenues are usually from gold. Out of the top 17 elite silver miners in the flagship SIL Global X Silver Miners ETF, only 7 generated over half of their Q1'16 sales from silver. And First Majestic Silver enjoyed a commanding lead on that desirable list.

Fully 69.5% of its revenues in this year's first quarter came from silver, which crowned it the purest major silver miner in the world during that slice of time! This well exceeded the silver percentages of even Silver Wheaton and Pan American Silver, granting First Majestic Silver exceptional leverage to silver prices. And it is widely respected and owned by professional investors, as evidenced by its broad major-ETF inclusion.

First Majestic is not only one of the top components of that dominant SIL silver miners ETF, but is also included in the flagship GDX VanEck Vectors Gold Miners ETF and GDXJ VanEck Vectors Junior Gold Miners ETF! Inclusion by the managers of these elite top ETFs is the gold standard for silver miners, gold miners, and junior gold miners respectively. So First Majestic has been heavily vetted by the best.

This company operates fully six silver mines in Mexico, Santa Elena, La Parrilla ("grill"), Del Toro ("bull"), La Encantada ("enchanted"), San Martin, and La Guitarra ("guitar"). Mexico is a fantastic place to explore for and mine for silver. It's not only geopolitically stable, but it is close to the US and Canada and easy and relatively cheap to operate in. And Mexico has been a global silver powerhouse for centuries.

Mexico was the world's top silver-producing country in 2015, responsible for over 1/5th of global mined supply. And this is nothing new. Ever since the Spanish colonials swarmed Mexico's shores in the 16th century, silver production has been massive. It's believed that fully one-third of all the silver ever mined in the history of the world came from Mexico! It's long been the epicenter of global silver mining.

Ask any hardened prospector where the best place to explore for silver is, and he'll reply where it has already been found. Miners have spent centuries scouring Mexico's rugged hills for silver, and have left extensive past workings. But since their technology was radically inferior to modern mining's, they literally just scraped the surface. They mined the most-obvious veins, but left most of the silver behind.

Fascinatingly, there have been multiple silver miners who have actually included old tailings piles in their mining plans! The waste rock discarded by miners of centuries past often still has very high grades of silver by current standards. Mexico is the best place in the world to mine silver, so it has been First Majestic's sole target. Many economies of scale and efficiency result from focusing in a single country.

First Majestic's excellent portfolio of Mexican silver mines all have very fascinating histories, but it's their collective economics that make this company so attractive to investors. They produced 11.1m ounces of pure silver in 2015, along with enough byproduct gold, lead, and zinc to boost silver-equivalent production to 16.1m ounces. While...