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First Majestic (AG) (FR.to) and the price it has paid for Jerritt Canyon

On opening the First Majestic Silver (AG) (FR.to) 4q22 financials this evening and being met by an ungodly mess of numbers, it soon became clear to this desk the extent to which Eric Sprott pulled an almighty fast one on Keif at First Majestic (AG) (FR.to) in March 2021 by selling him the worst mine in Nevada, Jerritt Canyon. So it’s time for some arithmetic sums and math to find out how much this deal has cost AG so far:

Purchase price: U$470m. My stars, did Eric ever see him coming. But that’s just for starters, as Jerritt Canyon has been a money pit of impressive scale since then.

Operations: Here’s a chart:

With revenues over the seven quarters since AG bought the “asset” coming to a total of U$254.027m and mine site costs (i.e. not including any financing costs, corporate G&A, etc) of U$290.665m, the mine has been running at a loss almost since the getgo and the last few quarters have been eye-watering. But that’s not all, as Depreciation, Depletion and Amortization

…has cost the company another U$92.74m over the seven quarters. That means a total Mine Operating Loss of U$129.378m and be clear, all the numbers on this page are not for AG as a whole, this is just Jerritt Canyon. But wait! There’s more! We need to factor in the capex AG has spent on this mine since it took ownership, which looks like this:

Another U$270.562m, which means that when you total it all up we’re just hair’s breadth away from a total loss of U$870m on the deal…so far. Compare that to AG’s market cap at U$1.865Bn this evening, which gives an idea of how much share equity has been flushed down the toilet by this crazy purchase. If AG buying Jerritt Canyon doesn’t rank as the dumbass mining deal of the decade, tell me which one I forgot.

17 Comments

    […] First Majestic (AG) (FR.to) and the price it has paid for Jerritt Canyon […]

    Reply

    Kinross sold Fruta de Norte in 2013…

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    Jerritt Canyon may be the record setter for the most number of fails in mining history after Freeport sold.
    I actually remember making a few bucks on Queenstake/YNG! IIRC, it may have been the bump when Queenstake/Yukon Nevada got $120MM for a future gold delivery contract.
    The $470MM in AG shares that Sprott got are now worth ~$160MM.

    Reply

      Most true and fwiw, I also booked a small and lucky win on Queenstake. Then it went haywire again, then Yukon-Nevada then became Veris and Deutschebank (sp?) pulled the plug in 2014. Sprott Inc bot it off the receivers in 2017 or 18, a bit o’ spit’n’polish, romance Keif a few weeks and tell him how smart he is, the rest is history.

      Highly doubt Sprott has held those shares.

      Reply

        Sprott received 28.4M shares and sold 7.3M shares so now owns 21.1M shares. Still a good deal for him. Better than for FM

        Reply

        Sprott received 28.4M shares and sold 7.3M shares so now owns 21.1M shares. Still a good deal for him. Better than for FM

        Reply

          I thought I’d check that, and in his latest 13G form Sprott disclosed a holding of 6.85m shares AG. So, he dumped 3/4 of the holding during 2022. I think your data is from the moment Sprott ducked under the 10% level and didn’t need to disclose in Canada again.

          Reply

    Then jet got an even better deal 😂 thanks for checking this out and finding the accurate data

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    Sprott is an itinerant gambler. People mistakenly think he has a cadre of geos on his staff, but the reality is he pulls these investments out of his ass like the rest of us.

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      I think you underestimate him on this deal. For sure it wasn’t planned out 16 moves in advance like Carlsen or Kasparov playing chess but..

      1) if memory serves, DB pulled the plug on Veris when they had around $280m of debt and the assets were booked at $360m at the time.
      2) It then spent two years in receivership, at which point Sprott bought. I have no idea how much he paid or the haircut DB et al took, but I’d guess maybe $100m changed hands total.
      3) ES probably bot Jerritt with the intention of making a go of it himself (Nevada gold mine…hypnotic eyes..i love gooooold etc) but at some point in in the following two years realized it was better “to find a buyer”, as they say.
      4) There’s no doubt he then went about romancing Keif N at that point, however. Bought into First Majestic PP, made public statements about how Keif “gets it” when it comes to PMs etc
      5) Then suddenly he sells his privately owned White Elephant of a gold mine to Keif.
      6) And we now know the rest. Sprott has sold its AG position, Keif holds the bag.

      So yes, his plan may have been one thing but ES was smart, too. The bottom line is that he’s perhaps the only person to have made real money from Jerritt Canyon and that’s no small achievement in itself.

      Reply

    This guy Keith has fallen so far off my radar I don’t even remember his last name anymore. And he used to be such a hot topic of conversation among the goldbugs like he was their savior, always with crazy ideas like not selling any metal until the gold/silver ratio hits single digits. And saying it with a straight face, that is impressive.

    Reply

    Almost as overpaid as RIO2 paid for its dump in Chile. Otto can’t seem to pick a winner since he got thrown out by his wife. Years of drug abuse and pizza taking its toll on tubby.

    Reply

    […] Jerritt Canyon was sticking out like the veritable sore thumb and we said as much, in the post First Majestic (AG) (FR.to) and the price it has paid for Jerritt Canyon dated February 23rd 2023. We ran the numbers, did a few pretty colours in charts and showed how […]

    Reply

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