 Good day fellow investors. Welcome to the Sunday stock analysis. Today we discuss a stock that a lot of you wanted me to analyze and that is first majestic silver, the pure silver play. So if you are a silver bug you will enjoy this video. Let's start. So this is the stock price of first majestic. We can see that it was negative in 2016, begin 2016 then it spiked up as there was a reversal in the commodity trend. The bottoms were hit to very high level almost 20 only to drift back down to the current level of what 6, 7. Let's see what is the value the net value of the assets. First majestic silver owns in relation to silver prices and let's see what is the reward potential reward that we can get from the current level and the potential risk. But before that let's dig into the company, discuss what has been going on and how good is let's say the management. The company is also a growth company. They are just producing 20 million ounces of silver. Their goal is to produce 40 million ounces. They have acquired a company Primero mining, the San Dima mine, so they'll hope to grow this revenue. For now 2017 revenue 252 million. Earnings per share were negative in 2017 and cash flow per share were around 40 cents. Core assets only Mexican mines and we can see they have six operating mines, one San Dima acquisition that will close probably in this quarter and they have two projects and some exploration. What is important here to note immediately is that they have relatively high all-in sustaining costs which means that at current silver prices they are not so profitable. So they expect 2018 to have mining costs between 15 and 16 which means that they are barely profitable at silver prices of 16 and if silver prices go down then the company is in trouble. And here I have one concern already because as you can see in the columns the sustaining capex is the green part and if you lower those then your costs are lower but with underground mining those are always very tricky situations and if you don't have the cash if you want to show something as profitable you can simply lower those sustaining costs and show the mine as better but long term you are exposing yourself to structural risks, strikes as it has been the case with First Majestic and San Dimas etc etc. So keep an eye on how the company is fluctuating with its capex is it enough to sustain operations? Nevertheless all these low margins means that Majestic explodes with higher silver prices because every dollar that silver goes up it's pure profit for Majestic minus taxes of course. And you can see here how in 2010 the stock price exploded 2016 again exploded but also on the other hand when silver prices drop it is very very bad. The company as I said looks for growth there are a lot of catalysts in their view commissioning La Encantada net present value is just 5 million so okay you spent a lot of money you hope to get something especially if silver prices go up other improvements better recoveries connecting to power grids exploration and closing the Primero acquisition so this is their guidance they what they want to achieve you see 40 million ounces of silver which is big deal if silver prices go up but the key is always is the management capable and let's just talk a little bit about Keith Neumeyer who is the CEO and he is very very famous especially in the silver world as a big big silver bull who says that silver will go to one hundred dollars however the key is he started his life as a stock promoter so he was an investor relations person that promotes a stock and he also did that with first quantum he was there as an investor relation person that promotes the stock to investors to push the stock price higher and there have been plenty of pump and dump schemes that he has been involved and as you see him in all these interviews you see that okay he's just pumping his stock he's not focused on operational things and in Mexico he's focused on doing interviews and that's something I would not like he might look like an expert he's not in mining he is a stock market promoter which might be good for first majestic especially if they want to issue more shares to get cash something we'll talk about later now somebody also mentioned in the comments about the projects they have they what they are acquiring of all the operating minds majestic has only santa elena has not seen impairments so when they are promising something really take it with the grain of salt because all the past promises and there have been plenty of them have seen impairments expect except santa elena so we'll see if they will be able to turn around the san dima mine which is a key component to the story with first majestic further as I said he's a promoter so they need higher stock prices and what did they do in 2016 when the stock price reached 10 immediately they issued new stocks to get more cash to keep the company alive now let's look at the value of the mines or better let's look at the value of the silver that is in the ground so we'll go through the resources and reserves to see okay what is the value of the silver if everything is mined out to make just a quick back of an napkin calculation I like to see what is the value of the proven and probable reserves and then not discounted then the measured and indicated and inferred resources are my discount so let's look at the value of what's in the ground and then we'll see okay what's the real value of first majestic so all in sustaining costs are 15 net price of silver is 16.5 so the proven and probable reserves are 120 million ounces if I put that against 1.5 dollars which is the margin the value is 100 million measured and indicated resources are much less reliable but 137 million ounces so let's say 200 million in value inferred resources are speculative and I quote the annual report of first majestic inferred mineral resources have a great amount of uncertainty as to their existence and great uncertainty as to their economic and legal feasibility nevertheless 226 million ounces for 300 million not discounted so 120 million ounces times 1.5 what is the margin you get to a value of 180 million now every one dollar increase in the price of silver there is the tax they have to pay royalties and whatever but let's say adds then one dollar in revenue 120 million let's say a little bit less in profits but as they have a lot going on let's say it adds 120 million dollar in value so if silver prices increase by 10 that's 1.2 billion liabilities are actually a good point here as there is practically no long term that except for the 75 million loan that will be received with the Primero acquisition the Primero acquisition they bought it in a deal a value that 320 million all issuing shares and here is something again about Neumeyer he has diluted since started first majestic he has diluted first investors more than 30 times yes 30 times so again here we have seen the acquisition more dilution they don't have the cash to pay such things restructuring the stream was okay but that costed 11 percent of the company that's owned now by Silverwitten so a lot of things going behind the scenes that are not really good or are excellent if one thing happens higher silver prices Sunday must gold mine the question is will they be able to change what's going on but let's put a value of 375 million there are 40 million ounces there so okay let's take it as that 375 plus the 180 that I came down minus the 50 I can come to half a billion value for first majestic now if silver prices hit 100 then if I make the same calculation I get to about 14 billion in value for first majestic and the silver that it has just in the ground if that happens every all the silver or even the inferred resources are very valuable then and then you have really an explosion so the upside is I don't know 14 times if silver hits 100 a little bit less taxes and everything and the negative downside is always it can go to zero you can lose 90 percent very easily so that's the risk reward and then I think okay perhaps owning silver is a better risk reward because from 16 to 100 you win seven times and from 16 to let's say eight which is the worst case scenario that can recover so you there is less potential for capital loss it's a better risk reward so I would prefer physical silver than first majestic I'm sorry if you are more bullish on the company but you know me I'm very very risk averse so that's my take on this company let me show you another thing that's very interesting for silver bugs and silver miners what I see when I analyze silver stocks is that they are mostly stock market promoters to retail investors yesterday I was searching something and then I saw this google ad why the hell would a company like silver corp put google ads to attract investors that's the case also for first majestic most of their investors are retailers so retail investors like you and me mom and dad silver bugs from somewhere in the world that own most of the shares so their key is to focus and promote promote to keep the stock prices high the history of first majestic is burning cash diluting shareholders and a lot of promotions that never actually happened silver prices they might go up they might go down but it's always risk reward in this case silver might be a better risk reward because there is much less risk than first majestic and the upside is also there now first majestic is priced as silver prices would be around 26 so that's a huge upside for silver and that's the value of first majestic thank you for watching I think I made a good spec of an apkin analysis that's what I see perhaps I've helped perhaps not looking forward especially to your comments do you have a different idea thank you for watching see you tomorrow