What Bank’s Don’t Want You to Know (Uncut) 03-08-2025

The Massive Silver Shortage: What Bank’s Don’t Want You to Know

Hi, this is Daniela Cambone on the road here in Toronto, we are at the Gold and Silver event, really the key event to attend during the PDAC in Toronto, hosted by First Majestic and a slew of other great silver and gold producers. With me now, Keith Neumeier, CEO of First Majestic. Keith, we’ve been doing this a long time.

We love being here, thank you for having us back. Daniela, it’s fantastic for us as well to have you here, and it’s a pleasure for me to have this time with you today. Well, thank you for that and excited to catch up on all the things happening at First Majestic.

But first and foremost, I have to say the event is taking place in Toronto. I don’t know if you feel the tension in the air, but the tariffs have arrived and the Canadians I’ve spoken to feel it’s quite an unfortunate event. I mean, you definitely feel it, right? You know, I’ve been in meetings all day, but there’s been a few times where I’ve caught the televisions on the screens and the different places I’ve been throughout the day.

And I see, you know, the Premier of Ontario coming out and earlier the Premier of Alberta came out and yeah, I don’t quite get it. You know, I understand that, you know, the current administration of the United States wants to bring manufacturing back in the U.S. And that’s completely a legitimate concern. And I think that’s, you know, a good, you know, process that the United States needs to go under.

But it’s a long-term plan. You’re not going to fix that problem overnight or that issue overnight. You know, putting tariffs on commodities, you know, is a big issue.

Because all of a sudden, you know, the United States, you know, can’t get their metals, you know, can’t get their, you know, energy products. And, you know, that’s all it’s going to do is create inflation. It’s going to hurt the United States and it’s going to hurt Canada.

Well, that’s a really good point. And I want to talk first, Majestically, now that you’ve brought it up, is can there be tariffs because you’re operating in Mexico, right? Can there be tariffs placed on silver, on gold? You know, it’s a good question. And they have not been very transparent.

We actually don’t know the answer to that question right now. You know, we haven’t had any metal cross the border today. So you haven’t tested it yet? No, we have not.

So I actually asked my guys that said, because, you know, I don’t even know what we’re going to do. Wow. So all of a sudden, we get a bunch of ounces of silver across the border, you know, because it’s going to Asahi in Salt Lake City, right? So Asahi needs to refine the metal.

You know, that metal goes into the U.S. industry for the production of, you know, circuit boards and windows and, you know, different coating products that U.S. manufacturers are producing. And they need that silver. If all of a sudden, you know, you’re these producers of all these unique products that require the metal, require silver.

Wow. Have to pay, you know, this 25% tariff. Like, what does that do to their businesses? Like, you know, we could bypass the United States.

You know, there are refineries in Canada. Right. You know, it costs us a little bit more, you know, to get the metal, you know, into Canada versus shipping it into the U.S. But, you know, incrementally, the 25% is just a non-starter for us.

You know, we have to bypass the United States, which is only going to hurt the United States. Wow. So you’re bringing up a really good point here, because it’s not just going to be you.

I mean, there’s obviously many producers in Mexico, in Canada, who may need to now find a new solution. But you’re saying you could technically go directly Mexico to Canada. Absolutely.

All right. So that’s going to be the plan B? There is. Yeah, exactly right.

Wow. All right. Let’s get back to First Majestic now, because so much has been happening.

You closed the Gatloss acquisition in January, a $970 million transaction. What do you expect the impact to be? I know it took, I believe you were at BMO last year when those conversations had started with Gatloss. Right.

It’s interesting you remember that. And it’s funny because I just said that to a number of our investors just last week when we were in Florida at the BMO conference. And it took a while.

You know, it was a very competitive process. We paid a lot. You know, we paid $970 million U.S. for that mine.

But it brings a lot of, you know, value to the business. So we’re going from 21 million ounces of silver pluton production to 31, 32 million ounces. We went from 40, call it 4,500 employees to 5,700 employees overnight.

Our revenues in 2024 are somewhere just south of $600 million. Our revenues as a result of the Gauss transaction in 2025 will be approaching over $800 million. So, you know, we’re becoming a pretty sizable business.

Was it also a very, let’s say, conscious or strategic decision to go back to being core silver with Gatloss? Well, not so much. We’ve always, in my opinion, we’ve always been core silver. You know, the Jarrett Canyon acquisition, you know, threw a few people off.

But I always knew that we’re going to back that up with another big silver transaction. So, you know, we’ve always been kind of like 50, 60% silver production in revenue base. And then we dropped, you know, close to 35, 40% silver as a result of Jarrett Canyon.

And then once we shut it down, we went into the low or actually the mid-40s. And then now we’re at 53%, you know, silver. And, you know, it’s tough to maintain.

You know yourself, you interview a lot of people. So good silver mines are hard to find. Very hard.

Jarrett plays silver? Absolutely. On that note, we’ve seen a lot of M&A activity. Curve buying Silvercrest, the discovery buying the Porcupine project.

What do you make of the activity in the silver sector? How would you sum it up? How would you sum that up? That’s a good question. Look, all the current players in both the gold and silver market are looking to grow. And, you know, how do you grow? You know, as a mining company, we have three choices.

You buy exploration companies, which have permitting risk and can take multiple years, you know, to ever get an ounce out of the ground. I personally believe that our shareholders would not really appreciate if First Majestic built up its portfolio with a bunch of silver explorers. We own some of them.

We’ve got small holdings in a variety of them and we’re always watching that market. Then you get to the developers and they’re still unpermitted. They’re more advanced.

They’ve got maybe preliminary economic assessments out or whatever the case may be. But they still have the permitting risk. And then you have the producers, which we’re more focused on.

And I just really don’t want to invest First Majestic’s capital in investing in explorers or developers. You know, when we do M&A, you know, I want to buy a producing asset or something that’s close to producing. You know, maybe they’re building a mill.

All the permits are in place. And it’s just a matter of time and money. And we can add talent.

We could add money. We could add time. No problem with that.

We do that all the time. You know, we’ve been in business for 21 years. So, but I just don’t want to go too far down the space.

Would you not make the argument those are the same challenges a gold producer faces? Absolutely. Exactly the same. Exactly the same.

Yeah, for sure. Looking at your Q4 results, free cash flow, 190%. 119% jumps off the page for me.

Yeah. What do you want to do with that? What’s the goal? I’m not going to tell you what our treasury is at right now, because we’ll be putting that out in the next five or six weeks. But yeah, our treasury position is the highest it’s ever been in the company’s history.

Wow. Yeah. You know, we spun off 68 million US dollars worth of cash flow in Q4.

That’s pre-Gattos. So now with Gattos, I get, you know, I don’t want to get into too much detail, but you know, I get it. I get our treasury report every Friday, and it puts a smile on my face.

All right. Something shareholders will be happy to hear. They will be happy to hear it.

Yes. Let’s talk about the silver industry as a whole, because I read a TD report, really good. It was talking about the supply demand imbalance in silver, warning of a liquidity crisis in silver, talking about a fifth consecutive year of structural deficit for silver.

Are you seeing this? And do you agree that there could be a liquidity crisis here? You know, we see it in price for sure. The price discovery is not what it should be. You know, we always know there’s a bunch of paper out there floating around, and, you know, it does act as a detriment to the actual physical silver price, which is always, you know, a concern of our shareholders.

You know, I can’t tell you how many emails we get, you know, on a weekly basis of people complaining about silver price. And I feel the same way. I go to bed every night thinking, what the hell is going on in this market? And, you know, we’re trading at 90 to 1, you know, which is like absolutely ridiculous.

And silver is required metal. It’s a strategic metal. It’s, you know, without silver, we couldn’t do this presentation.

And yet it’s not understood by the marketplace. And, you know, it’s slowly being understood, but the process is very small. Despite, you know, we saw green new deals off the table.

I remember just a few years ago when that was on the table under the Biden administration, the silver industry was rejoicing. So you’re saying even without massive initiatives like that, that have just been struck down, the supply side, the demand side is there. You know, where are you going to go? You know, everything that produces electricity requires silver.

So it doesn’t matter to me as a silver producer where the energy to produce. You know, you heard Elon Musk and Trump just in their last press conference in the White House, I think it’s about three or four days ago, which I listened to. And I think they said that the United States seems to produce three more, three times as much energy as they’re currently producing.

Okay, fine. So how are you going to do it? Nuclear? A nuclear power plant requires a ton of silver. All those rods in those nuclear generation facilities, you know, require silver.

You know, rebuild the electrical grid. You know, whatever the case may be, I don’t really, it doesn’t really matter. Is it a question of the price? I mean, some folks have said the gold price has broken free right now.

There’s so many interpretations that we don’t have enough time to go down that rabbit hole. But is it a question? What will it take for the silver price to break out here? You know. Because, sorry to interrupt, but gold has beat its all-time highs, right? Yeah, for sure.

Silver’s still a long way from that all-time high. Yeah, and, you know, that’s a conundrum I have constantly. And, you know, when I put this company together 21 years ago, you know, I looked at, because I came from a copper company prior to that, and I looked at silver as, and I love the supply-demand fundamentals of the metal.

And even today, it’s dynamic. Yet, you know, we’re just not seeing it in the price. And, you know, what’s, you know, is it going to take the retail investor? Is it going to take the institutional investor? You know, is it going to take industry? I would not be surprised if we saw a big consumer of the metal not be able to produce their product.

They just announced, sorry, we can’t produce XYZ, you know, iPad, you know, iPhone, automobile, refrigerator, you know, freezer, microwave oven, you know, whatever the heck they’re producing. We have to shut down production because we can’t get silver. That’s what I’m expecting is going to happen.

Wow. Like a big flare. Yeah.

You’re talking apple-sized flare. Yeah, because all these guys are huge consumers and they all keep it quiet. Yes, they do.

They keep it secret. Yeah. They don’t want to talk about it.

You know, the Silver Institute, you know, does a terrible job in accumulating the data. And they do a terrible job? Absolutely terrible job. And because they don’t have a clue about this, about the demand side of the business.

Like, you know, you have a staff of like, what, three or four people? What are they going to do? They’re going to phone up BMW and Mercedes and Tesla. Well, no one’s ever been able to get there. And Samsung and iPad or, you know, Apple and find out how much silver.

And the crazy thing is that computer in front of you, you know, this is an IBM computer, I think it is. And if you ask someone at IBM how much silver is in there, they would not have a clue. They don’t even know.

So you’re like, who really knows? No one knows. Because all these components inside this device are outsourced from all these different places. And all this company is doing is assembling it to sell you that product.

So my guess is there’s about two to three ounces of silver in there. Approximately. That much.

Talking about shrouded in secrecy. Let’s wrap with this. I don’t know if you caught Eric Sprott’s presentation.

I heard about it. He said, I mean, Eric Sprott, probably one of the biggest players in this space, said bullion banks aren’t able to cover their shorts. He spoke about how they use monthly option expiry to keep the price down.

There’s a lot happening with banks, gold and silver right now. Do you have any thoughts on what we see happening here? You know, a bank’s job is to protect their book. And that’s what they do.

And they’ll protect their book at pretty well any cost. There’s corporate governors. There’s dock offices.

There’s lawyers. There’s accountants involved behind these banks. So you’ve got a set of traders that are watching the screens and making trades.

And I came from the trading business. So I started in the banking sector in 1984. I started in the mining sector in 1990.

So I know the way the banking system works. And they’re very risk adverse. But at the same time, they’re going to protect their book as best as they can.

So if Sony calls them up tomorrow and says, hey, look, I need 25 million ounces of silver delivered to these variety of ports around the world to produce whatever we’re going to produce, whatever bank they do the deal with, they’ll sign a 12-month contract at a fixed price. And so that bank will now deliver that physical metal. They know what the miners are going to produce.

So they know their incoming metal, right? Because they’re dealing with traders and so on. So they know what the risk profile is when they make those trades, right? But it gets offside now and then. They can’t stand the retail investor because the retail investor is the unknown.

That’s the inelastic part. That’s what really screws them up. So if they could put out headlines, if they could try to dissuade that investor.

Dissuade. Dissuade, yeah. Persuade them not to invest into the metal through headlines and through media and so on and so forth, then they’ve got more control of the market.

The second they lose control, then all of a sudden they’re paper hedge, which is about 350 to 1. So for every one ounce of physical metal that’s sold into the marketplace, they’re short 350 times that amount. So they’re able to manage that. Surprisingly, they can do it.

How did you get that number? Well, do the math. There’s about 240 days of trading per year. And silver trades in the paper market about a billion ounces a day.

So it’s 240 billion. And the miners only produce 830 million ounces a year. So divide 240 by 830 and you get the relationship between the metal and the paper.

And they manage it and they’ve done a heck of a job and they make a lot of money doing it. So in metal prices, like in the Reddit squeeze, what happened when silver went from $18 to $30, they stood there at $30 and just printed millions of contracts at $30 just to stop it. And once the Reddit crowd stopped buying, they won because they knew the buying was going to end.

So once the buying ends, they go, they take a breath and they sit back and they go, OK, suckers, sell us back to your paper silver. And this is what they do. And it’s a constant game that they play.

And the reason why we opened up our mint is try to break that. So in 2024, we’re going direct to the investor. Exactly.

So we have 5% of our silver going through our mint. And if you do the math, times it by 240, you end up with a lot of silver that we’re taking off the market over a billion ounces. What’s the appetite been like from the retail investor? What are you seeing? It fluctuates a lot.

So they are doing a good job, the banks. Yeah, oh yeah. Because the retail investor tends to follow price.

Right. So if the price is going up, our sales explode. You know, if the price drops, our sales drop.

You know, typical, you know, like a stock, I suppose. Yeah. Yeah.

That’s really fascinating insights. JP Morgan doesn’t want you buying silver. You know, I’m not sure it’s just them, but, you know, I don’t want to.

I’m not putting words into your mouth. I don’t want to point fingers. No.

Like, I don’t, you know, I don’t know enough what’s going on behind the scenes. Yeah. You know, all the movement of gold into the United States is interesting.

You know, who knows what that’s all about. Is the gold important, Oxfie? Yeah. Anyone’s guess.

You know, I hope it is. I really do hope it is. But the question is, how many times has it been sold, though? It’s not whether it’s there, right? Look, we love being here.

I love being at the aquarium. My kids are so upset they’re not here. They’re like, mom, why do you get to be at the Ripley’s Aquarium in Toronto? One of the perks of the job that I love doing Thank you so much.

I’ll let you get to your evening. And no silver price prediction? Because you get upset when I ask. It’s funny because there was an event last night.

I’m not going to tell you the name of it. But a dinner event. I actually won a gold coin because I actually picked the gold price closer than anyone in the crowd.

But the gold price for when? Closing December 31st, I believe. Okay. Okay.

It’s triple digits. You’re triple digits silver Keith Neumeyer. I know.

Is that not the forecast? I coined the phrase. And I still think it’s going to be there. And it’s always a grind.

Every bull mark is a grind. We need to get through 34, 35 to really break out. And you see the resistance.

It’s pretty obvious these last couple of weeks. But I think we’re going to be there. We’re going into a little bit of a weak period for metals.

We always March, April, May, somewhat a little bit suspect. And who knows what’s going to happen. I don’t have a crystal ball.

But by the end of the year, I’ll give you a $40 call on silver. All right. And a $3,200 call on gold.

$40 silver, $3,200 gold. Yeah. So next year, the aquarium, we can… We’ll see where we’re at.

We’ll see where we’re at. We’ll get you a prize. We’ll see how close we are.

Keith, love catching up with you. I feel it was a long time since we last spoke. It has been a while.

Yeah, so it was good. We did a nice touch base. And look, we’ll have more great content tonight.

So stay tuned here from the wonderful Ripley’s Aquarium in Toronto at the gold and silver event. All good?