First Majestic Silver Corp Third party refining vs internal processing
Executive summary
First Majestic operates its own processing plants (including a campaign-style Santa Elena plant and a 4,000 tpd cyanidation mill at La Encantada) while also relying on third‑party metallurgical services for some ores and test work, with public materials touting third‑party recoveries above 95% and an active program of plant expansions to increase internal throughput [1] [2] [3]. The company’s messaging and analyst coverage emphasize growth through higher internal processing capacity (Santa Elena mill expansion) but also point to strong external metallurgical performance that has supported recent resource development and market optimism [2] [4] [3].
1. What First Majestic currently runs in‑house and what it outsources
First Majestic lists multiple owned processing facilities and operations: the Santa Elena operation (with a processing plant using a campaign method treating Santa Elena and Ermitaño ores separately) and La Encantada’s 4,000 tpd cyanidation mill are presented as company‑owned internal processing assets [1]. Company disclosures and third‑party summaries also highlight that the firm has achieved “excellent third‑party metallurgical recoveries above 95%,” indicating that some metallurgical test work or toll‑processing arrangements with outside refiners/metallurgists remain part of how First Majestic validates ore treatment and recovery assumptions [3]. Public filings and releases do not detail a complete split of volumes sent to outside refiners versus those processed internally; that granular throughput split is not available in the supplied reporting [1] [2].
2. Operational tradeoffs: control, capacity and recovery performance
Owning processing plants gives First Majestic operational control and the option to expand throughput—management is explicitly pursuing a Santa Elena mill expansion and increased mine throughput at Los Gatos to lift internal processing and recoveries, signaling a strategic preference for internal capacity growth [2] [5]. Conversely, continuing third‑party metallurgical relationships can validate recoveries and accelerate early‑stage resource development where building or expanding on‑site plants isn’t economical; First Majestic’s cited third‑party recoveries above 95% have been used in public commentary as supportive evidence for resource upside at targets like Santo Niño and Navidad [3]. The company’s public narrative ties both approaches together: internal plant investment for scale and reliance on high third‑party recoveries where appropriate [2] [3].
3. Financial signaling and market reaction
Analysts have revised revenue forecasts for First Majestic sharply higher into 2026, reflecting both higher metal prices and anticipated gains from operational initiatives including mill expansion and throughput improvements—this bullish analyst view underpins the company’s move to invest in internal processing capacity while marketplaces remain attentive to realized recoveries and margins [4]. Media coverage and investor commentary credit strong production results and liquidity for enabling capital projects and shareholder returns like the increased dividend, again linking internal processing scale and cash generation to market expectations [6] [7]. At the same time, some short‑term market reactions have been mixed despite production gains, showing how execution on processing strategies must match guidance to sustain valuations [8].
4. Conflicting incentives and where to watch for bias
First Majestic’s investor materials naturally emphasize successful recoveries, expansion projects and upgrades to management that support a growth narrative—press releases tout records and upcoming mill work, and third‑party sources (e.g., analyst writeups) have been quick to raise revenue forecasts on that basis, creating a positive feedback loop that benefits share price if execution follows [2] [4] [7]. Independent reporting in the provided set is limited on the detailed economics of tolling versus internal processing costs; absent those line‑item disclosures, investors and observers should treat recovery‑and‑expansion claims as directional rather than a complete economic accounting [3].
5. Bottom line — pragmatic hybrid approach
The evidence in First Majestic’s public materials shows a pragmatic hybrid: the company is expanding internal milling capacity (Santa Elena expansion, La Encantada mill) to capture more margin and scale while using high‑quality third‑party metallurgical work to validate recoveries and accelerate resource definition in places where immediate on‑site processing isn’t optimal [1] [2] [3]. The key metrics to monitor going forward are confirmed metallurgical recovery rates on expanded internal circuits, actual throughput after the Santa Elena mill expansion, and how those translate into cash flow relative to analyst revenue upgrades—details that are not fully documented in the supplied sources and will matter for assessing whether internal processing outperforms third‑party alternatives in practice [5] [4].