First Majestic Silver Corp.
Annual Report 2021

Plain-text annual report

TSX FR NYSE AG FSE FMV the power of silver 2021 ANNUAL REPORT Focused on Silver. Focused on Growth. Vancouver-based First Majestic Silver Corp. is one of the industry’s fastest-growing silver producers. With four operations in the US and Mexico, First Majestic has grown from one small mine in 2004 to a 27 million ounce silver-equivalent producer today. The Company employs more than 5,200 workers across its operating mines and ranks as one of Mexico’s leading employers. After 19 years in business, First Majestic continues to reach new production milestones as it modernizes, expands operations, acquires new mines and explores for new resources. The Company has developed a leading reputation for community outreach and support, especially through its comprehensive response to the COVID-19 pandemic. Our Mines and Projects IN PRODUCTION NEVADA, USA JERRITT CANYON GOLD MINE IN PRODUCTION MEXICO SANTA ELENA SILVER/GOLD MINE LA ENCANTADA SILVER MINE SAN DIMAS SILVER/GOLD MINE PROJECTS MEXICO LA PARRILLA SILVER MINE DEL TORO SILVER MINE SAN MARTIN SILVER MINE LA GUITARRA SILVER MINE From the Team’s Perspective: Photography in this Annual Report Once again, we are both pleased and proud to feature photos taken by employees at our operations. Some of the images were part of a company-wide photo contest conducted in 2021. As in the previous year, the contest aligned with First Majestic’s Heart-Mind and Well-Being initiative, where we brought employees together through our Company intranet to share knowledge on various wellness topics, including managing pandemic stress and demands. I’m pleased to report this initiative was received enthusiastically with participation throughout the Company. The photos in this report reflect the closeness, community and shared support amongst our First Majestic Family. Jill Anne Arias Vice President of Marketing & Corporate Communications Table of Contents 02 Our Vision, Our Mission, Our Values 05 Milestones in 2021 05 Operating and Financial Highlights 06 Looking Ahead 07 Why Silver is More Essential than Ever 08 Message from the President and CEO 10 Letter from the Chief Operating Officer 11 Financial Review 12 Our Senior Leadership 14 Community, Health and Safety 16 Environmental Review 18 Jerritt Canyon Gold Mine 20 San Dimas Silver/Gold Mine 22 Santa Elena Silver/Gold Mine 24 La Encantada Silver Mine 26 Reserves & Resources 29 Audited Consolidated Financial Statements 77 Management Discussion & Analysis Our Vision FIRST MAJESTIC’S VISION WE WILL ACHIEVE OUR VISION BY: IS TO BECOME THE WORLD’S LARGEST PRIMARY SILVER PRODUCER WHILE IMPROVING LIVES AND COMMUNITIES IN OUR HOST REGIONS AND INCREASING SHAREHOLDER VALUE. Continuing to hire the industry’s best talent. Aggressively pursuing the development of our existing property assets. Maximizing margins and minimizing risk through company-wide R&D, optimization and modernization. Ongoing investment in exploration. Acquiring additional mineral assets focused on silver & gold. 02 Our Mission OUR MISSION IS TO SAFELY PRODUCE PROFITABLE OUNCES AND TO OPTIMIZE AND GROW OUR MINERAL RESOURCES THROUGH ETHICAL, INNOVATIVE AND SUSTAINABLE PRACTICES THROUGH AN EMPOWERED WORK FORCE THAT ENCOURAGES CONTINUOUS IMPROVEMENT AND PERMANENCE OF THE ORGANIZATION. Our Values TRUST Act and firmly believe in commitment and dedication of each other. ATTITUDE Maintain a strong positive disposition and commit in order to learn and change. ACCOUNTABILITY Take ownership of our responsibilities and meet our commitments. HONESTY Always tell the truth, have strong moral principles CREATIVITY Turn new and imaginative ideas into better ways of doing things. SUSTAINABILITY Work to improve the quality of life of the communities where we operate, while using the best practices. LOYALTY Be true to our values, always look after the best interest of our co-workers and families FIRST MAJESTIC SILVER 2021 ANNUAL REPORT 03 “ FIRST MAJESTIC GENERATED RECORD ANNUAL REVENUES OF $584.1 MILLION IN 2021, 61% HIGHER THAN THE PREVIOUS YEAR.” 04 Milestones in 2021 Achieved the highest production of our 19-year history Achieved the strongest production quarter (Q4) in the Company’s history Record gold production of 192,353 ounces (2020 = 100,081 ounces) Acquired the Jerritt Canyon Gold Mine in Nevada, USA Record silver equivalent production of 26.9 million ounces (2020 = 20.4 million ounces) Began initial production at the Ermitaño mine near Santa Elena, ahead of schedule Total capital expenditures of $219.8 million Generated record sales of over $10 million from our on-line Silver Bullion Store Operating and Financial Highlights All dollar amounts in this report US$ unless otherwise indicated OPERATING 2021 2020 2019 2018 2017 Silver equivalent ounces produced 26,855,783 20,379,010 25,554,288 22,243,071 16,207,905 Silver ounces produced Gold ounces produced Cash costs per silver equivalent ounce3 All-in Sustaining Costs per silver equivalent ounce3 FINANCIAL (Millions except per share amounts) Revenues Mine 0perating earnings Net (loss) earnings (Loss) earnings per share (“EPS”) - basic Free Cash Flow (2021,2020,2019)2, 3 12,842,944 11,598,380 13,241,118 11,679,452 9,749,591 192,353 100,081 134,580 111,084 62,991 $ $ $ $ $ $ $ 13.23 18.84 2021 584.1 101.4 (4.9) (0.02) (16.9) $ $ $ $ $ $ $ 9.00 14.03 2020 363.9 105.1 23.1 0.11 30.7 $ $ $ $ $ $ $ 8.74 12.62 2019 363.9 66.2 (40.5) (0.20) 91.0 $ $ $ $ N/A1 N/A1 2018 300.9 (11.9) (204.2) (1.11) N/A $ $ $ $ N/A1 N/A1 2017 252.3 16.0 (53.3) (0.32) N/A 1. N/A: “Not available”. The Company transitioned its cost reporting from Cost per Payable Silver Ounce to a Cost per Payable Silver Equivalent Ounce (“AgEq” Oz) basis effective January 1, 2021. Costs for 2020 and 2019 have been retrospectively adjusted to Payable Silver Equivalent Ounces while figures shown for 2018 and earlier are reported on a Cost per Payable Silver Ounce basis. Management believes the change to using Payable AgEq Oz will provide management and investors with an improved ability to evaluate operating performance of the Company, as it eliminates volatility in Cash Cost and AISC per ounce due to market volatility in silver and gold prices as well as timing of by-product credit sales. 2. Effective December 31, 2021, the company has started reporting free cash flow and has transitioned away from cash flow per share, as this non-GAAP measure of liquidity is being widely adopted and has replaced cash flow per share within the industry. Management has retrospectively calculated and reported this figure for 2020 and 2019 within the year-end MD&A. 3. The Company reports non-GAAP measures which include cash costs per ounce produced, all-in sustaining cost per ounce, total production cost per tonne, average realized silver price per ounce sold, working capital, adjusted EPS and free cash flow. These measures are widely used in the mining industry as a benchmark for performance, but do not have a standardized meaning and the methods used by the Company to calculate such measures may differ from methods used by other companies with similar descriptions. See “Non-GAAP Measures” on pages 45 to 53 for a reconciliation of non-GAAP to GAAP measures in the Management Discussion and Analysis (“MD&A”). FIRST MAJESTIC SILVER 2021 ANNUAL REPORT 05 Looking Ahead anticipating another record year “ 2022 IS ABOUT PRODUCTION GROWTH, FOCUSING ON SAFETY, COST REDUCTIONS, INNOVATION AND ENVIRONMENTAL STEWARDSHIP. MAJOR CONTRIBUTORS WILL INCLUDE A FULL YEAR OF PRODUCTION FROM BOTH THE JERRITT CANYON AND ERMITAÑO MINES.” —Steve Holmes, COO KEY GOALS FOR 2022 Grow annual silver equivalent production to a record 32.2 to 35.8 million ounces Increase silver production to 12.2 to 13.5 million ounces Increase gold production to a record 258,000- 288,000 ounces Aggressive exploration investment, both brownfield and greenfield, of $45.2 million, including 320,000 metres of exploration drilling 06 Capital investments of $207.8 million, focused on technology, plant modernization and expansion, including our new “green” energy LNG power generating plant at Santa Elena Continued improvements in metallurgical recoveries through implementation of fine grinding and other ongoing R&D initiatives Digital modernization of our underground mining operations Further strengthen our leadership and technical teams across the Company anticipating another record year A Very Special Metal The Power of Silver speaks primarily to the metal’s most important properties: conductivity and reflectivity. It’s why we say there is no substitute for silver, and why our vision is to become the largest primary silver producer. While silver is an important precious metal for investment, its utility is what makes it unique and most valuable—especially as the world develops new technology to reduce greenhouse gases, manage climate change and meet skyrocketing demand for electric vehicles. While investment demand remains an important segment of silver consumption, First Majestic’s vision is built upon silver’s fundamental value as an industrial metal. Looking ahead for 2022, we believe the world’s post-COVID economies will continue to drive strong industrial silver demand, maintaining or strengthening the current supply deficit. FIRST MAJESTIC’S SILVER BULLION STORE: BUY SILVER FROM THE SOURCE Now in its 14th year, with a record of $10 million of bullion products sold in 2021 alone, First Majestic’s unique Silver Bullion Store offers investors and silver enthusiasts the opportunity to purchase physical silver mined from our Mexico operations. At www.store.firstmajestic.com, you can buy silver bullion online, securely, 24/7. We offer high quality 0.999-fine silver rounds, ingots, bars and medallions at one of the lowest premiums on per-ounce silver prices on the internet. Worldwide secure shipping and the ability to track your order is available. Due to high demand, we are now also selling our #tripledigitsilver t-shirts online as well — grab your t-shirt today! Here’s why First Majestic remains focused on silver: • Annual global silver consumption totals over 1 billion ounces • The silver industry operated in a physical deficit of 51.8 Moz in 2021, with the Silver Institute forecasting a 71.5 Moz deficit in 2022 • Silver demand increased 19% from 2020 to 2021 • ~80% of silver is sourced from mining, with ~20% sourced from recycling • Scrap recycling is near historic lows • Silver boasts higher electrical conductivity than copper • Industrial/technical applications consume 57% of the annual silver supply, including: − Solar power − Electronics − Automotive manufacturing − Medicine − Water purification − Window manufacturing − 3D Printing − Jewelry, silverware and coins/bullion consume the remaining 43% FIRST MAJESTIC SILVER 2021 ANNUAL REPORT 07 Message from the President and CEO the power of silver The Power of Silver underlies two fundamental beliefs that fueled our accomplishments in 2021. One is how our confidence in silver’s value has helped First Majestic grow and prosper, thereby bettering the lives of our employees and for citizens of the regions in which we operate. The other is silver’s power to drive industry and technology forward towards a better future. In short, The Power of Silver is why we’re in business. Silver has generated exceptional growth for First Majestic, including record production and revenues in 2021. Over the past ten years, our silver equivalent production has grown from 7.5 million ounces to nearly 27 million ounces. In the coming year, we expect to produce more than 32 million ounces of silver equivalent—an increase of 18 percent over 2021. In the bigger picture, silver is essential for industry, especially for new and innovative technologies that are helping reduce greenhouse gases, power the world and improve lives through cleaner water, medical advancements and countless innovations to come. Silver’s utility will only increase in the years ahead. 08 Two key events marked our growth in 2021. One was acquisition of the Jerritt Canyon Gold Mine in Nevada. The other was the start-up of our Ermitaño mine, situated only four kilometres away from the Santa Elana milling operation. The two mines, Jerritt Canyon and Ermitaño, are expected to produce over 150,000 ounces of gold for our production mix in 2022. While we remain focused on silver, this base of gold production gives us revenue stability and diversification. Jerritt Canyon, located near Elko, Nevada, represents our first acquisition outside of Mexico. It met all our criteria as an operating mine which we feel we can build upon and develop into a very profitable and larger operation. With the changing geopolitical landscape in Mexico, we also believed First Majestic’s growth and stability would be enhanced with production from another top jurisdiction for mining. Our gold revenue will also allow us to sell silver more strategically. We can limit silver sales, or even temporarily suspend sales, when silver prices are down. We developed the Ermitaño mine which is part of the Santa Elena operation, ahead of schedule in November. As a result, Santa Elena achieved record quarterly production in Q4. Ermitaño is expected to significantly increase production and reduce costs at Santa Elena as it ramps up through 2022. PHOTO: Jose Pacheco Ochoa “ JERRITT CANYON MET ALL OUR CRITERIA AS AN OPERATING MINE WHICH WE FEEL WE CAN BUILD UPON AND DEVELOP INTO A VERY PROFITABLE AND LARGER OPERATION.” LOOKING AHEAD With added revenue from both Jerritt Canyon and Ermitaño, combined with our solid cash position of $237.9 million, we’re making record investments in exploration and development in 2022 to increase reserves and production at all our mines in the years ahead. We’re also investing heavily in mine improvements, including mine digital innovation, fine grinding technology, plant modernization and expansion of the LNG power generation plant at Santa Elena. In addition, we will continue seeking new M&A opportunities, focused on silver producers in top mining jurisdictions. Our vision is to become the largest global primary silver producer, and internal growth plus M&A remains our key strategy for achieving that vision. In closing, I want to offer special thanks and congratulations to our former CFO Ray Polman, who retired from First Majestic after 15 years of exceptional contributions to this company. Always a gentleman, working with Ray was a pleasure. The First Majestic Family wishes him a very happy retirement. I also congratulate our entire team, in Mexico, Nevada and Vancouver, for continuing to move us even closer towards our vision. We continue to grow as the “First Majestic Family,” for which I’m most grateful. I look forward to the very exciting year ahead. Keith Neumeyer President and CEO FIRST MAJESTIC SILVER 2020 ANNUAL REPORT 09 Letter from the Chief Operating Officer The key event for First Majestic in 2021 was acquisition of the Jerritt Canyon Gold Mine in Nevada. This strategic move marked a major step for our production growth and diversification. While First Majestic remains first and foremost a silver company, having a dependable base of gold production outside of Mexico provides a stable base for growth in a premium, dependable, pro-mining US state. As noted in The Fraser Institute’s latest survey, Nevada is the world’s number one mining jurisdiction. Jerritt Canyon has quickly become a top contributing asset for the Company. It’s what I call a “turnaround” project—we are rebuilding the project, one step at a time, starting with exploration and development, followed by production increase and cost reductions. Our goal is to return Jerritt Canyon back to its previous status as one of Nevada’s top mines. To achieve these objectives, we were fortunate to bring in a top leadership team, primarily from major operators within Nevada, to manage this transformation. Our goal is to safely reach the 200,000-ounce annual production level at Jerritt Canyon in 2024. With over 100 square miles of exploration territory and rich targets, Jerritt Canyon also offers exceptional long- term potential. In the coming year alone, we’re planning 138,000 metres of exploration drilling to test over 25 high-priority targets. Other key achievements for the Company in 2021 included record quarterly production in Q4, with 8.6 million silver equivalent ounces produced. The total included gold production of 67,411 ounces, representing the Company’s highest-ever quarterly gold production. Our San Dimas and Santa Elena operations achieved the highest ever quarterly production since becoming part of our portfolio. It’s important to note that all our mines produce doré bars and not concentrate. Doré provides significant advantages through lower refining, storage and shipping costs, and integrates seamlessly into our fast-growing bullion sales. 10 Our strong Q4 performance contributed to record annual production of 26.9 million silver equivalent ounces, an increase of 11% over 2020, boosted by highest ever gold output of 193,353 ounces. This figure marks a 92% increase in gold production over 2020, due primarily to the opening of Ermitaño and new production from Jerritt Canyon. To make an aggressive company like First Majestic grow, we must find new ore sources to feed our mill capacity. We drilled over 227,000 metres in 2021, with active programs across all mines. At the end of Q4, 21 drill rigs were active in Mexico and Nevada. In 2022, we’re planning to increase our exploration budget by 44%, which includes 320,000 metres of drilling. Over the last five years, the Company has focused on reducing its fossil fuel consumption and carbon footprint. In 2021, we converted the Santa Elena operation from diesel fuel generation to clean-burning liquified natural gas (LNG) with completion of a new 12.4 MW powerplant facility. Over the past five years, we’ve increased the LNG power contribution in Mexico from 16% to 40%. At San Dimas, over 50% of the power requirements are provided by clean, low-cost hydroelectric power. We will continue efforts to reduce our fossil fuel consumption in the coming years, through both LNG and hydropower and potentially other technologies. Steven Holmes, Chief Operating Officer Financial Review RECORD ANNUAL REVENUES AND CASH First Majestic generated record annual revenues of $584.1 million in 2021, 61% higher than the previous year due primarily to the addition of the Jerritt Canyon Gold Mine during the second quarter, a 32% increase in payable silver equivalent ounces sold, and a 19% increase in the average realized silver price per ounce which averaged $25.16 per ounce compared to $21.15 per ounce in 2020. The record revenues contributed to record year-end cash and cash equivalents of $237.9 million. “ RECORD REVENUES CONTRIBUTED TO RECORD YEAR-END CASH AND CASH EQUIVALENTS POSITION OF $237.9 MILLION.” NET EARNINGS AISC The Company recognized a net loss of $4.9 million (EPS of $(0.02)) in 2021, compared to net earnings of $23.1 million (EPS of $0.11) in 2020. The decrease in net earnings was attributable primarily to an increase in income tax expense during the year as well as an accounting loss recognized on the settlement of the Company’s 2018 senior convertible notes of $4.6 million. The new convertible notes provided extended financing terms and allowed the Company to raise $230 million in cash through the issuance of new senior convertible notes with a coupon rate of 0.375%, representing a low-cost bond offering by a precious metals company. The remaining net proceeds will be used for general corporate purposes and strategic opportunities. CASH COSTS Cash cost per silver equivalent (“AgEq”) ounce in 2021 was $13.23, compared to $9.00 in the previous year. The cost increase was due primarily to the addition of Jerritt Canyon, which was producing at a higher cash cost since the acquisition. The Company has identified various projects to be implemented over the next 12 months at Jerritt Canyon to improve production and reduce costs at the mine and processing plant. Additionally, there was an increase in energy costs at San Dimas due to lower energy contribution from the hydroelectric power plant as well as an increase in costs at Santa Elena primarily due to higher ore development and mining contractor costs to prepare ore faces in the mine. All-in sustaining cost (“AISC”) per AgEq ounce in the year was $18.84, compared to $14.03 in the previous year. The increase in AISC was primarily attributed to higher cash costs, combined with an increase in sustaining capital costs related to the Tailings Storage Facility 2 (“TSF2”) lift project at Jerritt Canyon, which was completed on time and under budget. The AISC increase was offset partially by increased production at San Dimas, Santa Elena and Jerritt Canyon during the year. REVENUE The Company generated record annual revenues of $584.1 million in 2021, 61% higher than the previous year. DIVIDENDS Under the Company’s dividend policy, initiated in 2021, the quarterly dividend per common share is targeted to equal approximately 1% of the Company’s revenue which fluctuates with silver and gold prices. CAPITAL EXPENDITURES In 2022, the Company plans to invest a total of $208 million in capital expenditures, including: $88 million for underground development $45 million for exploration $52 million for property, plant and equipment (PP&E) $23 million for corporate projects FIRST MAJESTIC SILVER 2021 ANNUAL REPORT 11 Our Senior Leadership the power of experience Keith Neumeyer President and Chief Executive Officer Steve Holmes Chief Operating Officer David Soares Chief Financial Officer Connie Lillico Corporate Secretary Sophie Hsia General Counsel Andrew Poon Vice President Finance Jill Arias Vice President Corporate Communications and Marketing Todd Anthony Vice President Corporate Development Karen Liu Vice President Treasury Amar Parmar Vice President of Taxation 12 12 First Majestic’s steady growth over the past 19 years has relied on a commitment to hiring the industry’s best and providing an environment that encourages creativity, independence and fresh ideas. We strengthened the team in 2021 with new talent in exploration, mine management, ESG and finance. Post year end, in time for the printing of this Annual Report, we were happy to announce the appointment of David Soares as our new CFO. Mr. Soares recently served as the Chief Financial Officer of Kirkland Lake Gold where he played a key role in leading the development and execution plan transforming Kirkland from an Intermediate to a Senior gold producer. EQUITY, DIVERSITY AND INCLUSION VALUE STATEMENT: AT FIRST MAJESTIC SILVER CORP., WE VALUE THE DIVERSITY OF OUR PEOPLE, OUR PARTNERS, AND COMMUNITIES. WE BELIEVE A SUCCESSFUL ORGANIZATION IS BUILT ON OUR COMMITMENT TO PROVIDE A RESPECTFUL, EQUITABLE, DIVERSE AND INCLUSIVE WORK ENVIRONMENT THAT PROMOTES TRUST AND ENCOURAGES INNOVATION, AGILITY AND SUSTAINABILITY Ramon Mendoza Vice President Technical Services Pepe Figueroa Vice President Information Techhnology Mani Alkhafaji Vice President Business Planning and Procurement Persio Rosario Vice President Processing, Metallurgy, and Innovation David Smith Vice President Human Resources Colin Bower Vice President Operations - Mexico Gonzalo Mercado Vice President Exploration FIRST MAJESTIC SILVER 2021 ANNUAL REPORT 13 Community, Health & Safety the power of stewardship This second year of operating within the global pandemic again challenged how we worked and interacted with our people and the communities within our area of influence. Within First Majestic’s Values, our Sustainability focus continued to lead our major business decisions and capital allocation to continue delivering long-term benefits for all First Majestic stakeholders. We shared the mining industry’s global call to build a more resilient and inclusive post-COVID-19 future, maximizing positive impacts through our most effective tools: local employment, local purchases, community investments, and environmental stewardship. EXPANDING EMPLOYMENT Thanks to our higher silver and gold production in 2021, we not only retained employment but also expanded our job creation footprint. The expansion of the Santa Elena mine and the ramp-up of its Ermitaño deposit opened more than 500 new direct and indirect jobs, hiring mostly from communities in Sonora. We also incorporated approximately 290 direct employees and around 270 indirect employees from our recently acquired Jerritt Canyon Gold Mine in Nevada. SUPPORTING LOCAL COMMERCE Our focus on expanding local purchases of goods and services that meet our health, safety and environmental standards also increased. In Mexico, we expanded local purchases by 33%. Last year, after new governmental regulation, First Majestic recertified the legal and labor compliance of all of its suppliers, including local businesses from the communities where we operate. 14 INVESTING IN COMMUNITIES AND INFRASTRUCTURE In 2021, our community and infrastructure budget increased by 20% over the previous year. Access to clean water, irrigation, health services, education programs, solid waste management, economic diversification, and cultural initiatives continued as our local stakeholders’ priorities, and we were proud of supporting them. EQUITY, DIVERSITY AND INCLUSION In 2021, we promoted diversity, equity, and inclusion in our social investments to support the most vulnerable members of our host communities. As an example, we increased our resources dedicated to the COVID-19 community response by more than 50%. Continuing our commitment to equity, diversity and inclusion across our workforce, suppliers, and the communities where we operate, 19.4% of our new hires were women, including leadership positions. Currently 12% of our full-time and direct employees are women. EMPLOYEE HEALTH AND SAFETY Attracting the best talent from our host communities in Mexico and the US demands a daily focus on the health and safety of our employees. In 2021 we reported a new year with zero fatalities and also a new consecutive year with a substantial improvement in our safety performance. Our Total Recordable Incident Frequency Rate (TRIFR) moved from 0.95 in 2020 to 0.84, and our Lost Time Injury Frequency Rate (LTIFR) closed at 0.24 in 2021 compared with 0.31 in 2020. INVESTING IN CLEANER ENERGY We continue our commitment to greenhouse gas reductions, with 2021 marking a new record as we completed the transition from diesel to Liquid Natural Gas (LNG) at both Santa Elena and La Encantada. This transition implied a 43% reduction in our gross direct emissions and a 23% reduction in total greenhouse gas emissions. In 2022 we will further expand our “green” energy capacity at Santa Elena by expanding this state-of-the-art LNG powerplant. Several other initiatives are also underway, potentially expanding the use of hydroelectric energy and adopting hydrogen to supplement energy needs. COMMUNITY OUTREACH AND COLLABORATION We are proud to provide outreach and support to local and State communities in Mexico and to our new neighbors in northern Nevada. Our approach focused on an unprecedented level of collaboration with local stakeholders providing jobs, clean drinking water, infrastructure improvement, youth activities, educational opportunities and medical support and advanced technology to the communities in which we operate. We achieved an entire year with zero operational disruptions due to community disputes. Our engagement model solved one legacy conflict with a communal landowner organization, while reducing significant complaints by 39% and the number of relevant incidents with community members by 22%. FIRST MAJESTIC SILVER 2021 ANNUAL REPORT 15 Environmental Review the power of responsibility First Majestic is committed to socially responsible mining, and we believe that taking responsibility for our impacts on the environment is a critical aspect of social responsibility. Access to a healthy environment is not only a fundamental human right, it also provides a foundation for long-term, sustainable relations with our community and government partners. The team managing our Environmental Management System achieved positive results that demonstrated high responsibility and care for the ecosystem. We proudly reported zero environmental incidents in 2021 related to mine tailings across all operational and non-operational mines, and no significant contaminant spills were reported to the authorities. REDUCING ENVIRONMENTAL INCIDENTS REDUCING GREENHOUSE GAS EMISSIONS First Majestic’s ongoing effort to operate in a socially and environmentally responsible manner is generating tangible results. In 2021, we reduced the number of environmental incidents associated with our operations by 21% while reducing the severity of those incidents to a low and moderate level. As part of our environmental goals, we continue our commitment to greenhouse gas reductions. In 2021, we completed the transition from diesel to Liquid Natural Gas (LNG) at both Santa Elena and La Encantada. This transition generated annual reductions in GHG emissions of 8% between 2019 and 2021. As a result, we are increasing mineral production with lower greenhouse emissions. 16 EFFICIENT WATER MANAGEMENT First Majestic continues to work with local stakeholders to maintain efficient water management, an essential resource for people, communities, and our operations. In 2021, First Majestic’s three operating mines in Mexico consumed a total of 1,594,267 m3 of water compared with 1,370,816 m3 in 2020. Water usage at San Dimas and La Encantada remained stable, why we registered an increase in water usage at Santa Elena due to expansion of the Ermitaño deposit. In 2021, our Mexico mines reported a total of 524,904 m3 in surface discharged water, complying with the quality standards for water discharge established by the country’s national standard. FIRST MAJESTIC SILVER 2021 ANNUAL REPORT 17 Jerritt Canyon Gold Mine Elko County, Nevada HIGHLIGHTS Ownership 2021 Gold Production (ounces – partial year) 2021 Silver Equivalent Production (ounces – partial year) 2021 Cash Costs per AuEq Ounce 2021 All-In Sustaining Costs per AuEq Ounce 2022 Projected Cash Costs per AuEq Ounce 2022 Projected All-In Sustaining Costs per AuEq Ounce 2022 Projected Gold Production (ounces) 100% 68,567 5,013,399 $1,624 $2,048 $ 1,259 - $1,334 $ 1,503 - $1,607 116,000 - 129,000 2022 Projected Silver Equivalent Production (ounces) 9,000,000 – 10,000,000 18 A NEW CORNERSTONE ASSET FOR FIRST MAJESTIC First Majestic acquired the Jerritt Canyon Gold Mine, historically one of Nevada’s most prolific gold operations, from Sprott Mining, on April 30, 2021. The property consists of 30,821 hectares (119 square miles) of mining claims located 45 miles north of Elko in northeast Nevada. The processing plant has a capacity of 4,000 tpd and currently averages 2,500 tpd. The plant produces high quality gold doré bars, which are then shipped for commercial refining and sale. Jerritt Canyon was discovered in 1972 and has been in production since 1981, having produced over 9.5 million ounces of gold over its 40-year history. The mine currently operates as an underground mine and holds one of three permitted gold processing plants in Nevada that uses roasting in its treatment of ore. In our first year as owners of Jerritt Canyon, the new team achieved an average gold grade of 3.84 g/t. We are planning a number of improvements to the operation designed to bring production up to levels not seen for over 15 years. Jerritt Canyon operated as an open pit mine from early 1981 until late 1999. Underground operations started in 1997 at the SSX mine and continued until 2008. A new mine plan was prepared in 2009, and underground mining from the Smith mine recommenced in late January 2010 and the SSX mine reopened in October 2010. First Majestic invested $30.5 million in capital projects in 2021, including expanded exploration, mine development, plant upgrades and a major tailings expansion lift. We completed a drift to connect the SSX and Smith mines at the end of 2021. Plans are in place for increased exploration and ore extraction. Current plans are to rehabilitate and restart the West Generation and Saval II underground mines in H2 2022. Gold production is projected to reach approximately 200,000 ounces in 2024. One of the most attractive features at Jerritt Canyon is its vast exploration potential. Approximately 138,000 metres of exploration drilling are planned for 2022 to test over 25 high-priority targets. At the end of Q4, nine drill rigs, consisting of four surface rigs and five underground rigs, were active. Underground development at Jerritt Canyon totaled 3,916 metres in 2021, while exploration drilling totaled 48,670 metres. FIRST MAJESTIC SILVER 2021 ANNUAL REPORT 19 San Dimas Silver/Gold Mine Durango State, México HIGHLIGHTS Ownership 2021 Silver Production (ounces) 2021 Silver Equivalent Production (ounces) 2021 Cash Costs per Ounce 2021 All-In Sustaining Costs per Ounce 2022 Projected Cash Costs per AgEq Ounce 2022 Projected All-In Sustaining Costs per AgEq Ounce 2022 Projected Silver Production (ounces) 2022 Projected Silver Equivalent Production (ounces) 100% 7,646,898 13,525,049 $9.01 $12.70 $8.59 – $9.13 $11.75 – 12.65 7,400,000 - 8,200,000 13,700,000 – 15,200,000 OUR LEADING SILVER PRODUCER, POWERED BY CLEAN HYDROELECTRICITY The San Dimas Silver/Gold Mine, one of Mexico’s most important silver and gold mines, is the largest producing underground mine in the state of Durango. Mining was first recorded at San Dimas in 1757. The property covers 71,868 hectares of mining concessions located approximately 130 kilometres northwest of the city of Durango, which has a population 655,000. Since its acquisition in 2018, San Dimas has become First Majestic’s largest mine producing approximately 50% Silver and 50% Gold. The mine employs around 1,800 people, most from the nearby town of Tayoltita. San Dimas is fortunate to have over 50% of the mine’s power provided by environmentally clean, low-cost hydroelectric generation. First Majestic has begun engineering and the permitting process to potentially expand the dam to supply up to 100% of the power for both the mine and the town of Tayoltita. San Dimas uses long-hole stoping and mechanized cut-and-fill underground mining methods, with all mined production processed at the 2,500 tpd capacity milling operation. After milling, cyanidation, precipitation, and smelting, doré bars are poured and transported to refineries in México and the United States. Underground development at San Dimas totaled 25,220 metres in 2021, compared with 26,154 metres in 2020. Exploration drilling totaled 99,825 metres, compared with 87,659 metres in 2020. 20 FIRST MAJESTIC SILVER 2021 ANNUAL REPORT 21 Santa Elena Silver/Gold Mine Sonora State, México HIGHLIGHTS Ownership 2021 Silver Production (ounces) 2021 Silver Equivalent Production (ounces) 2021 Cash Costs per Ounce 2021 All-In Sustaining Costs per Ounce 2022 Projected Cash Costs per Ounce 2022 Projected All-In Sustaining Costs per Ounce 2022 Projected Silver Production (ounces) 2022 Projected Silver Equivalent Production (ounces) 100% 1,954,491 5,041,937 $15.40 $19.20 $13.06 – $13.86 $15.58 – $16.66 1,900,000 – 2,100,000 6,600,000 – 7,400,000 COMMISSIONED ERMITAÑO, A NEW UNDERGROUND MINE IN RECORD TIME OF 5 YEARS FROM DISCOVERY The Santa Elena Silver/Gold Mine is located approximately 150 kilometres northeast of the city of Hermosillo in Sonora State, México. The mining concessions at Santa Elena cover a surface of 102,244 hectares, the largest in the company, encompassing major geological structures that appear to be controlling some of the region’s best mineralized systems. The Santa Elena operation consists of the Santa Elena mine and the new Ermitaño mine. The Santa Elena processing plant is currently using a campaign method of ore processing for treating the Santa Elena and Ermitaño ores separately. To achieve optimum metal recoveries and efficiencies, operating throughputs will be adjusted throughout the year. An innovative dual- circuit plant processing design including an additional leach tank, CCD thickener and new high-capacity tailings filter press is currently being constructed, which is anticipated to allow for higher throughputs, recoveries and cost reductions by Q4 2022. A major milestone achieved in 2021 was the completion of the 12.4 MW Liquid Natural Gas power generation facility in April. The new LNG plant replaces the historic diesel generators, substantially reducing the greenhouse gas emissions and improving the environment footprint of the Santa Elena operation. As a result of the Ermitaño mine coming online, ahead of schedule, this LNG plant will be expanded to roughly 20 MW by year end. Approximately 68,100 metres of infill and near mine drilling are planned to continue testing the Santa Elena Main, Alejandra del Bajo, America, Fenix and Ermitaño veins. Brownfield drilling is expected to focus on several targets at both Santa Elena and Ermitaño, and additional greenfield drilling is planned to test key prospects already identified within this very large property. Underground development at Santa Elena totaled 18,119 metres in 2021, compared with 7,851 metres in 2020. Exploration drilling totaled 63,977 metres, compared with 39,451 metres in 2020. 22 FIRST MAJESTIC SILVER 2021 ANNUAL REPORT 23 La Encantada Silver Mine Coahuila State, México HIGHLIGHTS Ownership 2021 Silver Production (ounces) 2021 Silver Equivalent Production (ounces) 2021 Cash Costs per Ounce 2021 All-in Sustaining Costs per Ounce 2022 Projected Cash Costs per Ounce 2022 Projected All-In Sustaining Costs per Ounce 2022 Projected Silver Production (ounces) 2022 Projected Silver Equivalent Production (ounces) 100% 3,241,556 3,274,798 $13.49 $16.66 $14.82 - $15.74 $17.89 - $19.15 2,900,000 – 3,200,000 2,900,000 – 3,200,000 ONE OF OUR ORIGINAL MINES ACHIEVES RECORD SILVER PRODUCTION The La Encantada Silver Mine, producing almost entirely silver, is located in northern México, 708 kilometres northeast of Torreon, Coahuila. The project includes a 4,000 tpd cyanidation mill, and the site encompasses 4,076 hectares of mining concessions and 1,343 hectares of surface rights. The La Encantada property has been in First Majestic’s portfolio since 2006 and is a 100% silver producer of silver in the form of doré bars. The Company recently completed a land access agreement with the Tenochtitlan Ejido. This agreement has opened a significant amount of new, unexplored surface areas that are being planned for exploration 2022. Late in 2021, the Company completed 77 metres of an underground ramp to access the Ojuelas orebody which is known to contain higher silver grades. The Company is planning to prepare the area for initial ore extraction in the second half of 2022. Natural gas generators currently supply 90% of power requirements, providing significant cost savings over diesel generation and producing considerably less greenhouse gas emissions. For 2022, First Majestic is focused on achieving higher recoveries at La Encantada with recent changes made to milling operations and improved ore production from caving. We’re also evaluating modifications to the existing roasting circuit to reprocess tailings and mine ore which is expected to add additional production in the following years assuming current studies confirm feasibility. The Company also plans approximately 19,000 metres of near-mine drilling in 2022 to continue adding resources on several existing areas and brownfield drilling to test several high potential targets. Underground development at La Encantada totaled 3,305 metres in 2021, compared with 3,674 metres in 2020. Exploration drilling totaled 15,373 metres, compared with 18,611 metres in 2020. 24 FIRST MAJESTIC SILVER 2021 ANNUAL REPORT 25 Measured and Indicated Mineral Resource Estimates for the Material Properties, With an Effective Day of December 31, 2021 Mineral Resource Statement prepared under the supervision of Ramon Mendoza Reyes, P.Eng., QP for First Majestic Mine/Project Category/Area Mineral Type Tonnage k tonnes Grades Metal Content Ag (g/t) Au (g/t) Ag-Eq (g/t) Ag (k Oz) Au (k Oz) Ag-Eq (k Oz) MATERIAL PROPERTIES SAN DIMAS Measured (UG) Indicated (UG) Total Measured and Indicated (UG) Sulphides Sulphides Sulphides JERRITT CANYON Measured (UG) Indicated (UG) Indicated (OP) Total Measured and Indicated SANTA ELENA Measured Ermitano (UG) Measured Santa Elena (UG) Indicated Ermitano (UG) Indicated Santa Elena (UG) Indicated (Leach Pad) Total Measured and Indicated (UG+Pad) Sulphides Sulphides Sulphides All Mineral Types Sulphides Sulphides Sulphides Sulphides Oxides Spent Ore All Mineral Types LA ENCANTADA Indicated (UG) Indicated Tailings Deposit No. 4 Total Measured and Indicated (UG+Tailings) Oxides Oxides All Mineral Types SUBTOTAL MATERIAL PROPERTIES 2,546 1,906 4,452 4,068 4,303 180 8,550 119 723 2,498 2,276 190 5,806 4,308 2,459 6,767 Total Measured Total Indicated Total Measured and Indicated All mineral types All mineral types All mineral types 7,456 18,120 25,575 474 336 415 - - - - 56 155 68 127 34 101 169 119 151 178 117 135 6.15 3.83 5.15 5.85 5.90 4.00 5.84 5.54 1.65 4.75 1.35 0.61 2.92 - - - 5.54 2.68 3.51 924 616 792 421 425 288 420 627 278 558 228 79 379 169 119 151 582 331 404 38,780 20,580 59,360 - - - - 210 3,610 5,440 9,320 210 18,790 23,410 9,410 32,820 42,600 68,370 110,970 503 235 738 - 765 816 23 1,604 21 38 382 99 4 544 - - - 75,640 37,770 113,410 55,050 58,780 1,660 115,490 2,400 6,450 44,790 16,680 490 70,810 23,410 9,410 32,820 1,327 1,559 2,886 139,540 192,990 332,530 Inferred Mineral Resource Estimates for the Material Properties, With an Effective Day of December 31, 2021 Mineral Resource Statement prepared under the supervision of Ramon Mendoza Reyes, P.Eng., QP for First Majestic Mine/Project Category/Area Mineral Type Tonnage k tonnes Grades Metal Content Ag (g/t) Au (g/t) Ag-Eq (g/t) Ag (k Oz) Au (k Oz) Ag-Eq (k Oz) MATERIAL PROPERTIES SAN DIMAS Inferred Total (UG) Sulphides 4,073 310 3.54 570 40,660 463 74,630 JERRITT CANYON SANTA ELENA Inferred Total (UG) Inferred Total (OP) Inferred Total (UG & OP) Inferred Ermitaño (UG) Inferred Santa Elena (UG) Inferred Total (UG) LA ENCANTADA Sulphides Sulphides Sulphides Sulphides Sulphides Sulphides Inferred Total (UG) Inferred Inferred Tailings Deposit No. 4 Inferred Total (UG + Tailings) Oxides Oxides All Mineral Types 6,778 150 6,927 3,157 1,674 4,831 3,470 428 3,898 Total Inferred Material Properties All mineral types 19,730 - - - 78 114 91 170 118 164 119 5.65 3.89 5.61 2.99 1.16 2.36 - - - 407 280 404 386 200 322 170 118 164 - - - 7,900 6,160 14,060 18,930 1,620 20,550 1,231 19 1,249 304 62 366 - - - 88,600 1,350 89,950 39,180 10,790 49,970 18,930 1,620 20,550 3.28 371 75,270 2,078 235,100 1. Mineral Resource estimates have been classified in accordance with the 2014 Canadian Institute of Mining, Metallurgy and Petroleum (“CIM”) Definition Standards on Mineral Resources and Mineral Reserves, whose definitions are incorporated by reference into National Instrument NI 43-101. 2. The Mineral Resource estimates provided above have an effective date of December 31, 2021, for the Material Properties. The estimates were prepared by FMS Internal QPs, who have the appropriate relevant qualifications, and experience in geology and resource estimation. The information provided was compiled by David Rowe, CPG, Internal QP for First Majestic, and reviewed by Ramon Mendoza Reyes, P.Eng., Internal QP for First Majestic. 3. Sample data was collected through a cut-off date of December 31, 2021, for the material properties. All properties account for relevant technical information and mining depletion through December 31, 2021. 4. Metal prices considered for Mineral Resources estimates were $25.00/oz Ag and $1,800/oz Au. 5. Silver-equivalent grade is estimated considering metal price assumptions, metallurgical recovery for the corresponding mineral type/mineral process and the metal payable of the corresponding contract of each mine. Estimation details are listed in each mine section of the 2021 Annual Information Form. 6. The cut-off grades and cut-off values used to report Mineral Resources are different for all mines. The cut-off grades, values and economic parameters are listed in the applicable section describing each mine section of the 2021 Annual Information Form. 7. Measured and Indicated Mineral Resource estimates are inclusive of the Mineral Reserve estimates. 8. The technical reports from which the above-mentioned information for the material properties is derived are cited under the heading “Technical Reports for Material Properties” of the 2021 Annual Information Form. 26 Measured and Indicated Mineral Resource Estimates for the Non-Material Properties, With an Effective Day of December 31, 2020 Prepared under the supervision of Ramon Mendoza Reyes, P.Eng., QP for First Majestic Mine/Project Category/Area Mineral Type Tonnage Grades Metal Content k tonnes Ag (g/t) Au (g/t) Pb (%) Zn (%) Ag-Eq (g/t) Ag (k Oz) Au (k Oz) Pb (M lb) Zn (M lb) Ag-Eq (k Oz) NON-MATERIAL PROPERTIES SAN MARTIN Measured (UG) Indicated (UG) Total Measured and Indicated (UG) Oxides Oxides Oxides LA PARRILLA DEL TORO LA GUITARRA Measured (UG) Indicated (UG) Indicated (UG) Total Measured and Indicated (UG) Sulphides Sulphides Oxides Oxides + Sulphides Indicated (UG) Indicated (UG) Total Measured and Indicated (UG) Sulphides Oxides + Transition All Mineral Types Measured (UG) Indicated (UG) Total Measured and Indicated (UG) Sulphides Sulphides Sulphides TOTAL NON-MATERIAL PROPERTIES 70 958 1,028 15 1,028 76 1,119 440 153 592 57 644 701 Total Measured Total Indicated Total Measured and Indicated All mineral types All mineral types All mineral types 142 3,298 3,440 221 277 273 193 193 270 198 193 226 201 217 228 228 216 227 227 0.40 0.53 0.52 - 0.07 0.09 0.07 0.53 0.15 0.43 1.55 1.19 1.22 0.82 0.49 0.50 - - - 1.27 1.78 - 1.65 3.52 4.97 3.90 - - - - - - 1.27 1.62 - 1.50 5.75 - 4.27 - - - 0.13 1.25 1.21 0.13 1.27 1.22 255 321 317 250 277 278 277 414 351 398 347 328 330 291 322 320 500 8,520 9,020 90 6,370 660 7,120 2,720 1,110 3,830 400 4,730 5,130 990 24,110 25,100 1 16 17 - 2 0 3 7 1 8 3 25 28 4 52 55 - - - 0.4 40.3 - 40.7 34.2 16.7 50.9 - - - - - - 580 9,890 10,470 0.4 36.6 - 37.0 55.7 - 55.7 - - - 120 9,160 680 9,960 5,850 1,720 7,570 640 6,800 7,440 0.4 91.1 91.5 0.4 92.4 92.8 1,340 34,100 35,440 Inferred Mineral Resource Estimates for the Non-Material Properties, With an Effective Day of December 31, 2020 Prepared under the supervision of Ramon Mendoza Reyes, P.Eng., QP for First Majestic Mine/Project Category/Area Mineral Type Tonnage Grades Metal Content k tonnes Ag (g/t) Au (g/t) Pb (%) Zn (%) Ag-Eq (g/t) Ag (k Oz) Au (k Oz) Pb (M lb) Zn (M lb) Ag-Eq (k Oz) NON-MATERIAL PROPERTIES SAN MARTIN LA PARRILLA DEL TORO LA GUITARRA Inferred Total (UG) Oxides 2,533 226 0.36 - - 256 18,400 29 - - 20,870 Inferred (UG) Inferred (UG) Inferred Total (UG) Inferred (UG) Inferred (UG) Inferred Total (UG) Oxides Sulphides All Mineral Types Sulphides Oxides + Transition All Mineral Types 393 1,028 1,421 496 690 1,186 200 215 211 185 182 183 0.08 0.09 0.09 0.25 0.08 0.15 - 1.56 1.13 3.08 3.74 3.46 - 1.91 1.38 2.73 - 1.15 207 299 274 322 273 293 2,530 7,090 9,620 2,950 4,030 6,970 1 3 4 4 2 6 - 35.4 35.4 33.7 56.8 90.5 - 43.3 43.3 29.8 - 30.1 2,610 9,890 12,500 5,130 6,050 11,180 Inferred Total (UG) Sulphides 1,044 240 0.71 - - 299 8,040 24 - - 10,030 Total Inferred Non-Material Properties All mineral types 6,184 216 0.32 0.92 0.54 275 43,030 63 125.9 73.4 54,580 1. Mineral Resource estimates have been classified in accordance with the 2014 Canadian Institute of Mining, Metallurgy and Petroleum (“CIM”) Definition Standards on Mineral Resources and Mineral Reserves, whose definitions are incorporated by reference into National Instrument NI 43-101. 2. The Mineral Resource estimates for the non-material properties were updated December 31, 2020. The estimates were prepared by FMS Internal QPs, who have the appropriate relevant qualifications, and experience in geology and resource estimation. The information provided was compiled by David Rowe, CPG, Internal QP for First Majestic, and reviewed by Ramon Mendoza Reyes, P.Eng., Internal QP for First Majestic. 3. Sample data was collected through a cut-off date of December 31, 2020, for non-material properties. 4. Metal prices considered for Mineral Resources estimates on December 31, 2020 were $22.50/oz Ag, $1,850/oz Au, $0.90/lb Pb and $1.05/lb Zn. 5. Silver-equivalent grade is estimated considering: metal price assumptions, metallurgical recovery for the corresponding mineral type/mineral process and the metal payable of the corresponding contract of each mine. 6. The cut-off grades and cut-off values used to report Mineral Resources are different for all mines. The cut-off grades, values and economic parameters are listed in the applicable section describing each mine section of the Annual Information Form. 7. Tonnage is expressed in thousands of tonnes, metal content is expressed in thousands of ounces. Totals may not add up due to rounding. FIRST MAJESTIC SILVER 2021 ANNUAL REPORT 27 Proven and Probable Mineral Reserves, With an Effective Date of December 31, 2021 Summary consolidated by Ramon Mendoza Reyes, P.Eng., QP Mining for First Majestic Silver Corp. Mine Category Mineral Type SAN DIMAS Proven (UG) Probable (UG) Total Proven and Probable (UG) JERRITT CANYON Proven (UG) Probable (UG) Total Proven and Probable (UG) SANTA ELENA Proven (UG - Ermitano) Proven (UG - Santa Elena) Probable (UG - Ermitano) Probable (UG - Santa Elena) Probable (Pad) Total Proven and Probable (UG+Pad) LA ENCANTADA Probable (UG) Total Probable (UG) Consolidated FMS Proven (UG) Probable (UG) Total Proven and Probable Sulphides Sulphides Sulphides Oxides Oxides Oxides Sulphides Sulphides Sulphides Sulphides Oxides Oxides + Sulphides Oxides Oxides All mineral types All mineral types All mineral types Tonnage k tonnes 2,328 1,506 3,834 847 1,682 2,529 162 447 2,627 1,133 188 4,557 2,260 2,260 3,784 9,397 13,181 Grades Metal Content Ag (g/t) Au (g/t) Ag-Eq (g/t) Ag (k Oz) Au (k Oz) Ag-Eq (k Oz) 348 265 315 - - - 45 144 52 134 31 80 170 170 216 122 149 4.42 3.02 3.87 5.23 5.50 5.41 4.70 1.68 3.60 1.26 0.55 2.74 - - 4.09 2.72 3.11 697 504 621 407 428 421 569 279 453 236 75 371 170 170 545 368 419 26,050 12,820 38,870 - - - 240 2,060 4,430 4,870 190 11,790 12,350 12,350 28,350 34,660 63,010 331 146 477 143 297 440 25 24 304 46 3 402 - - 52,190 24,390 76,580 11,080 23,120 34,200 2,970 4,010 38,260 8,600 450 54,290 12,350 12,350 522 797 1,319 70,250 107,170 177,420 1. Mineral Reserves have been classified in accordance with the Canadian Institute of Mining, Metallurgy and Petroleum (“CIM”) Definition Standards on Mineral Resources and Mineral Reserves, whose definitions are incorporated by reference into NI 43-101. 2. The Mineral Reserve statement provided in the table above have an effective date of December 31, 2021. The Mineral Reserve estimates were prepared under the supervision of Ramón Mendoza Reyes, P.Eng., and a Qualified Person (“QP”) for the purposes of NI 43-101 who has the appropriate relevant qualifications, and experience in mining and mineral reserves estimation. 3. The Mineral Reserves were estimated from the Measured and Indicated portions of the Mineral Resource estimate. Inferred Mineral Resources were not considered to be converted into Mineral Reserves. 4. Silver-equivalent grade (Ag-Eq) is estimated considering metal price assumptions, metallurgical recovery for the corresponding mineral type/mineral process and the metal payable of the selling contract. (a) The Ag-Eq grade formula used was: Ag-Eq Grade = Ag Grade + Au Grade * (Au Recovery * Au Payable * Au Price) / (Ag Recovery * Ag Payable * Ag Price). (b) Metal prices considered for Mineral Reserves estimates were $22.50/oz Ag and $1,750/oz Au for all sites. The silver-equivalent factor used for Jerritt Canyon was 77.8 g/t Ag-Eq per 1 g/t Au. (c) Other key assumptions and parameters include: metallurgical recoveries; metal payable terms; direct mining costs, processing costs, indirect and G&A costs and sustaining costs. These parameters are different for each mine and mining method assumed and are presented in each mine section of the 2021 Annual Information Form. 5. A two-step constraining approach has been implemented to estimate reserves for each mining method in use: A General Cut-Off Grade (GC) was used to delimit new mining areas that will require development of access, infrastructure and all sustaining costs. A second Incremental Cut-Off Grade (IC) was considered to include adjacent mineralized material which recoverable value pays for all associated costs, including but not limited to the variable cost of mining and processing, indirect costs, treatment, administration costs and plant sustaining costs but excludes the access development assumed to be covered by the block above the GC grade. 6. The cut-off grades, metallurgical recoveries, payable terms and modifying factors used to convert Mineral Reserves from Mineral Resources are different for all mines and are presented in each mine section in the 2021 Annual Information Form. 7. Modifying factors for conversion of resources to reserves include consideration for planned dilution which is based on spacial and geotechnical aspects of the designed stopes and economic zones, additional dilution consideration due to unplanned events, materials handling and other operating aspects, and mining recovery factors. Mineable shapes were used as geometric constraints. 8. Tonnage is expressed in thousands of tonnes; metal content is expressed in thousands of ounces. Metal prices and costs are expressed in USD. 9. Numbers have been rounded as required by reporting guidelines. Totals may not sum due to rounding. 10. The technical reports from which the above-mentioned information is derived are cited under the heading “Technical Reports for Material Properties” in the 2021 Annual Information Form. Production 2021 Ore Processed Material from Reserves Mined and Processed Material Mined from Areas Not In Reserves Silver Produced Gold Produced Silver-Equivalent Produced from Gold (1) Silver-Equivalent Produced 28 Units Tonnes Tonnes Tonnes Ounces Ounces Ounces Ounces SAN DIMAS SANTA ELENA LA ENCANTADA JERRITT CANYON TOTAL 822,791 768,829 53,962 879,060 873,151 5,909 1,004,144 255,262 748,882 633,400 171,000 462,400 3,339,394 2,068,242 1,271,153 7,646,898 1,954,492 3,241,555 0 12,842,945 81,237 42,088 5,878,151 3,087,445 460 33,243 68,567 192,353 5,013,999 14,012,838 13,525,049 5,041,937 3,274,798 5,013,999 26,855,783 Management’s Responsibilities over Financial Reporting The consolidated financial statements of First Majestic Silver Corp. (the “Company”) have been prepared and are the responsibility of the Company’s management. The consolidated financial statements are prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board and reflect management’s best estimates and judgment based on information currently available. Management has developed and maintains a system of internal controls to ensure that the Company’s assets are safeguarded, transactions are authorized and properly recorded, and financial information is reliable. The Board of Directors is responsible for ensuring management fulfills its responsibilities. The Audit Committee reviews the results of the audit and the annual consolidated financial statements prior to their submission to the Board of Directors for approval. The consolidated financial statements have been audited by Deloitte LLP and their report outlines the scope of their examination and gives their opinion on the consolidated financial statements. Keith Neumeyer President & CEO March 9, 2022 Andrew W. Poon, CPA, CA Interim CFO March 9, 2022 29 FIRST MAJESTIC SILVER 2021 ANNUAL REPORTMANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Management excluded from its assessment the internal controls, policies and procedures of Jerritt Canyon, which the Company acquired control on April 30, 2021. Jerritt Canyon’s total assets, net assets, total revenues and net profit/loss on a combined basis constitute approximately 34%, 35%, 21% and 653%, respectively, of these consolidated annual financial statement amounts as of and for the year ended December 31, 2021. This limitation of scope is in accordance with section 3.3(1)(b) of NI 52-109, which allows for an issuer to limit the design of DC&P or ICFR to exclude a business that the issuer acquired not more than 365 days before the end of the financial period to which the CEO’s and CFO’s certification of annual filings relates. The Company’s management assessed the effectiveness of the Company’s Internal control over financial reporting as of the year ended December 31, 2021, in accordance with the criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management concluded that, as of the year ended December 31, 2021, the Company’s internal control over financial reporting was effective. Deloitte LLP, an Independent Registered Public Accounting Firm, has audited the Company’s consolidated financial statements for the year ended December 31, 2021, and as stated in the Report of Independent Registered Public Accounting Firm, they have expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting as of the year ended December 31, 2021. 30 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the Board of Directors of First Majestic Silver Corp. Opinion on the Financial Statements We have audited the accompanying consolidated statements of financial position of First Majestic Silver Corp. and subsidiaries (the “Company”) as at December 31, 2021 and 2020, the related consolidated statements of earnings (loss), comprehensive income (loss), changes in equity and cash flows, for each of the two years in the period ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2021 and 2020, and its financial performance and its cash flows for each of the two years in the period ended December 31, 2021, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 9, 2022, expressed an unqualified opinion on the Company’s internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate. Acquisition of Jerritt Canyon Canada Ltd. (“Jerritt Canyon”) — Refer to Note 4 to the financial statements Critical Audit Matter Description On April 30, 2021 the Company completed the acquisition of 100% of Jerritt Canyon and recognized the assets acquired, including a mining interest, and liabilities assumed at fair value. In determining the fair value of mining interest management used an income approach (discounted cashflow) and a market approach which required management to make assumptions around future gold prices, quantities of reserves, expected future production costs and capital expenditures based on the life of mine plans, discount rate and the area-based resources multiples to determine exploration potential. While there are several estimates and assumptions that are required to determine the fair value of the mining interest, the estimates and assumptions with the highest degree of subjectivity are future gold prices, discount rate and the area-based resources multiples. This required a high degree of auditor judgment and an increased extent of audit effort, including the involvement of fair value specialists. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the future gold prices, discount rate and area-based resources multiples used to determine the fair value of the mining interest included the following, among others: • Evaluated the effectiveness of the Company’s controls over management’s determination of estimates and assumptions relating to future gold prices, discount rate, and area-based resources multiples. • With the assistance of fair value specialists, evaluated the reasonableness of: - Future gold prices by comparing forecasts to third party forecasts, - The discount rate by developing a range of independent estimates and comparing those to the discount rate selected by management, and - Area-based resources multiples applied to determine the valuation of the exploration potential by comparing to a range of comparable market transactions. 31 FIRST MAJESTIC SILVER 2021 ANNUAL REPORTPrimero Tax Rulings — Refer to Note 27(b) to the financial statements Critical Audit Matter Description The Company has an ongoing dispute with the Mexican Tax Authorities, the Servicio de Administracion Tributaria (“SAT”). The dispute relates to the determination of the transfer price, which is based upon an Advanced Pricing Agreement (“APA”) from the SAT, applied to intercompany silver sales in connection with a silver streaming arrangement with an unrelated third party. In 2020, the Mexican Federal Court on Administrative Matters issued a decision nullifying the APA and directing the SAT to reexamine the evidence and basis for the issuance of the APA; the Company has appealed this decision to the Mexican Circuit Courts. As a result of the tax dispute with the SAT, should the Company ultimately be required to pay tax on its intercompany silver revenues based on market prices, the incremental income tax for the years 2010 - 2019 would be approximately $228.5 million, before interest and penalties, without any mitigating adjustments. The Company has not recognized a tax liability related to the Primero tax dispute with the SAT. The evaluation of the accounting and the disclosure of the matter requires significant management judgment to determine the probability of having to pay incremental income tax. Auditing the accounting and the disclosures related to the tax matter required a high degree of auditor judgment due to the significant judgment by management and evaluating whether the audit evidence supports management’s position. This resulted in an increased extent of audit effort, including the involvement of tax specialists. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures relating to the evaluation of the accounting and disclosure related to the tax matter included the following, among others: • Inquired of management to understand the developments of the tax dispute; • Evaluated the effectiveness of management’s controls over the evaluation of the appropriateness of income tax filing positions and corresponding disclosures in the financial statements; • Obtained and evaluated management’s assessment of the dispute, including analysis from the Company’s external counsel; • With the assistance of tax specialists, analyzed the Company’s accounting position related to the tax dispute; and • Evaluated the Company’s disclosures for consistency with our knowledge of the Company’s tax matters and audit evidence obtained. /s/ Deloitte LLP Chartered Professional Accountants Vancouver, Canada March 9, 2022 We have served as the Company’s auditor since 2005. 32 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the Board of Directors of First Majestic Silver Corp. Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of First Majestic Silver Corp. and subsidiaries (the “Company”) as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as at and for the year ended December 31, 2021, of the Company and our report dated March 9, 2022, expressed an unqualified opinion on those financial statements. As described in Management’s Report on Internal Control over Financial Reporting, management excluded from its assessment the internal control over financial reporting at Jerritt Canyon Canada Ltd. (“Jerritt Canyon”), which was acquired on April 30, 2021, and whose financial statements constitute 34% and 35% of total and net assets, respectively, 21% of revenues, and 653% of net profit/loss of the consolidated financial statement amounts as of and for the year ended December 31, 2021. Accordingly, our audit did not include the internal control over financial reporting at Jerritt Canyon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Deloitte LLP Chartered Professional Accountants Vancouver, Canada March 9, 2022 33 FIRST MAJESTIC SILVER 2021 ANNUAL REPORTCONSOLIDATED STATEMENTS OF EARNINGS (LOSS) FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020 (In thousands of US dollars, except share and per share amounts) The Consolidated Statements of Earnings (Loss) provide a summary of the Company’s financial performance and net earnings or loss over the reporting periods. Revenues Mine operating costs Cost of sales Cost of sales - standby costs Depletion, depreciation and amortization Mine operating earnings General and administrative expenses Share-based payments Mine holding costs Loss on divestiture of exploration projects Acquisition costs Foreign exchange (gain) loss Operating earnings Unrealized loss on foreign currency derivatives Investment and other (loss) income Finance costs Earnings before income taxes Income taxes Current income tax expense Deferred income tax recovery Net (loss) earnings for the year (Loss) earnings per common share      Basic      Diluted Weighted average shares outstanding      Basic      Diluted Approved by the Board of Directors Year Ended December 31, Note 2021 2020 6 7 7 8 9 4 10 11 23 23 12 12 12 12 $584,117 $363,876 366,085 — 116,613 482,698 194,305 10,112 54,405 258,822 101,419 105,054 27,063 12,290 12,056 — 1,973 (1,165) 49,202 — (2,948) (21,004) 25,250 49,283 (19,110) 30,173 24,855 8,255 21,583 3,685 — 6,319 40,357 (982) 5,127 (14,773) 29,729 9,966 (3,324) 6,642 ($4,923) $23,087 ($0.02) ($0.02) $0.11 $0.11 244,749,772 213,879,622 244,749,772 215,878,829 Keith Neumeyer, Director Douglas Penrose, Director The accompanying notes are an integral part of the audited consolidated financial statements 34                         CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020 (In thousands of US dollars) The Consolidated Statements of Comprehensive Income (Loss) provide a summary of total comprehensive earnings or loss and summarizes items recorded in other comprehensive income that may or may not be subsequently reclassified to profit or loss depending on future events. Note Year Ended December 31, 2021 2020 Net (loss) earnings for the year ($4,923) $23,087 Other comprehensive (loss) income Items that will not be subsequently reclassified to net (loss) earnings: Unrealized (loss) gain on fair value of investments in marketable securities, net of tax Realized (loss) gain on investments in marketable securities, net of tax Remeasurement of retirement benefit plan 14(b) 14(b) (12,456) (1,439) 95 10,249 211 (515) Other comprehensive (loss) income Total comprehensive (loss) income (13,800) 9,945 ($18,723) $33,032 The accompanying notes are an integral part of the audited consolidated financial statements 35 FIRST MAJESTIC SILVER 2021 ANNUAL REPORT    CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020 (In thousands of US dollars) The Consolidated Statements of Cash Flows provide a summary of movements in cash and cash equivalents during the reporting periods by classifying them as operating, investing or financing activities. Operating Activities Net (loss) earnings for the year Adjustments for: Depletion, depreciation and amortization Share-based payments Income tax expense Finance costs Acquisition costs Loss of write-down of plant and equipment Loss (gain) from marketable securities and silver futures derivatives Loss on divestiture of exploration projects Fair value adjustment on foreign currency derivatives Unrealized foreign exchange gain Operating cash flows before working capital and taxes Net change in non-cash working capital items Income taxes paid Cash provided by operating activities Investing Activities Restricted cash acquired on the acquisition of Jerritt Canyon Reclassification to restricted cash related to the acquisition of Jerritt Canyon Expenditures on mining interests Acquisition of property, plant and equipment Deposits paid for acquisition of non-current assets Jerritt Canyon acquisition costs, net of cash acquired Acquisition of Springpole Silver Stream Other Cash used in investing activities Financing Activities Proceeds from prospectus offering, net of share issue costs Proceeds from 2021 convertible debenture, net of transaction costs Payment for redemption of 2018 convertible debenture Proceeds from exercise of stock options Repayment of lease liabilities Finance costs paid Proceeds from debt facilities Repayment of debt facilities Dividends declared and paid Shares repurchased and cancelled Cash provided by financing activities Effect of exchange rate on cash and cash equivalents held in foreign currencies (Decrease) increase in cash and cash equivalents Cash and cash equivalents, beginning of the year Cash and cash equivalents, end of year Cash Short-term investments Cash and cash equivalents, end of year Supplemental cash flow information The accompanying notes are an integral part of the audited consolidated financial statements 36 Year Ended December 31, Note 2021 2020 ($4,923) $23,087 118,283 12,290 30,173 21,004 1,973 2,501 1,521 — — (6,067) 176,755 (31,504) (76,528) 68,723 30,000 (12,574) (132,409) (56,558) (7,839) (948) — (425) 56,283 8,255 6,642 14,773 — — (4,051) 3,894 982 (2,522) 107,343 (22,831) (4,799) 79,713 — — (68,647) (43,322) (13,846) — (2,521) 1,221 (180,753) (127,115) 66,674 222,776 (171,841) 21,793 (9,287) (4,326) 30,000 (40,000) (3,930) (42) 111,817 (439) (213) 238,578 $237,926 $237,926 — $237,926 126,132 — — 14,011 (7,706) (4,200) 10,000 (19,969) — (1,694) 116,574 397 69,172 169,009 $238,578 $207,132 31,446 $238,578 11 4 10 15 26 4 18 4 15(d) 26 24(a) 20(a) 20(a) 21 20(b) 20(b) 24(g) 24(f) 26                                                                 CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS AT DECEMBER 31, 2021 AND 2020 (In thousands of US dollars) The Consolidated Statements of Financial Position provides a summary of assets, liabilities and equity, as well as their current versus non-current nature, as at the reporting date. Note December 31, 2021 December 31, 2020 Assets Current assets Cash and cash equivalents Restricted cash Trade and other receivables Value added taxes receivable Inventories Other financial assets Prepaid expenses and other Total current assets Non-current assets Mining interests Property, plant and equipment Right-of-use assets Deposits on non-current assets Non-current restricted cash Non-current value added taxes receivable Deferred tax assets Total assets Liabilities and Equity Current liabilities Trade and other payables Unearned revenue Current portion of debt facilities Current portion of lease liabilities Income taxes payable Total current liabilities Non-current liabilities Debt facilities Lease liabilities Decommissioning liabilities Other liabilities Non-current income taxes payable Deferred tax liabilities Total liabilities Equity Share capital Equity reserves Accumulated deficit Total equity Total liabilities and equity Commitments (Note 15; Contingencies (Note 27); Subsequent event (Note 30) The accompanying notes are an integral part of the audited consolidated financial statements 18(a) 25 13 14 15 16 17 18(b) 25(c) 23 19 6 20 21 23 20 21 22 23 23 $237,926 $238,578 12,570 7,729 46,531 60,613 26,486 5,352 — 4,271 41,641 32,512 36,319 2,725 397,207 356,046 1,048,530 449,237 29,225 10,949 115,012 572 74,257 509,730 258,220 14,330 14,246 — 15,301 69,644 $2,124,989 $1,237,517 $120,666 12,226 125 11,825 27,980 172,822 181,108 28,036 153,607 5,797 21,812 150,836 $76,002 2,717 10,975 5,358 6,574 101,626 141,733 15,217 51,471 5,406 23,099 48,729 $714,018 $387,281 1,659,781 98,943 (347,753) $1,410,971 $2,124,989 1,087,139 101,997 (338,900) $850,236 $1,237,517 37 FIRST MAJESTIC SILVER 2021 ANNUAL REPORT                                                                  CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31 2021 AND 2020 (In thousands of US dollars, except share and per share amounts) The Consolidated Statements of Changes in Equity summarizes movements in equity, including common shares, share capital, equity reserves and retained earnings or accumulated deficit. Share Capital Equity Reserves Shares Amount Share-based payments(a) Other comprehensive income(loss)(b) Equity component of convertible debenture(c) Total equity reserves Accumulated deficit Total equity Balance at December 31, 2019 208,112,072 $933,182 $74,060 ($2,532) $19,164 $90,692 ($361,553) $662,321 Net earnings for the year Other comprehensive income Total comprehensive income Share-based payments Shares issued for: — — — — — — — — — — — 8,255 Prospectus offerings (Note 24(a)) 10,654,338 126,132 — Exercise of stock options (Note 24(b)) Acquisition of Springpole Silver Stream (Note 15(d)) Acquisition of mining interests Settlement of restricted share units (Note 24(c)) Shares repurchased and cancelled (Note 24(f)) 2,473,906 19,914 (5,903) 805,698 66,997 127,000 7,479 700 992 (275,000) (1,260) — — (992) — — 9,945 9,945 — — — — — — — — — — — — — — — — — — 9,945 9,945 8,255 — (5,903) — — (992) 23,087 — 23,087 — — — — — — 23,087 9,945 33,032 8,255 126,132 14,011 7,479 700 — — (434) (1,694) Balance at December 31, 2020 221,965,011 $1,087,139 $75,420 $7,413 $19,164 $101,997 ($338,900) $850,236 Net loss for the year Other comprehensive loss Total comprehensive loss Share-based payments Shares issued for: — — — — — — — — — — — 12,421 Acquisition of Jerritt Canyon (Note 4) 26,719,727 416,561 23,150 Sprott private placement (Note 4) 1,705,514 Prospectus offerings (Note 24(a)) 4,225,000 Debt settlement (Note 20) 2,579,093 Exercise of stock options (Note 24(b)) 2,502,234 26,589 66,674 27,733 30,436 Acquisition of Springpole Silver Stream (Note 15(d)) Settlement of restricted share units (Note 24(c) and 24(e)) Equity component of convertible notes, net of tax (Note 20) Shares repurchased and cancelled (Note 24(f)) Dividend declared and paid (Note 24(g)) 287,300 3,750 73,692 — (6,913) — 941 — (42) — — — — (8,643) — (963) — — — — (13,800) (13,800) — — — — — — — — — — — — — — — — — — (13,800) (13,800) 12,421 23,150 — — (46,127) (46,127) — — — (8,643) — (963) 30,908 30,908 — — — — — (4,923) (4,923) (13,800) — (4,923) (18,723) — — — — — — — — — — (3,930) 12,421 439,711 26,589 66,674 (18,394) 21,793 3,750 (22) 30,908 (42) (3,930) Balance at December 31, 2021 260,050,658 $1,659,781 $101,385 ($6,387) $3,945 $98,944 ($347,753) $1,410,971 (a) Share-based payments reserve records the cumulative amount recognized under IFRS 2 share-based payments in respect of stock options granted, restricted share units and shares purchase warrants issued but not exercised or settled to acquire shares of the Company. (b) Other comprehensive income reserve principally records the unrealized fair value gains or losses related to fair value through other comprehensive income (“FVTOCI”) financial instruments and re-measurements arising from actuarial gains or losses and return on plan assets in relation to San Dimas’ retirement benefit plan. (c) Equity component of convertible debenture reserve represents the estimated fair value of its conversion option of $42.3 million, net of deferred tax effect of $11.4 million. This amount is not subsequently remeasured and will remain in equity until the conversion option is exercised, in which case, the balance recognized in equity will be transferred to share capital. Where the conversion option remains unexercised at the maturity date of the convertible note, the balance will remain in equity reserves. e capital. Where the conversion option remains unexercised at the maturity date of the convertible note, the balance will remain in equity reserves. The accompanying notes are an integral part of the audited consolidated financial statements 38 NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts are expressed in thousands of US dollars) 1. NATURE OF OPERATIONS New and amended IFRS standards that are effective for the current year First Majestic Silver Corp. (the “Company” or “First Majestic”) is in the business of production, development, exploration, and acquisition of mineral properties with a focus on silver and gold production in North America. The Company owns four producing mines, three mines in Mexico consisting of the San Dimas Silver/Gold Mine, the Santa Elena Silver/Gold Mine and the La Encantada Silver Mine and the recently acquired Jerritt Canyon Gold Mine in Nevada, USA (see Note 4). In addition, the Company owns four mines in suspension: the San Martin Silver Mine, the Del Toro Silver Mine, the La Parrilla Silver Mine and the La Guitarra Silver/Gold Mine, and several exploration stage projects. First Majestic is incorporated in Canada with limited liability under the legislation of the Province of British Columbia and is publicly listed on the New York Stock Exchange under the symbol “AG”, on the Toronto Stock Exchange under the symbol “FR” and on the Frankfurt Stock Exchange under the symbol “FMV”. The Company’s head office and principal address is located at 925  West Georgia Street, Suite 1800, Vancouver, British Columbia, Canada, V6C 3L2. 2. BASIS OF PRESENTATION These audited consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”). The significant accounting policies, estimates and judgments applied in preparing these consolidated financial statements are summarized in Note 3 of the consolidated financial statements and have been consistently applied throughout all periods presented. These audited consolidated financial statements have been prepared on an historical cost basis except for certain items that are measured at fair value such as other financial assets (Note 14). All dollar amounts presented are in thousands of United States dollars unless otherwise specified. These audited consolidated financial statements incorporate the financial statements of the Company and its controlled subsidiaries. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The consolidated financial statements include the accounts of the Company and its subsidiaries (see Note 28). Intercompany balances, transactions, income and expenses are eliminated on consolidation.  In the current year, the Company has applied the below amendments to IFRS Standards and Interpretations issued by the International Accounting Standards Board (“IASB”) that were effective for annual periods that begin on or after January 1, 2021. Their adoption has not had any material impact on the disclosures or on the amounts reported in these financial statements. Interest Rate Benchmark Reform - Phase 2(Amendments to IFRS 9, I AS 39, IFRS 7, IFRS 4 and IFRS 16) The amendments in Interest Rate Benchmark Reform — Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16) introduce a practical expedient for modifications required by the reform, clarify that hedge accounting is not discontinued solely because of the IBOR reform, and introduce disclosures that allow users to understand the nature and extent of risks arising from the IBOR reform to which the entity is exposed to and how the entity manages those risks as well as the entity’s progress in transitioning from IBORs to alternative benchmark rates, and how the entity is managing this transition. Business Combinations Accounting Policy: Acquisitions of businesses are accounted for using the acquisition method. The consideration of each business combination is measured, at the date of the exchange, as the aggregate of the fair value of assets given, liabilities incurred or assumed and equity instruments issued by the Company to the former owners of the acquiree in exchange for control of the acquiree. Acquisition-related costs incurred for the business combination are expensed. The acquiree’s identifiable assets, liabilities and contingent liabilities are recognized at their fair value at the acquisition date. Goodwill arising on acquisition is recognized as an asset and initially measured at cost, being the excess of the consideration of the acquisition over the Company’s interest in the fair value of the net identifiable assets, liabilities and contingent liabilities recognized. If the Company’s interest in the fair value of the acquiree’s net identifiable assets, liabilities and contingent liabilities exceeds the cost of the acquisition, the excess is recognized in earnings or loss immediately. Goodwill may also arise as a result of the requirement under IFRS to record a deferred tax liability on the excess of the fair value of the acquired assets over their corresponding tax bases, with the corresponding offset recorded as goodwill. These audited consolidated financial statements of First Majestic Silver Corp. for the years ended December 31, 2021 and 2020 were approved and authorized for issue by the Board of Directors on March 9, 2022. Accounting Estimates and Judgments: Determination of a Business 3. SIGNIFICANT ACCOUNTING POLICIES, ESTIMATES AND JUDGMENTS The Company’s management makes judgments in its process of applying the Company’s accounting policies in the preparation of its audited annual consolidated financial statements. In addition, the preparation of the financial data requires that the Company’s management to make assumptions and estimates of the impacts of uncertain future events on the carrying amounts of the Company’s assets and liabilities at the end of the reporting period, and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates as the estimation process is inherently uncertain. Estimates are reviewed on an ongoing basis based on historical experience and other factors that are considered to be relevant under the circumstances. Revisions to estimates and the resulting impacts on the carrying amounts of the Company’s assets and liabilities are accounted for prospectively. Determination of whether a set of assets acquired and liabilities assumed constitute a business may require the Company to make certain judgments, taking into account all facts and circumstances. A business consists of inputs, including non-current assets and processes, including operational processes, that when applied to those inputs have the ability to create outputs that provide a return to the Company and its shareholders. In 2021, the Company concluded that Jerritt Canyon Canada Ltd. (“Jerritt Canyon”) met the definition of a business and, accordingly, the acquisition was accounted for as a business combination (Note 4). 39 FIRST MAJESTIC SILVER 2021 ANNUAL REPORT3. SIGNIFICANT ACCOUNTING POLICIES, ESTIMATES AND JUDGMENTS (continued) Determining what is part of the business combination in the acquisition of Jerritt Canyon Accounting Estimates and Judgments: (continued) Fair Value Estimates In business combinations, it generally requires time to obtain the information necessary to identify and measure the following as of the acquisition date: (i) The identifiable assets acquired and liabilities assumed; (ii) The consideration transferred in exchange for an interest in the acquiree; (iii) The resulting goodwill. If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Company reports in its consolidated financial statements provisional amounts for the items for which the accounting is incomplete. These provisional amounts are adjusted during the measurement period, or additional assets or liabilities are recognized, to reflect new information obtained about facts and circumstances that existed as of the acquisition date and, if known, would have affected the measurement of the amounts recognized as of that date. The measurement period ends as soon as the Company receives the information it was seeking about facts and circumstances that existed as of the acquisition date or learns that more information is not obtainable and shall not exceed one year from the acquisition date. The fair value of assets acquired and liabilities assumed requires that management make judgments and estimates taking into account information available at the time of the acquisition about future events including, but not restricted to, estimates of mineral reserves and resources, exploration potential, future metal prices, future operating costs and capital expenditures and discount rates. During the allowable measurement period, the Company will retrospectively adjust the provisional amounts recognized at the acquisition date to reflect new information obtained about facts and circumstances that existed as of the acquisition date and, if known, would have affected the measurement of the amounts recognized as of that date. The Company may also recognize additional assets or liabilities if new information is obtained about facts and circumstances that existed as of the acquisition date and, if known, would have resulted in the recognition of those assets and liabilities as of that date. The measurement period ends as soon as the Company receives the information it was seeking about facts and circumstances that existed as of the acquisition date or learns that more information is not obtainable and shall not exceed one year from the acquisition date. The fair value of assets acquired and liabilities assumed are subject to change for up to one year from the Acquisition Date. If new information arises which would impact management’s assessment of the fair value at the Acquisition Date, any adjustments to the allocation of the purchase consideration will be recognized retrospectively and comparative information will be revised. Consequently, the final allocation of the purchase price may result in different adjustments than those shown in these audited consolidated financial statements. The Company needs to assess if other arrangement(s) or transaction(s) shall be recognized as part of applying the acquisition method. To determine if the arrangement(s) or transaction(s), is(are) part of the business combination, the Company considers the following factors: (i) The reasons for the arrangement(s) or transaction(s); (ii) Who initiated the arrangement(s) or transaction(s); and (iii) The timing of the arrangement(s) or transaction(s). Management applied judgment based on the above criteria to determine if private placement shares included as part of the acquisition of Jerritt Canyon were a part of the business combination. Goodwill Accounting Policy: Goodwill arising on the acquisition of a business is carried at cost as established at the date of the acquisition less accumulated impairment losses, if any. Goodwill is allocated to each of the Company’s cash-generating units that is expected to benefit from the synergies of the acquisition. A cash- generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognized directly in profit or loss in the consolidated statements of earnings or loss. An impairment loss recognized for goodwill is not reversed in subsequent periods. As at December 31, 2021, the Company had $nil goodwill (2020 - $nil). Foreign Currency Accounting Policy: The consolidated financial statements are presented in U.S. dollars. The individual financial statements of each entity are presented in their functional currency, which is the currency of the primary economic environment in which the entity operates. Transactions in foreign currencies are translated into the entities’ functional currencies at the exchange rates at the date of the transactions. Monetary assets and liabilities of the Company’s operations denominated in a currency other than the U.S. dollar are translated using exchange rates prevailing at the date of the statement of financial position. Non- monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates on the dates of the transactions. Revenue and expense items are translated at the exchange rates in effect at the date of the underlying transaction, except for depletion and depreciation related to non-monetary assets, which are translated at historical exchange rates. Exchange differences are recognized in the statements of earnings or loss in the period in which they arise. Consideration for the acquisition of Jerritt Canyon Accounting Estimates and Judgments: Acquisitions of businesses are accounted for using the acquisition method. The consideration of each business combination is measured, at the date of the exchange, as the aggregate of the fair value of assets given, liabilities incurred or assumed and equity instruments issued by the Company to the former owners of the acquiree in exchange for control of the acquiree. Management made judgments and estimates in calculating the value of the shares and warrants transferred, including but not limited to share price, volatility, rate of quarterly dividends and the discount rate. Determination of Functional Currency The functional currency for each of the Company’s subsidiaries is the currency of the primary economic environment in which the entity operates. The Company has determined that the functional currency of each entity is the U.S. dollar. Determination of functional currency may involve certain judgments to determine the primary economic environment and the Company reconsiders the functional currency of its entities if there is a change in events and conditions which determined the primary economic environment. 40 NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS(Tabular amounts are expressed in thousands of US dollars) Revenue Recognition (Note 6) Accounting Policy: The Company’s primary product is silver and gold. Other metals, such as lead and zinc, produced as part of the extraction process are considered to be by-products arising from the production of silver and gold. Smelting and refining charges are net against revenue from the sale of metals. Revenue relating to the sale of metals is recognized when control of the metal or related services are transferred to the customer in an amount that reflects the consideration the Company expects to receive in exchange for the metals. When considering whether the Company has satisfied its performance obligation, it considers the indicators of the transfer of control, which include, but are not limited to, whether: the Company has a present right to payment; the customer has legal title to the asset; the Company has transferred physical possession of the asset to the customer; and the customer has the significant risks and rewards of ownership of the asset. Metals in doré sold are priced on date of transfer of control. Final weights and assays are adjusted on final settlement which is approximately one month after delivery. Metals in concentrate sold are provisionally priced at the date of transfer of control as the final selling price is subject to movements in the monthly average prices up to the final settlement date, typically one to three months after delivery to the customer. Upon transfer of control of the concentrate, the Company recognizes revenue on a provisional basis based on spot price and, at each period end, subsequently re-estimated by reference to forward market prices of the estimated month of settlement, with the impact of changes in the forward market prices recognized as revenue adjustments as they occur until final settlement. Revenue from the sale of coins, ingots and bullion is recorded when the products have been shipped and funds have been received. When cash was received from customers prior to shipping of the related finished goods, the amounts are recorded as unearned revenue until the products are shipped. Accounting Estimates and Judgments: Determination of Performance Obligations The Company applied judgment to determine if a good or service that is promised to a customer is distinct based on whether the customer can benefit from the good or service on its own or together with other readily available resources and whether the good or service is separately identifiable. Based on these criteria, the Company determined the primary performance obligation relating to its sales contracts is the delivery of the bullion, doré and concentrates. Shipping and insurance services arranged by the Company for its concentrate sales customers that occur after the transfer of control are also considered to be performance obligations. Inventories (Note 13) Accounting Policy: Mineral inventories, including stockpiled ore, work in process and finished goods, are valued at the lower of weighted average cost and estimated net realizable value. Cost includes all direct costs incurred in production including direct labour and materials, freight, depreciation and amortization and directly attributable overhead costs. Net realizable value is calculated as the estimated price at the time of sale based on prevailing and future metal prices less estimated future production costs to convert the inventories into saleable form. Any write-downs of inventory to net realizable value are recorded as cost of sales. If there is a subsequent increase in the value of inventories, the previous write-downs to net realizable value are reversed to the extent that the related inventory has not been sold. Stockpiled ore inventory represents ore that has been extracted from the mine and is available for further processing. Costs added to stockpiled ore inventory are valued based on current mining cost per ounce incurred up to the point of stockpiling the ore and are removed at the weighted average cost per ounce. Stockpiled ore tonnage and head grades are verified by periodic surveys and physical counts. Work in process inventory includes precipitates, inventories in tanks and in the milling process. Finished goods inventory includes metals in their final stage of production prior to sale, including primarily doré and dried concentrates at our operations and finished goods in-transit. Materials and supplies inventories are valued at the lower of weighted average cost and net realizable value. Costs include acquisition, freight and other directly attributable costs.. Exploration Potential, Exploration and Evaluation Expenditures (Note 15) Accounting Policy: Exploration and evaluation activity involves the search for mineral resources, the determination of technical feasibility and the assessment of commercial viability of an identified resource. Exploration and evaluation activity includes: • acquiring the rights to explore; • researching and analyzing historical exploration data; • gathering exploration data through topographical, geochemical and geophysical studies; • exploratory drilling, trenching and sampling; • determining and examining the volume and grade of the resource; • surveying transportation and infrastructure requirements; and • compiling pre-feasibility and feasibility studies. Capitalization of exploration and evaluation expenditures commences on acquisition of a beneficial interest or option in mineral rights. Capitalized costs are recorded as mining interests at cost less accumulated transfers to producing mineral properties and impairment charges, if applicable. No amortization is charged during the exploration and evaluation phase as the asset is not available for use. Exploration and evaluation assets include exploration potential which represents the potential additional mineralization beyond the existing known reserves and resources of a producing mineral property which the Company gain access through acquiring the mineral rights and/or concessions. The exploration potential is recorded at cost less accumulated transfers to producing mineral properties and accumulated impairment losses, if any. No amortization is charged during the exploration and evaluation phase as the asset is not available for use. The majority of the Company’s exploration and evaluation expenditures focus on mineral deposits in proximity to its existing mining operations. Where the Company is acquiring a new property, the Company makes a preliminary evaluation to determine that the property has significant potential to develop an economic ore body. Exploration and evaluation expenditures are transferred to development or producing mining interests when technical feasibility and commercial viability of the mineral resource have been demonstrated. Factors taken into consideration include: • there is sufficient geological certainty of converting the mineral deposit into proven and probable reserves; • life of mine plan and economic modeling support the economic extraction of such reserves and resources; 41 FIRST MAJESTIC SILVER 2021 ANNUAL REPORTNOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS(Tabular amounts are expressed in thousands of US dollars)3. SIGNIFICANT ACCOUNTING POLICIES, ESTIMATES AND JUDGMENTS (continued) Exploration Potential, Exploration and Evaluation Expenditures (Note 15) (continued) From time to time, the Company acquires or disposes of properties pursuant to the terms of option agreements. Options are exercisable entirely at the discretion of the optionee with no obligation or sale until exercised or expired and, accordingly, are recorded as mineral property costs or recoveries when the payments are made or received. Accounting Policy: (continued) Accounting Estimates and Judgments: • or new properties, a scoping study and/or feasibility study demonstrates that the additional reserves and resources will generate a positive economic outcome; and • operating and environmental permits exist or are reasonably assured as obtainable. Exploration and evaluation expenditures remain as exploration mining interests and do not qualify as producing mining interests until the aforementioned criteria are met. Exploration and evaluation expenditures are transferred to development or producing mining interests when the technical feasibility and commercial viability of a mineral resource has been demonstrated according to the above mentioned factors. Once the technical feasibility, commercial viability and a development decision have been established, the value of the exploration and evaluation asset is reclassified and accounted for in accordance with IAS 16, Property, Plant and Equipment (“IAS 16”). The exploration and evaluation asset is subject to an impairment test prior to reclassification in accordance with IFRS 6. It is subsequently measured at cost less accumulated depletion and accumulated impairment losses, if any. Accounting estimates and judgments Economic recoverability and probability of future economic benefits of exploration, evaluation and development costs Management has determined that exploratory drilling, evaluation, development and related costs incurred which were capitalized have potential future economic benefits and are potentially economically recoverable, subject to impairment analysis. Management uses several criteria in its assessments of economic recoverability and probability of future economic benefit including geologic and metallurgic information, exploration plans and results, accessible facilities and existing permits. Mining Interests (Note 15) Accounting Policy: Exploration, development and field support costs directly related to mining interests are deferred until the property to which they directly relate is placed into production, sold, abandoned or subject to a condition of impairment. The deferred costs are amortized over the useful life of the ore body following commencement of production, or written off if the property is sold or abandoned. Administration costs and other exploration costs that do not relate to any specific property are expensed as incurred. Upon commencement of commercial production, mining interests are depleted on a units-of-production basis over the estimated economic life of the mine. In applying the units of production method, depletion is determined using quantity of material extracted from the mine in the period as a portion of total quantity of material to be extracted in current and future periods based on reserves and resources considered to be highly probable to be economically extracted over the life of mine. If no published reserves and resources are available, the Company may rely on internal estimates of economically recoverable mineralized material, prepared on a basis consistent with that used for determining reserves and resources, for purpose of determining depletion. Mineral Reserve and Resource Estimates Mineral reserve and resource estimates affect the determination of recoverable value used in impairment assessments, the depletion and depreciation rates for non-current assets using the units of production method and the expected timing of reclamation and closure expenditures. The figures for mineral reserves and mineral resources are determined in accordance with National Instrument 43-101 (“NI 43-101”) Technical Report standards. There are numerous uncertainties in estimating mineral reserves and mineral resources, including many factors beyond the Company’s control. Such estimation is a subjective process and the accuracy of any mineral reserve or mineral resource estimate is a function of the quantity and quality of available data and of the assumptions made and judgments used in engineering and geological interpretation. Differences between management’s assumptions including economic assumptions such as metal prices and market conditions could have a material effect in the future on the Company’s financial position, results of operation and cash flows. inherent Depletion Rate for Mining Interests Depletion expenses are allocated based on estimated useful life of the asset. Should the expected asset life and associated depletion rate differ from the initial estimate, the change in estimate would be made prospectively in the consolidated statements of earnings or loss. Stream Asset (Note 15) Accounting Policy: A stream asset is a long-term metal purchase agreement for which settlement is called for in silver, the amount of which is based on production at a mine corresponding to the specific agreement. On acquisition of a stream asset, it is recorded at cost and is accounted for in accordance with IFRS 6, Exploration and Evaluation of Mineral Resources (“IFRS 6”). A stream asset where the mine corresponding to the specific agreement is an exploration and evaluation stage property is classified as exploration and evaluation asset and is assessed for impairment whenever indicators of impairment exist in accordance with IFRS 6. An impairment loss is recognized for the amount by which the asset’s carrying value exceeds its recoverable amount. Once the technical feasibility, commercial viability and a development decision have been established, the value of the stream asset is reclassified and accounted for in accordance with IAS 16, Property, Plant and Equipment (“IAS 16”). The exploration and evaluation asset is subject to an impairment test prior to reclassification in accordance with IFRS 6. It is subsequently measured at cost less accumulated depletion and accumulated impairment losses, if any. A producing stream asset is depleted using the units-of-production method over the life of the property to which the interest relates, which is estimated using available information of proven and probable reserves and the portion of resources expected to be classified as mineral reserves at the mine corresponding to the specific agreement. 42 NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS(Tabular amounts are expressed in thousands of US dollars)Property, Plant and Equipment (Note 16) Accounting Policy: Borrowing Costs Accounting Policy: Property, plant and equipment are recorded at cost less accumulated depreciation and accumulated impairment losses. The cost of an item of property, plant and equipment includes the purchase price or construction cost, any costs directly attributable to bringing the asset to the location and condition necessary for its intended use, an initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located, and borrowing costs related to the acquisition or construction of qualifying assets. Property, plant and equipment are depreciated using either the straight-line or units-of-production method over the shorter of the estimated useful life of the asset or the expected life of mine. Where an item of property, plant and equipment comprises of major components with different useful lives, the components are accounted for as separate items of property, plant and equipment. Assets under construction are recorded at cost and reclassified to machinery and equipment when it becomes available for use. Depreciation commences when the asset is in the condition and location necessary for it to operate in the manner intended by management. Depreciation charges on assets that are directly related to mineral properties are allocated to those mineral properties. The Company conducts an annual review of residual balances, useful lives and depreciation methods utilized for property, plant and equipment. Any changes in estimate that arise from this review are accounted for prospectively. Accounting Estimates and Judgments: Commencement of Commercial Production Prior to reaching commercial production levels intended by management, costs incurred are capitalized as part of the related mine or mill . Depletion of capitalized costs for mining properties and depreciation and amortization of property, plant and equipment begin when operating levels intended by management have been reached. Determining when a mine or mill is in the condition necessary for it to be capable of operating in the manner intended by management is a matter of judgment dependent on the specific facts and circumstances. The following factors may indicate that commercial production has commenced: • substantially all major capital expenditures have been completed to bring the asset to the condition necessary to operate in the manner intended by management; • the mine or mill has reached a pre-determined percentage of design capacity; • the ability to sustain a pre-determined level of design capacity for a significant period of time (i.e. the ability to process ore continuously at a steady or increasing level); • the completion of a reasonable period of testing of the mine plant and equipment; • the ability to produce a saleable product (i.e. the ability to produce concentrate within required sellable specifications); • the mine or mill has been transferred to operating personnel from internal development groups or external contractors; and • mineral recoveries are at or near the expected production levels. Depreciation and Amortization Rates for Property, Plant and Equipment Depreciation and amortization expenses are determined based on estimated useful life of the asset. Should the expected asset life and associated depreciation rates differ from the initial estimate, the change in estimate would be made prospectively in the consolidated statements of earnings or loss. Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset that takes a substantial period of time to get ready for its intended use are capitalized as part of the cost of the asset until the asset is substantially ready for its intended use. Other borrowing costs are recognized as an expense in the period incurred. As at December 31, 2021 and 2020, the Company does not have any qualifying assets under construction. Right of Use Assets (Note 17) and Lease Liabilities (Note 21) Accounting Policy: The Company assesses whether a contract is or contains a lease, at inception of the contract. The Company recognizes a right-of-use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets (such as tablets and personal computers, small items of office furniture and telephones). For short-term and low value leases, the Company recognizes the lease payments as an operating expense on a straight-line basis over the term of the lease. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the lessee uses its incremental borrowing rate. Lease payments included in the measurement of the lease liability comprise: • fixed lease payments (including in-substance fixed payments), less any lease incentives receivable; • variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date; • the amount expected to be payable by the lessee under residual value guarantees; • the exercise price of purchase options, if the lessee is reasonably certain to exercise the options; and • payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease. The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect the lease payments made. The Company remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever: • the lease term has changed or there is a significant event or change in circumstances resulting in a change in the assessment of exercise of a purchase option, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate. • the lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value, in which case the lease liability is remeasured by discounting the revised lease payments using an unchanged discount rate (unless the lease payments change is due to a change in a floating interest rate, in which case a revised discount rate is used). • a lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is remeasured based on the lease term of the modified lease by discounting the revised lease payments using a revised discount rate at the effective date of the modification. 43 FIRST MAJESTIC SILVER 2021 ANNUAL REPORTNOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS(Tabular amounts are expressed in thousands of US dollars) 3. SIGNIFICANT ACCOUNTING POLICIES, ESTIMATES AND JUDGMENTS (continued) CGU not been impaired. A reversal of an impairment loss is recognized as a gain in the statements of earnings or loss. Right of Use Assets (Note 17) and Lease Liabilities (Note 21) (continued) Accounting Estimates and Judgments: Accounting Policy: (continued) Indications of Impairment and Reversal of Impairment The right-of-use assets comprise of the initial measurement of the corresponding lease liability, lease payments made at or before the commencement day, less any lease incentives received and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and impairment losses. Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset. If a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Company expects to exercise a purchase option, the related right-of- use asset is depreciated over the useful life of the underlying asset. The depreciation starts at the commencement date of the lease. As a practical expedient, IFRS 16 permits a lessee not to separate non- lease components, and instead account for any lease and associated non- lease components as a single arrangement. Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognized immediately in profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalized in accordance with the Company’s general policy on borrowing costs. Impairment of Non-Current Assets Accounting Policy: At each statement of financial position date, the Company reviews the carrying amounts of its non-current assets to determine whether there is any indication that those assets are impaired. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment, if any. Where the asset does not generate independent cash inflows, the Company estimates the recoverable amount of the cash generating unit (“CGU”) to which the asset belongs. If the recoverable amount of the asset or CGU is determined to be less than its carrying amount, the carrying amount of the asset or CGU is reduced to its recoverable amount and an impairment loss is recognized as an expense in the consolidated statements of earnings or loss. Recoverable amount is the higher of fair value less costs of disposal (“FVLCD”) and value in use (“VIU”). FVLCD is determined as the amount that would be obtained from the sale of the asset or CGU in an arm’s length transaction between knowledgeable and willing parties. The Company considers the use of a combination of its internal discounted cash flow economic models and in-situ value of reserves, resources and exploration potential of each CGU for estimation of its FVLCD. These cash flows are discounted by an appropriate post-tax discount rate to arrive at a net present value of the asset. VIU is determined as the present value of the estimated cash flows expected to arise from the continued use of the asset or CGU in its present form and its eventual disposal. VIU is determined by applying assumptions specific to the Company’s continued use and does not take into account future development. Where an impairment loss subsequently reverses, the carrying amount of the asset or CGU is increased to the revised estimate of its recoverable amount, so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment been recognized for the asset or CGU in prior periods, adjusted for additional amortization which would have been recorded had the asset or 44 Management considers both external and internal sources of information in assessing whether there are any indications that the Company’s property, plant and equipment and mining interests are impaired or previous impairments should be reversed. External sources of information management considers include changes in the market, economic and legal environment in which the Company operates that are not within its control and affect the recoverable amount of its property, plant and equipment and mining interests. Internal sources of information management considers includes the manner in which mining properties and plant and equipment are being used or are expected to be used and indications of economic performance of the assets. For exploration and evaluation assets, indications include but are not limited to expiration of the right to explore, substantive expenditure in the specific area is neither budgeted nor planned, and if the entity has decided to discontinue exploration activity in the specific area. The Company did not identify any indicators of potential impairment or impairment reversal on its non-current assets and CGUs during the years ended December 31, 2021 and 2020. Fair Value Estimates In determining the recoverable amounts of the Company’s property, plant and equipment and mining interests, management makes estimates of the discounted future cash flows expected to be derived from the Company’s mining properties, costs of disposal of the mining properties and the appropriate discount rate. Reductions in metal price forecasts, increases in estimated future costs of production, increases in estimated future capital expenditures, reductions in the amount of recoverable reserves, resources, and exploration potential, and/or adverse current economics can result in an impairment of the carrying amounts of the Company’s non-current assets. Conversely, favourable changes to the aforementioned factors can result in a reversal of previous impairments. Share-based Payment Transactions (Note 24(b)) Accounting Policy: transactions Employees (including directors and officers) of the Company may receive a portion of their remuneration in the form of stock options which are share-based payment (“share-based payments”). Stock options issued to employees are measured by reference to their fair value using the Black-Scholes model at the date on which they were granted. Forfeitures are estimated at grant date and adjusted prospectively based on actual forfeitures. Share-based payments expense, for stock options that are forfeited or cancelled prior to vesting, is reversed. The costs of share-based payments are recognized, together with a corresponding increase in the equity reserve, over the period in which the services and/or performance conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (“the vesting date”). On exercise by the employee, the associated option value in the equity reserve is reclassified to share capital. The Company adopted the 2019 LTIP to allow the Company to grant to its directors, employees and consultants non-transferable Restricted Share Units (“RSU’s”) based on the value of the Company’s share price at the date of grant. Unless otherwise stated, the awards typically have NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS(Tabular amounts are expressed in thousands of US dollars)a graded vesting schedule over a three-year period and can be settled either in cash or equity upon vesting at the discretion of the Company. The Company intends to settle all RSU’s in equity. Deferred tax assets are recognized for all deductible temporary differences to the extent that the realization of the related tax benefit through future taxable earnings is probable. In situations where equity instruments are issued to non-employees, the share-based payments are measured at the fair value of goods or services received. If some or all of the goods or services received by the Company as consideration cannot be specifically identified, they are measured at the fair value of the share-based payment. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset the current tax assets against the current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis. Accounting Estimates and Judgments: Accounting Estimates and Judgments: Valuation of Share-based Payments Recognition of Deferred Income Tax Assets The Company uses the Black-Scholes Option Pricing Model for valuation of share-based payments. Option pricing models require the input of subjective assumptions including expected price volatility, interest rate and forfeiture rate. Changes in the input assumptions can materially affect the fair value estimate and the Company’s earnings and equity reserves. Taxation (Note 23) Accounting Policy: Current and deferred tax are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case they are recognized in other comprehensive income or directly in equity. Current income tax is based on taxable earnings for the year. The tax rates and tax laws to compute the amount payable are those that are substantively enacted in each tax regime at the date of the statement of financial position. Deferred income tax is recognized, using the liability method, on temporary differences between the carrying value of assets and liabilities in the statement of financial position, unused tax losses, unused tax credits and the corresponding tax bases used in the computation of taxable earnings, based on tax rates and tax laws that are substantively enacted at the date of the statement of financial position and are expected to apply when the related deferred tax asset is realized or the deferred tax liability is settled. Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries, and interests in joint ventures, except where the timing of the reversal of the temporary difference is controlled by the Company and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets are recognized for all deductible temporary differences to the extent that the realization of the related tax benefit through future taxable earnings is probable. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset the current tax assets against the current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis. Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries, and interests in joint ventures, except where the timing of the reversal of the temporary difference is controlled by the Company and it is probable that the temporary difference will not reverse in the foreseeable future. In assessing the probability of realizing income tax assets recognized, management makes estimates related to expectations of future taxable income, applicable tax opportunities, expected timing of reversals of existing temporary differences and the likelihood that tax positions taken will be sustained upon examination by applicable tax authorities. In making its assessments, management gives additional weight to positive and negative evidence that can be objectively verified. Estimates of future taxable income are based on forecasted cash flows from operations and the application of existing tax laws in each jurisdiction. Forecasted cash flows from operations are based on life of mine projections internally developed, reviewed by management and are consistent with the forecasts utilized for business planning and impairment testing purposes. Weight is attached to tax planning opportunities that are within the Company’s control, and are feasible and implementable without significant obstacles. The likelihood that tax positions taken will be sustained upon examination by applicable tax authorities is assessed based on individual facts and circumstances of the relevant tax position evaluated in light of all available evidence. Where applicable tax laws and regulations are either unclear or subject to ongoing varying interpretations, it is reasonably possible that changes in these estimates can occur that materially affect the amounts of income tax assets recognized. At the end of each reporting period, the Company reassesses recognized and unrecognized income tax assets. Tax Contingencies involve dealing with uncertainties and The Company’s operations judgments in the application of tax regulations in multiple jurisdictions. The final taxes paid are dependent upon many factors, including negotiations with tax authorities in various jurisdictions and resolution of disputes arising from tax audits. The Company recognizes potential liabilities and records tax liabilities for anticipated tax audit issues based on its estimate of whether, and the extent to which, additional taxes will be due. The Company adjusts these liabilities in light of changing facts and circumstances; however, due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the Company’s current estimate of the tax liabilities. If the Company’s estimate of tax liabilities proves to be less than the ultimate assessment, an additional charge to expense would result. If the estimate of tax liabilities proves to be greater than the ultimate assessment, a tax benefit would result. Cash and Cash Equivalents Accounting Policy: Cash in the statement of financial position includes cash on hand and held at banks and cash equivalents include short-term guaranteed investment certificates redeemable within three months or less at the date of purchase. 45 FIRST MAJESTIC SILVER 2021 ANNUAL REPORTNOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS(Tabular amounts are expressed in thousands of US dollars)3. SIGNIFICANT ACCOUNTING POLICIES, ESTIMATES AND JUDGMENTS Fair value through other comprehensive income (“FVTOCI”) (continued) Cash and Cash Equivalents (continued) Accounting Estimates and Judgments: Determination and classification of current and non-current restricted cash (Note 18) The Company determines if the funds on hand and held at banks meets the definition of cash or cash equivalents. When there is a restriction on those funds, the Company assesses the nature of the restriction and if it is applicable, excludes the related amounts from the cash and cash equivalents balance. The Company then assesses the classification of the restricted cash between current and non-current based on the following factors: • an asset is cash or a cash equivalent unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the period; and • it expects to realize the asset within twelve months after the reporting period. The evaluation was performed based on the available information at the end of the reporting period; if there are changes in the circumstances the Company will reassess the classification. Financial Instruments Accounting Policy: Financial assets and financial liabilities are recognized when the Company becomes a party to the contractual provisions of the instrument. On initial recognition, all financial assets and financial liabilities are recorded at fair value, net of attributable transaction costs, except for financial assets and liabilities classified as at fair value through profit or loss (“FVTPL”). The directly attributable transaction costs of financial assets and liabilities classified as at FVTPL are expensed in the period in which they are incurred. Subsequent measurement of financial assets and liabilities depends on the classifications of such assets and liabilities. Amortized cost Financial assets that meet the following conditions are measured subsequently at amortized cost: • the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows, and • the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. The amortized cost of a financial asset is the amount at which the financial asset is measured at initial recognition minus the principal repayments, plus the cumulative amortization using effective interest method of any difference between that initial amount and the maturity amount, adjusted for any loss allowance. Interest income is recognized using the effective interest method. The Company’s financial assets at amortized cost primarily include cash and cash equivalents, trade and other receivables and value added taxes receivable included in other current and non-current financial assets in the Consolidated Statement of Financial Position. 46 Financial assets that meet the following conditions are measured at FVTOCI: • The financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and • The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. The Company has designated certain investments in marketable securities that are not held for trading as FVTOCI (Note 14). On initial recognition, the Company may make an irrevocable election (on an instrument-by-instrument basis) to designate investments in equity instruments that would otherwise be measured at fair value through profit or loss to present subsequent changes in fair value in other comprehensive income. Designation at FVTOCI is not permitted if the equity investment is held for trading or if it is contingent consideration recognized by an acquirer in a business combination. Investments in equity instruments at FVTOCI are initially measured at fair value plus transaction costs. Subsequently, they are measured at fair value with gains and losses arising from changes in fair value recognized in OCI. The cumulative gain or loss is not reclassified to profit or loss on disposal of the equity instrument, instead, it is transferred to retained earnings. Financial assets measured subsequently at fair value through profit or loss (“FVTPL”) By default, all other financial assets, including derivatives, are measured subsequently at FVTPL. The Company, at initial recognition, may also irrevocably designate a financial asset as measured at FVTPL if doing so eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise from measuring assets or liabilities or recognizing the gains and losses on them on different bases. Financial assets measured at FVTPL are measured at fair value at the end of each reporting period, with any fair value gains or losses recognized in profit or loss to the extent they are not part of a designated hedging relationship. Fair value is determined in the manner described in note 24. The Company’s financial assets at FVTPL include its account receivable arising from sales of metal contained in concentrates. Financial liabilities and equity Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument. An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all its liabilities. Equity instruments issued by the Company are recognized at the proceeds received, net of direct issue costs. Repurchase of the Company’s own equity instruments is recognized and deducted directly in equity. No gain or loss is recognized in profit or loss on the purchase, sale, issue or cancellation of the Company’s own equity instruments. Financial liabilities that are not contingent consideration of an acquirer in a business combination, held for trading or designated as FVTPL, are measured at amortized cost using the effective interest method. The Company’s financial liabilities at amortized cost primarily include trade and other payables, debt facilities (Note 20) and lease liabilities (Note 21) NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS(Tabular amounts are expressed in thousands of US dollars)Provisions (Note 22) Accounting Policy: Provisions are recognized when the Company has a present legal or constructive obligation as a result of a past event, it is probable that the Company will be required to settle the obligation, and a reliable estimate of the obligation can be made. The amount recognized as a provision is the present value of the expenditures expected to be required to settle the obligation using a pre-tax discount rate that reflects current market assessment of the time value of money and the risks specific to the obligation. The increase in the provision due to the passage of time is recognized as finance costs. Accounting Estimates and Judgments: Estimated Reclamation and Closure Costs The Company’s provision for decommissioning liabilities represents management’s best estimate of the present value of the future cash outflows required to settle estimated reclamation and closure costs at the end of the mine’s life. The provision reflects estimates of future costs, inflation, movements in foreign exchange rates and assumptions of risks associated with the future cash outflows, and the applicable risk-free interest rates for discounting the future cash outflows. Changes in the above factors can result in a change to the provision recognized by the Company. Changes to reclamation and closure cost obligations are recorded with a corresponding change to the carrying amounts of related mining properties. Adjustments to the carrying amounts of related mining properties can result in a change to future depletion expense. Earnings or Loss per Share (Note 12) Accounting Policy: Basic earnings or loss per share for the period is calculated by dividing the earnings or loss attributable to equity holders of the Company by the weighted average number of shares outstanding during the reporting period. Diluted earnings or loss per share is calculated by adjusting the weighted average number of shares outstanding to assume conversion of all potentially dilutive share equivalents, such as stock options, restricted share units, convertible debt and share purchase warrants. Diluted earnings or loss per share is calculated using the treasury stock method and assumes the receipt of proceeds upon exercise of the options with exercise prices below the average market price to determine the number of shares assumed to be purchased at the average market price during the period. Future Changes in Accounting Policies Not Yet Effective as at December 31, 2021 Property, Plant and Equipment — Proceeds before Intended Use (Amendments to IAS 16) The amendments prohibit deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Instead, an entity recognises the proceeds from selling such items, and the cost of producing those items, in profit or loss. on or after the beginning of the earliest period presented in the financial statements in which the Company first applies the amendments. The Company will recognise the cumulative effect of initially applying the amendments as an adjustment to the opening balance of retained earnings at the beginning of that earliest period presented. This amendment will impact the Company’s accounting for proceeds from mineral sales prior to reaching commercial production levels intended by management. Classification of Liabilities as Current or Non-Current (Amendments to IAS 1) The amendments aim to promote consistency in applying the requirements by helping companies determine whether, in the statement of financial position, debt and other liabilities with an uncertain settlement date should be classified as current (due or potentially due to be settled within one year) or non-current. The amendments are applied on or after the first annual reporting period beginning on or after January 1, 2023, with early application permitted. This amendment is not expected to have a material impact on the Company’s financial statements. Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2 Making Materiality Judgments—Disclosure of Accounting Policies The amendments change the requirements in IAS 1 with regard to disclosure of accounting policies. The amendments replace all instances of the term ‘significant accounting policies’ with ‘material accounting policy information’. Accounting policy information is material if, when considered together with other information included in an entity’s financial statements, it can reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements. The supporting paragraphs in IAS 1 are also amended to clarify that accounting policy information that relates to immaterial transactions, other events or conditions is immaterial and need not be disclosed. Accounting policy information may be material because of the nature of the related transactions, other events or conditions, even if the amounts are immaterial. However, not all accounting policy information relating to material transactions, other events or conditions is itself material. The Board has also developed guidance and examples to explain and demonstrate the application of the ‘four-step materiality process’ described in IFRS Practice Statement 2. The amendments to IAS 1 are effective for annual periods beginning on or after 1 January 2023, with earlier application permitted and are applied prospectively. The amendments to IFRS Practice Statement 2 do not contain an effective date or transition requirements Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors—Definition of Accounting Estimates The amendments replace the definition of a change in accounting estimates with a definition of accounting estimates. Under the new definition, accounting estimates are “monetary amounts in financial statements that are subject to measurement uncertainty”. The definition of a change in accounting estimates was deleted. However, the Board retained the concept of changes in accounting estimates in the Standard with the following clarifications: The amendments are applied on or after the first annual reporting period beginning on or after January 1, 2022, with early application permitted. The amendments are applied retrospectively, but only to items of property, plant and equipment that are brought to the location and condition necessary for them to be capable of operating in the manner intended by management • A change in accounting estimate that results from new information or new developments is not the correction of an error • The effects of a change in an input or a measurement technique used to develop an accounting estimate are changes in accounting estimates if they do not result from the correction of prior period errors 47 FIRST MAJESTIC SILVER 2021 ANNUAL REPORTNOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS(Tabular amounts are expressed in thousands of US dollars)3. SIGNIFICANT ACCOUNTING POLICIES, ESTIMATES AND JUDGMENTS (continued) Future Changes in Accounting Policies Not Yet Effective as at December 31, 2021 (continued) Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors—Definition of Accounting Estimates (continued) The amendments are effective for annual periods beginning on or after January 1, 2023 to changes in accounting policies and changes in accounting estimates that occur on or after the beginning of that period, with earlier application permitted. Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction (Amendments to IAS 12) In May 2021, the International Accounting Standards Board issued targeted amendments to IAS 12, Income Taxes. The amendments are effective for annual periods beginning on or after January 1, 2023, although earlier application is permitted. With a view to reducing diversity in reporting, the amendments will clarify that companies are required to recognize deferred taxes on transactions where both assets and liabilities are recognized, such as with leases and decommissioning liabilities. This amendment is not expected to have a material impact on the Company’s financial statements. 4. ACQUISITION OF JERRITT CANYON CANADA LTD. Description of the Transaction On April 30, 2021, the Company completed the acquisition of 100% of the issued and outstanding shares of Jerritt Canyon Canada Ltd. from Sprott Mining Inc. (“Sprott Mining”) in exchange for 26,719,727 common shares of First Majestic (the “Consideration Shares”) and five million common share purchase warrants (the “Consideration Warrants”), each exercisable for one common share of the Company at a price of $20 per share for a period of three years from the date of acquisition on April 30, 2021 (the “Acquisition Date”). Concurrent with closing of the acquisition, Sprott Mining also completed a private placement consisting of $30.0 million at a price of $17.59 per share for a total of 1,705,514 common shares of the Company (the “Private Placement Shares”) (together, the “Acquisition Agreement”). Pursuant to closing of the Acquisition Agreement, the Company deposited into escrow an aggregate of $60.0 million (the “Escrowed Funds”), including $30.0 million from First Majestic and $30.0 million proceeds from the Private Placement Shares, representing the estimated tax (“Triggered Tax”) due by Jerritt Canyon Canada as a result of a reorganization completed prior to the acquisition of the Jerritt Canyon Gold Mine. Pursuant to the Acquisition Agreement, the Purchase Price is increased to the extent the Triggered Tax is less than $60 million (“Triggered Tax Adjustment”) and decreased to the extent the working capital (the “Working Capital Adjustment”) of Jerritt Canyon is less than zero. The amount of such tax liability was $45.2 million and has been paid from the Escrowed Funds. As of April 30, 2021, Jerritt Canyon had a preliminary negative working capital of $2.8 million. As at December 31, 2021, the Working Capital Adjustment and Triggered Tax Adjustment had not been finally determined and $12.6 million remains in escrow pending such determination. Jerritt Canyon owns and operates the Jerritt Canyon Gold Mine located in Elko County, Nevada. Jerritt Canyon was discovered in 1972 and has been in production since 1981 having produced over 9.5 million ounces of gold over its 40-year production history. The mine currently operates as an underground mine and has one of three permitted gold processing plants in Nevada that uses roasting in its treatment of ore. This processing plant has a capacity of 4,000 tonnes per day (“tpd”) and is currently operating at an average rate of approximately 2,200 tpd. The property consists of a large, under explored land package consisting of 30,821 hectares (119 square miles). The acquisition was completed in order to support the Company’s growth strategy by adding another cornerstone asset within a world class mining jurisdiction to the Company’s portfolio. Management has concluded that Jerritt Canyon constitutes a business and, therefore, the acquisition is accounted for in accordance with IFRS 3 - Business Combinations. Given the delivery of the consideration and the fulfillment of the covenants as per the Acquisition Agreement, the transaction was deemed to be completed with First Majestic identified as the acquirer. Based on the April 30, 2021 opening share price of common shares, the total consideration of the Jerritt Canyon acquisition is $478.9 million. The Company began consolidating the operating results, cash flows and net assets of Jerritt Canyon from April 30, 2021 onwards. The determination of the fair value of assets acquired and liabilities assumed was previously reported based on preliminary estimates at the Acquisition Date. The Company is completing a full and detailed valuation of the fair value of the net assets of Jerritt Canyon acquired using income, market, and cost valuation methods with the assistance of an independent third party. As of the date of these consolidated financial statements, the allocation of purchase price with respect to the fair value increment of assets acquired and liabilities assumed have been updated to reflect new information obtained which existed at the Acquisition Date. The fair value of assets acquired, and liabilities assumed are subject to change for up to one year from the Acquisition Date. The Company is finalizing its full and detailed assessment of the fair value of the net assets of Jerritt Canyon acquired. As stated above, the Triggered Tax Adjustment and the Working Capital Adjustment, as well as any consequential impact on the deferred tax liabilities, have yet to be finally determined. If new information arises which would impact management’s assessment of the fair value at the Acquisition Date, any adjustments to the allocation of the purchase consideration will be recognized retrospectively and comparative information will be revised. Consequently, the final allocation of the purchase price consideration may result in material adjustments to the amounts shown in these audited consolidated financial statements. Consideration and Purchase Price Allocation Total consideration for the acquisition was valued at $478.9 million on the Acquisition Date. The following table summarizes the consideration paid as part of the purchase price: 48 NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS(Tabular amounts are expressed in thousands of US dollars)Total Consideration 26,719,727 Consideration Shares issued to Sprott Mining with an accounting fair value of $15.59 per share(1) 1,705,514 Private Placement Shares issued to Sprott Mining with an accounting fair value of $15.59 per share(1) 5,000,000 Consideration Warrants issued to Sprott Mining with an accounting fair value of $4.63 per warrant(2) Estimated Triggered Tax Adjustment Total consideration $416,561 26,589 23,150 12,570 $478,870 (1) Fair values of Consideration Shares and Private Placement Shares were estimated at $15.59 per share based on the opening price of First Majestic’s common share on the New York Stock Exchange on April 30, 2021, as compared to their deemed price of $17.59 according to the Acquisition Agreement. (2) The Consideration Warrants have an exercise price of $20 per share for a three-year term expiring on April 30, 2024. The fair value of Consideration Warrants were estimated using the Black-Scholes method at the Jerritt Canyon Acquisition Date, using the following assumptions: Stock price (as of opening on April 30, 2021) Exercise price of Consideration Warrants Term (years) Volatility Annual rate of quarterly dividends Discount rate - bond equivalent yield Total fair value of warrants $15.59 $20.00 3 55% 0% 0.5% $23,150 The following table summarizes the preliminary and revised purchase price allocated to the identifiable assets and liabilities based on their estimated fair values on the acquisition date: Allocation of Purchase Price Cash and cash equivalents Inventories Trade and other receivables Other financial assets Prepaid expenses Restricted cash(1) Mining interest Property, plant and equipment Deposit on non-current assets Trade and other payables Lease liabilities(3) Income taxes payable Contingent environmental provision(2) Decommissioning liabilities(2) Deferred tax liabilities Net assets acquired Preliminary as reported June 30, 2021 Adjustments Revised as reported December 31, 2021 $1,025 19,304 135 3,581 1,662 96,985 409,930 224,034 128 (27,159) (2,194) (47,185) (17,900) (87,705) (98,186) $476,455 $— — (63) — 62 — 22,729 (48,307) — 3,974 — 1,866 17,900 16,570 (12,316) $2,415 $1,025 19,304 72 3,581 1,724 96,985 432,659 175,727 128 (23,185) (2,194) (45,319) — (71,135) (110,502) $478,870 (1) Restricted cash includes $30.0 million proceeds from the issuance of Private Placement Shares which were deposited into the Escrowed Funds and $67.0 million in non-current environmental reclamation bonds. (2) Decommissioning liabilities include funds required to establish a trust agreement with the Nevada Division of Environmental Protection (“NDEP”) to cover post-closure water treatment costs at Jerritt Canyon, which were previously reported as a contingent environmental provision. (3) Lease liabilities are defined per Note 21. The Company used discounted cash flow models to determine the fair value of the depletable mining interest. The expected future cash flows are based on estimates of future gold prices, estimated quantities of ore reserves and mineral resources, expected future production costs and capital expenditures based on the life of mine plans at the acquisition date. The discounted future cash flow models used a 5.1% discount rate based on the Company’s assessment of country risk, project risk, and other potential risks specific to the acquired mining interest. 49 FIRST MAJESTIC SILVER 2021 ANNUAL REPORTNOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS(Tabular amounts are expressed in thousands of US dollars)4. ACQUISITION OF JERRITT CANYON CANADA LTD. (continued) Consideration and Purchase Price Allocation (continued) The significant assumptions used in the determination of the fair value of the mining interests were as follows: Short-term and long-term gold price Discount rate Mine life (years) Average gold grade over life of mine Average gold recovery rate $1,750 5.1% 11 6.0 g/t 86% The Company used a market approach to determine the fair value of exploration potential by comparing the costs of other precedent market transactions within the industry on a dollar per square kilometres basis. Those amounts were used to determine the range of area-based resources multiples implied within the value of transactions by other market participants. Management made a significant assumption in the determination of the fair value of exploration potential by using an implied multiple of $298,524 per square kilometre for a total of $92.0 million. The Company accounted for exploration potential through inclusion within non-depletable mineral interest. Financial and operating results of Jerritt Canyon are included in the Company’s consolidated financial statements effective April 30, 2021. During the year ended December 31, 2021, the acquisition of Jerritt Canyon contributed $123.8 million of revenues and $32.1 million of net loss to the Company’s financial results since April 30, 2021. Had the business combination been effected at January 1, 2021, pro forma revenues and net loss of the Company for the year ended December 31, 2021 would have been $636.4 million and $26.5 million, respectively. Total transaction costs of $2.0 million related to the acquisition were expensed during the year. 5. SEGMENTED INFORMATION All of the Company’s operations are within the mining industry and its major products are precious metals doré which are refined or smelted into pure silver and gold and sold to global metal brokers. Transfer prices between reporting segments are set on an arms-length basis in a manner similar to transactions with third parties. Coins and bullion cost of sales are based on transfer prices. A reporting segment is defined as a component of the Company that: • engages in business activities from which it may earn revenues and incur expenses; • whose operating results are reviewed regularly by the entity’s chief operating decision maker; and • for which discrete financial information is available. For the year ended December 31, 2021, the Company’s significant reporting segments includes its three operating mines in Mexico, the recently acquired Jerritt Canyon Gold Mine in Nevada, United States and its “non-producing properties” in Mexico which include the La Parrilla, Del Toro, San Martin and La Guitarra mines, which have been placed on suspension. “Others” consists primarily of the Company’s corporate assets including cash and cash equivalents, other development and exploration properties (Note 15), debt facilities (Note 20), coins and bullion sales, and corporate expenses which are not allocated to operating segments. The Company’s chief operating decision maker (“CODM”) evaluates segment performance based on mine operating earnings. Therefore, other income and expense items are not allocated to the segments. 50 NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS(Tabular amounts are expressed in thousands of US dollars) Significant information relating to the Company’s reportable operating segments is summarized in the tables below: Mining Interests Year Ended December 31, 2021 and 2020  Revenue Cost of sales Depletion, depreciation, and amortization Mine operating earnings (loss) Capital expenditures Mexico San Dimas Santa Elena La Encantada Non-producing Properties United States Jerritt Canyon Others(1) Intercompany elimination(2) Consolidated 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 $275,463 $132,550 $44,859 $98,054 $56,385 217,576 117,303 76,051 81,738 73,632 — 183 110,782 77,126 52,990 45,350 37,794 — 1,362 33,738 17,536 10,472 8,123 8,265 418 848 73,056 22,641 12,589 28,265 27,573 (418) (2,027) 43,772 67,453 33,739 11,355 10,733 1,977 4,338 123,808 117,324 43,511 (37,027) 46,408 — 10,882 2,251 (25,077) (5,817) $584,117 $363,876 — 6,073 4,173 (12,338) (2,684) $366,085 $204,417 — 2,166 1,082 — — — 2,643 (3,004) (12,739) (3,133) — 36,190 32,453 — — $116,613 $54,405 $101,419 $105,054 $219,768 $125,036 (1) The “Others” segment includes revenues of $10.9 million from coins and bullion sales of 349,278 silver ounces at an average price of $31.16 per ounce. (2) Effective January 1, 2021, the Company is presenting its segment revenue, cost of sales and mine operating earnings (loss) on a gross basis, with a new line item to reflect intercompany eliminations. The segmented information for the comparative periods have been adjusted to reflect this change for consistency. During the year ended December 31, 2021, the Company had three (December 31, 2020 - three) customers that accounted for 99% (2020 - 99%) of its sales revenue, with one major metal broker accounting for 93% of total revenue (2020 - 92%). At December 31, 2021 and 2020 Producing Exploration Property, plant and equipment Total mining assets  Total assets Total liabilities Mining Interests Mexico San Dimas Santa Elena La Encantada Non-producing Properties United States Jerritt Canyon Others Consolidated 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 $213,526 204,592 97,271 52,892 25,827 25,865 106,215 108,837 $29,186 $105,473 $348,185 $495,479 $119,764 17,179 31,067 33,951 4,640 2,955 38,752 37,004 112,105 64,843 49,245 20,680 16,555 27,180 29,888 333,876 193,181 136,088 51,147 45,375 172,147 175,730 439,145 257,244 166,525 114,634 99,185 215,725 219,109 105,462 66,795 33,467 35,245 29,354 31,760 40,274 362,811 104,431 172,857 640,099 733,725 233,484 — — — $805,649 $392,185 — 34,804 26,455 $242,881 $117,545 — 58,204 50,427 — 93,008 76,882 — 308,182 313,553 $449,237 $1,497,767 $2,124,989 $258,220 $767,950 $1,237,517 — 226,970 178,724 $714,018 $387,281 51 FIRST MAJESTIC SILVER 2021 ANNUAL REPORTNOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS(Tabular amounts are expressed in thousands of US dollars)                        6. REVENUES The majority of the Company’s revenues are from the sale of precious metals contained in doré form. The Company’s primary products are precious metals of silver and gold. Revenues from the sale of metal, including by-products, are recorded net of smelting and refining costs. Revenues for the year are summarized as follows: Gross revenue from payable metals:    Silver    Gold    Lead Gross revenue Less: smelting and refining costs Revenues Year Ended December 31, 2021 52% 48% 0% 2020 66% 34% 0% $242,338 124,264 74 $307,304 279,921 — 587,225 100% 366,676 100% (3,108) $584,117 (2,800) $363,876 As at December 31, 2021, the Company had $12.2 million of unearned revenue (December 31, 2020 - $2.7 million) that has not satisfied performance obligations. (a) Gold Stream Agreement with Sandstorm Gold Ltd. The Santa Elena mine is subject to a gold streaming agreement with Sandstorm Gold Ltd. (“Sandstorm”), which requires the Company to sell 20% of its gold production over the life of mine from its leach pad and a designated area of its underground operations at the Santa Elena mine. The selling price to Sandstorm is the lesser of the prevailing market price or $450 per ounce, subject to a 1% annual inflation. During the year ended December 31, 2021, the Company delivered 5,327 ounces (2020 - 5,697 ounces) of gold to Sandstorm at an average price of $467 per ounce (2020 - $463 per ounce). (b) Net Smelter Royalty The Santa Elena mine has a net smelter royalty (“NSR”) agreement with Orogen Royalties Inc. that requires a 2% NSR from the production of the Ermitaño property. In addition, there is an underlying NSR royalty where Osisko Gold Royalties Ltd. retains a 2% NSR from the sale of mineral products extracted from the Ermitaño property. During the year ended December 31, 2021, the Company had accrued $1.0 million (2020 - $nil) in NSR from the production of Ermitaño in November and December of 2021 to be paid in the first quarter of 2022. 52 NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS(Tabular amounts are expressed in thousands of US dollars)        (c) Gold Stream Agreement with Wheaton Precious Metals Corporation In 2018, the San Dimas mine entered into a purchase agreement with Wheaton Precious Metals International (“WPMI”), a wholly owned subsidiary of Wheaton Precious Metals Corp., which entitles WPMI to receive 25% of the gold equivalent production (based on a fixed exchange ratio of 70 silver ounces to 1 gold ounce) at San Dimas in exchange for ongoing payments equal to the lesser of $600 (subject to a 1% annual inflation adjustment) and the prevailing market price for each gold equivalent ounce delivered. Should the average gold to silver ratio over a six-month period exceed 90:1 or fall below 50:1, the fixed exchange ratio would be increased to 90:1 or decreased to 50:1, respectively. The fixed gold to silver exchange ratio as at December 31, 2021 was 70:1. During the year ended December 31, 2021, the Company delivered 48,015 ounces (2020 - 38,604 ounces) of gold to WPMI at $617 (2020 - $610) per ounce, respectively. 7. COST OF SALES Cost of sales excludes depletion, depreciation and amortization and are costs that are directly related to production and generation of revenues at the operating segments. Significant components of cost of sales are comprised of the following: Consumables and materials Labour costs Energy Other costs Production costs Transportation and other selling costs Workers participation costs Environmental duties and royalties Inventory changes Other Cost of Sales Cost of Sales - Standby Costs(1) Year Ended December 31, 2021 $78,463 194,846 42,881 27,011 2020 $36,760 103,075 25,075 11,275 $343,201 $176,185 2,739 15,939 5,835 (2,304) 675 2,288 14,245 2,010 (423) — $366,085 $— $194,305 $10,112 (1) Cost of sales for the year ended December 31, 2020 included standby costs of $10.1 million, primarily related to direct costs incurred at the San Dimas ($3.5 million), Santa Elena ($2.0 million) and La Encantada ($1.7 million) mines due to temporary suspensions following Mexico’s Ministry of Health’s Federal Decree requiring all non-essential businesses, including mining, to temporarily suspend activities throughout most of April and May in response to the global pandemic. In addition, the Company incurred $2.0 million in standby costs related to the 13-day union work stoppage at San Dimas in June 2020. 8. GENERAL AND ADMINISTRATIVE EXPENSES General and administrative expenses are incurred to support the administration of the business that are not directly related to production. Significant components of general and administrative expenses are comprised of the following: Corporate administration Salaries and benefits Audit, legal and professional fees Filing and listing fees Directors fees and expenses Depreciation Year Ended December 31, 2021 $7,806 11,636 4,619 506 826 1,670 2020 $5,012 11,271 5,353 499 842 1,878 $27,063 $24,855 53 FIRST MAJESTIC SILVER 2021 ANNUAL REPORTNOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS(Tabular amounts are expressed in thousands of US dollars)          9. MINE HOLDING COSTS The Company’s mine holding costs are primarily comprised of labour costs associated with care and maintenance staff, electricity, security, environmental and community support costs for the following mines which are currently under temporary suspension: Del Toro La Parrilla San Martin La Guitarra 10. INVESTMENT AND OTHER (LOSS) INCOME The Company’s investment and other (loss) income are comprised of the following: (Loss) gain from investment in marketable securities (Note 14(a)) Loss on write-down of plant and equipment(1)(2) Gain from investment in silver futures derivatives Interest income and other Year Ended December 31, 2021 $3,385 3,278 2,597 2,796 2020 $7,999 5,563 5,265 2,757 $12,056 $21,583 Year Ended December 31, 2021 ($2,054) (2,501) 532 1,075 ($2,948) 2020 $1,973 — 2,079 1,075 $5,127 (1) In March 2021, the Company entered into an agreement with Condor Gold PLC (“Condor”) to sell its AG Mill equipment for gross proceeds of $6.5 million, including $3.5 million in cash and $3.0 million in common shares of Condor. During the year ended December 31, 2021, the Company completed the sale and recognized a loss of $2.1 million, being the difference between the proceeds of disposal and the carrying amount of the project’s net assets, as loss on write-down of plant and equipment. (2) In May 2021, the Company entered into an agreement with Capstone Mining Corp. to sell certain mill equipment for gross proceeds of $6.4 million in cash, of which $5.7 million has been received as at December 31, 2021. No gain or loss was recognized as part of this transaction as the equipment was sold at cost. 11. FINANCE COSTS Finance costs are primarily related to interest and accretion expense on the Company’s debt facilities, lease liabilities and accretion of decommissioning liabilities. The Company’s finance costs in the year are summarized as follows: Debt facilities(1) (Note 20) Lease liabilities (Note 21) Loss on settlement of senior convertible note(2) (Note 20(a)) Accretion of decommissioning liabilities Silver sales and other Year Ended December 31, 2021 $10,541 2,013 4,642 3,228 580 2020 $10,593 1,479 — 2,362 339 $21,004 $14,773 (1) During the year ended December 31, 2021, finance costs for debt facilities include non-cash accretion expense of $7.2 million (2020 - $6.8 million). (2) In December 2021, the Company closed an offering of $200.0 million aggregate principal amount of unsecured senior convertible notes plus an additional over-allotment option of $30 million which it used to repurchase the outstanding 2018 senior convertible notes (Note 20 (a)). The repurchase generated a loss due to the difference between the cash paid to repurchase and cancel the 2018 senior convertible notes, compared to the carrying value of the notes on the date of settlement. 54 NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS(Tabular amounts are expressed in thousands of US dollars)                  12. EARNINGS OR LOSS PER SHARE Basic earnings or loss per share is the net earnings or loss available to common shareholders divided by the weighted average number of common shares outstanding during the period. Diluted net earnings or loss per share adjusts basic net earnings per share for the effects of potential dilutive common shares. The calculations of basic and diluted earnings or loss per share for the years ended December 31, 2021 and 2020 are as follows: Net (loss) earnings for the year Year Ended December 31, 2021 ($4,923) 2020 $23,087 Weighted average number of shares on issue - basic 244,749,772 213,879,622 Impact of effect on dilutive securities: Stock options Restricted, performance and deferred share units Weighted average number of shares on issue - diluted(1) (Loss) earnings per share - basic and diluted — — 1,705,689 293,518 244,749,772 215,878,829 ($0.02) $0.11 (1) For the year ended December 31, 2021, diluted weighted average number of shares excluded 2,014,379 (2020 - 2,666,819) options, 5,000,000 (2020 - nil) warrants, 701,250 restricted and performance share units (2020 - nil), 16,327,598 (2020 - 16,327,598) common shares issuable under the 2018 convertible debentures and 13,888,895 common shares issuable under the 2021 convertible debentures (2020- nil) (Note 20(a)) that were anti-dilutive. 13. INVENTORIES Inventories consist primarily of materials and supplies and products of the Company’s operations, in varying stages of the production process, and are presented at the lower of weighted average cost or net realizable value. Finished goods - doré Work-in-process Stockpile Silver coins and bullion Materials and supplies December 31, 2021 December 31, 2020 $3,735 6,409 9,015 10,790 30,664 $60,613 $2,812 2,780 1,336 956 24,628 $32,512 The amount of inventories recognized as an expense during the period is equivalent to the total of cost of sales plus depletion, depreciation and amortization for the period. As at December 31, 2021 mineral inventories, which consist of stockpile, work-in-process and finished goods, include a $7.5 million (2020 - $nil) writedown which was recognized in cost of sales during the year. 14. OTHER FINANCIAL ASSETS As at December 31, 2021, other financial assets consists of the Company’s investment in marketable securities comprised of the following: FVTPL marketable securities (a) FVTOCI marketable securities (b) Total other financial assets December 31, 2021 December 31, 2020 $10,851 15,635 $26,486 $13,876 22,443 $36,319 (a) Fair Value through Profit or Loss (“FVTPL”) Marketable Securities Loss in marketable securities designated as FVTPL for the year ended December 31, 2021 was $2.1 million (2020 - gain of $2.0 million), and was recorded through profit or loss. (b) Fair Value through Other Comprehensive Income (“FVTOCI”) Marketable Securities Changes in fair value of marketable securities designated as FVTOCI for the year ended December 31, 2021 was a loss of $13.9 million (2020 - gain of $10.5 million), net of tax, and were recorded through other comprehensive income and will not be transferred into earnings or loss upon disposition or impairment. 55 FIRST MAJESTIC SILVER 2021 ANNUAL REPORTNOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS(Tabular amounts are expressed in thousands of US dollars)          15. MINING INTERESTS Mining interests primarily consist of acquisition, development, exploration and exploration potential costs directly related to the Company’s operations and projects. Upon commencement of commercial production, mining interests for producing properties are depleted on a units-of-production basis over the estimated economic life of the mine. In applying the units of production method, depletion is determined using quantity of material extracted from the mine in the period as a portion of total quantity of material, based on reserves and resources, considered to be highly probable to be economically extracted over the life of mine plan. The Company’s mining interests are comprised of the following: Depletable properties Non-depletable properties (exploration and evaluation costs, exploration potential) December 31, 2021 December 31, 2020 $805,649 242,881 $1,048,530 $392,185 117,545 $509,730 Depletable properties are allocated as follows Depletable properties Cost At December 31, 2019 Additions Change in decommissioning liabilities (Note 22) Transfer from exploration properties At December 31, 2020 Additions Acquisition of Jerritt Canyon (Note 4) Change in decommissioning liabilities (Note 22) Transfer from exploration properties San Dimas Santa Elena La Encantada Jerritt Canyon Non-producing Properties(1) Total $220,658 $61,654 $111,590 $— $494,132 $888,034 21,263 4,527 3,645 $250,093 34,894 — 1,209 — 6,218 1,191 4,229 $73,292 16,150 — 2,177 34,302 4,201 2,049 472 — — — — 3,059 — 31,682 10,826 8,346 $118,312 $— $497,191 $938,888 2,546 — 584 1,293 16,618 340,652 28,799 — — — (2,623) — 70,208 340,652 30,147 35,595 At December 31, 2021 $286,196 $125,921 $122,735 $386,069 $494,569 $1,415,490 Accumulated depletion, amortization and impairment At December 31, 2019 Depletion and amortization At December 31, 2020 Depletion and amortization At December 31, 2021 Carrying values At December 31, 2020 At December 31, 2021 ($27,225) ($16,608) ($88,499) (18,277) (3,792) (3,948) ($45,502) ($20,400) ($92,447) $— — $— ($388,354) ($520,686) — (26,017) ($388,354) ($546,703) (27,169) (8,250) (4,461) (23,258) — (63,138) ($72,671) ($28,650) ($96,908) ($23,258) ($388,354) ($609,841) $204,592 $213,526 $52,892 $97,271 $25,865 $25,827 $— $362,811 $108,837 $106,215 $392,185 $805,649 (1) Non-producing properties include the San Martin, Del Toro, La Parrilla and La Guitarra mines. 56 NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS(Tabular amounts are expressed in thousands of US dollars)                    Non-depletable properties costs are allocated as follows: Non-depletable properties San Dimas(a) Santa Elena(b) La Encantada   Jerritt Canyon(c) Non- producing Properties(1) Exploration Projects(2) Springpole Stream(d) Total $8,699 $18,592 $1,104 $— $32,938 $34,710 $— $96,043 At December 31, 2019 Exploration and evaluation expenditures Change in decommissioning liabilities (Note 22) Sale of exploration project 12,125 19,588 2,323 — — — — — — — — — — 4,066 1,142 4,356 43,601 — — — 59 (13,812) — — — — 59 (13,812) (8,346) Transfer to producing properties (3,645) (4,229) (472) At December 31, 2020 $17,179 $33,951 $2,955 $— $37,004 $22,099 $4,356 $117,545 Exploration and evaluation expenditures Change in decommissioning liabilities (Note 22) Acquisition of Jerritt Canyon (Note 4) Transfer to producing properties 12,007 31,418 2,978 12,424 1,748 985 7,500 69,060 — — — — — — — (34,302) (1,293) — 92,007 — — — — (136) — — — — — (136) 92,007 (35,595) At December 31, 2021 $29,186 $31,067 $4,640 $104,431 $38,752 $22,948 $11,856 $242,881 (1) Non-producing properties include the San Martin, Del Toro, La Parrilla and La Guitarra mines. (2) Exploration projects include the La Luz, La Joya, Los Amoles, Jalisco Group of Properties and Jimenez del Tuel projects, as well as the Plomosas project which was sold during 2020. (a) San Dimas Silver/Gold Mine, Durango State, Mexico The San Dimas Mine is subject to a gold and silver streaming agreement with WPMI which entitles WPMI to receive 25% of the gold equivalent production (based on a fixed exchange ratio of 70 silver ounces to 1 gold ounce) at San Dimas in exchange for ongoing payments equal to the lesser of $600 (subject to a 1% annual inflation adjustment commencing in May 2019) and the prevailing market price for each gold ounce delivered. Should the average gold to silver ratio over a six-month period exceed 90:1 or fall below 50:1, the fixed exchange ratio would be increased to 90:1 or decreased to 50:1, respectively. The fixed gold to silver exchange ratio as at December 31, 2021 was 70:1. (b) Santa Elena Silver/Gold Mine, Sonora State, Mexico The Santa Elena Mine is subject to a gold streaming agreement with Sandstorm, which requires the mine to sell 20% of its life of mine gold production from its leach pad and a designated area of its underground operations of the Santa Elena mine to Sandstorm. The selling price to Sandstorm is currently the lesser of $464 per ounce, subject to a 1% annual inflation increase every April, and the prevailing market price. The Santa Elena mine has a net smelter royalty (“NSR”) agreement with Orogen Royalties Inc. that requires a 2% NSR from the production of the Ermitaño property. In addition, there is an underlying NSR royalty where Osisko Gold Royalties Ltd. retains a 2% NSR from the sale of mineral products extracted from the Ermitaño property. During the year ended December 31, 2021, the Company had accrued $1.0 million (2020 - $nil) in NSR from the production of Ermitaño in November and December of 2021 to be paid in the first quarter of 2022. (c) Jerritt Canyon Gold Mine, Nevada, United States The Jerritt Canyon Mine is subject to a 0.5% NSR royalty on production of gold and silver from the Jerritt Canyon mines and processing plant. The royalty is applied, at a fixed rate of 0.5%, against proceeds from gold and silver products after deducting treatment, refining, transportation, insurance, taxes and levies charges. The Jerritt Canyon Mine is also subject to a 2.5% to 5% NSR royalty relating to the production of gold and silver within specific boundary lines at certain mining areas. The royalty is applied, at a fixed rate of 2.5% to 5.0%, against proceeds from gold and silver products. As at December 31, 2021, total NSR royalty accrual outstanding was $0.1 million (2020 -$nil). (d) Springpole Silver Stream, Ontario, Canada In July 2020, the Company completed an agreement with First Mining Gold Corp. (“First Mining”) to purchase 50% of the life of mine payable silver produced from the Springpole Gold Project (“Springpole Silver Stream”), a development stage mining project located in Ontario, Canada. First Majestic agreed to pay First Mining consideration of $22.5 million in cash and shares, in three milestone payments, for the right to purchase silver at a price of 33% of the silver spot price per ounce, to a maximum of $7.50 per ounce (subject to annual inflation escalation of 2%, commencing at the start of the third anniversary of production). Commencing with its production of silver, First Mining must deliver 50% of the payable silver which it receives from the offtaker within five business days of the end of each quarter. Transaction consideration paid and payable by First Majestic is summarized as follows: • The first payment of $10.0 million, consisting of $2.5 million in cash and $7.5 million in First Majestic shares (805,698 common shares), was paid to First Mining on July 2, 2020; 57 FIRST MAJESTIC SILVER 2021 ANNUAL REPORTNOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS(Tabular amounts are expressed in thousands of US dollars)15. MINING INTERESTS (continued) (d) Springpole Silver Stream, Ontario, Canada (continued) • The second payment, consisting of $3.75 million in cash and $3.75 million in First Majestic shares (287,300 common shares), was paid on January 21, 2021 upon the completion and public announcement by First Mining of the results of a Pre-Feasibility Study for Springpole; and • The third payment, consisting of $2.5 million in cash and $2.5 million in First Majestic shares (based on 20 days volume weighted average price), will be paid upon receipt by First Mining of a Federal or Provincial Environmental Assessment approval for Springpole, which has not yet been received. In connection with the agreement, First Mining also granted First Majestic 30 million common share purchase warrants, each of which will entitle the Company to purchase one common share of First Mining at CAD$0.40 over a period of five years. The fair value of the warrants was measured at $5.7 million using the Black-Scholes option pricing model. First Mining shall have the right to repurchase 50% of the silver stream for $22.5 million at any time prior to the commencement of production at Springpole leaving the Company with a reduced silver stream of 25% of life of mine payable silver production. As at December 31, 2021, the Company has paid $17.5 million in consideration to First Mining as part of the agreement, of which $5.7 million was allocated to other financial assets and $11.8 million was allocated to the Springpole Silver Stream recognized within exploration and evaluation assets. First Mining is a related party with one independent board member who is also a director and/or officer of First Majestic. 16. PROPERTY, PLANT AND EQUIPMENT The majority of the Company’s property, plant and equipment is used in the Company’s operating mine segments. Property, plant and equipment is depreciated using either the straight-line or units-of-production method over the shorter of the estimated useful life of the asset or the expected life of mine. Where an item of property, plant and equipment comprises of major components with different useful lives, the components are accounted for as separate items of property, plant and equipment. Assets under construction are recorded at cost and re-allocated to land and buildings, machinery and equipment or other when they become available for use. Property, plant and equipment are comprised of the following:  Cost At December 31, 2019 Additions Transfers and disposals At December 31, 2020 Additions Acquisition of Jerritt Canyon (Note 4) Transfers and disposals At December 31, 2021 Accumulated depreciation, amortization and impairment At December 31, 2019 Depreciation and amortization Transfers and disposals At December 31, 2020 Depreciation and amortization Transfers and disposals Loss on disposal of equipment At December 31, 2021 Carrying values At December 31, 2020 At December 31, 2021 Land and Buildings(1) Machinery and Equipment Assets under Construction(2)(3) Other Total $198,412 $456,655 — 917 2,096 9,873 $199,329 $468,624 34 32,992 12,602 2,974 137,219 15,645 $244,957 $624,462 ($129,040) ($326,300) (4,188) 72 (19,833) 2,754 ($133,156) ($343,379) (13,923) (33,137) — — 1,637 — ($147,079) ($374,879) $27,645 47,266 (19,242) $55,669 77,151 4,337 (46,706) $90,451 $— — — $— — — — $— $24,438 $707,150 391 3,822 49,753 (4,630) $28,651 $752,273 341 1,179 3,412 80,500 175,727 (15,047) $33,583 $993,453 ($15,171) ($470,511) (2,555) 208 (26,576) 3,034 ($17,518) ($494,053) (2,899) 240 (2,081) (49,959) 1,877 (2,081) ($22,258) ($544,216) $66,173 $97,878 $125,245 $249,583 $55,669 $90,451 $11,133 $11,325 $258,220 $449,237 (1) Included in land and buildings is $11.2 million (2020 - $11.2 million) of land which is not subject to depreciation. (2) Assets under construction includes certain innovation projects, such as high-intensity grinding (“HIG”) mills and related modernization, plant improvements, other mine infrastructures and equipment overhauls. (3) Transfers and disposals in construction in progress includes the sale of the AG mill and certain mill equipment to Condor Gold PLC and Capstone Mining Corp. as disclosed in Note 10. 58 NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS(Tabular amounts are expressed in thousands of US dollars)Property, plant and equipment, including land and buildings, machinery and equipment, assets under construction and other assets above are allocated by mine as follow: San Dimas Santa Elena La Encantada Jerritt Canyon Non-producing Properties(1) Other Total Cost At December 31, 2019 $136,303 $90,762 $137,302 $— $297,240 $45,543 $707,150 Additions Transfers and disposals At December 31, 2020 Additions(2) Acquisition of Jerritt Canyon (Note 4) Transfers and disposals At December 31, 2021 10,384 41 7,933 (1,364) 4,209 1,999 — — 272 (3,751) 26,955 (1,555) 49,753 (4,630) $146,728 $97,331 $143,510 $— $293,761 $70,943 $752,273 9,484 — 2,316 19,885 — 5,381 5,831 — 1,377 17,366 175,727 229 — 27,705 — 80,500 175,727 (8) (8,184) (15,929) (15,047) $158,528 $122,597 $150,718 $193,085 $285,806 $82,719 $993,453 Accumulated depreciation, amortization and impairment At December 31, 2019 ($19,747) ($42,975) ($122,566) $— ($266,190) ($19,033) ($470,511) Depreciation and amortization Transfers and disposals At December 31, 2020 Depreciation and amortization Transfers and disposals Write-down on assets held-for-sale At December 31, 2021 Carrying values At December 31, 2020 At December 31, 2021 (15,032) 156 (6,451) 1,340 (2,646) (1,743) — — (592) 2,909 (1,855) (26,576) 372 3,034 ($34,623) ($48,086) ($126,955) $— ($263,873) ($20,516) ($494,053) (17,801) (631) — (6,997) (2,671) — (2,259) (824) — (20,228) — — (266) 5,513 — (2,408) (49,959) 490 (2,081) 1,877 (2,081) ($53,055) ($57,754) ($130,038) ($20,228) ($258,626) ($24,515) ($544,216) $112,105 $105,473 $49,245 $64,843 $16,555 $20,680 $— $172,857 $29,888 $27,180 $50,427 $58,204 $258,220 $449,237 (1) Non-producing properties include the San Martin, Del Toro, La Parrilla and La Guitarra mines. (2) Additions classified in “Other” primarily consist of innovation projects and construction-in-progress. 17. RIGHT-OF-USE ASSETS The Company entered into operating leases to use certain land, building, mining equipment and corporate equipment for its operations. The Company is required to recognize right-of-use assets representing its right to use these underlying leased asset over the lease term. Right-of-use assets are initially measured at cost, equivalent to its obligation for payments over the term of the leases, and subsequently measured at cost less accumulated depreciation and impairment losses. Depreciation is recorded on a straight-line basis over the shorter period of lease term and useful life of the underlying asset. Right-of-use assets are comprised of the following: At December 31, 2019 Additions Remeasurements Depreciation and amortization Disposals At December 31, 2020 Additions Remeasurements Depreciation and amortization Disposals At December 31, 2021 Land and Buildings Machinery and Equipment $4,207 1,939 2,789 (848) — $8,087 1,294 363 (1,325) (117) $8,302 $7,812 554 (10) (2,106) (16) $6,234 17,560 1,668 (4,520) (23) $20,921 Other $15 — — (7) — $8 — — (7) — $2 Total $12,034 2,494 2,779 (2,961) (16) $14,330 18,854 2,031 (5,851) (139) $29,225 59 FIRST MAJESTIC SILVER 2021 ANNUAL REPORTNOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS(Tabular amounts are expressed in thousands of US dollars)                  18. RESTRICTED CASH Restricted cash is comprised of the following: (a) Current As part of the acquisition of Jerritt Canyon (Note 4), the Company was required to hold certain funds in escrow to settle the payment for Triggered Tax provisions along with any adjustments to working capital. As at December 31, 2021, $12.6 million (2020 - $nil) remains in escrow which the Company expects to be settled within the next twelve months. (b) Non-Current Nevada Division of Environmental Protection bond(1) Chartis Commutation Account(2) SAT Primero tax dispute(3) December 31, 2021 December 31, 2020 $39,727 27,275 48,010 $115,012 $— — — $— 1. Jerritt Canyon is required to provide a surety bond to the Nevada Division of Environmental Protection (“NDEP”) and the US Forestry Service to fund the ongoing reclamation and mine closure obligations. To meet this surety requirement, the Company has on deposit $39.7 million in money market accounts. The money market account principal balance plus interest earned on the principal is used to fund ongoing reclamation and mine closure obligations. 2. The Company owns an environmental risk transfer program (the “ERTP”) for Jerritt Canyon from American Insurance Group (“AIG”). As part of the ERTP, $27.3 million is on deposit in an interest-bearing account with AIG (the “Commutation Account”). The Commutation Account principal plus interest earned on the principal is used to fund ongoing reclamation and mine closure obligations. The Company can elect to extinguish all rights under the policy, which would release AIG from reclamation cost and financial assurance liabilities, and substitute with replacement bonds. AIG would pay Jerritt Canyon the remaining balance in the Commutation Account. 3. In connection with the dispute between Primero Empresa Minera, S.A. de C.V. (“PEM”) and the Servicio de Admistracion Tributaria (“SAT”) in relation to the advanced pricing agreement (Note 27(b)), the tax authority has frozen a PEM bank account with funds of $48.0 million (989.9 million MXN) as a guarantee against certain disputed tax assessments. This balance consists of Value Added Tax (“VAT”) refunds that the Company has received which were previously withheld by the tax authority. The Company does not agree with SAT’s position and has challenged it through the relevant legal channels. 19. TRADE AND OTHER PAYABLES The Company’s trade and other payables are primarily comprised of amounts outstanding for purchases relating to mining operations, exploration and evaluation activities and corporate expenses. The normal credit period for these purchases is usually between 30 to 90 days. Trade and other payables are comprised of the following items: Trade payables Trade related accruals Payroll and related benefits Estimated Triggered Tax Adjustment and Working Capital Adjustment payable, net (Note 4) NSR royalty liabilities (Notes 15(b)(c)) Environmental duty and net mineral sales proceeds tax Other accrued liabilities December 31, 2021 December 31, 2020 $41,827 30,621 28,162 12,570 1,147 3,281 3,058 $31,262 18,635 21,427 — — 2,156 2,522 $120,666 $76,002 60 NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS(Tabular amounts are expressed in thousands of US dollars)        20. DEBT FACILITIES The movement in debt facilities during the year ended December 31, 2021 and year ended December 31, 2020, respectively, are comprised of the following: Balance at December 31, 2019 Finance costs Interest expense Accretion Proceeds from drawdown of revolving credit facility Repayments of principal Payments of finance costs Balance at December 31, 2020 Gross proceeds from debt financing Portion allocated to equity reserves from debt financing Finance costs Interest expense Accretion Proceeds from drawdown of revolving credit facility Repayments of principal Conversion of senior convertible notes to common shares Transaction costs Payments of finance costs Balance at December 31, 2021 Statements of Financial Position Presentation Current portion of debt facilities Non-current portion of debt facilities Balance at December 31, 2020 Current portion of debt facilities Non-current portion of debt facilities Balance at December 31, 2021 (a) Convertible Debentures 2018 Senior Convertible Debentures Convertible Debentures (a) $136,607 2,984 6,168 — — (2,934) $142,825 $230,000 (42,340) 2,846 6,809 — (125,576) (23,230) (7,224) (2,932) $181,178 $1,092 141,733 $142,825 $69 181,108 $181,178 Revolving Credit Facility (b) Total $19,211 $155,818 763 678 10,000 (19,969) (800) $9,883 $— — 537 349 30,000 (40,000) — (101) (612) $56 $9,883 — $9,883 $56 — $56 3,747 6,846 10,000 (19,969) (3,734) $152,708 $230,000 ($42,340) 3,383 7,158 30,000 (165,576) (23,230) (7,325) (3,544) $181,234 $10,975 141,733 $152,708 $125 181,108 $181,234 During the first quarter of 2018, the Company issued $156.5 million of unsecured senior convertible debentures (the “Existing Notes”). The Company received net proceeds of $151.1 million after transaction costs of $5.4 million. The Existing Notes mature on March 1, 2023 and bear an interest rate of 1.875% per annum, payable semi-annually in arrears in March and September of each year. The Existing Notes are convertible into common shares of the Company at any time prior to maturity at a conversion rate of 104.3297 common shares per $1,000 principal amount of Existing Notes converted, representing an initial conversion price of $9.59 per common share, subject to certain anti- dilution adjustments. In addition, if certain fundamental changes occur, holders of the Existing Notes may be entitled to an increased conversion rate. The Company may not redeem the Existing Notes before March 6, 2021, except in the event of certain changes in Canadian tax law. At any time on or after March 6, 2021 and until maturity, the Company may redeem all or part of the Existing Notes for cash if the last reported share price of the Company’s common shares for 20 or more trading days in a period of 30 consecutive trading days exceeds 130% of the conversion price or $12.47 per common share. The redemption price is equal to the sum of: (i) 100% of the principal amount of the notes to be redeemed and (ii) accrued and unpaid interest, if any, to the redemption date. The Company is required to offer to purchase for cash all of the outstanding Existing Notes upon a fundamental change, at a cash purchase price equal to 100% of the principal amount of the Existing Notes to be purchased, plus accrued and unpaid interest, if any, to the fundamental change purchase date. 61 FIRST MAJESTIC SILVER 2021 ANNUAL REPORTNOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS(Tabular amounts are expressed in thousands of US dollars)20. DEBT FACILITIES (continued) (a) Convertible Debentures (continued) 2018 Senior Convertible Debentures (continued) The component parts of the convertible debentures, a compound instrument, are classified separately as financial liabilities and equity in accordance with the substance of the contractual arrangement and the definitions of a financial liability and an equity instrument. A conversion option that will be settled by the exchange of a fixed amount of cash or another financial asset for a fixed number of the Company’s own equity instrument is an equity instrument. At initial recognition, net proceeds of $151.1 million from the Existing Notes were allocated into its debt and equity components. The fair value of the debt portion was estimated at $124.8 million using a discounted cash flow model method with an expected life of five years and a discount rate of 6.14%. This amount is recorded as a financial liability on an amortized cost basis using the effective interest method using an effective interest rate of 6.47% until extinguished upon conversion or at its maturity date. The conversion option is classified as equity and was estimated based on the residual value of $26.3 million. This amount is not subsequently remeasured and will remain in equity until the conversion option is exercised, in which case, the balance recognized in equity will be transferred to share capital. Where the conversion option remains unexercised at the maturity date of the convertible note, the balance will remain in equity reserves. Deferred tax liability of $7.1 million related to taxable temporary difference arising from the equity portion of the convertible debenture was recognized in equity reserves. Transaction costs of $5.4 million that relate to the issuance of the convertible debentures were allocated to the liability and equity components in proportion to the allocation of the gross proceeds. Transaction costs relating to the equity component are recognized directly in equity. Transaction costs relating to the liability component are included in the carrying amount of the liability component and are amortized over the life of the convertible debentures using the effective interest method. 2021 Senior Convertible Debentures On December 2, 2021, the Company issued $230 million of unsecured senior convertible debentures (the “Notes”). The Company received net proceeds of $222.8 million after transaction costs of $7.2 million. The Notes mature on January 15, 2027 and bear an interest rate of 0.375% per annum, payable semi-annually in arrears in January and July of each year. The Notes are convertible into common shares of the Company at any time prior to maturity at a conversion rate of 60.3865 common shares per $1,000 principal amount of Notes converted, representing an initial conversion price of $16.56 per common share, subject to certain anti-dilution adjustments. In addition, if certain fundamental changes occur, holders of the Notes may be entitled to an increased conversion rate. The Company may not redeem the Notes before January 20, 2025 except in the event of certain changes in Canadian tax law. At any time on or after January 20, 2025 and until maturity, the Company may redeem all or part of the Notes for cash if the last reported share price of the Company’s common shares for 20 or more trading days in a period of 30 consecutive trading days exceeds 130% of the conversion price in effect on each such trading day. The redemption price is equal to the sum of: (i) 100% of the principal amount of the Notes to be redeemed and (ii) accrued and unpaid interest, if any, to the redemption date. 62 The Company is required to offer to purchase for cash all of the outstanding Notes upon a fundamental change, at a cash purchase price equal to 100% of the principal amount of the Notes to be purchased, plus accrued and unpaid interest, if any, to the fundamental change purchase date. The component parts of the convertible debentures, a compound instrument, are classified separately as financial liabilities and equity in accordance with the substance of the contractual arrangement and the definitions of a financial liability and an equity instrument. A conversion option that will be settled by the exchange of a fixed amount of cash or another financial asset for a fixed number of the Company’s own equity instrument is an equity instrument. At initial recognition, net proceeds of $222.8 million from the Notes were allocated into its debt and equity components. The fair value of the debt portion was estimated at $180.4 million using a discounted cash flow model method with an expected life of five years and a discount rate of 4.75%. This amount is recorded as a financial liability on an amortized cost basis using the effective interest method using an effective interest rate of 5.09% until extinguished upon conversion or at its maturity date. The conversion option is classified as equity and was estimated based on the residual value of $42.3 million. This amount is not subsequently remeasured and will remain in equity until the conversion option is exercised, in which case, the balance recognized in equity will be transferred to share capital. Where the conversion option remains unexercised at the maturity date of the convertible note, the balance will remain in equity reserves. Deferred tax liability of $11.4 million related to taxable temporary difference arising from the equity portion of the convertible debenture was recognized in equity reserves. Transaction costs of $7.2 million that relate to the issuance of the convertible debentures were allocated to the liability and equity components in proportion to the allocation of the gross proceeds. Transaction costs relating to the equity component are recognized directly in equity. Transaction costs relating to the liability component are included in the carrying amount of the liability component and are amortized over the life of the convertible debentures using the effective interest method. A portion of the Notes proceeds received were used to redeem 125,231 of the Existing Notes for total costs of $164.9 million. The total proceeds were allocated to the carrying value of the debt by $118.9 million and $41.8 million to equity reserves of these Notes, resulting with a loss on the settlement of debt of $4.6 million. 24,219 of the remaining Notes were converted to common shares by note holders at an adjusted conversion rate of 106.0528 common shares per $1,000 face value note, where $23.2 million were allocated to the carrying value of the debt and $4.1 million were transferred to share capital from equity reserves. Finally, 6,950 of the remaining notes were settled at par value with a payment in cash of $6.95 million; the cash paid was allocated to the carrying value of the debt by $6.6 million and $0.2 million to equity reserves. At December 31, 2021, the Existing Notes have been fully settled, with a remaining carrying value of $nil. (b) Revolving Credit Facility On April 1, 2021, the Company renewed its senior secured revolving credit facility (the “Revolving Credit Facility”) with the Bank of Nova Scotia and Bank of Montreal by extending the maturity date from May 10, 2021 to November 30, 2022 and reducing the credit limit from $75.0 million to $50.0 million. Interest on the drawn balance will accrue at LIBOR plus an applicable range of 2.25% to 3.5% per annum while the undrawn portion is subject to a standby fee with an applicable range of 0.563% to 0.875% per annum, dependent on certain financial parameters of First Majestic. As at December 31, 2021, the applicable rates were 2.3% and 0.5625% per annum, respectively. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS(Tabular amounts are expressed in thousands of US dollars)These debt facilities are guaranteed by certain subsidiaries of the Company and are also secured by a first priority charge against the assets of the Company, and a first priority pledge of shares of the Company’s subsidiaries. The Revolving Credit Facility includes financial covenants, to be tested quarterly on a consolidated basis, requiring First Majestic to maintain the following: (a) a leverage ratio based on net indebtedness to rolling four quarters adjusted EBITDA of not more than 3.00 to 1.00; (b) an interest coverage ratio, based on rolling four quarters adjusted EBITDA divided by interest payments, of not less than 4.00 to 1.00; and (c) tangible net worth of not less than $563.5 million plus 50% of its positive earnings subsequent to June 30, 2018. The debt facilities also provide for negative covenants customary for these types of facilities and allows the Company to enter into finance leases, excluding any leases that would have been classified as operating leases in effect immediately prior to the implementation of IFRS 16 - Leases, of up to $30.0 million. As at December 31, 2021 and December 31, 2020, the Company was in compliance with these covenants. 21. LEASE LIABILITIES The Company has finance leases, operating leases and equipment financing liabilities for various mine and plant equipment, office space and land. Finance leases and equipment financing obligations require underlying assets to be pledged as security against the obligations and all of the risks and rewards incidental to ownership of the underlying asset being transferred to the Company. For operating leases, the Company controls but does not have ownership of the underlying right-of-use assets. Lease liabilities are initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate. Lease liabilities are subsequently measured at amortized cost using the effective interest rate method. Certain lease agreements may contain lease and non-lease components, which are generally accounted for separately. For certain equipment leases, such as vehicles, the Company has elected to account for the lease and non-lease components as a single lease component. The movement in lease liabilities during the year ended December 31, 2021 and year ended December 31, 2020 are comprised of the following: Balance at December 31, 2019 Additions Remeasurements Finance costs Repayments of principal Payments of finance costs Foreign exchange gain Balance at December 31, 2020 Acquisition of Jerritt Canyon (Note 4) Additions Remeasurements Disposals Finance costs Repayments of principal Payments of finance costs Foreign exchange gain Balance at December 31, 2021 Statements of Financial Position Presentation Current portion of lease liabilities Non-current portion of lease liabilities Balance at December 31, 2020 Current portion of lease liabilities Non-current portion of lease liabilities Balance at December 31, 2021 Finance Leases Operating Leases(a) $50 — — — (50) — — $— 2,194 4,001 — — 89 (942) (89) — $18,951 2,494 2,779 1,396 (5,353) — (281) $19,986 — 18,854 2,031 (150) 1,915 (7,824) — (268) $5,253 $34,544 $— — $— $2,165 3,088 $5,253 $4,820 15,166 $19,986 $9,596 24,948 $34,544 Equipment Financing(b) $2,935 — — 83 (2,303) (126) — $589 — — — — 9 (521) (13) — $64 $538 51 $589 $64 — $64 Total $21,936 2,494 2,779 1,479 (7,706) (126) (281) $20,575 2,194 22,855 2,031 (150) 2,013 (9,287) (102) (268) $39,861 $5,358 15,217 $20,575 $11,825 28,036 $39,861 63 FIRST MAJESTIC SILVER 2021 ANNUAL REPORTNOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS(Tabular amounts are expressed in thousands of US dollars)21. LEASE LIABILITIES (continued) (a) Operating leases Operating leases primarily relate to equipment and building rental contracts, land easement contracts and service contracts that contain embedded leases for property, plant and equipment. These operating leases have remaining lease terms of one to ten years, some of which include options to terminate the leases within a year, with incremental borrowing rates ranging from 3.35% to 11.20% per annum. During the year ended December 31, 2021 and 2020, the amounts of lease payments recognized in the profit and loss are summarized as follows: Expenses relating to variable lease payments not included in the measurement of lease liability Expenses relating to short-term leases Expenses relating to low value leases (b) Equipment financing Year Ended December 31, 2021 Year Ended December 31, 2020 $109,565 41,283 5 $150,853 $25,560 19,607 81 $45,248 During 2017, the Company entered into a $7.9 million credit facility with repayment terms ranging from 12 to 16 equal quarterly installments in principal plus related interest. The facility bears an interest rate of LIBOR plus 4.60%. Proceeds from the equipment financing were primarily used for the purchase and rehabilitation of property, plant and equipment. The equipment financing is secured by certain equipment of the Company and is subject to various covenants, including the requirement for First Majestic to maintain a leverage ratio based on total debt to rolling four quarters adjusted EBITDA. As of December 31, 2021 and year ended December 31, 2020, the Company was in compliance with these covenants. As at December 31, 2021, the net book value of property, plant and equipment includes $2.0 million (December 31, 2020 - $1.9 million) of equipment pledged as security for the equipment financing. 22. DECOMMISSIONING LIABILITIES The Company has an obligation to undertake decommissioning, restoration, rehabilitation and environmental work when environmental disturbance is caused by the development and ongoing production of a mining operation. Movements in decommissioning liabilities during the years ended December 31, 2021 and 2020 are allocated as follow: Balance at December 31, 2019 $9,442 $4,971 $8,112 $— $7,103 $4,337 $3,769 $2,178 $616 $40,528 San Dimas Santa Elena La Encantada Jerritt Canyon San Martin La Parrilla Del Toro La Guitarra La Luz Total Movements during the year: Disposition of exploration project — — — Change in rehabilitation provision 4,527 1,191 2,049 Reclamation costs incurred Interest or accretion expense Foreign exchange loss — 565 (475) (55) 295 (252) — 477 (415) — — — — — — 1,240 (81) 418 (359) — 830 (20) 259 — 772 — 226 (216) (190) (153) 217 — 122 (86) — 59 — — (153) 10,885 (156) 2,362 (2) (1,995) Balance at December 31, 2020 $14,059 $6,150 $10,223 $— $8,321 $5,190 $4,577 $2,278 $673 $51,471 Movements during the year: Acquisition of Jerritt Canyon — — Change in rehabilitation provision 1,209 2,177 Reclamation costs incurred Interest or accretion expense — 715 — 313 — 584 — 521 Foreign exchange (loss) gain (454) (199) (333) 71,135 28,799 (186) 642 — — (1,435) (339) 424 (264) — (900) (17) 264 (169) — (565) (64) 234 (148) — 278 — 115 (73) — 71,135 (137) 30,010 — — 9 (606) 3,228 (1,631) Balance at December 31, 2021 $15,529 $8,441 $10,995 $100,390 $6,707 $4,368 $4,034 $2,598 $545 $153,607 A provision for decommissioning liabilities is estimated based on current regulatory requirements and is recognized at the present value of such costs. The expected timing of cash flows in respect of the provision is based on the estimated life of the Company’s mining operations. The discount rate is a risk-free rate determined based on Mexican pesos default swap rates ranging between 7.4% to 7.5% (2020 - 5.0% to 5.3%) for the respective estimated life of the operations. The inflation rate used is based on historical Mexican inflation rate of 4.2% (2020 - 3.9%). At the Jerritt Canyon Gold Mine, the discount rate is a risk-free rate determined based on the US swap rates ranging between 1.5% to 1.6% for the estimated life of the mine. The inflation rate is based on historical US inflation rate of 2.15%. The present value of reclamation liabilities may be subject to change based on changes to cost estimates, remediation technologies or applicable laws and regulations. Changes in decommissioning liabilities are recorded against mining interests. 64 NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS(Tabular amounts are expressed in thousands of US dollars)At December 31, 2021, the reclamation and closure cost obligation for the Jerritt Canyon Gold Mine totaled $100.4 million. This obligation is secured through cash of $39.7 million (note 18(b)), a surety bond of $41.3 million held with the NDEP and two surety bonds totaling $11.2 million held with the United States Forest Services (“USFS”) to support various reclamation obligation bonding requirements. On November 2, 2021, the Company executed an agreement with the NDEP relating to funds required to establish a trust agreement to cover post-closure water treatment cost at Jerritt Canyon. The estimated costs are $17.6 million which are included in the decommissioning liabilities provision and would need to be funded by October 31, 2022. 23. INCOME TAXES The following is a reconciliation of income taxes calculated at the combined Canadian federal and provincial statutory tax rate to the income tax expense for the year ended December 31, 2021 and 2020: Earnings before tax Combined statutory tax rate Income tax expense computed at statutory tax rate Reconciling items: Effect of different foreign statutory tax rates on earnings of subsidiaries Impact of foreign exchange on deferred income tax assets and liabilities Change in unrecognized deferred income tax asset 7.5% mining royalty in Mexico Other non-deductible expenses Impact of inflationary adjustments Change in tax provision estimates Impact of divestitures and restructurings Other Income tax expense Statements of Earnings Presentation Current income tax expense Deferred income tax recovery Income tax expense Effective tax rate As at December 31, 2021 and 2020, the Company has the following income tax payable balances: Current income tax payable Non-current income tax payable Year Ended December 31, 2021 $25,250 27% 6,818 4,962 (1,419) 14,100 13,389 15,491 (13,504) (945) 102 (8,821) $30,173 $49,283 (19,110) $30,173 119% 2020 $29,729 27% 8,027 (4,760) 15,688 (4,596) 7,415 758 (1,317) 10,387 (16,724) (8,236) $6,642 $9,966 (3,324) $6,642 22% Year Ended December 31, 2021 $27,980 21,812 $49,792 2020 $6,574 23,099 $29,673 65 FIRST MAJESTIC SILVER 2021 ANNUAL REPORTNOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS(Tabular amounts are expressed in thousands of US dollars)        23. INCOME TAXES (continued) During the years ended December 31, 2021 and 2020, the movement in deferred tax assets and deferred tax liabilities is shown as follows: Deferred tax assets At December 31, 2019 Benefit to statement of earnings At December 31, 2020 Benefit (expense) to statement of earnings Acquired from Jerritt Canyon At December 31, 2021 Deferred tax liabilities At December 31, 2019 Expense (Benefit) to statement of earnings Reclassed to current income taxes payable Charged to OCI Divestiture of exploration projects At December 31, 2020 Expense to statement of earnings Reclassed to current income taxes payable Acquired from Jerritt Canyon Benefit to equity Translation and other At December 31, 2021 Statements of Financial Position Presentation Deferred tax assets Deferred tax liabilities At December 31, 2020 Deferred tax assets Deferred tax liabilities At December 31, 2021 Losses Provisions Deferred tax asset not recognized $126,472 21,327 $147,799 29,196 10,275 $22,887 ($100,504) 2,389 $25,276 16,467 — 11,788 ($88,716) (12,891) — Other $8,845 456 $9,301 4,667 2,801 Total $57,700 35,960 $93,660 37,439 13,076 $187,270 $41,743 ($101,607) $16,769 $144,175 Property, plant and equipment and mining interests $33,001 23,883 — — — $56,884 12,186 — 123,578 — — Effect of Mexican tax deconsolidation $4,429 (113) (2,245) — — $2,071 84 (1,549) — — — Other $33,045 (18,311) — 1,633 (2,577) $13,790 6,059 — — 9,843 (2,192) Total $70,475 5,459 (2,245) 1,633 (2,577) $72,745 18,329 (1,549) 123,578 9,843 (2,192) $192,648 $606 $27,500 $220,754 $69,644 48,729 ($20,915) $74,257 150,836 $76,579 At December 31, 2021, the Company recognized $74.3 million (2020 - $69.6 million) of net deferred tax assets in entities that have had a loss for tax purposes in either 2021 or 2020, or both. In evaluating whether it is probable that sufficient taxable income will be generated to realize the benefit of these deferred tax assets, the Company considered all available evidence, including approved budgets, forecasts and business plans and, in certain cases, tax planning opportunities. The aggregate amount of taxable temporary differences associated with investments in subsidiaries for which deferred taxes have not been recognized, as at December 31, 2021 was $334.0 million (2020 - $236.5 million). 66 NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS(Tabular amounts are expressed in thousands of US dollars)Deductible temporary differences, unused tax losses and unused tax credits for which no deferred tax assets have been recognized are attributable to the following: Non-capital losses Capital losses Accrued expenses Mineral properties, plant and equipment Other Year Ended December 31, 2021 $239,175 10,619 78,754 44,300 17,578 2020 $207,853 — 25,513 55,460 6,897 $390,426 $295,723 As at December 31, 2021 and 2020, the Company has available Canadian, US and Mexican non-capital tax losses, which if not utilized will expire as follows: Year of expiry Canadian non-capital losses US non-capital losses Mexican non-capital losses December 31, 2021 December 31, 2020 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 and after No expiry Total Unrecognized losses 24. SHARE CAPITAL (a) Authorized and issued capital $— $— — — — — — — — — — — — — — — — — 11,113 — $11,113 $11,113 14,334 66,578 $80,912 $— $4,025 2,052 37,355 41,286 108,513 11,579 55,852 75,381 153,152 57,889 — $4,025 2,052 37,355 41,286 108,513 11,579 55,852 75,381 153,152 83,336 66,578 $3,835 3,878 2,071 34,964 38,901 104,044 21,040 57,809 68,074 152,862 — $547,084 $243,180 $639,109 $254,293 $487,478 $199,775 The Company has unlimited authorized common shares with no par value. The movement in the Company’s issued and outstanding capital during the years ended December 31, 2021 and 2020 is summarized in the consolidated statements of changes in equity. ATM program(1) Prospectus offering Year Ended December 31, 2021 Year Ended December 31, 2020 Number of Shares Net Proceeds Number of Shares Net Proceeds 4,225,000 — $66,674 — 5,654,338 5,000,000 4,225,000 $66,674 10,654,338 $67,896 58,240 $126,136 (1) In May 2021, the Company filed prospectus supplements to its short form base shelf prospectus, pursuant to which the Company may, at its discretion and from time-to-time, sell common shares of the Company for aggregate gross proceeds of up to $100.0 million. The sale of common shares is to be made through “at-the-market distributions” (“ATM”), as defined in the Canadian Securities Administrators’ National Instrument 44-102 Shelf Distributions, directly on the New York Stock Exchange. During the year ended December 31, 2021, the Company sold 4,225,000 (2020 - 5,654,338) common shares of the Company under the ATM program at an average price of $16.24 (2020 - $12.31) for gross proceeds of $68.6 million (2020 - $69.6 million), or net proceeds of $66.7 million (2020 - $67.9 million) after costs. At December 31, 2021, the Company completed $68.6 million of the ATM program. (b) Stock options Under the terms of the Company’s 2019 Long-Term Incentive Plan (“LTIP”), the maximum number of shares reserved for issuance under the LTIP is 8% of the issued shares on a rolling basis. Options may be exercisable over periods of up to ten years as determined by the Board of Directors of the Company and the exercise price shall not be less than the closing price of the shares on the day preceding the award date, subject to regulatory approval. All stock options granted are subject to vesting with 25% vesting on first anniversary from the date of grant, and 25% vesting each six months thereafter. 67 FIRST MAJESTIC SILVER 2021 ANNUAL REPORTNOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS(Tabular amounts are expressed in thousands of US dollars)        24. SHARE CAPITAL (continued) (b) Stock options (continued) The following table summarizes information about stock options outstanding as at December 31, 2021: Exercise prices (CAD$) 5.01 - 10.00 10.01 - 15.00 15.01 - 20.00 20.01 - 250.00     Options Outstanding         Options Exercisable     Number of Options 2,226,614 1,369,993 1,296,821 744,955 5,638,383 Weighted Average Exercise Price (CAD $/Share) Weighted Average Remaining Life (Years) 8.62 13.62 16.21 21.56 13.29 6.87 8.19 8.45 8.76 7.80 Number of Options 1,819,114 537,120 286,973 52,705 2,695,912 Weighted Average Exercise Price (CAD $/Share) Weighted Average Remaining Life (Years) 8.57 13.31 15.93 22.55 10.57 6.70 7.61 7.56 0.23 6.85 The movements in stock options issued during the years ended December 31, 2021 and 2020 are summarized as follows: Balance, beginning of the year Granted Exercised Cancelled or expired Balance, end of the year Year Ended December 31, 2021 Year Ended December 31, 2020 Number of Options 7,074,092 1,400,000 (2,502,234) (333,475) 5,638,383 Weighted Average Exercise Price (CAD $/Share) 12.07 18.98 10.87 29.45 13.29 Number of Options 7,583,439 2,621,924 (2,473,926) (657,345) 7,074,092 Weighted Average Exercise Price (CAD $/Share) 10.70 13.46 7.50 18.96 12.07 During the year ended December 31, 2021, the aggregate fair value of stock options granted was $9.9 million (December 31, 2020 - $12.1 million), or a weighted average fair value of $7.04 per stock option granted (2020 - $4.63). During the year ended December 31, 2021, total share-based payments expense related to stock options was $8.8 million (December 31, 2020 - $7.0 million). The following weighted average assumptions were used in estimating the fair value of stock options granted using the Black-Scholes Option Pricing Model: Assumption Based on Risk-free interest rate (%) Yield curves on Canadian government zero- coupon bonds with a remaining term equal to the stock options’ expected life Expected life (years) Average of the expected vesting term and expiry term of the option Expected volatility (%) Historical and implied volatility of the precious metals mining sector Expected dividend yield (%) Annualized dividend rate as of the date of grant Year Ended December 31, 2021 Year Ended December 31, 2020 1.04 5.93 49.00 0.10% 1.03 5.83 49.00 — The weighted average closing share price at date of exercise for the year ended December 31, 2021 was CAD$13.29 (December 31, 2020 - CAD$15.61). (c) Restricted Share Units The Company adopted the 2019 LTIP to allow the Company to grant to its directors, employees and consultants non-transferable Restricted Share Units (“RSU’s”) based on the value of the Company’s share price at the date of grant. Unless otherwise stated, the awards typically have a graded vesting schedule over a three-year period and can be settled either in cash or equity upon vesting at the discretion of the Company. The Company intends to settle all RSU’s in equity. The associated compensation cost is recorded as share-based payments expense against equity reserves. The following table summarizes the changes in RSU’s for the year ended December 31, 2021 and the year ended December 31, 2020: 68 NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS(Tabular amounts are expressed in thousands of US dollars)          Outstanding, beginning of the year Granted Settled Forfeited Outstanding, end of the year Year Ended December 31, 2021 Year Ended December 31, 2020 Number of shares Weighted Average Fair Value (CAD$) Number of shares Weighted Average Fair Value (CAD$) 184,483 312,991 (69,504) (27,421) 400,549 15.66 17.19 15.79 16.56 16.77 128,944 211,192 (127,000) (28,653) 184,483 10.36 15.72 10.32 15.93 15.66 During the year ended December 31, 2021, total share-based payments expense related to RSU’s was $1.9 million (December 31, 2020 - $0.8 million). (d) Performance Share Units The Company adopted the 2019 LTIP to allow the Company to grant to its directors, employees and consultants non-transferable Performance Share Units (“PSU’s”). The amount of units to be issued on the vesting date will vary from 0% to 200% of the number of PSU’s granted, depending on the Company’s total shareholder return compared to the return of a selected group of peer companies. Unless otherwise stated, the awards typically vest three years from the grant date. The fair value of a PSU is based on the value of the Company’s share price at the date of grant and will be adjusted based on actual units issued on the vesting date. The Company intends to settle all PSU’s in equity. The following table summarizes the changes in PSU’s granted to employees and consultants for the year ended December 31, 2021 and the year ended December 31, 2020: Outstanding, beginning of the year Granted Forfeited Outstanding, end of the year Year Ended December 31, 2021 Year Ended December 31, 2020 Number of shares Weighted Average Fair Value (CAD$) Number of shares Weighted Average Fair Value (CAD$) 109,035 184,050 (17,569) 275,516 15.62 17.15 16.56 16.58 — 122,575 (13,540) 109,035 — 15.65 15.93 15.62 During the year ended December 31, 2021, total share-based payments expense related to PSU’s was $1.2 million (year ended December 31, 2020 - $0.5 million). (e) Deferred Share Units The Company adopted the 2019 LTIP to allow the Company to grant to its directors, employees and consultants non-transferrable Deferred Share Units (“DSU’s”). Unless otherwise stated, the awards typically vest immediately at the grant date. The fair value of a DSU is based on the value of the Company’s share price at the date of grant. The Company intends to settle all DSU’s in equity. The following table summarizes the changes in DSU’s granted to directors for the year ended December 31, 2021 and December 31, 2020: Outstanding, beginning of the year Granted Settled Outstanding, end of the year Year Ended December 31, 2021 Year Ended December 31, 2020 Number of shares Weighted Average Fair Value (CAD$) Number of shares Weighted Average Fair Value (CAD$) — 31,040 (5,855) 25,185 — 18.08 17.08 18.31 — — — — — — — — During the year ended December  31, 2021, total share-based payments expense related to DSU’s was $0.4 million (year ended December 31, 2020 - $nil). 69 FIRST MAJESTIC SILVER 2021 ANNUAL REPORTNOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS(Tabular amounts are expressed in thousands of US dollars)24. SHARE CAPITAL (continued) (f) Share Repurchase Program and Share Cancellation The Company has an ongoing share repurchase program to repurchase up to 5% of the Company’s issued and outstanding shares. The normal course issuer bids will be carried through the facilities of the Toronto Stock Exchange and alternative Canadian marketplaces. During the year ended December 31, 2020, the Company repurchased and cancelled 275,000 common shares for a total consideration of $1.7 million through a normal course issuer bid in the open market as approved by the Toronto Stock Exchange. No shares were repurchased during the year ended December 31, 2021. The Company cancelled 6,913 shares pursuant to section 4.4 of the plan of arrangement between Primero Mining Corp. (“Primero”) and the Company with an effective date of May 10, 2018 that states that any former shareholder of Primero who does not surrender their shares on the third anniversary of the effective date would cease the right to any of the Company’s shares and as such would automatically be cancelled. (g) Dividend The Company declared the following dividends during the year ended December 31, 2021: Declaration Date May 6, 2021 August 16, 2021 November 4, 2021 March 10, 2022(1) Record Date May 17, 2021 August 26, 2021 November 17, 2021 March 21, 2022 Dividend per Common Share $0.0045 $0.0060 $0.0049 $0.0079 (1) These dividends were declared subsequent to the period end and have not been recognized as distributions to ownersduring the period presented. 25. FINANCIAL INSTRUMENTS AND RELATED RISK MANAGEMENT The Company’s financial instruments and related risk management objectives, policies, exposures and sensitivity related to financial risks are summarized below. (a) Fair value and categories of financial instruments Financial instruments included in the consolidated statements of financial position are measured either at fair value or amortized cost. Estimated fair values for financial instruments are designed to approximate amounts for which the instruments could be exchanged in an arm’s-length transaction between knowledgeable and willing parties. The Company uses various valuation techniques in determining the fair value of financial assets and liabilities based on the extent to which the fair value is observable. The following fair value hierarchy is used to categorize and disclose the Company’s financial assets and liabilities held at fair value for which a valuation technique is used: Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities. Level 2: All inputs which have a significant effect on the fair value are observable, either directly or indirectly, for substantially the full contractual term. Level 3: Inputs which have a significant effect on the fair value are not based on observable market data. There were no transfers between levels 1, 2 and 3 during the year ended December 31, 2021 and year ended December 31, 2020. The table below summarizes the valuation methods used to determine the fair value of each financial instrument: Financial Instruments Measured at Fair Value Valuation Method Marketable securities - common shares Marketable securities - stock warrants Silver futures derivatives Marketable securities and silver future derivatives are valued based on quoted market prices for identical assets in an active market (Level 1) as at the date of statements of financial position. Marketable securities - stock warrants are valued using the Black-Scholes model based on the observable market inputs (Level 2). Financial Instruments Measured at Amortized Cost Valuation Method Cash and cash equivalents Restricted cash Trade and other receivables Trade and other payables Debt facilities 70 Approximated carrying value due to their short-term nature Approximated carrying value as discount rate on these instruments approximate the Company’s credit risk. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS(Tabular amounts are expressed in thousands of US dollars)        The following table presents the Company’s fair value hierarchy for financial assets and financial liabilities that are measured at fair value: December 31, 2021 Fair value measurement December 31, 2020 Fair value measurement Carrying value Level 1 Level 2 Carrying value Level 1 Level 2 Financial assets Marketable securities (Note 14) $26,486 $22,531 $3,955 $36,319 $30,996 $5,323 The Company’s objectives when managing capital are to maintain financial flexibility to continue as a going concern while optimizing growth and maximizing returns of investments from shareholders. (b) Capital risk management The Company monitors its capital structure and, based on changes in operations and economic conditions, may adjust the structure by repurchasing shares, issuing new shares, issuing new debt or retiring existing debt. The Company prepares annual budget and quarterly forecasts to facilitate the management of its capital requirements. The annual budget is approved by the Company’s Board of Directors. The capital of the Company consists of equity (comprising of issued capital, equity reserves and retained earnings or accumulated deficit), debt facilities, lease liabilities, net of cash and cash equivalents as follows: Equity Debt facilities Lease liabilities Less: cash and cash equivalents December 31, 2021 December 31, 2020 $1,410,971 181,233 39,861 (237,926) $1,394,139 $850,236 152,708 20,575 (238,578) $784,941 The Company’s investment policy is to invest its cash in highly liquid short-term investments with maturities of 90 days or less, selected with regards to the expected timing of expenditures from operations. The Company expects that its available capital resources will be sufficient to carry out its development plans and operations for at least the next 12 months. The Company is not subject to any externally imposed capital requirements with the exception of complying with covenants under the debt facilities (Note 20(b)) and lease liabilities (Note 21(b)). As at December 31, 2021 and December 31, 2020, the Company was in compliance with these covenants. (c) Financial risk management The Company thoroughly examines the various financial instruments and risks to which it is exposed and assesses the impact and likelihood of those risks. These risks may include credit risk, liquidity risk, currency risk, commodity price risk, and interest rate risk. Where material, these risks are reviewed and monitored by the Board of Directors. Credit Risk Credit risk is the risk of financial loss if a customer or counterparty fails to meet its contractual obligations. The Company’s credit risk relates primarily to chartered banks, trade receivables in the ordinary course of business, value added taxes receivable and other receivables. As at December 31, 2021, VAT receivable was $47.1 million (December 31, 2020 - $56.9 million), of which $22.2 million (December 31, 2020 $16.5 million) relates to Minera La Encantada S.A. de C.V. (“MLE”) and $22.0 million (December 31, 2020 - $37.9 million) relates to PEM. The SAT commenced processing VAT refund requests by PEM in June 2021 and the Company expects the amounts to be refunded within the next twelve months. The Company sells and receives payment upon delivery of its silver doré and by-products primarily through three international customers. All of the Company’s customers have good ratings and payments of receivables are scheduled, routine and fully received within 60 days of submission; therefore, the balance of trade receivables owed to the Company in the ordinary course of business is not significant. The carrying amount of financial assets recorded in the consolidated financial statements represents the Company’s maximum exposure to credit risk. With the exception to the above, the Company believes it is not exposed to significant credit risk. Liquidity Risk Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they arise. The Company manages liquidity risk by monitoring actual and projected cash flows and matching the maturity profile of financial assets and liabilities. Cash flow forecasting is performed regularly to ensure that there is sufficient capital in order to meet short-term business requirements, after taking into account cash flows from operations and our holdings of cash and cash equivalents. 71 FIRST MAJESTIC SILVER 2021 ANNUAL REPORTNOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS(Tabular amounts are expressed in thousands of US dollars)                      25. FINANCIAL INSTRUMENTS AND RELATED RISK MANAGEMENT (continued) (c) Financial risk management (continued) Liquidity Risk (continued) The following table summarizes the maturities of the Company’s financial liabilities as at December 31, 2021 based on the undiscounted contractual cash flows: Trade and other payables Debt facilities Lease liabilities Other liabilities Carrying Amount $120,666 181,233 39,861 5,797 Contractual Cash Flows $120,666 234,666 44,561 5,797 Less than 1 year 2 to 3 years 4 to 5 years After 5 years $120,666 1,216 11,252 — $— 1,725 21,312 — $— 231,725 10,752 — $— — 1,245 5,797 $7,042 $347,557 $405,690 $133,134 $23,037 $242,477 At December 31, 2021, the Company had working capital of $224.4 million (December 31, 2020 – $254.4 million). Total available liquidity at December 31, 2021 was $274.4 million, including $50.0 million of undrawn revolving credit facility. The Company believes it has sufficient cash on hand, combined with cash flows from operations, to meet operating requirements as they arise for at least the next 12 months. If the Company needs additional liquidity to meet obligations, the Company may consider drawing on its debt facility, securing additional debt financing and/or equity financing. Currency Risk The Company is exposed to foreign exchange risk primarily relating to financial instruments that are denominated in Canadian dollars or Mexican pesos, which would impact the Company’s net earnings or loss. To manage foreign exchange risk, the Company may occasionally enter into short-term foreign currency derivatives, such as forwards and options, to hedge its cash flows. The sensitivity of the Company’s net earnings or loss and comprehensive income or loss due to changes in the exchange rates of the Canadian dollar and the Mexican peso against the U.S. dollar is included in the table below: Canadian dollar Mexican peso Cash and cash equivalents Restricted cash $52,978 36,575 $89,553 $12,574 48,010 $60,584 Value added taxes receivable Other financial assets Trade and other payables Trade and other receivables Net assets (liabilities) exposure Effect of +/- 10% change in currency December 31, 2021 $— $7,644 ($3,547) (47,023) — $7,644 ($50,570) 42,979 $42,979 $90 — $90 $69,739 80,541 $6,974 8,054 $150,280 $15,028 The Company utilizes certain derivatives to manage its foreign exchange exposures to the Mexican Peso. During the year ended December 31, 2021, the Company had an unrealized loss of $nil (2020 - realized loss of $11.5 million) on fair value adjustments to its foreign currency derivatives. As at December 31, 2021, the Company does not hold any foreign currency derivatives (2020 - $nil). Commodity Price Risk The Company is exposed to commodity price risk on silver and gold, which have a direct and immediate impact on the value of its related financial instruments and net earnings. The Company’s revenues are directly dependent on commodity prices that have shown volatility and are beyond the Company’s control. The Company does not use derivative instruments to hedge its commodity price risk to silver or gold. The following table summarizes the Company’s exposure to commodity price risk and their impact on net earnings: Metals in doré inventory 72 December 31, 2021 Effect of +/- 10% change in metal prices Silver $2,217 $2,217 Gold $571 $571 Total $2,788 $2,788 NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS(Tabular amounts are expressed in thousands of US dollars)                  Interest Rate Risk The Company is exposed to interest rate risk on its short-term investments, debt facilities and lease liabilities. The Company monitors its exposure to interest rates and has not entered into any derivative contracts to manage this risk. The Company’s interest bearing financial assets comprise of cash and cash equivalents which bear interest at a mixture of variable and fixed rates for pre-set periods of time. As at December 31, 2021, the Company’s exposure to interest rate risk on interest bearing liabilities is limited to its debt facilities and lease liabilities. Based on the Company’s interest rate exposure at December 31, 2021, a change of 25 basis points increase or decrease of market interest rate does not have a significant impact on net earnings or loss. 26. SUPPLEMENTAL CASH FLOW INFORMATION Other adjustments to investing activities: Purchase of marketable securities Proceeds from disposal of marketable securities Cash received on settlement of derivatives Net change in non-cash working capital items: (Increase) decrease in trade and other receivables Decrease (increase) in value added taxes receivable Increase in inventories Increase in prepaid expenses and other Decrease (increase) in income taxes payable Increase in trade and other payables Increase in restricted cash (Note 18(b)) Non-cash investing and financing activities: Acquisition of Jerritt Canyon (Note 4) Transfer of share-based payments reserve upon settlement of RSU’s Transfer of share-based payments reserve upon exercise of options Acquisition of mining interests Assets acquired by finance lease Conversion to common shares upon settlement of the convertible note Year Ended December 31, 2021 2020 ($3,522) 2,564 533 ($425) ($3,386) 9,839 (8,956) (903) 3,332 16,580 (48,010) ($31,504) $466,300 963 8,643 (3,750) (4,001) (23,230) $444,925 ($1,522) 664 2,079 $1,221 $24 (27,525) (4,288) (692) (1,115) 10,765 — ($22,831) $— 992 5,903 (8,179) — — ($1,284) As at December 31, 2021, cash and cash equivalents include $6.4 million (December 31, 2020 - $6.4 million) that are held in-trust as bonds for tax audits in Mexico. 27. CONTINGENCIES AND OTHER MATTERS Due to the size, complexity and nature of the Company’s operations, various legal and tax matters arise in the ordinary course of business. The Company accrues for such items when a liability is probable and the amount can be reasonably estimated. In the opinion of management, these matters will not have a material effect on the consolidated financial statements of the Company. (a) Claims and Legal Proceedings Risks The Company is subject to various claims and legal proceedings covering a wide range of matters that arise in the ordinary course of business activities. Many factors, both known and unknown, could cause actual results, performance or achievements to be materially different from the results, performance or achievements that are or may be expressed or implied by such forward-looking statements or information and the Company has made assumptions and estimates based on or related to many of these factors. Such factors include, without limitation: availability of time on court calendars in Canada and elsewhere; the recognition of Canadian judgments under Mexican law; the possibility of settlement discussions; the risk of appeal of judgment; and the insufficiency of the defendant’s assets to satisfy the judgment amount. Each of these matters is subject to various uncertainties and it is possible that some of these matters may be resolved unfavourably to the Company. First Majestic carries liability insurance coverage and establishes provisions for matters that are probable and can be reasonably estimated. In addition, the Company may be involved in disputes with other parties in the future which may result in a significant impact on our financial condition, cash flow and results of operations. 73 FIRST MAJESTIC SILVER 2021 ANNUAL REPORTNOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS(Tabular amounts are expressed in thousands of US dollars)                 27. CONTINGENCIES AND OTHER MATTERS (continued) (a) Claims and Legal Proceedings Risks (continued) Although the Company has taken steps to verify ownership and legal title to mineral properties in which it has an interest, according to the usual industry standards for the stage of mining, development and exploration of such properties, these procedures do not guarantee the Company’s title. Such properties may be subject to prior agreements or transfers, and title may be affected by undetected defects. However, management is not aware of any such agreements, transfers or defects. (b) Primero Tax Rulings When Primero, the previous owner of San Dimas acquired the San Dimas Mine in August 2010, it assumed the obligations under a Silver Purchase Agreement (“Old Stream Agreement”) that required its subsidiary PEM to sell to WPMI all the silver produced from the San Dimas mine, up to 6 million ounces and 50% of silver produced thereafter, at the lower of: (i) the spot market price and (ii) $4.014 per ounce plus an annual increase of 1%. In order to reflect the commercial terms and the effects of the Old Stream Agreement, for Mexican income tax purposes, PEM recognized the revenue on these silver sales based on its actual realized revenue (“PEM Realized Price”) instead of at spot market prices. To obtain assurance that the SAT would accept the PEM Realized Price as the price to use to calculate Mexican income taxes, Primero applied for and received on October 4, 2012, an Advance Pricing Agreement (“APA”) from the SAT for taxation years 2010 to 2014. The APA confirmed that the PEM Realized Price could be used as Primero’s basis for calculating taxes owed by PEM for the silver sold under the Old Stream Agreement. The purpose of the APA was to have SAT provide tax certainty and as a result Primero and PEM made significant investments in Mexico based on that certainty. In February 2016, PEM received a legal claim from the SAT seeking to nullify the APA. The legal claim did not identify any alternative basis for paying taxes. In 2019, the SAT issued reassessments for the 2010 to 2012 tax years in the total amount of $239.0 million (4,919 million MXN) inclusive of interest, inflation, and penalties. In 2021, the SAT also issued a reassessment against PEM for the 2013 tax year in the total amount of $132.3 million (2,723 million MXN) (collectively, the “Reassessments”). The Company believes that the Reassessments were issued in violation of the terms of the APA. The key items in the Reassessments include determining revenue on the sale based on the silver spot market price, denial of the deductibility of interest expense and service fees, SAT technical error related to double counting of taxes, and interest and penalties. The Company continues to defend the APA in the Mexican legal proceedings, and initiated proceedings under relevant tax treaties between the competent tax authorities of Mexico, Canada, Luxembourg and Barbados, all of which were subsequently dismissed on a unilateral basis by the SAT (“Dismissals”) in May 2020. The Company believes that the Dismissals breach international obligations regarding double taxation treaties, and also that the APA remains valid and legally binding. The Company will continue disputing the Reassessments, exhausting its domestic and international remedies. While the Company continues to vigorously defend the validity of the APA and its transfer pricing position, it is also engaging in various proceedings against the SAT seeking to resolve matters and bring tax certainty through a negotiated solution. Despite these extensive efforts and ongoing legal challenges to the Reassessments and the Dismissals, in April 2020 and February 2021, SAT issued notifications to PEM to attempt to secure amounts it claims are owed pursuant to its reassessments issued. These notifications impose certain restrictions on PEM including its ability to dispose of its concessions and real properties, and to restrict access to funds within its bank account, the latter as disclosed in Note 18(b)3 of the audited financial statements. The Company has challenged SAT’s Reassessments and Dismissals through all domestic means available to it, including annulment suits before the Mexican Federal Tax Court on Administrative Matters (“Federal Court”), which remain unresolved, and a complaint before Mexico’s Federal Taxpayer Defense Attorney’s Office (known as “PRODECON”). The Company believes that the actions of the SAT are neither fair nor equitable, are discriminatory against the Company as a foreign investor, amount to a denial of justice under international law, and furthermore violate various provisions of the Federal Constitution of the United Mexican States, Mexican domestic law, and Mexican court precedents. On May 13, 2020, the Company provided to the Government of Mexico notice of its intention to initiate an international arbitration proceeding (“Notice of Intent”) pursuant to the North American Free Trade Agreement (“NAFTA”). The Notice of Intent commenced a 90-day period for the Government of Mexico to enter into good faith and amicable negotiations with the Company to resolve the dispute. On August 11, 2020, the 90-day period expired without any resolution of the dispute. In September 2020, the Company was served with a decision of the Federal Court seeking to nullify the APA granted to PEM. The Federal Court’s decision directs SAT to re-examine the evidence and basis for the issuance of the APA with retroactive effect, for the following key reasons: (i) SAT’s errors in analyzing PEM’s request for the APA and the evidence provided in support of the request; and (ii) SAT’s failure to request from PEM certain additional information before issuing the APA. The Company’s legal advisors having reviewed the written reasons have advised that the Federal Court’s decision is flawed both due to SAT’s procedural irregularities and failure to address the relevant evidence and legal authorities. In addition, they consider that the laws applied to PEM in the decision are unconstitutional. As a result, the Company filed an appeal of the decision to the Mexican Circuit Courts on November 30, 2020. Since two writs of certiorari were filed before the Mexican Supreme Court of Justice, on April 15, 2021, the Plenary of the Supreme Court i) admitted one of those writs, ii) requested the Circuit Court to send the amparo file and iii) assigned such writ to the Second Chamber of the Supreme Court for issuing the corresponding decision. The other writ of certiorari has not been admitted by the Plenary of the Supreme Court. Therefore, the Company is currently waiting for the Supreme Court to issue a resolution towards such writs of certiorari. 74 NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS(Tabular amounts are expressed in thousands of US dollars) The Company intends to continue to challenge the actions of the SAT in Mexican courts. However, due to the ongoing COVID-19 crisis, the Mexican courts continues to be available only on a restricted basis for further hearings on these matters. On March 2, 2021, the Company announced that it submitted a Request for Arbitration to the International Centre for Settlement of Investment Disputes (“ICSID”), on its own behalf and on behalf of PEM, based on Chapter 11 of NAFTA. On March 31, 2021, the Notice of Registration of the Request for Arbitration was issued by the ICSID Secretariat. Once the NAFTA Arbitration Panel (the “Tribunal”) was fully constituted by the appointment of all three panel members on August 20, 2021, the NAFTA Arbitration Proceedings (the “NAFTA Proceedings”) were deemed to have commenced. The first session of the NAFTA Proceedings was held by videoconference on September 24, 2021 to decide upon the procedural rules which will govern the NAFTA Proceedings. The Tribunal issued Procedural Order No. 1 on October 21, 2021. If the SAT were to be successful in retroactively nullifying the APA, the SAT may seek to audit and reassess PEM in respect of its sales of silver pursuant to the Old Stream Agreement for 2010 through 2014. Such an outcome would likely have a material adverse effect on the Company’s results of operations, financial condition and cash flows. Should the Company ultimately be required to pay tax on its silver revenues based on spot market prices without any mitigating adjustments, the incremental income tax for the years 2010-2019 would be approximately $228.5 million (4,703 million MXN), before taking into consideration interest or penalties. Based on the Company’s consultation with third party advisors, the Company believes PEM filed its tax returns in compliance with applicable Mexican law and, therefore, at this time no liability has been recognized in the financial statements. To the extent it is ultimately determined that the appropriate price of silver sales under the Old Stream Agreement is significantly different from the PEM Realized Price and while PEM would have rights of appeal in connection with any reassessments, it is likely to have a materially adverse effect on the Company’s business, financial position and results of operations. La Encantada Tax Re-assessments In December 2019, as part of the ongoing annual audits of the tax returns of Minera La Encantada S.A. de C.V., the SAT issued tax assessments for fiscal 2012 and 2013 in the amount of $7.6 million (155.4 million MXN) and $6.2 million (126.6 million MXN), respectively.  The key items relate to forward silver purchase agreement and denial of the deductibility of mine development costs and service fees.  The Company continues to defend the validity of the forward silver purchase agreement and will vigorously dispute the assessments that have been issued.  The Company, based on advice from legal and financial advisors believes MLE’s tax filings were appropriate and its tax filing position is correct, therefore no liability has been recognized in the financial statements.  First Silver litigation In April 2013, the Company received a positive judgment on the First Silver litigation from the Supreme Court of British Columbia (the “Court”), which awarded the sum of $93.8 million in favour of First Majestic against Hector Davila Santos (the “Defendant”). The Company received a sum of $14.1 million in June 2013 as partial payment of the judgment, leaving an unpaid amount of approximately $64.3 million (CAD$81.5 million). As part of the ruling, the Court granted orders restricting any transfer or encumbrance of the Bolaños Mine by the Defendant and limiting mining at the Bolaños Mine. The orders also require that the Defendant to preserve net cash flow from the Bolaños Mine in a holding account and periodically provide to the Company certain information regarding the Bolaños Mine. However, there can be no guarantee that the remainder of the judgment amount will be collected and it is likely that it will be necessary to take additional action in Mexico and/or elsewhere to recover the balance. Therefore, as at December 31, 2021, the Company has not accrued any of the remaining $64.3 million (CAD$81.5 million) unrecovered judgment in favour of the Company. 28. SUBSIDIARIES The consolidated financial statements of the Company include the following significant subsidiaries as at December 31, 2021 and 2020 as follows: Name of subsidiary Operations and Projects First Majestic Silver Corp. Parent company and bullion sales Corporación First Majestic, S.A. de C.V. Primero Empresa Minera, S.A de C.V. Nusantara de Mexico, S.A. de C.V. Minera La Encantada, S.A. de C.V. First Majestic Plata, S.A. de C.V. Minera El Pilón, S.A. de C.V. First Majestic Del Toro, S.A. de C.V. La Guitarra Compañia Minera, S.A. de C.V. Majestic Services, S.A. de C.V. Jerritt Canyon Canada Ltd. Jerritt Canyon Gold LLC FM Metal Trading (Barbados) Inc. FMS Trading AG Holding company San Dimas Silver/Gold Mine Santa Elena Silver/Gold Mine La Encantada Silver Mine La Parrilla Silver Mine San Martin Silver Mine Del Toro Silver Mine La Guitarra Silver Mine Service company Holding company Jerritt Canyon Gold Mine United States Metals trading company Metals trading company Barbados Switzerland Location Canada Mexico Mexico Mexico Mexico Mexico Mexico Mexico Mexico Mexico Canada 2021 % Ownership 2020 % Ownership 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% —% —% 100% 100% 75 FIRST MAJESTIC SILVER 2021 ANNUAL REPORTNOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS(Tabular amounts are expressed in thousands of US dollars)           29. KEY MANAGEMENT COMPENSATION Salaries, bonuses, fees and benefits Independent members of the Board of Directors Other members of key management Share-based payments Independent members of the Board of Directors Other members of key management 30. SUBSEQUENT EVENTS Declaration of Quarterly Dividend Year Ended December 31, 2021 2020 $868 3,790 769 3,661 $9,088 $803 3,937 402 2,646 $7,788 On March 9, 2022, the Company’s board of directors approved its quarterly common share dividend of $0.0079 per share, payable on and after April 4, 2022, to common shareholders of record at the close of business on March 21, 2022. These dividends were declared subsequent to the quarter end and have not been recognized as distributions to owners during the year ended December 31, 2021. 76 NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS(Tabular amounts are expressed in thousands of US dollars)Management’s Discussion and Analysis FOR THE YEAR AND QUARTER ENDED DECEMBER 31, 2021 FIRST MAJESTIC SILVER 2021 ANNUAL REPORT 77 This Management’s Discussion and Analysis of Results of Operations and Financial Condition (“MD&A”) should be read in conjunction with the audited consolidated financial statements of First Majestic Silver Corp. (“First Majestic” or “the Company”) as at and for the year ended December 31, 2021 which are prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”). All dollar amounts are expressed in United States (“US”) dollars and tabular amounts are expressed in thousands of US dollars, unless otherwise indicated. Certain amounts shown in this MD&A may not add exactly to total amounts due to rounding differences. This MD&A contains “forward-looking statements” that are subject to risk factors set out in a cautionary note contained at the end of this MD&A. All information contained in this MD&A is current and has been approved by the Board of Directors of the Company as of March 9, 2022 unless otherwise stated. Company Overview First Majestic is a multinational mining company headquartered in Vancouver, Canada, focused on primary silver and gold production in North America, pursuing the exploration and development of its existing mineral properties and acquiring new assets. The Company owns one producing mine in the USA, the Jerritt Canyon Gold Mine, three producing mines in Mexico: the San Dimas Silver/Gold Mine, the Santa Elena Silver/Gold Mine, the La Encantada Silver Mine, four mines currently in care and maintenance in Mexico: the San Martin Silver Mine, the Del Toro Silver Mine, the La Parrilla Silver Mine and the La Guitarra Silver/Gold Mine. First Majestic is publicly listed on the New York Stock Exchange under the symbol “AG”, on the Toronto Stock Exchange under the symbol “FR” and on the Frankfurt Stock Exchange under the symbol “FMV”. IN PRODUCTION NEVADA, USA JERRITT CANYON GOLD MINE IN PRODUCTION MEXICO SANTA ELENA SILVER/GOLD MINE LA ENCANTADA SILVER MINE SAN DIMAS SILVER/GOLD MINE PROJECTS MEXICO LA PARRILLA SILVER MINE DEL TORO SILVER MINE SAN MARTIN SILVER MINE LA GUITARRA SILVER MINE 78 MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION2021 Annual Highlights Key Performance Metrics Operational Ore Processed / Tonnes Milled Silver Ounces Produced Silver Equivalent Ounces Produced Cash Costs per Silver Equivalent Ounce (1) All-in Sustaining Cost per Silver Equivalent Ounce (1) Total Production Cost per Tonne (1) Average Realized Silver Price per Ounce (1) Financial (in $millions) Revenues Mine Operating Earnings Earnings (Loss) before Income Taxes Net (Loss) Earnings Operating Cash Flows before Working Capital and Taxes Cash and Cash Equivalents Working Capital (1) Free Cash Flow (1) Shareholders (Loss) Earnings per Share (“EPS”) - Basic Adjusted EPS (1) NM - Not meaningful 2021 2020 2019 Change ‘21 vs ‘20 3,339,394 2,213,954 2,831,999 12,842,945 11,598,380 13,241,118 26,855,783 20,379,010 25,554,288 $13.23 $18.84 $102.77 $25.16 $584.1 $101.4 $25.3 ($4.9) $176.8 $237.9 $224.4 ($16.9) $9.00 $14.03 $79.59 $21.15 $363.9 $105.1 $29.7 $23.1 $107.3 $238.6 $254.4 $30.7 $8.74 $12.62 $75.05 $16.40 $363.9 $66.2 ($39.0) ($40.5) $108.9 $169.0 $171.1 $91.0 ($0.02) $0.02 $0.11 $0.18 ($0.20) $0.04 51% 11% 32% 47% 34% 29% 19% 61% (3%) (15%) (121%) 65% 0% (12%) (155%) (119%) (86%) (1) The Company reports non-GAAP measures which include cash costs per ounce produced, all-in sustaining cost per ounce, total production cost per tonne, average realized silver price per ounce sold, working capital, adjusted EPS and free cash flow. These measures are widely used in the mining industry as a benchmark for performance, but do not have a standardized meaning and the methods used by the Company to calculate such measures may differ from methods used by other companies with similar descriptions. See “Non-GAAP Measures” on pages 109 to 114 for a reconciliation of non-GAAP to GAAP measures. Silver Production (M Oz) Silver Equivalent Production (M Oz) Cash Cost per Eq Ounce ($/Oz) AISC per Eq Ounce ($/Oz) 12.8 11.6 13.2 26.9 25.6 $13.23 $18.84 20.4 $9.00 $8.74 $14.03 $12.62 2021 2020 2019 2021 2020 2019 2021 2020 2019 2021 2020 2019 79 FIRST MAJESTIC SILVER 2021 ANNUAL REPORTMANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Operational Highlights Annual Production Summary Ore Processed / Tonnes Milled Silver Ounces Produced Gold Ounces Produced Silver Equivalent Ounces Produced Cash Costs per Silver Equivalent Ounce(1) All-in Sustaining Cost per Silver Equivalent Ounce(1) Cash Cost per Gold Equivalent Ounce(1) All-in Sustaining Costs per Gold Equivalent Ounce(1) San Dimas Santa Elena La Encantada Jerritt Canyon Consolidated 822,791 879,060 7,646,898 1,954,492 1,004,144 3,241,555 633,400 3,339,394 — 12,842,945 81,237 42,088 460 68,567 192,353 13,525,049 5,041,937 3,274,798 5,013,999 26,855,783 $9.01 $12.70 N/A N/A $15.40 $19.20 N/A N/A $13.49 $16.66 N/A N/A $22.21 $28.01 $1,624 $2,048 $13.23 $18.84 N/A N/A Total Production Cost per Tonne(1) $142.00 $85.15 $42.25 $172.20 $102.77 (1) See “Non-GAAP measures” • Annual silver production of 12,842,945 ounces, which slightly missed the lower end of the Company’s revised guidance range of producing between 13.0 to 13.8 million ounces of silver. • Annual gold production of 192,353 ounces, was within the higher end of the Company’s revised guidance range of producing between 181,000 to 194,000 ounces. This strong performance was primarily attributed to the processing of Ermitaño ore at the Santa Elena plant and strong gold grades at San Dimas in the fourth quarter • Successfully completed the acquisition of the Jerritt Canyon Gold Mine in Nevada, USA adding a fourth operating mine to the Company’s portfolio. • Successfully began underground ore production from the Ermitaño mine near the Santa Elena mill in the fourth quarter of 2021, after five years since its initial discovery. This was completed ahead of schedule following batch processing of Ermitaño ore which started in November. This important new mine is expected to significantly increase production and reduce costs at Santa Elena as it ramps up throughout 2022. • Successfully converted Santa Elena from diesel power to more environmentally friendly and lower cost liquid natural gas (“LNG”) with the construction of the new 12.4 megawatt (“MW”) LNG facility. • Sold a record 349,278 ounces of retail silver bullion products, or approximately 3% of the Company’s silver production, on First Majestic’s online bullion store at an average silver price of $31.21 per ounce for total proceeds of $10.9 million. • Cash cost per silver equivalent (“AgEq”) ounce in the year was $13.23, compared to $9.00 in the previous year. The increase in cash cost per AgEq ounce was primarily due to the addition of Jerritt Canyon which was producing at a higher cash costs since the acquisition. The Company has identified various projects to be implemented over the next 12 months at Jerritt Canyon to improve production and reduce costs at the mine and processing plant. Additionally, there was an increase in energy costs at San Dimas due to lower energy contribution from the hydroelectric power plant as well as an increase in costs at Santa Elena primarily due to higher ore development and mining contractor costs to prepare ore faces in the mine. • All-in sustaining cost (“AISC”) per AgEq ounce in the year was $18.84, compared to $14.03 in the previous year. The increase in AISC per AgEq ounce was primarily attributed to higher cash costs, combined with an increase in sustaining capital costs related to the Tailings Storage Facility 2 (“TSF2”) lift project which was completed on time and under-budget at Jerritt Canyon Gold Mine. The increase in AISC was partially offset by increased production at San Dimas, Santa Elena and Jerritt Canyon during the year. Financial Highlights • Robust cash position and liquidity: The Company ended the year with cash and cash equivalents of $237.9 million compared to $238.6 million at the end of the previous year, while working capital decreased to $224.4 million compared to $254.4 million. Cash and cash equivalent excludes the re- allocation of $48.0 million in VAT refunds which have been recorded within non-current restricted cash. • Revenue: The Company generated record annual revenues of $584.1 million in 2021, 61% higher than the previous year primarily due to the addition of the Jerritt Canyon Gold Mine during the second quarter, a 32% increase in payable silver equivalent ounces sold and a 19% increase in the average realized silver price per ounce which averaged $25.16 per ounce compared to $21.15 per ounce in 2020. • Mine operating earnings: During the year, the Company recognized mine operating earnings of $101.4 million compared to $105.1 million in 2020. The decrease in mine operating earnings was primarily driven by higher costs at Jerritt Canyon to prepare the mine for higher throughputs and improved plant performance along with increased costs at Santa Elena due to Ermitaño ramping up production during the year which was partially offset by an increase in revenue. • Net earnings: The Company recognized a net loss of $4.9 million (EPS of $(0.02)) in 2021 compared to net earnings of $23.1 million (EPS of $0.11) in 2020. The decrease in net earnings was primarily attributable to an increase in income tax expense during the year as well as an accounting loss recognized on the settlement of the Company’s 2018 senior convertible notes of $4.6 million. The new convertible notes provided extended financing terms and allowed the Company to raise $230 million in cash which was used to repurchase the notes issued in 2018 for $171.8 million, with the remaining net proceeds to be used for general corporate purposes and strategic opportunities. 80 MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION • Adjusted earnings: Adjusted earnings (see “Non-GAAP Measures”), normalized for non-cash or unusual items such as COVID-19 standby costs, write- down of mineral inventory, loss on early settlement of senior convertible notes, share-based payments and deferred income taxes for the year ended December 31, 2021 was $6.0 million ($0.02 per share), compared to adjusted earnings of $37.4 million ($0.18 per share) in 2020. • Cash flow from operations: During the year, cash flow from operations before changes in working capital and income taxes was $176.8 million compared to $107.3 million in 2020. Acquisition of Jerritt Canyon Canada Ltd. On April 30, 2021, the Company completed the acquisition of 100% of the issued and outstanding shares of Jerritt Canyon Canada Ltd. from Sprott Mining Inc. (“Sprott Mining”) in exchange for 26,719,727 common shares of First Majestic (the “Consideration Shares”) and five million common share purchase warrants (the “Consideration Warrants”), each exercisable for one common share of the Company at a price of $20 per share for a period of three years from the date of acquisition on April 30, 2021 (the “Acquisition Date”). Concurrent with closing of the acquisition, Sprott Mining also completed a private placement consisting of $30.0 million at a price of $17.59 per share for a total of 1,705,514 common shares of the Company (the “Private Placement Shares”) (together, the “Acquisition Agreement”). Pursuant to closing of the Acquisition Agreement, the Company deposited into escrow an aggregate of $60.0 million (the “Escrowed Funds”), including $30.0 million from First Majestic and $30.0 million proceeds from the Private Placement Shares, representing the estimated tax (“Triggered Tax”) due by Jerritt Canyon Canada as a result of a reorganization completed prior to the acquisition of the Jerritt Canyon Gold Mine. Pursuant to the Acquisition Agreement, the Purchase Price is increased to the extent the Triggered Tax is less than $60 million (“Triggered Tax Adjustment”) and decreased to the extent the working capital (the “Working Capital Adjustment”) of Jerritt Canyon is less than zero. The amount of such tax liability was $45.2 million and has been paid from the Escrowed Funds. As of April 30, 2021, Jerritt Canyon had a preliminary negative working capital of $2.8 million. As at December 31, 2021, the Working Capital Adjustment and Triggered Tax Adjustment had not been finally determined and $12.6 million remains in escrow pending such determination. Jerritt Canyon owns and operates the Jerritt Canyon Gold Mine located in Elko County, Nevada. Jerritt Canyon was discovered in 1972 and has been in production since 1981 having produced over 9.5 million ounces of gold over its 40-year production history. The mine currently operates as an underground mine and has one of three permitted gold processing plants in Nevada that uses roasting in its treatment of ore. This processing plant has a capacity of 4,000 tonnes per day (“tpd”) and is currently operating at an average rate of approximately 2,200 tpd. The property consists of a large, under explored land package consisting of 30,821 hectares (119 square miles). The acquisition was completed in order to support the Company’s growth strategy by adding another cornerstone asset within a world class mining jurisdiction to the Company’s portfolio. Management has concluded that Jerritt Canyon constitutes a business and, therefore, the acquisition is accounted for in accordance with IFRS 3 - Business Combinations. Given the delivery of the consideration and the fulfillment of the covenants as per the Acquisition Agreement, the transaction was deemed to be completed with First Majestic identified as the acquirer. Based on the April 30, 2021 opening share price of common shares, the total consideration of the Jerritt Canyon acquisition is $478.9 million. The Company began consolidating the operating results, cash flows and net assets of Jerritt Canyon from April 30, 2021 onwards. The determination of the fair value of assets acquired and liabilities assumed was previously reported based on preliminary estimates at the Acquisition Date. The Company is completing a full and detailed valuation of the fair value of the net assets of Jerritt Canyon acquired using income, market, and cost valuation methods with the assistance of an independent third party. As of the date of these consolidated financial statements, the allocation of purchase price with respect to the fair value increment of assets acquired and liabilities assumed have been updated to reflect new information obtained which existed at the Acquisition Date. The fair value of assets acquired, and liabilities assumed are subject to change for up to one year from the Acquisition Date. The Company is finalizing its full and detailed assessment of the fair value of the net assets of Jerritt Canyon acquired. As stated above, the Triggered Tax Adjustment and the Working Capital Adjustment, as well as any consequential impact on the deferred tax liabilities, have yet to be finally determined. If new information arises which would impact management’s assessment of the fair value at the Acquisition Date, any adjustments to the allocation of the purchase consideration will be recognized retrospectively and comparative information will be revised. Consequently, the final allocation of the purchase price consideration may result in material adjustments to the amounts shown in these audited consolidated financial statements. 81 FIRST MAJESTIC SILVER 2021 ANNUAL REPORTMANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Consideration and Purchase Price Allocation Total consideration for the acquisition was valued at $478.9 million on the acquisition date. The following table summarizes the consideration paid as part of the purchase price: Total Consideration 26,719,727 Consideration Shares issued to Sprott Mining with an accounting fair value of $15.59 per share(1) 1,705,514 Private Placement Shares issued to Sprott Mining with an accounting fair value of $15.59 per share(1) 5,000,000 Consideration Warrants issued to Sprott Mining with an accounting fair value of $4.63 per warrant(2) Estimated Triggered Tax Adjustment Total consideration $416,561 26,589 23,150 12,570 $478,870 (1) Fair values of Consideration Shares and Private Placement Shares were estimated at $15.59 per share based on the opening price of First Majestic’s common share on the New York Stock Exchange on April 30, 2021, as compared to their deemed price of $17.59 according to the Acquisition Agreement. (2) The Consideration Warrants have an exercise price of $20 per share for a three-year term expiring on April 30, 2024. The fair value of Consideration Warrants were estimated using the Black-Scholes method at the Jerritt Canyon Acquisition Date, using the following assumptions: Stock price (as of opening on April 30, 2021) Exercise price of Consideration Warrants Term (years) Volatility Annual rate of quarterly dividends Discount rate - bond equivalent yield Total fair value of warrants $15.59 $20.00 3 55% 0% 0.5% $23,150 The following table summarizes the preliminary and revised purchase price allocated to the identifiable assets and liabilities based on their estimated fair values on the acquisition date: Allocation of Purchase Price Cash and cash equivalents Inventories Trade and other receivables Other financial assets Prepaid expenses Restricted cash(1) Mining interest Property, plant and equipment Deposit on non-current assets Trade and other payables Lease liabilities(3) Income taxes payable Contingent environmental provision(2) Decommissioning liabilities(2) Deferred tax liabilities Net assets acquired Preliminary as reported June 30, 2021 Adjustments Revised as reported December 31, 2021 $1,025 19,304 135 3,581 1,662 96,985 409,930 224,034 128 (27,159) (2,194) (47,185) (17,900) (87,705) (98,186) $476,455 $— — (63) — 62 — 22,729 (48,307) — 3,974 — 1,866 17,900 16,570 (12,316) $2,415 $1,025 19,304 72 3,581 1,724 96,985 432,659 175,727 128 (23,185) (2,194) (45,319) — (71,135) (110,502) $478,870 (1) Restricted cash includes $30.0 million proceeds from the issuance of Private Placement Shares which were deposited into the Escrowed Funds and $67.0 million in non-current environmental reclamation bonds. (2) Decommissioning liabilities include funds required to establish a trust agreement with the Nevada Division of Environmental Protection (“NDEP”) to cover post-closure water treatment costs at Jerritt Canyon, which were previously reported as a contingent environmental provision. (3) Lease liabilities are defined per Note 21. 82 MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION The Company used discounted cash flow models to determine the fair value of the depletable mining interest. The expected future cash flows are based on estimates of future gold prices, estimated quantities of ore reserves and mineral resources, expected future production costs and capital expenditures based on the life of mine plans at the acquisition date. The discounted future cash flow models used a 5.1% discount rate based on the Company’s assessment of country risk, project risk, and other potential risks specific to the acquired mining interest. The significant assumptions used in the determination of the fair value of the mining interests were as follows: Short-term and long-term gold price Discount rate Mine life (years) Average gold grade over life of mine Average gold recovery rate $1,750 5.1% 11 6.0 g/t 86% The Company used a market approach to determine the fair value of exploration potential by comparing the costs of other precedent market transactions within the industry on a dollar per square kilometres basis. Those amounts were used to determine the range of area-based resources multiples implied within the value of transactions by other market participants. Management made a significant assumption in the determination of the fair value of exploration potential by using an implied multiple of $298,524 per square kilometre for a total of $92.0 million. The Company accounted for exploration potential through inclusion within non-depletable mineral interest. Financial and operating results of Jerritt Canyon are included in the Company’s consolidated financial statements effective April 30, 2021. During the year ended December 31, 2021, the acquisition of Jerritt Canyon contributed $123.8 million of revenues and $32.1 million of net loss to the Company’s financial results since April 30, 2021. Had the business combination been effected at January 1, 2021, pro forma revenues and net loss of the Company for the year ended December 31, 2021 would have been $636.4 million and $26.5 million, respectively. Total transaction costs of $2.0 million related to the acquisition were expensed during the year. 2021 Fourth Quarter Highlights Key Performance Metrics Operational Ore Processed / Tonnes Milled Silver Ounces Produced Silver Equivalent Ounces Produced Cash Costs per Silver Equivalent Ounce (1) All-in Sustaining Cost per Silver Equivalent Ounce (1) Total Production Cost per Tonne (1) Average Realized Silver Price per Ounce (1) Financial (in $millions) Revenues Mine Operating Earnings Net (Loss) Earnings Operating Cash Flows before Movements in Working Capital and Taxes Cash and Cash Equivalents Working Capital (1) Free cash flow (1) Shareholders (Loss) Earnings per Share (“EPS”) - Basic Adjusted EPS (1) NM - Not meaningful 2021-Q4 2021-Q3 Change Q4 vs Q3 2020-Q4 Change Q4 vs Q4 955,810 943,126 3,358,809 3,302,086 8,561,023 7,319,441 $12.32 $17.26 $105.37 $24.18 $14.09 $19.93 $106.52 $23.10 $204.9 $40.4 ($4.0) $71.8 $237.9 $224.4 $66.4 $124.6 $3.5 ($18.4) $22.6 $192.8 $262.5 ($24.7) ($0.02) $0.02 ($0.07) ($0.07) 1% 2% 17% (13%) (13%) (1%) 5% 64% NM (78%) NM 23% (15%) NM (71%) NM 625,332 3,452,959 5,477,492 $10.21 $16.12 $85.68 $24.88 $117.1 $43.7 $34.5 $48.2 $238.6 $254.4 $25.7 53% (3%) 56% 21% 7% 23% (3%) 75% (8%) (112%) 49% 0% (12%) 158% $0.16 $0.11 (110%) (85%) (1) The Company reports non-GAAP measures which include cash costs per silver equivalent ounce produced, all-in sustaining cost per silver equivalent ounce produced, total production cost per tonne, average realized silver price per ounce sold, working capital, adjusted EPS and free cash flow. These measures are widely used in the mining industry as a benchmark for performance, but do not have a standardized meaning and the methods used by the Company to calculate such measures may differ from methods used by other companies with similar descriptions. See “Non-GAAP Measures” on pages 109 to 114 for a reconciliation of non-GAAP to GAAP measures. 83 FIRST MAJESTIC SILVER 2021 ANNUAL REPORTMANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITIONFourth Quarter Production Summary San Dimas Santa Elena La Encantada Jerritt Canyon Consolidated Ore Processed / Tonnes Milled Silver Ounces Produced Gold Ounces Produced Silver Equivalent Ounces Produced Cash Costs per Silver Equivalent Ounce All-in Sustaining Cost per Silver Equivalent Ounce Cash Cost per Gold Equivalent Ounce All-In Sustaining Costs per Gold Equivalent Ounce 206,738 2,174,353 23,795 224,459 426,870 19,810 268,239 757,586 146 256,374 955,810 — 3,358,809 23,660 67,411 4,015,346 1,955,550 768,796 1,821,331 8,561,023 $7.98 $11.29 N/A N/A $11.56 $14.02 N/A N/A $14.51 $19.41 N/A N/A $21.71 $26.95 $1,674 $2,077 $12.32 $17.26 N/A N/A Total Production Cost per Tonne $146.30 $93.78 $39.70 $151.23 $105.37 Operational Highlights • Total production: During the quarter, total production was 8.6 million silver equivalent ounces, representing a 17% increase over the prior quarter. Silver production reached 3.4 million ounces, representing a 2% increase over the prior quarter. Gold production reached 67,411 ounces of gold, representing a 24% increase from the prior quarter and the Company’s highest quarterly gold production primarily due to the addition of Jerritt Canyon and higher gold grades from San Dimas and Santa Elena. • Cash cost per silver equivalent ounce for the quarter was $12.32 per ounce, compared to $14.09 per ounce in the previous quarter. The decrease in cash cost per AgEq ounce was primarily due to an increase in production from San Dimas and Santa Elena. • All-in sustaining cost per silver equivalent ounce in the fourth quarter was $17.26 per ounce compared to $19.93 per ounce in the previous quarter. The decrease in AISC per AgEq ounce was primarily attributed to an increase in production at San Dimas and Santa Elena, as well as lower sustaining capital expenditures in the fourth quarter as expenditures related to the Tailings Storage Facility 2 (“TSF2”) lift project at Jerritt Canyon have now been completed on time and under budget. • Processing of Ermitaño ore: In November, the Company began batch processing of Ermitaño’s ore at the Santa Elena processing plant and in December started commercial production, ahead of schedule, which resulted in a new quarterly production record at Santa Elena. A total of 2.0 million silver equivalent ounces were produced in the quarter consisting of 426,870 ounces of silver and 19,810 ounces of gold. This represents a significant 84% increase from the prior quarter and the highest quarterly production since acquiring the mine in 2015. • San Dimas Production: San Dimas produced a record 4.0 million silver equivalent ounces, consisting of 2.2 million ounces of silver and 23,795 ounces of gold, representing a 17% increase in total production from the prior quarter and the highest quarterly production since acquiring the mine in 2018. • 21 active drill rigs: The Company completed a total of 55,621 metres in exploration drilling across the Company’s mines during the quarter. At the end of the quarter, a total of 21 exploration drill rigs were active consisting of seven rigs at San Dimas, nine rigs at Jerritt Canyon, three rigs at Santa Elena and two rigs at La Encantada. Financial Highlights • In the fourth quarter, the Company generated revenues of $204.9 million compared to $117.1 million in the fourth quarter of 2020. The increase in revenues was primarily attributed to the addition of Jerritt Canyon, the processing of the Ermitaño ore and the sale of 1.4 million silver ounces of inventory previously withheld in the prior quarter. The average realized silver price of silver averaged $24.18 per ounce during the quarter, a 3% decrease compared to $24.88 in the fourth quarter of 2020. • The Company realized mine operating earnings of $40.4 million compared to mine operating earnings of $43.7 million in the fourth quarter of 2020. The decrease in mine operating earnings was primarily attributed to an increase in cost of sales and depreciation and depletion attributed to the addition of Jerritt Canyon, partially offset by an increase in silver ounces sold. • Net loss for the quarter was $4.0 million (EPS of ($0.02)) compared to net earnings of $34.5 million (EPS of $0.16) in the fourth quarter of 2020. The decrease in net earnings was primarily attributable to an income tax expense of $23.9 million compared to a recovery of $7.1 million in the fourth quarter of 2020. • Adjusted net earnings (a non-GAAP measure) for the quarter, normalized for non-cash or unusual items such as loss on early settlement of senior convertible notes, share-based payments, unrealized gain on foreign currency derivatives and deferred income taxes for the quarter ended December 31, 2021, was $4.1 million (Adjusted EPS of $0.02) compared to adjusted net earnings of $24.2 million (Adjusted EPS of $0.11) in the fourth quarter of 2020. • Operating cash flow before movements in working capital and taxes in the quarter was an inflow of $71.8 million compared to a cash inflow of $48.2 million in the fourth quarter of 2020. • As of December 31, 2021, the Company had cash and cash equivalents of $237.9 million and working capital of $224.4 million. 84 MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION2022 Production Outlook and Cost Guidance Update This section provides management’s revised production outlook and cost guidance for 2022. These are forward-looking estimates and are subject to the cautionary note regarding the risks associated with relying on forward-looking statements at the end of this MD&A. Actual results may vary based on production throughputs, grades, recoveries and changes in economic circumstances. The Company expects 2022 total production from its four operating mines to range between 32.2 to 35.8 million silver equivalent ounces consisting of 12.2 to 13.5 million ounces of silver and 258,000 to 288,000 ounces of gold. Based on the midpoint of the guidance range the Company expects silver equivalent ounces to increase 27% when compared to 2021. Silver production is expected to remain consistent with 2021 rates whereas gold production is expected to increase by 42% year-over-year. The increase in gold production is primarily due to the ramp up of production at Ermitaño which is known to contain higher amounts of gold and a full year of production from Jerritt Canyon. A mine-by-mine breakdown of the 2022 production guidance is included in the table below. The Company reports cost guidance to reflect cash costs and AISC on a per silver equivalent payable ounces. For 2022, the Company is using a 78:1 silver to gold ratio compared to a 72:1 silver to gold ratio in its revised 2021 guidance. Metal price and foreign currency assumptions for calculating equivalents are silver: $22.50/oz, gold: $1,750/oz, MXN:USD 20:1. Guidance for Full Year 2022 Silver: San Dimas, Mexico Santa Elena, Mexico La Encantada, Mexico Mexico Consolidated: Gold: Jerritt Canyon, USA Total Production Consolidated* Silver Oz (M) Gold Oz (k) Silver Eqv Oz (M) Cash Cost AISC 7.4 – 8.2 1.9 – 2.1 2.9 – 3.2 81 – 91 61 – 68 – 13.7 – 15.2 8.59 – 9.13 11.75 – 12.65 6.6 – 7.4 2.9 – 3.2 13.06 – 13.68 15.58 – 16.66 14.82 – 15.74 17.89 – 19.15 12.2 – 13.5 142 – 159 23.2 – 25.8 10.65 – 11.31 15.18 – 16.35 ($ per AgEq oz) ($ per AgEq oz) – 116 – 129 9.0 – 10.0 1,259 – 1,334 1,503 – 1,607 ($ per AuEq oz) ($ per AuEq oz) ($ per AgEq oz) ($ per AgEq oz) 12.2 – 13.5 258 – 288 32.2 – 35.8 12.20 – 12.94 16.79 – 18.06 *Certain amounts shown may not add exactly to the total amount due to rounding differences. * Cash Costs and AISC are non-GAAP measures. Consolidated AISC includes general and administrative cost estimates and non-cash costs of $1.49 to $1.66 per payable silver ounce. The Company calculates AISC in the manner set out in the table below. The Company is projecting its 2022 AISC to be within a range of $16.79 to $18.06 on a per consolidated payable silver equivalent ounce basis. Excluding non-cash items, the Company anticipates its 2022 AISC to be within a range of $16.34 to $17.56 per payable silver equivalent ounce. An itemized AISC cost table is provided below: All-In Sustaining Cost Calculation Total Cash Costs per Payable Silver Ounce General and Administrative Costs Sustaining Development Costs Sustaining Property, Plant and Equipment Costs Sustaining Exploration Costs Profit Sharing Share-based Payments (non-cash) Lease Payments Accretion and Reclamation Costs (non-cash) All-In Sustaining Costs (Ag Eq Oz) All-In Sustaining Costs: (Ag Eq Oz excluding non-cash items) FY 2022 ($ per AgEq oz) 12.20 – 12.94 1.04 – 1.16 1.29 – 1.44 0.86 – 0.96 0.13 – 0.15 0.49 – 0.54 0.34 – 0.38 0.33 – 0.37 0.11 – 0.13 16.79 – 18.06 16.34 – 17.56 (1) AISC is a non-GAAP measure and is calculated based on the Company’s consolidated operating performance. Other mining companies may calculate AISC differently as a result of differences in underlying accounting principles, the definition of “sustaining costs” and the distinction between sustaining and expansionary capital costs. (2) Total cash cost per payable silver equivalent ounce includes estimated royalties and 0.5% Mexico mining environmental fee of $0.15 to $0.17 per payable silver equivalent ounce. 85 FIRST MAJESTIC SILVER 2021 ANNUAL REPORTMANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITIONInvesting for Future Growth In 2022, the Company plans to invest a total of $207.8 million on capital expenditures consisting of $86.3 million for sustaining investments and $121.5 million for expansionary projects. This represents a 5.4% decrease compared to the 2021 capital expenditures and is aligned with the Company’s future growth strategy of investments in fine grinding technology, processing plant modernizations (including the dual-circuit project installation and expansion of the LNG generation plant at Santa Elena), increased exploration investment, higher mine development rates, and to increase underground ore extraction and plant processing rates at Jerritt Canyon and Santa Elena. 2022 Capital Budget ($millions) Underground Development Exploration Property, Plant and Equipment Corporate Projects Total* Sustaining Expansionary $46.2 9.2 27.4 3.4 $86.2 $41.8 36.0 24.5 19.3 Total $88.8 45.2 51.9 22.7 $121.6 $207.8 *Certain amounts shown may not add exactly to the total amount due to rounding differences. The 2022 annual budget includes total capital investments of $88.8 million to be spent on underground development; $51.9 million towards property, plant and equipment; $45.2 million in exploration; and $22.7 million towards corporate innovation projects. Management may revise the guidance and budget during the year to reflect actual and anticipated changes in metal prices or to the business. The Company plans to increase underground development in 2022 to approximately 53,700 metres compared to 50,559 metres completed in 2021. The 2022 development program consists of approximately 29,100 metres at San Dimas; 4,950 metres at Jerritt Canyon; 14,900 metres at Santa Elena (including Ermitaño) and 4,750 metres at La Encantada. This year-over-year increase is primarily due to the Company’s plan to increase underground ore production in the mines. At San Dimas, the Company is planning to bring the Perez and San Jose Veins, located in the Sinaloa Graben block, into production in the second half of 2022. At Santa Elena, underground development will focus on the Ermitaño mine to continue the ramp up process to achieve approximately 1,000 tonnes per day of underground ore extraction throughout all of 2022 and further increasing to 2,000 tonnes per day in 2023. At Jerritt Canyon, higher development rates are planned to prepare the SSX/Smith mines for increased ore extraction over the next two years. In addition, the Company is planning to begin underground production in the West Generator mine at the end of 2022. At La Encantada, the Company is continuing to develop towards the Ojuelas orebody to prepare for initial production in the second half of 2022. The Company is planning to significantly increase exploration drilling in 2022 by 41% to approximately 320,200 metres compared to 227,845 metres which were completed in 2021. The 2022 drilling program will consist of: • At San Dimas, approximately 98,000 metres of exploration drilling are planned with infill, step-out and exploratory holes focused on near-mine and brownfield targets including major ore controlling structures in the West, Central, Sinaloa and Tayoltita blocks. • At Jerritt Canyon, approximately 135,100 metres are planned and consisting of a mixture of surface and underground infill, step-out and exploratory holes to support the life of mine and test the presence of a new ore body target at Waterpipe II, Wheeler Fault Zone, and Northeast Starvation Canyon. In addition, eight near-mine targets located adjacent to historic underground and open pit mines will be drilled from surface. Underground drilling will be conducted at the Saval 2 mine located north of the main SSX/Smith mine operations and in the West Generator underground mine which is scheduled to be re-opened by the end of 2022. • At Santa Elena, approximately 68,100 metres are planned with infill and near-mine drilling to continue testing the Santa Elena Main, Alejandra de Bajo, America, Fenix and Ermitaño veins. Brownfield drilling will focus on several targets around the mine areas (both Santa Elena and Ermitaño) and greenfield exploration will continue to test key projects around this very large property. • Finally, at La Encantada the Company has planned approximately 19,000 metres consisting of near-mine drilling to continue adding resources on several existing areas and brownfield drilling to test several high potential targets. The Company recently completed a land access agreement with the Tenochtitlan Ejido which has opened a significant amount of new land that is planned to be explored for the first time in 2022. 86 MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITIONOverview of Operating Results Selected Production Results for the Past Eight Quarters PRODUCTION HIGHLIGHTS Ore processed/tonnes milled San Dimas Santa Elena La Encantada Jerritt Canyon Consolidated Silver equivalent ounces produced San Dimas Santa Elena La Encantada Jerritt Canyon Consolidated Silver ounces produced San Dimas Santa Elena La Encantada Consolidated Gold ounces produced San Dimas Santa Elena Jerritt Canyon Consolidated Cash cost per Ounce(2) San Dimas (per AgEq Ounce) Santa Elena (per AgEq Ounce) La Encantada (per AgEq Ounce) Jerritt Canyon (per AuEq Ounce) Consolidated (per AgEq Ounce) All-in sustaining cost per Ounce(2) San Dimas (per AgEq Ounce) Santa Elena (per AgEq Ounce) La Encantada (per AgEq Ounce) Jerritt Canyon (per AuEq Ounce) Consolidated (per AgEq Ounce) Production cost per tonne San Dimas Santa Elena La Encantada Jerritt Canyon Consolidated 2021 2020 Q4 Q3 Q2(3) Q1 Q4 Q3 Q2(1) Q1 206,738 214,205 202,382 199,466 208,648 189,918 114,390 200,109 224,459 234,862 234,381 185,358 168,276 204,577 89,590 177,834 268,239 263,645 242,839 229,421 248,408 261,425 129,579 221,200 256,374 230,415 146,611 — — — — — 955,810 943,126 826,213 614,245 625,332 655,920 333,559 599,142 4,015,346 3,422,032 3,176,725 2,910,946 3,477,061 3,125,662 2,395,633 3,672,169 1,955,550 1,061,657 1,140,398 884,332 901,630 1,091,026 595,651 1,593,400 768,796 913,481 847,502 745,018 1,098,800 984,397 514,092 929,487 1,821,331 1,922,270 1,270,398 — — — — — 8,561,023 7,319,441 6,435,023 4,540,296 5,477,492 5,201,085 3,505,376 6,195,057 2,174,353 1,888,371 1,868,031 1,716,143 1,941,286 1,678,075 1,102,931 1,677,376 426,870 508,641 565,453 453,528 418,153 502,375 222,100 550,133 757,586 905,074 840,541 738,354 1,093,521 978,416 509,544 924,472 3,358,809 3,302,086 3,274,026 2,908,024 3,452,959 3,158,866 1,834,575 3,151,980 23,795 19,810 23,660 67,265 $7.98 $11.56 $14.51 $1,674 $12.32 $11.29 $14.02 $19.41 $2,077 $17.26 20,767 7,498 26,145 54,410 $8.29 $17.09 $12.25 $1,735 $14.09 $11.58 $21.10 $15.28 $2,286 $19.93 19,227 8,453 18,762 46,442 $10.17 $16.70 $13.66 $1,407 $13.89 $14.22 $21.31 $15.97 $1,679 $19.42 17,448 6,327 — 19,980 6,294 — 18,268 7,428 — 12,042 3,677 — 21,308 10,842 — 23,775 26,274 25,696 15,719 32,150 $10.00 $20.18 $13.77 $— $8.49 $16.50 $10.42 $— $12.61 $10.21 $14.31 $25.66 $16.30 $— $12.32 $21.76 $12.39 $— $7.74 $13.81 $10.16 $— $9.48 $10.74 $16.36 $12.12 $— $6.43 $11.44 $9.55 $— $7.76 $10.70 $15.02 $11.76 $— $7.15 $9.25 $10.80 $— $8.25 $9.86 $10.60 $13.33 $— $19.35 $16.12 $14.01 $13.95 $12.23 $146.30 $128.67 $153.43 $140.29 $135.13 $120.60 $129.67 $126.33 $93.78 $39.70 $75.76 $41.08 $79.17 $45.71 $151.23 $192.17 $177.30 $94.15 $42.99 $— $86.32 $43.72 $— $71.44 $36.04 $— $74.50 $36.80 $— $81.04 $43.82 $— $105.37 $106.52 $104.94 $90.03 $85.68 $71.56 $78.78 $82.41 (1) In response to the COVID-19 pandemic, the Mexican Ministry of Health issued a decree requiring non-essential businesses, including mining, to temporarily suspend activities until May 23, 2020. As a result, production and costs were adversely affected during the quarter. (2) Effective January 1, 2021, the Company is reporting its cash costs and all-in sustaining costs on a per silver equivalent (“AgEq”) ounce basis. Cash cost and AISC per AgEq Ounce for previous comparative periods were updated based on the new metric. See “Non-GAAP” section. (3) Jerritt Canyon production was from April 30, 2021 to June 30, 2021, or 62 days. 87 FIRST MAJESTIC SILVER 2021 ANNUAL REPORTMANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITIONOperating Results – Consolidated Operations CONSOLIDATED 2021-Q4 2021-Q3 2021-Q2 2021-Q1 2021-YTD 2020-YTD Ore processed/tonnes milled 955,810 943,126 826,213 614,245 3,339,394 2,213,954 Average silver grade (g/t) Average gold grade (g/t) Silver recovery (%) Gold recovery (%) Production Silver ounces produced Gold ounces produced 125 2.42 88% 91% 122 2.00 90% 90% 137 1.80 90% 91% 166 1.26 89% 96% 135 1.94 89% 91% 184 1.46 88% 96% 3,358,809 3,302,086 3,274,026 2,908,024 12,842,945 11,598,380 67,411 54,525 46,544 23,873 192,353 100,081 Silver equivalent ounces produced 8,561,023 7,319,441 6,435,023 4,540,296 26,855,783 20,379,010 Cost Cash Cost per AgEq Ounce All-In sustaining costs per AgEq ounce $12.32 $17.26 $14.09 $19.93 $13.89 $19.42 Total production cost per tonne $105.37 $106.52 $104.94 Underground development (m) Diamond drilling (m) 11,535 55,621 11,827 79,066 13,490 53,608 The Impact of COVID-19 on Business and Operations $12.61 $19.35 $90.03 13,706 39,550 $13.23 $18.85 $102.77 $9.00 $14.03 $79.59 50,558 38,504 227,845 156,244 Change Q4 vs Q3 Change ‘21 vs ‘20 1% 2% 21% (2%) 1% 2% 24% 17% (13%) (13%) (1%) (2%) (30%) 51% (27%) 33% 1% (5%) 11% 92% 32% 47% 34% 29% 31% 46% COVID-19 sanitary protocols were established in 2020 at all Company facilities and operations. These protocols include continuous monitoring and testing of workers, use of effective PPE, and other sanitary control measures. These measures have proven effective at managing the pandemic impacts on the Company’s operations and remain in full effect. Worker availability has improved over the past several months, however, it continues to be a challenge but is currently being mitigated by increasing the use of temporary workers and contractors to replace vulnerable workers. The Company also continues supporting local communities by sponsoring health professionals, medical and testing equipment, personal protective equipment, medicine and health supplements. Production During the year, the Company produced 26.9 million silver equivalent ounces, consisting of 12.8 million ounces of silver and 192,353 ounces of gold, representing an increase of 11% and 92% respectively, compared to the prior year. The increase in production was primarily due to the reduced effect of the temporary COVID-19 suspensions and units operating with limited workforce levels in the previous year, as well as the addition of Jerritt Canyon and commencing production at Ermitaño. Total production in the fourth quarter was 8.6 million silver equivalent ounces, consisting of 3.4 million ounces of silver and 67,411 ounces of gold, representing an increase of 2% and 24%, respectively, compared to the previous quarter. Total ore processed amounted to 3,339,394 tonnes during the year and 955,810 tonnes during the quarter, representing a 51% and 1% increase compared to the prior year and quarter, respectively. The increase in tonnes processed was primarily due to Jerritt Canyon processing higher volumes of lower grade surface material partially offset by slightly lower throughput rates at San Dimas and Santa Elena. Consolidated silver grades in the quarter averaged 125 g/t compared to 122 g/t in the previous quarter and consolidated gold grades averaged 2.42 g/t compared to 2.00 g/t in the prior quarter. The increase in consolidated silver and gold grades were primarily due to processing higher grade ore within the Jessica vein at San Dimas and the introduction of Ermitaño’s ore into the Santa Elena plant in November. Consolidated silver and gold recoveries averaged 88% and 91%, respectively, during the quarter which are consistent compared to the previous quarter. The Company continues to work towards optimizing the metallurgical recoveries of Ermitaño’s ore which achieved 61% for silver and 91% for gold during the fourth quarter. The Santa Elena processing plant will be modified to facilitate finer grinding and improve metallurgical recoveries and operating costs with the commissioning of a new tailing filter-press, an additional leaching tank and a fourth counter current decantation (“CCD”) thickener in the fourth quarter of 2022. Cash Cost and All-In Sustaining Cost per Ounce Cash cost per AgEq ounce for the year was $13.23 per ounce, compared to $9.00 per ounce in the previous year. The increase in cash cost per AgEq ounce was primarily due to the addition of Jerritt Canyon which was producing at a higher cash costs since the acquisition. The Company has identified 88 MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITIONvarious projects to be implemented over the next 12 months at Jerritt Canyon to improve production and reduce costs at the mine and processing plant. Additionally, there was an increase in energy costs at San Dimas due to lower energy contribution from the hydroelectric power plant as well as an increase in costs at Santa Elena primarily due to higher ore development and mining contractor costs to prepare ore faces in the mine. Cash cost per AgEq ounce for the quarter was $12.32 per ounce, compared to $14.09 per ounce in the previous quarter. The decrease in cash cost per AgEq ounce was primarily due to an increase in production from San Dimas and Santa Elena. All-in Sustaining Cost per AgEq ounce in the year was $18.85 per ounce compared to $14.03 per ounce in the previous year. The increase in AISC per AgEq ounce was primarily attributed to higher cash costs, combined with an increase in sustaining capital costs related to the TSF2 lift project at Jerritt Canyon Gold. The increase in AISC was partially offset by increased production at San Dimas, Santa Elena and Jerritt Canyon Gold during the year. All-in Sustaining Cost per AgEq ounce in the fourth quarter was $17.26 per ounce compared to $19.93 per ounce in the previous quarter. The decrease in AISC per AgEq ounce was primarily attributed to lower sustaining capital expenditures in the fourth quarter as expenditures related to the TSF2 lift project at Jerritt Canyon have now been completed as well as an increase in production at San Dimas and Santa Elena. Development and Exploration During the year, the Company completed 50,558 metres of underground development and 227,845 metres of diamond drilling, compared to 38,504 metres and 156,244 metres, respectively, in the previous year. The Company completed a total of 55,621 metres in exploration drilling across the Company’s mines during the fourth quarter. At the end of the quarter, a total of 21 exploration drill rigs were active consisting of seven rigs at San Dimas, nine rigs at Jerritt Canyon, three rigs at Santa Elena and two rigs at La Encantada. San Dimas Silver/Gold Mine, Durango, México The San Dimas Silver/Gold Mine is located approximately 130 km northwest of Durango, Durango State, Mexico and consists of 71,868 hectares of mining claims located in the states of Durango and Sinaloa, Mexico. San Dimas is one of the country’s most prominent silver and gold mines and the largest producing underground mine in the state of Durango with over 250 years of operating history. The San Dimas operating plan involves processing ore from several underground mining areas with a 2,500 tpd capacity milling operation which produces silver/gold doré bars. The mine is accessible via a 40-minute flight from the Durango International Airport to the private airstrip in the town of Tayoltita, or by improved roadway. The Company owns 100% of the San Dimas mine. San Dimas 2021-Q4 2021-Q3 2021-Q2 2021-Q1 2021-YTD 2020-YTD Change Q4 vs Q3 Change ‘21 vs ‘20 Total ore processed/tonnes milled 206,738 214,205 202,382 199,466 822,791 713,064 Average silver grade (g/t) Average gold grade (g/t) Silver recovery (%) Gold recovery (%) Production Silver ounces produced Gold ounces produced 347 3.71 94% 96% 289 3.14 95% 96% 301 3.07 95% 96% 285 2.83 94% 96% 305 3.19 95% 96% 297 3.24 94% 96% 2,174,353 1,888,371 1,868,031 1,716,143 7,646,898 6,399,667 23,795 20,767 19,227 17,448 81,237 71,598 Silver equivalent ounces produced 4,015,346 3,422,032 3,176,725 2,910,946 13,525,049 12,670,526 Cost Cash cost per AgEq Ounce All-In sustaining costs per AgEq Ounce $7.98 $11.29 $8.29 $11.58 $10.17 $14.22 $10.00 $14.31 $9.01 $12.70 $7.53 $10.91 Total production cost per tonne $146.30 $128.67 $153.43 $140.29 $142.00 $127.91 (3%) 20% 18% (1%) 0% 15% 15% 17% (4%) (3%) 14% Underground development (m) Diamond drilling (m) 5,104 17,279 5,237 32,086 6,637 26,382 8,242 24,078 25,220 99,825 26,154 87,659 (3%) (46%) 15% 3% (2%) 1% 0% 19% 13% 7% 20% 16% 11% (4%) 14% 89 FIRST MAJESTIC SILVER 2021 ANNUAL REPORTMANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION2021 vs. 2020 In 2021, San Dimas produced 7,646,898 ounces of silver and 81,237 ounces of gold for a total production of 13,525,049 silver equivalent ounces, a 7% increase compared to 12,670,526 silver equivalent ounces in 2020. The mill processed a total of 822,791 tonnes, a 15% increase compared to 713,064 tonnes processed in the previous year. During 2021, silver and gold grades averaged 305 g/t and 3.19 g/t, respectively, compared to 297 g/t and 3.24 g/t in the previous year. Silver recoveries averaged 95% compared to 94% in 2020, while gold recoveries averaged 96%, which was consistent with 2020. During the year, cash cost per AgEq ounce averaged $9.01 compared to $7.53 per ounce in 2020. AISC averaged $12.70 per ounce in 2021 compared to $10.91 per ounce in 2020. The increase was primarily attributable to higher energy costs incurred in the first half of the year as the mine had to rely on electricity from the public grid and diesel power generation as a result of lower rainfall and lower energy contribution from the Las Truchas hydroelectric power plant during the dry season. The San Dimas mine is subject to a gold and silver streaming agreement with Wheaton Precious Metals Corp. (“Wheaton” or “WPM”) which entitles Wheaton to receive 25% of the gold equivalent production (based on a fixed exchange ratio of 70 silver ounces to 1 gold ounce) at San Dimas in exchange for ongoing payments equal to the lesser of $600 (subject to a 1% annual inflation adjustment commencing in May 2019) and the prevailing market price, for each gold ounce delivered. Should the average gold to silver ratio over a six-month period exceed 90:1 or fall below 50:1, the fixed exchange ratio would be increased to 90:1 or decreased to 50:1, respectively. The fixed gold to silver exchange ratio as at December 31, 2021 was 70:1. During the year ended December 31, 2021, the Company delivered 48,015 ounces (2020 - 38,604 ounces) of gold to WPM at $617 (2020 - $610) per ounce. During the year, a total of 25,220 metres of underground development and 99,825 metres of diamond drilling were completed compared to 26,154 metres and 87,659 metres, respectively, in the prior year. 2021Q4 vs. 2021Q3 During the fourth quarter, San Dimas produced 2,174,353 ounces of silver and 23,795 ounces of gold representing an increase of 15% in each metal, compared to the prior quarter. Total production during the fourth quarter amounted to 4,015,346 silver equivalent ounces compared to 3,422,032 silver equivalent ounces in the prior quarter, representing the highest quarterly production since the Company acquired the mine in 2018. The mill processed a total of 206,738 tonnes of ore with average silver and gold grades of 347 g/t and 3.71 g/t, respectively, compared to 214,205 tonnes milled with average silver and gold grades of 289 g/t and 3.14 g/t, respectively, in the previous quarter. Silver and gold grades increased in the fourth quarter as a major high-grade area within the Jessica vein of the Central Block was brought into production at the end of the third quarter. Silver and gold recoveries averaged 94% and 96%, respectively, during the quarter which was consistent with the prior quarter. The Central Block and Sinaloa Graben areas contributed approximately 62% and 35%, respectively, of the total production during the quarter. In addition, the Tayoltita, El Cristo and West Block areas contributed approximately 3% of total production in the quarter. In the fourth quarter, cash cost per AgEq ounce was $7.98 per ounce compared to $8.29 per ounce in the prior quarter. The decrease in cash costs during the quarter was primarily due to a 17% increase in silver equivalent ounces produced. AISC per AgEq ounce for the quarter was $11.29 per ounce compared to $11.58 per ounce in the prior quarter, primarily due to a decrease in cash costs per ounce. A total of 5,104 metres of underground development was completed in the fourth quarter, compared to 5,237 metres in the prior quarter. During the fourth quarter, seven underground drills completed 17,279 metres compared to 32,086 metres in the prior quarter. 90 MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITIONSanta Elena Silver/Gold Mine, Sonora, México The Santa Elena Silver/Gold Mine is located approximately 150 kilometres northeast of the city of Hermosillo, Sonora, Mexico. The operating plan for Santa Elena involves the processing of ore in a 3,000 tpd cyanidation circuit from a combination of underground reserves and spent ore from the previous heap leach pad. The Company owns 100% of the Santa Elena mine including mining concessions totaling over 102,244 hectares, inclusive of the Ermitaño concessions and ore deposit. SANTA ELENA 2021-Q4 2021-Q3 2021-Q2 2021-Q1 2021-YTD 2020-YTD Change Q4 vs Q3 Change ‘21 vs ‘20 Total ore processed/tonnes milled 224,459 234,862 234,381 185,358 879,060 640,276 (4%) 37% Santa Elena - heap leach and underground Tonnes milled Average silver grade (g/t) Average gold grade (g/t) Ermitaño mine Tonnes milled Average silver grade (g/t) Average gold grade (g/t) Silver recovery (%) Gold recovery (%) Production Silver ounces produced Gold ounces produced 120,717 234,861 234,381 185,358 775,317 640,276 88 1.37 103,742 54 4.83 82% 92% 74 1.04 — — — 91% 96% 81 1.17 — — — 93% 96% 82 1.11 — — — 93% 96% 80 1.15 103,742 54 4.83 90% 94% 88 1.43 — — — 93% 96% 426,870 508,641 565,453 453,528 1,954,492 1,692,761 19,810 7,498 8,453 6,327 42,088 28,242 Silver equivalent ounces produced 1,955,550 1,061,657 1,140,398 884,332 5,041,937 4,181,708 Cost Cash cost per AgEq Ounce All-In sustaining costs per AgEq Ounce Total production cost per tonne Underground development (m) Diamond drilling (m) 2021 vs. 2020 $11.56 $14.02 $93.78 4,430 13,847 $17.09 $21.10 $75.76 4,195 19,609 $16.70 $21.31 $79.17 4,994 17,915 $20.18 $25.66 $94.15 4,500 12,607 $15.40 $19.20 $85.15 18,119 63,977 $12.32 $15.14 $78.44 7,851 39,451 (49%) 19% 32% 100% 100% 100% (10%) (4%) (16%) 164% 84% (32%) (34%) 24% 6% (29%) 21% (9%) (20%) 100% 100% 100% (3%) (2%) 15% 49% 21% 25% 27% 9% 131% 62% In 2021, Santa Elena produced 1,954,492 ounces of silver and 42,088 ounces of gold for a total production of 5,041,937 silver equivalent ounces, a 21% increase compared to 4,181,708 silver equivalent ounces in 2020. The mill processed a total of 879,060 tonnes compared to 640,276 tonnes in the previous year, representing a 37% increase compared to 2020. Overall production in 2021 in the Santa Elena mine increased following multiple improvements in mining methods at the Main, Alejandra Bajo and America veins. Mining and milling rates improved as progress was made in improving underground infrastructure, development and haulage rates over the prior year, plus the addition of Ermitaño ore feed in the fourth quarter. A 12.4 MW LNG facility was successfully completed and commissioned at Santa Elena during the year, supplying all the power requirements to the operation by the end of the year. This modern “green energy” plant will significantly yield energy cost savings and reduce the carbon emissions of the operations. Silver and gold grades from Santa Elena ore averaged 80 g/t and 1.15 g/t, respectively, compared to 88 g/t and 1.43 g/t in the previous year as lower grade ore was extracted from the Main Santa Elena vein. Silver recoveries decreased from 93% in 2020 to 90% in 2021 while gold recoveries decreased from 96% to 94% in the current year. The decrease in recoveries is a result of the lower ore grades from Santa Elena and the first quarter of production at Ermitaño. The Company will continue to optimize batch processing and metallurgical recoveries of Ermitaño’s ore during 2022 and plans to upgrade the processing plant with the Dual Circuit Project. The Dual Circuit Project includes the addition of one leaching tank, one CCD tank and a new high-capacity tailing press filter to better handle fine grinding of Ermitaño and Santa Elena ores. 91 FIRST MAJESTIC SILVER 2021 ANNUAL REPORTMANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITIONDuring the year, cash cost per AgEq silver equivalent ounce averaged $15.40 compared to $12.32 per ounce in 2020, representing an increase of 25% while AISC averaged $19.20 per silver equivalent ounce compared to $15.14 per ounce in the previous year, an increase of 27%. The increase was primarily attributed to higher ore development and mining contractor costs incurred during the year to prepare additional ore faces in the Santa Elena mine. Additionally, costs for specialized consulting services were also incurred during the year to establish a more effective Management Operating System (“MOS”) at the mine. The increase in AISC is primarily attributed to increased waste mine development costs. The Santa Elena mine is subject to a gold streaming agreement with Sandstorm Gold Ltd. (“Sandstorm”), which requires the mine to sell 20% of its gold production from the leach pad and a designated area of its underground operations over the life of mine to Sandstorm. The selling price to Sandstorm is currently the lesser of $450 per ounce (subject to a 1% annual inflation increase every April) and the prevailing market price. During the year ended December 31, 2021, the Company delivered 5,327 ounces of gold (2020 - 5,697 ounces) to Sandstorm at an average price of $467 per ounce (2020 - $463 per ounce). Orogen Royalties Inc., formerly Evrim Resource Corp., retains a 2% net smelter return (“NSR”) royalty from the sale of mineral products extracted from the Ermitaño mining concessions. In addition, there is an underlying NSR royalty where Osisko Gold Royalties Ltd. retains a 2% NSR from the sale of mineral products extracted from the Ermitaño mining concessions. During the year, a total of 18,119 metres of underground development (2020 - 7,851 metres) and 63,977 metres of diamond drilling (2020 - 39,451 metres) were completed, including 6,301 metres of underground development at the Ermitaño project near Santa Elena. 2021Q4 vs. 2021Q3 After five years since its initial discovery, the Company successfully began underground ore production from the Ermitaño mine near Santa Elena in the fourth quarter of 2021. This important new mine is expected to significantly increase production and reduce costs at Santa Elena as it ramps up throughout 2022. During the fourth quarter, Santa Elena produced a new quarterly record of 1,955,550 silver equivalent ounces consisting of 426,870 ounces of silver and 19,810 ounces of gold representing a decrease of 16% in silver and an increase of 164% in gold production, when compared to the prior quarter. This represents a significant 84% increase from the prior quarter and the highest quarterly production since the Company acquired the mine in 2015. Production was significantly higher than prior quarter due to the introduction of Ermitaño’s higher grade ore into the processing plant in November, approximately two months ahead of schedule. During the year ended December 31, 2021, the Company had accrued $1.0 million (2020 - $nil) in NSR from the production of Ermitaño in November and December of 2021 to be paid in the first quarter of 2022. The mill processed a total of 224,459 tonnes during the quarter, consisting of 120,717 tonnes of ore from Santa Elena (including the existing heap leach pad) and 103,742 tonnes of ore from Ermitaño compared to total production of 234,862 tonnes in the prior quarter. Silver and gold grades from Santa Elena averaged 88 g/t and 1.37 g/t, respectively and increase of 19% and 32%, respectively compared to the previous quarter, while silver and gold grades from Ermitaño averaged 54 g/t and 4.83 g/t, respectively. Silver and gold recoveries in the fourth quarter averaged 82% and 92%, respectively compared to 91% and 96% respectively in the prior quarter. The Company continues to optimize the batch processing and metallurgical recoveries of Ermitaño and Santa Elena ore. The Company is in the process of modifying the Santa Elena processing plant with the commissioning of a new filter-press, an additional leaching tank and a fourth CCD thickener expected to be completed by the fourth quarter of 2022 in order to facilitate finer grinding, improve metallurgical recoveries and reduce operating costs. Cash cost per AgEq ounce in the fourth quarter was $11.56 per ounce compared to $17.09 per ounce in the previous quarter. The decrease in cash cost was primarily attributed to a 84% increase in production due to the increase in silver and gold grades compared to the previous quarter. AISC per AgEq ounce for the quarter was $14.02 per ounce compared to $21.10 per ounce in the prior quarter, primarily driven by the decrease in cash costs per ounce combined with the increase in AgEq production during the quarter. In the fourth quarter, Santa Elena completed a total of 4,430 metres of underground development, compared to 4,195 metres in the previous quarter. A total of three drill rigs, consisting of two surface rigs and one underground rig, were active at the end of the quarter, completing 13,847 metres compared to 19,609 metres in the prior quarter. 92 MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITIONLa Encantada Silver Mine, Coahuila, México The La Encantada Silver Mine is an underground mine located in the northern México State of Coahuila, 708 kilometres northeast of Torreon. La Encantada has 4,076 hectares of mineral concessions and surface land ownership of 1,343 hectares. La Encantada also has a 4,000 tpd cyanidation plant, a camp with 120 houses as well as administrative offices, laboratory, general store, hospital, airstrip and all the necessary infrastructure required for such an operation. The mine is accessible via a two-hour flight from the Durango International Airport to the mine’s private airstrip, or via an improved road from the closest city, Muzquiz, Coahuila State, which is 225 kilometres away. The Company owns 100% of the La Encantada Silver Mine. LA ENCANTADA 2021-Q4 2021-Q3 2021-Q2 2021-Q1 2021-YTD 2020-YTD Change Q4 vs Q3 Change ‘21 vs ‘20 Ore processed/tonnes milled 268,239 263,645 242,839 229,421 1,004,144 860,613 Average silver grade (g/t) Silver recovery (%) Production Silver ounces produced Gold ounces produced 117 75% 134 80% 138 78% 131 77% 130 77% 162 78% 757,586 905,074 840,541 738,354 3,241,555 3,505,953 146 114 102 98 460 241 Silver equivalent ounces produced 768,796 913,481 847,502 745,019 3,274,798 3,526,776 Cost Cash cost per AgEq Ounce All-In sustaining costs per AgEq Ounce Total production cost per tonne Underground development (m) Diamond drilling (m) 2021 vs. 2020 $14.51 $19.41 $39.70 790 2,406 $12.25 $15.28 $41.08 722 5,196 $13.66 $15.97 $45.71 827 4,905 $13.77 $16.30 $42.99 965 2,866 $13.49 $16.66 $42.25 3,304 15,373 $10.32 $12.47 $40.37 3,674 18,611 2% (13%) (6%) (16%) 28% (16%) 18% 27% (3%) 9% (54%) 17% (20%) (1%) (8%) 91% (7%) 31% 34% 5% (10%) (17%) In 2021, La Encantada produced 3,241,555 ounces of silver and 460 ounces of gold for a total of 3,274,798 silver equivalent ounces, a decrease of 7% compared to 3,526,776 silver equivalent ounces in 2020. The decrease was primarily due to a 20% decrease in silver head grade and a 1% decrease in silver recovery, partially offset by a 17% increase in tonnes milled. This reduction was driven by lower ore grades mined from the northern draw-points of the La Prieta, Milagros and La Fe ore bodies. Silver recoveries averaged 77% during the year, compared to 78% in 2020. Silver grades during the year averaged 130 g/t, a decrease of 20% compared to 162 g/t in 2020. In the fourth quarter, the Company began to establish new draw-points within the 660 area ore body in order to increase silver grades in the upcoming quarters. During the year, cash cost per AgEq ounce averaged $13.49 compared to $10.32 per ounce in 2020, and AISC averaged $16.66 per ounce in 2021 compared to $12.47 per ounce in 2020. The increase was primarily attributed to lower production, a stronger Mexican Peso against the U.S. Dollar compared to the previous year along with an increase in energy costs as diesel generators had to be rented due to delay in the liquid gas deliveries at the beginning of the year. Furthermore, the Company has invested in a mill modernization project that was advanced during the year; this included a new refinery scrubber and the installation of two thickener mechanisms. During the year, the Company entered into a surface access agreement with the Tenochtitlan Ejido to gain access to the land owned by the Ejido’s, covering part of the Company’s 4,076 hectares of mineral concessions at La Encantada. This new agreement allows the Company, for the first time since owning the mine, to initiate surface exploration programs on this large land package. A total of 3,304 metres of underground development and 15,373 metres of diamond drilling were completed in 2021 compared to 3,674 metres of underground development and 18,611 metres of diamond drilling in the prior year. 2021Q4 vs. 2021Q3 During the quarter, La Encantada produced 757,586 silver ounces compared to 905,074 in previous quarter, representing a 16% decrease in production compared to the previous quarter primarily due to a 13% decrease in silver grade. The mill processed a total of 268,239 tonnes with an average silver grade and recovery during the quarter of 117 g/t and 75%, respectively, compared to 263,645 tonnes, 134 g/t and 80%, respectively, in the previous quarter. The decrease in grade and recoveries were the result of low-grade material being sourced from previously mined areas. During the quarter, the Company began to establish new draw-points within the 660 area ore body in an effort to increase silver grades in the upcoming quarters. 93 FIRST MAJESTIC SILVER 2021 ANNUAL REPORTMANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITIONCash cost per AgEq ounce for the quarter was $14.51 compared to $12.25 in the previous quarter. The increase in cash cost per AgEq ounce was primarily due to the 16% decrease in silver equivalent ounces produced. AISC per AgEq ounce for the quarter was $19.41 per ounce, an increase of 27% compared to $15.28 per ounce in the previous quarter primarily due to the increase in cash cost per AgEq ounce combined with an increase in the workers participation cost. A total of two underground drill rigs were active on the property at the end of the quarter. A total of 790 metres of underground development were completed in the fourth quarter compared to 722 metres in the prior quarter. One underground and one surface drill completed 2,406 metres of drilling compared to 5,196 metres in the previous quarter. During the fourth quarter, the Company completed 77 metres of an underground ramp in order to access the Ojuelas orebody which is known to contain higher silver grades. The Company is planning to prepare the area for initial ore extraction in the second half of 2022. Jerritt Canyon Gold Mine, Nevada, United States The Jerritt Canyon Gold Mine is an underground mine located in Northern Nevada, United States. Jerritt Canyon was discovered in 1972 and has been in production since 1981 having produced over 9.5 million ounces of gold over its 40-year production history. The mine was purchased by the Company on April 30, 2021 and currently operates as an underground mine and has one of three permitted gold processing plants in Nevada that uses roasting in its treatment of ore. This processing plant has a capacity of 4,000 tonnes per day (“tpd”). The property consists of a large, under explored land package consisting of 30,821 hectares (119 square miles). Jerritt Canyon is 100% owned by the Company. Jerritt Canyon Ore processed/tonnes milled Average gold grade (g/t) Gold recovery (%) Production Gold ounces produced Silver equivalent ounces produced Cost Cash cost per AuEq Ounce All-In sustaining costs per AuEq Ounce Total production cost per tonne Underground development (m) Diamond drilling (m) 2021-Q4 2021-Q3 2021-Q2 2021-YTD Change Q4 vs Q3 256,374 230,415 146,611 633,400 3.41 84% 4.19 84% 4.03 84% 3.84 84% 23,660 26,145 18,762 68,567 1,821,331 1,922,270 1,270,398 5,013,999 $1,674 $2,077 $1,734 $2,285 $1,407 $1,679 $1,624 $2,048 $151.23 $192.17 $177.30 $172.20 1,211 22,089 1,673 22,175 1,031 4,406 3,915 48,670 11% (18%) 0% (10%) (5%) (3%) (9%) (21%) (28%) 0% Since being acquired on April 30, 2021, the Jerritt Canyon mine has produced 68,567 ounces of gold or 5,013,999 silver equivalent ounces. The mill processed a total of 633,400 tonnes with an average gold grade of 3.84 g/t and a recovery of 84%. Permitting, preparation and construction activities for the TSF2 12-ft lift project was completed during the year, which included installation of a new liner. The $10.4 million lift which was under budget which will provide over two years of additional deposition storage for tailings material at the site. A life-of- mine tailing deposition optimization study was started during the year and will be completed in early 2022. During the year, cash cost per AuEq ounce averaged $1,624 per ounce and AISC averaged $2,048 per ounce. The main cost drivers in 2021 were the semi- annual maintenance overhaul of the dual roasters which was completed on October 4th and included a planned 14-day major maintenance shutdown, combined with the TSF2 12-ft lift project. As a result, the AISC is expected to normalize in 2022. Since the acquisition announcement in January 2021, First Majestic has been developing a long-term mine and exploration plan for the future of the operation. The Company has identified numerous projects that have been implemented or will be implemented over the next 12 to 24 months to improve environmental compliance and production, and reduce costs at the mine and processing plant, including: 1. 2. 3. 4. 5. Rebuild a Leadership Team and add technical expertise to the operation (Completed) Complete the remodeling of all resources inclusive of all available drilling data and mapping (Completed) Execute a roaster expansion capacity study for future growth (Completed) Optimize the water treatment plant for mine dewatering prioritization (Completed) Complete the lift upgrade and develop a long-term TSF2 plan (Completed) 94 MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION6. 7. 8. Establish a Special Environmental Trust to manage the Reclamation and Closure of four waste rock stockpiles (Completed) Complete a site-wide Environmental Audit (Completed) Connect the two underground Smith and SSX producing mines with an underground development drift which will be used for future ore haulage and exploration activities (Completed December 2021) Obtain permits for potential pushbacks of past-producing open pits for future mill feed (Ongoing) 9. 10. Test over 25 high-priority exploration targets, both near-mine and greenfield (Ongoing) 11. Evaluate and complete ore purchase opportunities with third parties to fill roaster excess capacity (Ongoing) 12. Optimize the underground mining plan and execution of mining with the mine contractor (Ongoing) 13. Evaluate and competitively bid all major procurement contracts for services and consumables (Ongoing) 14. Develop a mercury remediation plan for improved capture of off-gas from the roasters and refinery (Ongoing) It should be noted that many of the anticipated benefits from these modifications are not yet reflected in the forecasted operating results and are expected to take several quarters to materialize. 2021Q4 vs. 2021Q3 During the fourth quarter, Jerritt Canyon produced 23,660 ounces of gold, representing a 10% decrease compared to the prior quarter. The decrease was primarily due to harsh winter weather in December which significantly reduced production for a period of two weeks, causing a reduction in throughput. In order to mitigate future harsh winter conditions, Jerritt Canyon: • implemented a new blending strategy to improve material handling of frozen and wet ore; • installed heat trace and insulation on critical lines and valves; • connected the two mines which will help with accessibility and ore movement in extreme winter events; and • are optimizing the dryer operation to better handle major swings in moisture content to improve reliability and performance. The mill processed a total of 256,374 tonnes with an average gold grade and recovery of 3.41 g/t and 84%, respectively, compared to 230,415 tonnes with an average grade and recovery of 4.19 g/t and 84%, respectively in the prior quarter. Increased ore development rates and processing of lower ore grade from surface material continued during the quarter which resulted in higher average tonnage with lower average ore grades processed in the plant. The SSX and Smith mines contributed approximately 33% and 50%, respectively, of the total production during the quarter. In addition, numerous lower grade surface stockpiles contributed approximately 17% of total production during the quarter. During the quarter, the tailings lift at TSF2 and the underground connection drift between the SSX and Smith mines were both completed on-time and under budget. The new connection is expected to reduce transportation bottlenecks and improve movement efficiencies of personnel and equipment. In addition, the connection drift is expected to support future exploration activities. Cash cost per AuEq ounce for the quarter was $1,674 compared to $1,734 in the prior quarter primarily due to a 14-day planned major maintenance of the dual roasters at the end of the previous quarter. AISC per AuEq ounce for the quarter was $2,077 per ounce, compared to $2,285 in the prior quarter primarily due lower exploration and sustaining costs as well as the completion of the TSF2 tailings lift project in the current quarter. A total of nine drill rigs, consisting of four surface rigs and five underground rigs, were active at the end of the quarter. A total of 22,089 diamond drilling metres and 1,211 metres of underground development were drilled during the quarter. In early November, the Company executed an agreement with the NDEP relating to funds required to establish a trust agreement to cover post-closure water treatment cost at Jerritt Canyon. The estimated costs are $17.6 million and would be required to be funded by October 31, 2022. The Company is investigating alternative closure methods, including passive remediation and alternative water treatment methods, that may reduce this funding requirement. La Parrilla Silver Mine, Durango, México The La Parrilla Silver Mine, located approximately 65 kilometres southeast of the city of Durango in Durango State, México, is a complex of underground operations consisting of the Rosarios, La Blanca and San Marcos mines which are inter-connected through underground workings, and the Vacas and Quebradillas mines which are connected via above-ground gravel roads. The total mining concessions consist of 69,478 hectares. The Company owns 60 hectares, and leases an additional 107 hectares of surface rights, for a total of 167 hectares of surface rights. La Parrilla includes a 2,000 tpd sequential processing plant consisting of a 1,000 tpd cyanidation circuit and a 1,000 tpd flotation circuit, an ISO 9001 certified central laboratory, metallurgical pilot plant, buildings, offices and associated infrastructure. The Company owns 100% of the La Parrilla Silver Mine. Operations at the La Parrilla mine have been placed on care and maintenance since September 2019. The Company completed discussions with the La Parrilla Ejido to continue the long-term land use agreement at La Parrilla during the fourth quarter. Del Toro Silver Mine, Zacatecas, México The Del Toro Silver Mine is located 60 kilometres to the southeast of the Company’s La Parrilla mine and consists of 3,815 hectares of mining concessions and 219 hectares of surface rights. The Del Toro operation represents the consolidation of three historical silver mines, the Perseverancia, San Juan and Dolores mines, which are approximately one and three kilometres apart, respectively. Del Toro includes a 2,000 tpd flotation circuit and a 2,000 tpd cyanidation circuit. First Majestic owns 100% of the Del Toro Silver Mine. Operations at the Del Toro mine has been placed on care and maintenance since January 2020. 95 FIRST MAJESTIC SILVER 2021 ANNUAL REPORTMANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITIONSan Martin Silver Mine, Jalisco, México The San Martin Silver Mine is an underground mine located near the town of San Martin de Bolaños in the Bolaños river valley, in the northern portion of the State of Jalisco, México. San Martin has 33 contiguous mining concessions in the San Martin de Bolaños mining district covering mineral rights for 12,795 hectares, plus an application of a new mining concession covering 24,723 hectares to be granted. In addition, the mine owns 160 hectares of surface land where the processing plant, camp, office facilities, maintenance shops, and tailings dams are located, and an additional 640 hectares of surface rights. The 1,300 tpd mill and processing plant consists of crushing, grinding and conventional cyanidation by agitation in tanks and a Merrill- Crowe doré production system. The mine can be accessed via small plane, 150 kilometres from Durango, or 250  kilometres by paved road north of Guadalajara, Jalisco. The San Martin Silver Mine is 100% owned by the Company. In July 2019, the Company temporarily suspended all mining and processing activities at the San Martin operation due to marginal economics and growing insecurity in the area. The Company continues to work with government authorities to secure the area and continued to maintain the mine and plant facilities, including advancing a buttressing project on the TSF2 tailings impoundment. The re-opening date is contingent on economics and security conditions in the region and cannot be determined at this time. La Guitarra Silver Mine, México State, México The La Guitarra Silver Mine is located in the Temascaltepec Mining District in the State of México, México, approximately 130 kilometres southwest from México City. The La Guitarra mine covers 39,714 hectares of mining claims and has a 500 tpd flotation processing plant, buildings and related infrastructure. The Company owns 100% of the La Guitarra Silver Mine. The La Guitarra milling and mining operations were placed under care and maintenance effective August 3, 2018. Springpole Silver Stream, Ontario, Canada In July 2020, the Company completed an agreement with First Mining Gold Corp. (“First Mining”) to purchase 50% of the life of mine payable silver produced from the Springpole Gold Project (“Springpole Silver Stream”), a development stage mining project located in Ontario, Canada. First Majestic agreed to pay First Mining consideration of $22.5 million in cash and shares, in three milestone payments, for the right to purchase silver at a price of 33% of the silver spot price per ounce, to a maximum of $7.50 per ounce (subject to annual inflation escalation of 2%, commencing at the start of the third anniversary of production). Commencing with its production of silver, First Mining must deliver 50% of the payable silver which it receives from the offtaker within five business days of the end of each quarter. Transaction consideration paid and payable by First Majestic is summarized as follows: • The first payment of $10.0 million, consisting of $2.5 million in cash and $7.5 million in First Majestic shares (805,698 common shares), was paid to First Mining on July 2, 2020; • The second payment, consisting of $3.75 million in cash and $3.75 million in First Majestic shares (287,300 common shares), was paid on January 21, 2021 upon the completion and public announcement by First Mining of the results of a Pre-Feasibility Study for Springpole; and • The third payment, consisting of $2.5 million in cash and $2.5 million in First Majestic shares (based on 20 days volume weighted average price), will be paid upon receipt by First Mining of a Federal or Provincial Environmental Assessment approval for Springpole, which has not yet been received. In connection with the agreement, First Mining also granted First Majestic 30 million common share purchase warrants, each of which will entitle the Company to purchase one common share of First Mining at CAD$0.40 over a period of five years. The fair value of the warrants was measured at $5.7 million using the Black-Scholes option pricing model. First Mining shall have the right to repurchase 50% of the silver stream for $22.5 million at any time prior to the commencement of production at Springpole leaving the Company with a reduced silver stream of 25% of life of mine payable silver production. Springpole is one of Canada’s largest, undeveloped gold projects with permitting underway. In January 2021, First Mining announced positive results of its Pre-Feasibility Study (“PFS”) which supports a 30,000 tonnes-per-day open pit mining operation over an 11 year mine life. First Mining announced resources of 24.3 million ounces of silver in the Indicated category and 1.4 million ounces of silver in the Inferred category, plus 4.6 million ounces of gold in the Indicated category and 0.3 million ounces of gold in the Inferred category. The Springpole Project also includes large land holdings of 41,913 hectares which are fully encompassed under the silver streaming agreement. As at December 31, 2021, the Company has paid $17.5 million in consideration to First Mining as part of the agreement, of which $5.7 million was allocated to other financial assets and $11.8 million was allocated to the Springpole Silver Stream recognized within exploration and evaluation assets. First Mining is a related party with one independent board member who is also a director and/or officer of First Majestic. 96 MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITIONOverview Of Financial Performance For the quarters ended December 31, 2021 and 2020 (in thousands of dollars, except for per share amounts): Revenues Mine operating costs Cost of sales Depletion, depreciation and amortization Fourth Quarter 2021 Fourth Quarter 2020 Variance % $204,876 $117,075 75% (1) 121,236 43,278 164,514 58,008 15,399 73,407 109% (2) 181% (3) 124% Mine operating earnings 40,362 43,668 (8%) General and administrative expenses Share-based payments Mine holding costs Acquisition costs Foreign exchange loss Operating earnings Unrealized gain on foreign currency derivatives Investment and other income (loss) Finance costs Earnings before income taxes Current income tax expense Deferred income tax expense (recovery) Income tax expense (recovery) Net (loss) earnings for the period (Loss) earnings per share (basic) (Loss) earnings per share (diluted) NM - Not meaningful 6,988 2,859 2,485 23 (262) 28,269 — 736 (9,077) 19,928 23,743 156 23,899 7,205 2,227 7,017 — (2,424) 29,643 3,880 (2,333) (3,717) 27,473 4,115 (11,187) (7,072) ($3,971) $34,545 ($0.02) ($0.02) $0.16 $0.15 (3%) 28% (65%) (4) 100% 89% 5% (100%) (5) 132% (6) (144%) (7) (27%) NM NM NM (8) NM (9) NM (9) NM (9) 1. Revenues in the quarter increased $87.8 million compared to the same quarter of the previous year primarily attributed to: • a 76% increase in payable silver equivalent ounces sold compared to the same quarter of the previous year which contributed to an increase in revenues of $91.6 million primarily due to the the addition of the Jerritt Canyon Gold Mine and the sale of 1.4 million silver ounces of inventory previously withheld in the prior quarter; Partially offset by: • a 3% decrease in realized silver price per ounce sold, which averaged $24.18 during the quarter compared to $24.88 in the fourth quarter of 2020, resulting in a $3.5 million decrease in revenues. 2. Cost of sales in the quarter increased $63.2 million compared to the same quarter of the previous year primarily due to: • the addition of the Jerritt Canyon mine which incurred $40.7 million in cost of sales during the fourth quarter; and • a $11.5 million increase in change in inventory expense primarily due to sale of 1.4 million silver ounces of inventory withheld in the prior quarter, which was sold in the fourth quarter of 2021. 3. Depletion, depreciation and amortization in the quarter increased $27.9 million compared to the same quarter of the previous year, primarily as a result of: • the addition of the Jerritt Canyon Gold Mine which incurred $18.4 million during the fourth quarter; • the increase of depletable assets from the Mexican operations which incurred $4.2 million; and • the sale of the 1.4 million in silver ounces withheld from the prior quarter which incurred $4.9 million during the quarter. 97 FIRST MAJESTIC SILVER 2021 ANNUAL REPORTMANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION4. Mine holding costs decreased by $4.5 million compared to the same quarter of 2020, primarily due to a decrease in labour costs at Del Toro, San Martin and La Parrilla following restructuring that took place in 2020. 5. Fair value adjustment on foreign currency derivatives of $3.9 million in the fourth quarter of the prior year related to mark-to-market adjustments on the Company’s foreign currency derivatives, which were fully settled as at December 31, 2020. The Company utilized these foreign currency options and swaps to hedge cash flows relating to mining operations, exploration and evaluation activities and corporate expenses in Mexican Pesos. 6. Investment and other income for the quarter increased by $3.1 million compared to the fourth quarter of the prior year, primarily due to an unrealized gain of $0.8 million on the companies marketable securities, compared to an unrealized loss of 2.4 million during the same quarter of the previous year. 7. Finance costs for the quarter increased by $5.4 million compared to the fourth quarter of the prior year, primarily due to an accounting loss of $4.6 million on the settlement of the Company’s 2018 senior convertible notes during the quarter. 8. During the quarter, the Company recorded an income tax expense of $23.9 million compared to a recovery of $7.1 million in the fourth quarter of 2020. The increase in income tax expense was primarily due to increase in the non-deductible expenses, the changes in valuation allowance, the foreign exchange impact on the Company’s Mexican Peso denominated future income tax liability balances and the benefit associated with the impact of divestitures and restructuring recognized in 2020. 9. As a result of the foregoing, net loss for the quarter was $4.0 million (EPS of ($0.02)) compared to net earnings of $34.5 million (EPS of $0.16) in the same quarter of the prior year. For the years to date ended December 31, 2021, 2020 and 2019 (in thousands of dollars, except for per share amounts): Revenues Mine operating costs Cost of sales Cost of sales - standby costs Depletion, depreciation and amortization Annual 2021 Annual 2020 Annual 2019 Variance % 21 vs ‘20 $584,117 $363,876 $363,944 61% (1) 366,085 — 116,613 482,698 194,305 10,112 54,405 258,822 232,146 — 65,584 297,730 88% (2) (100%) (3) 114% (4) 86% Mine operating earnings 101,419 105,054 66,214 (3%) General and administrative Share-based payments Impairment of non-current assets Acquisition costs Mine holding costs Loss on divestiture of exploration projects Foreign exchange (gain) loss Operating earnings (loss) Fair value adjustment on foreign currency derivatives Investment and other (loss) income Finance costs Earnings (loss) before income taxes Current income tax expense Deferred income tax (recovery) Income tax expense Net (loss) earnings for the year 27,063 12,290 — 1,973 12,056 — (1,165) 49,202 — (2,948) (21,004) 25,250 49,283 (19,110) 30,173 ($4,923) 24,855 8,255 — — 21,583 3,685 6,319 40,357 (982) 5,127 (14,773) 29,729 9,966 (3,324) 6,642 26,800 8,325 58,739 — 7,579 — (3,243) (31,986) — 8,109 (15,147) (39,024) 16,423 (14,973) 1,450 $23,087 ($40,474) (Loss) earnings per share (basic and diluted) ($0.02) $0.11 ($0.20) 9% 49% (5) 0% 100% (6) (44%) (7) (100%) (8) (118%) 22% (100%) (9) (157%) (10) (42%) (11) NM NM NM NM (12) NM (13) NM (13) NM - Not meaningful 98 MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION1. Revenues in the year ended December 31, 2021 increased $220.2 million or 61% compared to the previous year, primarily attributed to: • $126.1 million increase due to a 32% increase in payable silver equivalent ounces sold compared to the prior year mainly attributed to the addition of Jerritt Canyon, achieving production at Ermitaño during the fourth quarter of 2021 and the increase in production from the Mexican operations due to the reduced effect of the temporary COVID-19 suspension and units operating with limited workforce levels in the previous year; and • $94.4 million increase due to a 19% increase in realized silver price per ounce sold, which averaged $25.16 compared to $21.15 in the prior year. 2. Cost of sales in the year increased $171.8 million or 88% compared to 2020 as a result of the following factors: • the addition of the Jerritt Canyon Gold Mine on April 30, 2021, which contributed $117.3 million to cost of sales since its acquisition by First Majestic; • a stronger Mexican Peso against the U.S. Dollar, which averaged 7% higher compared to the same period of 2020; and • an increase in throughput from the Mexican operations compared to 2020 primarily attributed to an increase in operational days due to lower impact from the COVID-19 suspension. 3. 4. 5. 6. 7. 8. 9. Standby costs in 2020 were primarily related to direct costs incurred at the San Dimas ($3.5 million), Santa Elena ($2.0 million) and La Encantada ($1.7 million) mines during the temporary COVID-19 suspensions, as well as $2.0 million incurred during a 13-day union work stoppage at San Dimas during the second quarter of 2020. Depletion, depreciation and amortization in the year increased $62.2 million or 114% compared to the previous year primarily as a result of the addition of the Jerritt Canyon mine, which contributed $43.5 million during the year, and a $17.6 million increase from Mexican operations due to an increase in throughput, higher mining interest and property plant and equipment balances. Share based payments in the year increased $4.0 primarily attributed to an increase in the fair value of the options granted, restricted and performance share units granted during the year as well as the introduction of the deferred shares units compensation for the independent directors. Acquisition costs of $2.0 million relates to due diligence costs and closing fees incurred in connection with the acquisition of the Jerritt Canyon Canada Ltd. which closed on April 30, 2021. Mine holding costs for the year decreased $9.5 million compared to the previous year primarily due to a decrease in labour costs at Del Toro, San Martin and La Parrilla following restructuring that took place in early 2020. Loss on divestiture of exploration projects of $3.7 million in 2020 related to $10.2 million loss on the sale of the Plomosas project to GR Silver Mining Ltd. in March 2020, partially offset by $6.5 million gain on the arrangement to option the La Joya project to Silver Dollar Resources Inc. in September 2020. Fair value adjustment on foreign currency derivatives of $1.0 million loss during 2020 related to mark-to-market adjustments on the Company’s foreign currency derivatives, which have been fully settled as at December 31, 2021. The Company utilized these foreign currency options and swaps to hedge cash flows relating to mining operations, exploration and evaluation activities and corporate expenses in Mexican Pesos. 10. Investment and other income in the year decreased $8.1 million compared to the previous year primarily due to a $2.5 million loss on the write-down of property and equipment in relation to the sale of certain AG mill equipment to Condor Gold PLC and a $2.1 million unrealized loss on investments in marketable securities. 11. Finance costs in the year increased by $6.2 million compared to the previous year primarily due to an accounting loss of $4.6 million on the settlement of the Company’s 2018 senior convertible notes. 12. During the year ended December 31, 2021, the Company recorded an income tax expense of $30.2 million, compared to $6.6 million in 2020. The increase in income tax expense was primarily due to: • the increase in non-deductible expenses of $15.3 million at operating mines; • additional non-deductible expenses consisting of $14.1 million related to expenditures incurred at care and maintenance mines in Mexico, as well as head office losses arising from the cost of settlement of 2018 senior convertible notes and other expenses; • the one-time benefit associated with the impact of divestitures and restructuring recognized in 2020 in the amount of $16.7 million; Partially offset by: • the foreign exchange impact on the Company’s Mexican Peso denominated future income tax liability balances of $17.0 million. 13. As a result of the foregoing, net loss for the year ended December 31, 2021 was $4.9 million (EPS of ($0.02)), compared to net income of $23.1 million (EPS of $0.11) in the prior year. 99 FIRST MAJESTIC SILVER 2021 ANNUAL REPORTMANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Summary of Quarterly Results The following table presents selected financial information for each of the most recent eight quarters: 2021 2020 Selected Financial Information Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Revenue Cost of sales $204,876 $124,646 $154,073 $100,522 $117,075 $125,881 $34,855 $86,065 $121,236 $92,006 $95,782 $57,061 $58,008 $60,275 $26,187 $49,835 Cost of sales - standby costs $— $— $— $— $— $— Depletion, depreciation and amortization $43,278 $29,122 $28,868 $15,345 $15,399 $17,573 $9,166 $7,264 $946 $14,169 Mine operating earnings (loss) $40,362 $3,518 $29,423 $28,116 $43,668 $48,033 ($7,762) $21,115 Net (loss) earnings after tax ($3,971) ($18,406) $15,599 $1,855 $34,545 $30,946 ($9,968) ($32,436) (Loss) earnings per share - basic (Loss) earnings per share - diluted ($0.02) ($0.02) ($0.07) ($0.07) $0.06 $0.06 $0.01 $0.01 $0.16 $0.15 $0.14 $0.14 ($0.05) ($0.05) ($0.15) ($0.15) During the fourth quarter of 2021, mine operating earnings were $40.4 million compared to earnings of $3.5 million in the previous quarter. Net loss for the quarter was $4.0 million compared to a loss of $18.4 million in the prior quarter, as the Company sold 1.4 million ounces of silver withheld in inventory in the prior quarter. Liquidity, Capital Resources and Contractual Obligations Liquidity As at December  31, 2021, the Company had cash and cash equivalents of $237.9 million, comprised primarily of cash held with reputable financial institutions and is invested in cash accounts and in highly liquid short-term investments with maturities of three months or less. With the exception of $6.4 million held in-trust for tax audits in Mexico, the Company’s cash and cash equivalents are not exposed to liquidity risk and there are no restrictions on the ability of the Company to use these funds to meet its obligations. Working capital as at December 31, 2021 was $224.4 million compared to $254.4 million at December 31, 2020. Total available liquidity at December 31, 2021 was $274.4 million, including $50.0 million of undrawn revolving credit facility. The following table summarizes the Company’s cash flow activity during the year: Cash flow Cash generated by operating activities Cash used in investing activities Cash generated by financing activities (Decrease) increase in cash and cash equivalents Effect of exchange rate on cash and cash equivalents held in foreign currencies Cash and cash equivalents, beginning of the year Cash and cash equivalents, end of year Year Ended December 31, 2021 2020 $68,723 (180,753) 111,817 ($213) (439) 238,578 $79,713 (127,115) 116,574 $69,172 397 169,009 $237,926 $238,578 The Company’s cash flows from operating, investing and financing activities during the year ended December 31, 2021 are summarized as follows: • Cash used in operating activities of $68.7 million, primarily due to: • $176.8 million in cash flows from operating activities before movements in working capital and taxes; net of: • $76.5 million in income taxes paid during the period; and • $31.5 million in net change in non-cash working capital items during the period, including $9.0 million increase in inventories and $48.0 million increase in restricted cash (PEM frozen bank account), partially offset by an increase of $16,580.0 million in trade and other payables and $9.8 million decrease in VAT receivables. 100 MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION        • Cash used in investing activities of $180.8 million, primarily related to: • $132.4 million spent on mine development and exploration activities; • $56.6 million spent on purchase of property, plant and equipment; • $12.6 million reclassification of restricted cash for the acquisition of Jerritt Canyon (escrow funds); • $7.8 million spent on deposits on non-current assets; • $3.5 million spent on the purchase of marketable securities; net of: • $30.0 million of restricted cash acquired through the acquisition of Jerritt Canyon; and • $2.6 million of net proceeds from the disposal of marketable securities. • Cash provided by financing activities of $111.8 million, primarily consists of the following: • $222.8 million of net proceeds from the issuance of the 2021 senior convertible debentures; • $66.7 million of net proceeds from the issuance of shares through the ATM; • $30.0 million of net proceeds from the drawdown on the Scotiabank revolving credit facility; • $21.8 million of net proceeds from the exercise of stock options; net of: • $171.8 million net repayment of the 2018 senior convertible debentures; • $40.0 million repayment of debt facility; • $9.3 million on repayment of lease obligations; • $4.3 million payment of financing costs; and • $3.9 million payment on dividends paid. During the year ended December 31, 2021 the Company received $48.0 million (966 million MXN) related to value added tax filings. In connection with the PEM tax ruling, the tax authority has frozen a PEM bank account with funds of $48.0 million as a guarantee against certain disputed tax assessments which are currently held within the Company’s restricted cash accounts. This balance consists of VAT refunds that the Company has received which were previously withheld by the tax authority. The Company does not agree with SAT’s position and is challenging the freezing of the bank account through the relevant legal channels. Additionally, as part of the acquisition of Jerritt Canyon, the Company was required to hold certain funds in escrow to settle the payment for Triggered Tax provisions along with any adjustments to working capital. As at December 31, 2021, $12.6 million remained in escrow. Reconciliation on Use of Proceeds from ATM Programs At-the-Market Distributions (“ATM”) Programs During the year ended December 31, 2021, the Company sold 4,225,000 common shares under the ATM programs at an average price of $16.24 for gross proceeds of $68.6 million, or net proceeds of $66.7 million after costs. The primary business objectives that the Company expects to use the net proceeds is was for general working capital purposes, expansion of existing operations, and for general corporate purposes. This includes completing corporate acquisitions, financing future growth opportunities and to repay existing or future indebtedness. The use of proceeds from the amount raised in the current year is reconciled as follows: Gross Proceeds: Use of Proceeds: Mine development Mine exploration General working capital Offering expenses Capital Resources $68,630 35,191 18,822 12,662 1,955 $68,630 The Company’s objective when managing capital is to maintain financial flexibility to continue as a going concern while optimizing growth and maximizing returns of investments from shareholders. The Company monitors its capital structure and based on changes in operations and economic conditions, may adjust the structure by repurchasing shares, issuing new shares, issuing new debt or retiring existing debt. The Company prepares an annual budget and quarterly forecasts to facilitate the management of its capital requirements. The annual budget is approved by the Company’s Board of Directors. The Company is not subject to any externally imposed capital requirements with the exception of complying with banking covenants defined in its debt facilities. As at December 31, 2021 and December 31, 2020, the Company was fully in compliance with these covenants. 101 FIRST MAJESTIC SILVER 2021 ANNUAL REPORTMANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITIONContractual Obligations and Commitments As at December 31, 2021, the Company’s contractual obligations and commitments are summarized as follows: Trade and other payables Debt facilities Lease liabilities Other liabilities Purchase obligations and commitments Contractual Cash Flows $120,666 234,666 44,561 5,797 19,176 Less than 1 year 2 to 3 years 4 to 5 years After 5 years $120,666 1,216 11,252 — 19,176 $— 1,725 21,312 — — $— 231,725 10,752 — — $— — 1,245 5,797 — $424,866 $152,310 $23,037 $242,477 $7,042 At December 31, 2021, the Company had working capital of $224.4 million (2020 – $254.4 million) and total available liquidity of $274.4 million (2020 – $319.4 million), including $50.0 million of undrawn revolving credit facility. The Company believes it has sufficient cash on hand, combined with cash flows from operations, to meet operating requirements as they arise for at least the next 12 months. Management of Risks and Uncertainties The Company thoroughly examines the various financial instruments and risks to which it is exposed and assesses the impact and likelihood of those risks. These risks may include credit risk, liquidity risk, currency risk, commodity price risk, and interest rate risk. Where material, these risks are reviewed and monitored by the Board of Directors. Credit Risk Credit risk is the risk of financial loss if a customer or counterparty fails to meet its contractual obligations. The Company’s credit risk relates primarily to chartered banks, trade receivables in the ordinary course of business, value added taxes receivable and other receivables. As at December 31, 2021, VAT receivable was $47.1 million (December 31, 2020 - $56.9 million), of which $22.2 million (December 31, 2020 $16.5 million) relates to Minera La Encantada S.A. de C.V. (“MLE”) and $22.0 million (December 31, 2020 - $37.9 million) relates to PEM. The SAT commenced processing VAT refund requests by PEM in June 2021 and the Company expects the amounts to be refunded within the next twelve months. The Company sells and receives payment upon delivery of its silver doré and by-products primarily through three international customers. All of the Company’s customers have good ratings and payments of receivables are scheduled, routine and fully received within 60 days of submission; therefore, the balance of trade receivables owed to the Company in the ordinary course of business is not significant. The carrying amount of financial assets recorded in the consolidated financial statements represents the Company’s maximum exposure to credit risk. With the exception to the above, the Company believes it is not exposed to significant credit risk. Liquidity Risk Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they arise. The Company manages liquidity risk by monitoring actual and projected cash flows and matching the maturity profile of financial assets and liabilities. Cash flow forecasting is performed regularly to ensure that there is sufficient capital in order to meet short-term business requirements, after taking into account cash flows from operations and our holdings of cash and cash equivalents. Currency Risk The Company is exposed to foreign exchange risk primarily relating to financial instruments that are denominated in Canadian dollars or Mexican pesos, which would impact the Company’s net earnings or loss. To manage foreign exchange risk, the Company may occasionally enter into short-term foreign currency derivatives, such as forwards and options, to hedge its cash flows. 102 MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITIONThe sensitivity of the Company’s net earnings or loss and comprehensive income or loss due to changes in the exchange rates of the Canadian Dollar and the Mexican Peso against the U.S. Dollar is included in the table below: Cash and cash equivalents Restricted cash $52,978 36,575 $89,553 $12,574 48,010 $60,584 Canadian dollar Mexican peso Commodity Price Risk Value added taxes receivable Other financial assets Trade and other payables Trade and other receivable Net assets (liabilities) exposure Effect of +/- 10% change in currency December 31, 2021 $— $7,644 ($3,547) (47,023) — $7,644 ($50,570) 42,979 $42,979 $90 — $90 $69,739 80,541 $6,974 8,054 $150,280 $15,028 The Company is exposed to commodity price risk on silver and gold, which have a direct and immediate impact on the value of its related financial instruments and net earnings. The Company’s revenues are directly dependent on commodity prices that have shown volatility and are beyond the Company’s control. The Company does not use derivative instruments to hedge its commodity price risk to silver or gold. The following table summarizes the Company’s exposure to commodity price risk and their impact on net earnings: Metals in doré inventory Political and Country Risk December 31, 2021  Effect of +/- 10% change in metal prices Silver $2,217 $2,217 Gold $571 $571 Total $2,788 $2,788 First Majestic currently conducts foreign operations in México and the United States, and as such the Company’s operations are exposed to various levels of political and economic risks by factors outside of the Company’s control. These potential factors include, but are not limited to: royalty and tax increases or claims by governmental bodies, expropriation or nationalization, foreign exchange controls, high rates of inflation, extreme fluctuations in foreign currency exchange rates, import and export tariffs and regulations, lawlessness, cancellation or renegotiation of contracts and environmental and permitting regulations. The Company currently has no political risk insurance coverage against these risks. The Company is unable to determine the impact of these risks on its future financial position or results of operations. Changes, if any, in mining or investment policies or shifts in political attitude in foreign countries may substantively affect the Company’s exploration, development and production activities. Uncertainty in the Calculation of Mineral Reserves, Resources and Silver Recovery There is a degree of uncertainty attributable to the calculation of Mineral Reserves and Mineral Resources (as defined in NI 43-101). Until Mineral Reserves or Mineral Resources are actually mined, extracted and processed, the quantity of minerals and their grades must be considered estimates only. In addition, the quantity of Mineral Reserves and Mineral Resources may vary depending on, among other things, applicable metal prices. Any material change in the quantity of Mineral Reserves, Mineral Resources, grade or mining widths may affect the economic viability of some or all of the Company’s mineral properties and may have a material adverse effect on the Company’s operational results and financial condition. Mineral Reserves on the Company’s properties have been calculated on the basis of economic factors at the time of calculation; variations in such factors may have an impact on the amount of the Company’s Mineral Reserves. In addition, there can be no assurance that silver recoveries or other metal recoveries in small scale laboratory tests will be duplicated in larger scale tests under on-site conditions or during production, or that the existing known and experienced recoveries will continue. Public Health Crises Global financial conditions and the global economy in general have experienced, at various times in the past and potentially in the future, extreme volatility in response to economic shocks or other events, such as the ongoing situation concerning COVID-19. Many industries, including the mining industry, are impacted by volatile market conditions in response to the widespread outbreak of epidemics, pandemics, or other health crises. Such public health crises and the responses of governments and private actors can result in disruptions and volatility in economies, financial markets, and global supply chains as well as declining trade and market sentiment and reduced mobility of people, all of which could impact commodity prices, interest rates, credit ratings, credit risk and inflation. The Company’s business could be materially adversely affected by the effects of the COVID-19 pandemic. As of the date of this MD&A, the global spread of COVID-19 continues to result in, among other things, restrictions in many jurisdictions on travel and gatherings of individuals, quarantines, temporary business closures and a general reduction in consumer activity. Due to the potential for new variants of COVID-19, future disruptions to business internationally and related financial impact on the Company and the economy in general cannot be estimated with any degree of certainty at this time. In addition, the long-term impact of the pandemic on global economies and financial markets remains uncertain and could result in a protracted economic downturn that could have an adverse effect on the demand for precious metals and the Company’s future prospects. In particular, the continued spread of COVID-19 globally and emergence of new variants could materially and adversely impact the Company’s business, including without limitation, employee health, workforce availability and productivity, limitations on travel, supply chain disruptions, increased insurance 103 FIRST MAJESTIC SILVER 2021 ANNUAL REPORTMANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION                premiums, increased costs and reduced efficiencies, the availability of industry experts and personnel, restrictions on the Company’s exploration and drilling programs and/or the timing to process drill and other metallurgical testing and the slowdown or temporary suspension of operations at some or all of the Company’s properties, resulting in reduced production volumes. Although the Company has the capacity to continue certain administrative functions remotely, many other functions, including mining operations, cannot be conducted remotely. During 2021, the Company continued to implement preventative control measures to protect the safety and health of our employees, contractors, and communities in which we operate, including social distancing, remote working, cancellation of any non-essential visits to the mines, comprehensive sanitation measures for the workplace and company transportation, and pre-screening for virus symptoms. The Company’s Polymerase Chain Reaction (PCR) laboratory in Durango, Mexico, supported these initiatives. The Company continues to monitor the various government health measures in the jurisdictions where we operate and there are no COVID-19-related restrictions on mine operations at this time. There is no guarantee that the Company will not experience significant disruptions to or additional closures of some or all of its active mining operations due to COVID-19 restrictions in the future. Any such disruptions or closures could have a material adverse effect on the Company’s production, revenue, net income and business. In addition, parties with whom the Company does business or on whom the Company is reliant, including suppliers and refineries may also be adversely impacted by the COVID-19 crisis which may in turn cause further disruption to the Company’s business, including delays or halts in availability or delivery of consumables and delays or halts in refining of ore from the Company’s mines. Any long-term closures or suspensions may also result in the loss of personnel or the workforce in general as employees seek employment elsewhere. The impact of COVID-19 and government responses thereto may also continue to have a material impact on financial markets and could constrain the Company’s ability to obtain equity or debt financing in the future, which may have a material and adverse effect on its business, financial condition, and results of operations. Environmental and Health and Safety Risks The Company’s activities are subject to extensive laws and regulations governing environmental protection and employee health and safety. Environmental laws and regulations are complex and have tended to become more stringent over time. The Company is required to obtain governmental permits and in some instances air, water quality, and mine reclamation rules and permits. The Company has complied with environmental taxes applied to the use of certain fossil fuels according to the Kyoto Protocol. Although the Company makes provisions for reclamation costs, it cannot be assured that these provisions will be adequate to discharge its future obligations for these costs. Failure to comply with applicable environmental and health and safety laws may result in injunctions, damages, suspension or revocation of permits and imposition of penalties. While the health and safety of our people and responsible environmental stewardship are our top priorities, there can be no assurance that First Majestic has been or will be at all times in complete compliance with such laws, regulations and permits, or that the costs of complying with current and future environmental and health and safety laws and permits will not materially and adversely affect the Company’s business, results of operations or financial condition. On August 26, 2021, the NDEP issued 10 Notices of Alleged Violation (collectively the “NOAV”) that alleged the Company doing business as Jerritt Canyon Gold, LLC had violated various air permit conditions and regulations applicable to operations at the Jerritt Canyon in Elko County, Nevada. The NOAV are related to compliance with emission monitoring, testing, recordkeeping requirements, and emission and throughput limits. The Company filed a Notice of Appeal on September 3, 2021, challenging the NOAV before the Nevada State Environmental Commission (“NSEC”). The Company raised various defenses to the NOAV, including that the Company is not liable for the violations because it was never the owner/operator of Jerritt Canyon during the period the alleged violations began (on April 30, 2021, the Company acquired Jerritt Canyon Canada Ltd, which, through subsidiaries, owns and operates Jerritt Canyon). There is currently no hearing scheduled or any scheduling order in the matter, and the parties have yet to engage in discovery. At this time the estimated amount cannot be reliably determined. On March 8, 2022, NDEP issued an additional four Notices of Alleged Violations to Jerritt Canyon Gold, LLC for alleged exceedances and violations of an Air Quality Operating permit and Mercury Operating Permit to Construct. The new NOAVs relate to alleged exceedances of a mercury emission limitations, exceedances of operating parameters, installation of equipment, and recordkeeping requirements. The Company is evaluating the claims contained in the NOAVs and JCG has until March 18, 2022 to respond to the NOAV by filing a challenge with the NSEC.” Claims and Legal Proceedings Risks The Company is subject to various claims and legal proceedings covering a wide range of matters that arise in the ordinary course of business activities. Many factors, both known and unknown, could cause actual results, performance or achievements to be materially different from the results, performance or achievements that are or may be expressed or implied by such forward-looking statements or information and the Company has made assumptions and estimates based on or related to many of these factors. Such factors include, without limitation: availability of time on court calendars in Canada and elsewhere; the recognition of Canadian judgments under Mexican law; the possibility of settlement discussions; the risk of appeal of judgment; and the insufficiency of the defendant’s assets to satisfy the judgment amount. Each of these matters is subject to various uncertainties and it is possible that some of these matters may be resolved unfavourably to the Company. First Majestic carries liability insurance coverage and establishes provisions for matters that are probable and can be reasonably estimated. In addition, the Company may be involved in disputes with other parties in the future which may result in a significant impact on our financial condition, cash flow and results of operations. Although the Company has taken steps to verify ownership and legal title to mineral properties in which it has an interest, according to the usual industry standards for the stage of mining, development and exploration of such properties, these procedures do not guarantee the Company’s title. Such properties may be subject to prior agreements or transfers, and title may be affected by undetected defects. However, management is not aware of any such agreements, transfers or defects. 104 MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITIONPrimero Tax Rulings When Primero, the previous owner of San Dimas acquired the San Dimas Mine in August 2010, it assumed the obligations under a Silver Purchase Agreement (“Old Stream Agreement”) that required its subsidiary PEM to sell to WPMI all the silver produced from the San Dimas mine, up to 6 million ounces and 50% of silver produced thereafter, at the lower of: (i) the spot market price and (ii) $4.014 per ounce plus an annual increase of 1%. In order to reflect the commercial terms and the effects of the Old Stream Agreement, for Mexican income tax purposes, PEM recognized the revenue on these silver sales based on its actual realized revenue (“PEM Realized Price”) instead of at spot market prices. To obtain assurance that the SAT would accept the PEM Realized Price as the price to use to calculate Mexican income taxes, Primero applied for and received on October 4, 2012, an Advance Pricing Agreement (“APA”) from the SAT for taxation years 2010 to 2014. The APA confirmed that the PEM Realized Price could be used as Primero’s basis for calculating taxes owed by PEM for the silver sold under the Old Stream Agreement. The purpose of the APA was to have SAT provide tax certainty and as a result Primero and PEM made significant investments in Mexico based on that certainty. In February 2016, PEM received a legal claim from the SAT seeking to nullify the APA. The legal claim did not identify any alternative basis for paying taxes. In 2019, the SAT issued reassessments for the 2010 to 2012 tax years in the total amount of $239.0 million (4,919 million MXN) inclusive of interest, inflation, and penalties. In 2021, the SAT also issued a reassessment against PEM for the 2013 tax year in the total amount of $132.3 million (2,723 million MXN) (collectively, the “Reassessments”). The Company believes that the Reassessments were issued in violation of the terms of the APA. The key items in the Reassessments include determining revenue on the sale based on the silver spot market price, denial of the deductibility of interest expense and service fees, SAT technical error related to double counting of taxes, and interest and penalties. The Company continues to defend the APA in the Mexican legal proceedings, and initiated proceedings under relevant tax treaties between the competent tax authorities of Mexico, Canada, Luxembourg and Barbados, all of which were subsequently dismissed on a unilateral basis by the SAT (“Dismissals”) in May 2020. The Company believes that the Dismissals breach international obligations regarding double taxation treaties, and also that the APA remains valid and legally binding. The Company will continue disputing the Reassessments, exhausting its domestic and international remedies. While the Company continues to vigorously defend the validity of the APA and its transfer pricing position, it is also engaging in various proceedings against the SAT seeking to resolve matters and bring tax certainty through a negotiated solution. Despite these extensive efforts and ongoing legal challenges to the Reassessments and the Dismissals, in April 2020 and February 2021, SAT issued notifications to PEM to attempt to secure amounts it claims are owed pursuant to its reassessments issued. These notifications impose certain restrictions on PEM including its ability to dispose of its concessions and real properties, and to restrict access to funds within its bank account, the latter as disclosed in Note 18(b)3 of the audited financial statements. The Company has challenged SAT’s Reassessments and Dismissals through all domestic means available to it, including annulment suits before the Mexican Federal Tax Court on Administrative Matters (“Federal Court”), which remain unresolved, and a complaint before Mexico’s Federal Taxpayer Defense Attorney’s Office (known as “PRODECON”). The Company believes that the actions of the SAT are neither fair nor equitable, are discriminatory against the Company as a foreign investor, amount to a denial of justice under international law, and furthermore violate various provisions of the Federal Constitution of the United Mexican States, Mexican domestic law, and Mexican court precedents. On May 13, 2020, the Company provided to the Government of Mexico notice of its intention to initiate an international arbitration proceeding (“Notice of Intent”) pursuant to the North American Free Trade Agreement (“NAFTA”). The Notice of Intent commenced a 90-day period for the Government of Mexico to enter into good faith and amicable negotiations with the Company to resolve the dispute. On August 11, 2020, the 90-day period expired without any resolution of the dispute. In September 2020, the Company was served with a decision of the Federal Court seeking to nullify the APA granted to PEM. The Federal Court’s decision directs SAT to re-examine the evidence and basis for the issuance of the APA with retroactive effect, for the following key reasons: (i) SAT’s errors in analyzing PEM’s request for the APA and the evidence provided in support of the request; and (ii) SAT’s failure to request from PEM certain additional information before issuing the APA. The Company’s legal advisors having reviewed the written reasons have advised that the Federal Court’s decision is flawed both due to SAT’s procedural irregularities and failure to address the relevant evidence and legal authorities. In addition, they consider that the laws applied to PEM in the decision are unconstitutional. As a result, the Company filed an appeal of the decision to the Mexican Circuit Courts on November 30, 2020. Since two writs of certiorari were filed before the Mexican Supreme Court of Justice, on April 15, 2021, the Plenary of the Supreme Court i) admitted one of those writs, ii) requested the Circuit Court to send the amparo file and iii) assigned such writ to the Second Chamber of the Supreme Court for issuing the corresponding decision. The other writ of certiorari has not been admitted by the Plenary of the Supreme Court. Therefore, the Company is currently waiting for the Supreme Court to issue a resolution towards such writs of certiorari. The Company intends to continue to challenge the actions of the SAT in Mexican courts. However, due to the ongoing COVID-19 crisis, the Mexican courts continues to be available only on a restricted basis for further hearings on these matters. On March 2, 2021, the Company announced that it submitted a Request for Arbitration to the International Centre for Settlement of Investment Disputes (“ICSID”), on its own behalf and on behalf of PEM, based on Chapter 11 of NAFTA. On March 31, 2021, the Notice of Registration of the Request for Arbitration was issued by the ICSID Secretariat. Once the NAFTA Arbitration Panel (the “Tribunal”) was fully constituted by the appointment of all three panel members on August 20, 2021, the NAFTA Arbitration Proceedings (the “NAFTA Proceedings”) were deemed to have commenced. The first session of the NAFTA Proceedings was held by videoconference on September 24, 2021 to decide upon the procedural rules which will govern the NAFTA Proceedings. The Tribunal issued Procedural Order No. 1 on October 21, 2021. 105 FIRST MAJESTIC SILVER 2021 ANNUAL REPORTMANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION If the SAT were to be successful in retroactively nullifying the APA, the SAT may seek to audit and reassess PEM in respect of its sales of silver pursuant to the Old Stream Agreement for 2010 through 2014. Such an outcome would likely have a material adverse effect on the Company’s results of operations, financial condition and cash flows. Should the Company ultimately be required to pay tax on its silver revenues based on spot market prices without any mitigating adjustments, the incremental income tax for the years 2010-2019 would be approximately $228.5 million (4,703 million MXN), before taking into consideration interest or penalties. Based on the Company’s consultation with third party advisors, the Company believes PEM filed its tax returns in compliance with applicable Mexican law and, therefore, at this time no liability has been recognized in the financial statements. To the extent it is ultimately determined that the appropriate price of silver sales under the Old Stream Agreement is significantly different from the PEM Realized Price and while PEM would have rights of appeal in connection with any reassessments, it is likely to have a materially adverse effect on the Company’s business, financial position and results of operations. La Encantada Tax Re-assessments In December 2019, as part of the ongoing annual audits of the tax returns of Minera La Encantada S.A. de C.V., the SAT issued tax assessments for fiscal 2012 and 2013 in the amount of $7.6 million (155.4 million MXN) and $6.2 million (126.6 million MXN), respectively.  The key items relate to forward silver purchase agreement and denial of the deductibility of mine development costs and service fees.  The Company continues to defend the validity of the forward silver purchase agreement and will vigorously dispute the assessments that have been issued.  The Company, based on advice from legal and financial advisors believes MLE’s tax filings were appropriate and its tax filing position is correct, therefore no liability has been recognized in the financial statements.  First Silver litigation In April 2013, the Company received a positive judgment on the First Silver litigation from the Supreme Court of British Columbia (the “Court”), which awarded the sum of $93.8 million in favour of First Majestic against Hector Davila Santos (the “Defendant”). The Company received a sum of $14.1 million in June 2013 as partial payment of the judgment, leaving an unpaid amount of approximately $64.3 million (CAD$81.5 million). As part of the ruling, the Court granted orders restricting any transfer or encumbrance of the Bolaños Mine by the Defendant and limiting mining at the Bolaños Mine. The orders also require that the Defendant to preserve net cash flow from the Bolaños Mine in a holding account and periodically provide to the Company certain information regarding the Bolaños Mine. However, there can be no guarantee that the remainder of the judgment amount will be collected and it is likely that it will be necessary to take additional action in Mexico and/or elsewhere to recover the balance. Therefore, as at December 31, 2021, the Company has not accrued any of the remaining $64.3 million (CAD$81.5 million) unrecovered judgment in favour of the Company. Other Financial Information Share Repurchase Program The Company has an ongoing share repurchase program to repurchase up to 5% of the Company’s issued and outstanding shares. The normal course issuer bids will be carried through the facilities of the Toronto Stock Exchange and alternative Canadian marketplaces. During the year ended December 31, 2020, the Company repurchased and cancelled 275,000 common shares for a total consideration of $1.7 million, through a normal course issuer bid in the open market as approved by the Toronto Stock Exchange. No shares were repurchased during the year ended December 31, 2021. Off-Balance Sheet Arrangements At December  31, 2021, the Company had no material off-balance sheet arrangements such as contingent interest in assets transferred to an entity, derivative instruments obligations or any obligations that generate financing, liquidity, market or credit risk to the Company, other than contingent liabilities and vendor liability and interest, as disclosed in this MD&A and the consolidated financial statements and the related notes. Related Party Disclosures Amounts paid to related parties were incurred in the normal course of business and measured at the exchange amount, which is the amount agreed upon by the transacting parties and on terms and conditions similar to non-related parties. In July 2020, the Company completed the agreement with First Mining Gold Corp., to purchase 50% of the payable silver produced from the Springpole Gold Project for total consideration of $22.5 million in cash and shares, over three payments, for the silver stream which covers the life of the Springpole project. First Mining is a related party with one independent board member who is a director and/or officer of First Majestic. With the exception of the agreement with First Mining Gold Corp., there were no transactions with related parties outside of the ordinary course of business during the year ended December 31, 2021. Outstanding Share Data As at March 9, 2022, the Company has 260,181,673 common shares issued and outstanding. 106 MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION           Subsequent Events The following significant events occurred subsequent to December 31, 2021: Declaration of Quarterly Dividend On March 9, 2022, the Company’s board of directors approved its quarterly common share dividend of $0.0079 per share, payable on and after April 4, 2022, to common shareholders of record at the close of business on March 21, 2022. These dividends were declared subsequent to the quarter end and have not been recognized as distributions to owners during the year ended December 31, 2021. Accounting Policies, Judgments And Estimates Critical Accounting Judgments and Estimates The preparation of consolidated financial statements in conformity with IFRS as issued by IASB requires management to make judgments, estimates and assumptions about future events that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Although these estimates are based on management’s best knowledge of the amount, events or actions, actual results may differ from these estimates. Determination of a Business Determination of whether a set of assets acquired and liabilities assumed constitute a business may require the Company to make certain judgments, taking into account all facts and circumstances. A business consists of inputs, including non-current assets and processes, including operational processes, that when applied to those inputs have the ability to create outputs that provide a return to the Company and its shareholders. In 2021, the Company concluded that Jerritt Canyon met the definition of a business and, accordingly, the acquisition was accounted for as a business combination. Consideration for the acquisition of Jerritt Canyon Acquisitions of businesses are accounted for using the acquisition method. The consideration of each business combination is measured, at the date of the exchange, as the aggregate of the fair value of assets given, liabilities incurred or assumed and equity instruments issued by the Company to the former owners of the acquiree in exchange for control of the acquiree. Management made judgments and estimates in calculating the value of the shares and warrants transferred, including but not limited to share price, volatility, rate of quarterly dividends and the discount rate. Determining what is part of the business combination in the acquisition of Jerritt Canyon The Company needs to assess if other arrangement(s) or transaction(s) shall be recognized as part of applying the acquisition method. To determine if the arrangement(s) or transaction(s), is(are) part of the business combination, the Company considers the following factors: (i) The reasons for the arrangement(s) or transaction(s); (ii) Who initiated the arrangement(s) or transaction(s); and (iii) The timing of the arrangement(s) or transaction(s). Management applied judgment based on the above criteria to determine if private placement shares included as part of the acquisition of Jerritt Canyon were a part of the business combination. Fair Value Estimates In business combinations, it generally requires time to obtain the information necessary to identify and measure the following as of the acquisition date: (i) The identifiable assets acquired and liabilities assumed; (ii) The consideration transferred in exchange for an interest in the acquiree; (iii) The resulting goodwill. If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Company reports in its consolidated financial statements provisional amounts for the items for which the accounting is incomplete. These provisional amounts are adjusted during the measurement period, or additional assets or liabilities are recognized, to reflect new information obtained about facts and circumstances that existed as of the acquisition date and, if known, would have affected the measurement of the amounts recognized as of that date. The measurement period ends as soon as the Company receives the information it was seeking about facts and circumstances that existed as of the acquisition date or learns that more information is not obtainable and shall not exceed one year from the acquisition date. The fair value of assets acquired and liabilities assumed requires that management make judgments and estimates taking into account information available at the time of the acquisition about future events including, but not restricted to, estimates of mineral reserves and resources, exploration potential, future metal prices, future operating costs and capital expenditures and discount rates. During the allowable measurement period, the Company will retrospectively adjust the provisional amounts recognized at the acquisition date to reflect new information obtained about facts and circumstances that existed as of the acquisition date and, if known, would have affected the measurement of the amounts recognized as of that date. The Company may also recognize additional assets or liabilities if new information is obtained about facts and 107 FIRST MAJESTIC SILVER 2021 ANNUAL REPORTMANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION circumstances that existed as of the acquisition date and, if known, would have resulted in the recognition of those assets and liabilities as of that date. The measurement period ends as soon as the Company receives the information it was seeking about facts and circumstances that existed as of the acquisition date or learns that more information is not obtainable and shall not exceed one year from the acquisition date. The fair value of assets acquired and liabilities assumed are subject to change for up to one year from the Acquisition Date. If new information arises which would impact management’s assessment of the fair value at the Acquisition Date, any adjustments to the allocation of the purchase consideration will be recognized retrospectively and comparative information will be revised. Consequently, the final allocation of the purchase price may result in different adjustments than those shown in these audited consolidated financial statements. Determination and classification of current and non-current restricted cash The Company determines if the funds on hand and held at banks meets the definition of cash or cash equivalents. When there is a restriction on those funds, the Company assesses the nature of the restriction and if it is applicable, excludes the related amounts from the cash and cash equivalents balance. The Company then assesses the classification of the restricted cash between current and non-current based on the following factors: • an asset is cash or a cash equivalent unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the period; and • it expects to realize the asset within twelve months after the reporting period. The evaluation was performed based on the available information at the end of the reporting period; if there are changes in the circumstances the Company will reassess the classification. New and amended IFRS standards that are effective for the current year In the current year, the Company has applied the below amendments to IFRS Standards and Interpretations issued by the International Accounting Standards Board (“IASB”) that were effective for annual periods that begin on or after January 1, 2021. Their adoption has not had any material impact on the disclosures or on the amounts reported in these financial statements. Interest Rate Benchmark Reform - Phase 2(Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16) The amendments in Interest Rate Benchmark Reform — Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16) introduce a practical expedient for modifications required by the reform, clarify that hedge accounting is not discontinued solely because of the IBOR reform, and introduce disclosures that allow users to understand the nature and extent of risks arising from the IBOR reform to which the entity is exposed to and how the entity manages those risks as well as the entity’s progress in transitioning from IBORs to alternative benchmark rates, and how the entity is managing this transition. Future Changes in Accounting Policies Not Yet Effective as at December 31, 2021 Property, Plant and Equipment — Proceeds before Intended Use (Amendments to IAS 16) The amendments prohibit deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Instead, an entity recognises the proceeds from selling such items, and the cost of producing those items, in profit or loss. The amendments are applied on or after the first annual reporting period beginning on or after January 1, 2022, with early application permitted. The amendments are applied retrospectively, but only to items of property, plant and equipment that are brought to the location and condition necessary for them to be capable of operating in the manner intended by management on or after the beginning of the earliest period presented in the financial statements in which the Company first applies the amendments. The Company will recognise the cumulative effect of initially applying the amendments as an adjustment to the opening balance of retained earnings at the beginning of that earliest period presented. This amendment will impact the Company’s accounting for proceeds from mineral sales prior to reaching commercial production levels intended by management. Classification of Liabilities as Current or Non-Current (Amendments to IAS 1) The amendments aim to promote consistency in applying the requirements by helping companies determine whether, in the statement of financial position, debt and other liabilities with an uncertain settlement date should be classified as current (due or potentially due to be settled within one year) or non-current. The amendments are applied on or after the first annual reporting period beginning on or after January 1, 2023, with early application permitted. This amendment is not expected to have a material impact on the Company’s financial statements. Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2 Making Materiality Judgments—Disclosure of Accounting Policies The amendments change the requirements in IAS 1 with regard to disclosure of accounting policies. The amendments replace all instances of the term ‘significant accounting policies’ with ‘material accounting policy information’. Accounting policy information is material if, when considered together with other information included in an entity’s financial statements, it can reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements. 108 MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITIONThe supporting paragraphs in IAS 1 are also amended to clarify that accounting policy information that relates to immaterial transactions, other events or conditions is immaterial and need not be disclosed. Accounting policy information may be material because of the nature of the related transactions, other events or conditions, even if the amounts are immaterial. However, not all accounting policy information relating to material transactions, other events or conditions is itself material. The Board has also developed guidance and examples to explain and demonstrate the application of the ‘four-step materiality process’ described in IFRS Practice Statement 2. The amendments to IAS 1 are effective for annual periods beginning on or after 1 January 2023, with earlier application permitted and are applied prospectively. The amendments to IFRS Practice Statement 2 do not contain an effective date or transition requirements. Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors—Definition of Accounting Estimates The amendments replace the definition of a change in accounting estimates with a definition of accounting estimates. Under the new definition, accounting estimates are “monetary amounts in financial statements that are subject to measurement uncertainty”. The definition of a change in accounting estimates was deleted. However, the Board retained the concept of changes in accounting estimates in the Standard with the following clarifications: • A change in accounting estimate that results from new information or new developments is not the correction of an error • The effects of a change in an input or a measurement technique used to develop an accounting estimate are changes in accounting estimates if they do not result from the correction of prior period errors The amendments are effective for annual periods beginning on or after January 1, 2023 to changes in accounting policies and changes in accounting estimates that occur on or after the beginning of that period, with earlier application permitted. Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction (Amendments to IAS 12) In May 2021, the International Accounting Standards Board issued targeted amendments to IAS 12, Income Taxes. The amendments are effective for annual periods beginning on or after January 1, 2023, although earlier application is permitted. With a view to reducing diversity in reporting, the amendments will clarify that companies are required to recognize deferred taxes on transactions where both assets and liabilities are recognized, such as with leases and decommissioning liabilities. This amendment is not expected to have a material impact on the Company’s financial statements. Non-GAAP Measures The Company has included certain non-GAAP measures including “Cash costs per silver equivalents ounce”, “All-in sustaining cost per silver equivalent ounce”, “Production cost per tonne”, “Average realized silver equivalent price”, “Adjusted earnings per share”, “Free cash flow” and “Working capital” to supplement its consolidated financial statements, which are presented in accordance with IFRS. The terms IFRS and generally accepted accounting principles (“GAAP”) are used interchangeably throughout this MD&A. The Company believes that these measures, together with measures determined in accordance with IFRS, provide investors with an improved ability to evaluate the underlying performance of the Company. Non-GAAP measures do not have any standardized meaning prescribed under IFRS, and therefore they may not be comparable to similar measures employed by other companies. The data is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. Effective January 1, 2021, the Company transitioned its cost reporting from Cost per Silver Ounce to Cost per Silver Equivalent (“AqEq”) Ounce basis. Management believes the change to using silver equivalent ounce will provide management and investors with an improved ability to evaluate operating performance of the Company, as it eliminates volatility in Cash Cost and AISC per ounce due to market volatility in silver and gold prices as well as timing of by-product credit sales. Prior period comparatives of Cash Cost and AISC per ounce have been updated to be consistent with the new AgEq ounce metric. Cash Cost per AgEq Ounce, All-In Sustaining Cost per AgEq Ounce and Production Cost per Tonne Cash costs per AgEq ounce and total production cost per tonne are non-GAAP performance measures used by the Company to manage and evaluate operating performance at each of the Company’s operating mining units, in conjunction with the related GAAP amounts. These metrics are widely reported in the mining industry as benchmarks for performance but do not have a standardized meaning and are disclosed in addition to IFRS measures. Management and investors use these metrics for comparing the costs against peers in the industry and for assessing the performance of each mine within the portfolio. Management calculates the cash costs per ounce and production costs per tonne by: • starting with the production costs (GAAP) from the income statement; • adding back duties and royalties, smelting and refining costs as well as transportation and selling costs, which form a part of the cost of sales on the financial statements and provide a better representation of total costs incurred; • cash costs are divided by the payable silver equivalent ounces produced; and • production costs are divided by the total tonnes milled. 109 FIRST MAJESTIC SILVER 2021 ANNUAL REPORTMANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITIONAISC is a non-GAAP performance measure and was calculated based on guidance provided by the World Gold Council (“WGC”). WGC is not a regulatory industry organization and does not have the authority to develop accounting standards for disclosure requirements. Other mining companies may calculate AISC differently as a result of differences in underlying accounting principles and policies applied, as well as differences in definitions of sustaining versus expansionary capital expenditures. AISC is a more comprehensive measure than cash cost per ounce and is useful for investors and management to assess the Company’s operating performance by providing greater visibility, comparability and representation of the total costs associated with producing silver from its current operations, in conjunction with related GAAP amounts. AISC helps investors to assess costs against peers in the industry and help management assess the performance of each mine within the portfolio in a standardized manner. The Company defines sustaining capital expenditures as, “costs incurred to sustain and maintain existing assets at current productive capacity and constant planned levels of productive output without resulting in an increase in the life of assets, future earnings, or improvements in recovery or grade. Sustaining capital includes costs required to improve/enhance assets to minimum standards for reliability, environmental or safety requirements. Sustaining capital expenditures excludes all expenditures at the Company’s new projects and certain expenditures at current operations which are deemed expansionary in nature.” Expansionary capital expenditure is defined as, “costs incurred to extend existing assets beyond their current productive capacity and beyond their planned levels of productive output, resulting in an increase in the life of the assets, increasing their future earnings potential, or improving their recoveries or grades which would serve to increase the value of the assets over their useful lives”. Development and exploration work which moves inferred resources to measured or indicated resources and adds to the Net Present Value of the assets is considered expansionary in nature. Expansionary capital also includes costs required to improve/enhance assets beyond their minimum standard for reliability, environmental or safety requirements. Consolidated AISC includes total production costs (GAAP measure) incurred at the Company’s mining operations, which forms the basis of the Company’s total cash costs. Additionally, the Company includes sustaining capital expenditures, corporate general and administrative expense, share-based payments, operating lease payments and reclamation cost accretion. AISC by mine does not include certain corporate and non-cash items such as general and administrative expense and share-based payments. The Company believes this measure represents the total sustainable costs of producing silver from current operations, and provides additional information of the Company’s operational performance and ability to generate cash flows. As the measure seeks to reflect the full cost of silver production from current operations, new project and expansionary capital at current operations are not included. Certain other cash expenditures, including tax payments, dividends and financing costs are also not included. The following tables provide detailed reconciliations of these measures to cost of sales, as reported in notes to our consolidated financial statements. (expressed in thousands of U.S. Dollars, except ounce and per ounce amounts) San Dimas Santa Elena La Encantada Jerritt Canyon Consolidated Three Months Ended December 31, 2021 Mining cost Milling cost Indirect cost Total production cost (A) Add: transportation and other selling cost Add: smelting and refining cost Add: environmental duty and royalties cost Total cash cost (B) Workers’ participation General and administrative expenses Share-based payments Accretion of decommissioning liabilities Sustaining capital expenditures Operating lease payments All-In Sustaining Costs (C) $11,232 $10,052 $3,514 $20,480 $45,277 7,162 11,852 7,174 3,824 4,290 2,845 13,296 4,996 31,921 23,517 $30,246 $21,050 $10,649 $38,771 $100,716 449 755 591 160 165 1,203 103 239 116 14 20 793 780 1,179 2,703 $32,041 $22,578 $11,107 $39,598 $105,378 4,010 — — 175 8,989 95 54 — — 76 3,514 1,167 1,538 — — 128 1,272 816 — — — 319 8,887 347 5,602 6,591 2,859 951 23,387 2,996 $45,310 $27,389 $14,861 $49,151 $147,764 Payable silver equivalent ounces produced (D) 4,013,338 1,953,539 765,430 1,823,950 8,556,257 Payable gold equivalent ounces produced (E) Tonnes milled (F) N/A N/A N/A 206,738 224,459 268,239 23,660 256,374 N/A 955,810 Cash cost per AgEq ounce (B/D) AISC per AgEq ounce (C/D) Cash cost per AuEq ounce (B/D) AISC per AuEq ounce (C/E) Production cost per tonne (A/F) 110 $7.98 $11.29 N/A N/A $11.56 $14.02 N/A N/A $14.51 $19.41 N/A N/A $21.71 $26.95 $1,674 $2,077 $12.32 $17.26 N/A N/A $146.30 $93.78 $39.70 $151.23 $105.37 MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION(expressed in thousands of U.S. Dollars, except ounce and per ounce amounts) San Dimas Santa Elena La Encantada Consolidated Three Months Ended December 31, 2020 Mining cost Milling cost Indirect cost Total production cost (A) Add: transportation and other selling cost Add: smelting and refining cost Add: environmental duty and royalties cost Total cash cost (B) Workers’ participation General and administrative expenses Share-based payments Accretion of decommissioning liabilities Sustaining capital expenditures Operating lease payments All-In Sustaining Costs (C) Payable silver equivalent ounces produced (D) Tonnes milled (E) Cash cost per AgEq ounce (B/D) AISC per AgEq ounce (C/D) Production cost per tonne (A/E) $12,669 6,028 9,497 $4,461 6,308 3,757 $3,106 4,573 3,183 $20,236 16,909 16,437 $28,194 $14,526 $10,862 $53,582 433 471 425 134 107 97 160 241 141 784 819 665 $29,523 $14,864 $11,404 $55,850 3,103 — — 149 9,999 58 $42,832 3,475,323 208,648 $8.49 $12.32 $135.13 55 — — 78 3,636 963 $19,596 900,729 168,276 $16.50 $21.76 $86.32 87 — — 125 1,298 646 3,245 6,727 2,227 623 17,507 2,024 $13,560 $88,203 1,094,267 5,470,319 248,408 625,332 $10.42 $12.39 $43.72 $10.21 $16.12 $85.68 Year Ended December 31, 2021 (expressed in thousands of U.S. Dollars, except ounce and per ounce amounts) San Dimas Santa Elena La Encantada Jerritt Canyon Consolidated Mining cost Milling cost Indirect cost Total production cost (A) Add: transportation and other selling cost Add: smelting and refining cost Add: environmental duty and royalties cost Total cash cost (B) Workers’ participation General and administrative expenses Share-based payments Accretion of decommissioning liabilities Sustaining capital expenditures Operating lease payments All-In Sustaining Costs (C) $47,270 $32,024 $13,206 $58,689 $151,188 28,258 41,311 28,254 14,576 17,978 11,256 35,551 14,830 110,040 81,973 $116,840 $74,853 $42,440 $109,069 $343,202 1,433 1,819 1,683 618 523 1,559 427 718 406 47 47 2,188 2,738 3,107 5,836 $121,775 $77,553 $43,991 $111,351 $354,883 13,374 — — 716 35,542 312 269 — — 313 15,636 2,943 2,296 — — 521 4,616 2,894 — — — 642 27,565 862 15,939 25,393 12,290 3,228 85,664 8,708 $171,719 $96,714 $54,318 $140,420 $506,105 Payable silver equivalent ounces produced (D) 13,518,292 5,036,842 3,260,834 5,013,388 26,829,356 Payable gold equivalent ounces produced (E) N/A N/A N/A 68,567 N/A Tonnes milled (F) 822,791 879,059 1,004,144 633,400 3,339,394 Cash cost per AgEq ounce (B/D) AISC per AgEq ounce (C/D) Cash cost per AuEq ounce (B/D) AISC per AuEq ounce (C/E) Production cost per tonne (A/E) $9.01 $12.70 N/A N/A $15.40 $19.20 N/A N/A $13.49 $16.66 N/A N/A $22.21 $28.01 $1,624 $2,048 $13.23 $18.85 N/A N/A $142.00 $85.15 $42.25 $172.20 $102.77 111 FIRST MAJESTIC SILVER 2021 ANNUAL REPORTMANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION(expressed in thousands of U.S. Dollars, except ounce and per ounce amounts) Mining cost Milling cost Indirect cost Total production cost (A) Add: transportation and other selling cost Add: smelting and refining cost Add: environmental duty and royalties cost Total cash cost (B) Workers’ participation General and administrative expenses Share-based payments Accretion of decommissioning liabilities Sustaining capital expenditures Operating lease payments All-In Sustaining Costs (C) Payable silver equivalent ounces produced (D) Tonnes milled (E) Cash cost per AgEq ounce (B/D) AISC per AgEq ounce (C/D) Production cost per tonne (A/E) Twelve Months Ended December 31, 2020 San Dimas Santa Elena La Encantada Consolidated $40,662 $15,952 19,318 31,232 23,187 11,088 $9,597 15,335 9,813 $66,211 57,840 52,133 $91,212 $50,227 $34,746 $176,185 1,224 1,604 1,278 $95,318 13,663 — — 565 28,361 291 397 434 395 425 749 337 2,288 2,800 2,010 $51,453 $36,257 $183,283 206 — — 295 10,033 1,252 377 — — 477 4,112 2,573 14,245 22,977 8,255 2,362 49,003 5,349 $138,198 $63,239 $43,796 $285,474 12,664,191 4,177,527 3,512,126 20,353,844 713,064 640,276 860,613 2,213,954 $7.53 $10.91 $127.92 $12.32 $15.14 $78.44 $10.32 $12.47 $40.37 $9.00 $14.03 $79.59 112 MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITIONAverage Realized Silver Price per Ounce Revenues are presented as the net sum of invoiced revenues related to delivered shipments of silver or gold doré bars, including associated metal by- products of gold, lead and zinc after having deducted refining and smelting charges, and after elimination of intercompany shipments of silver, silver being minted into coins, ingots and bullion products. The average realized silver price is a non-GAAP performance measure that allows management and investors to assess the Company’s ability to sell ounces produced, in conjunction with related GAAP amounts. Management calculates this measure by taking total revenue reported under GAAP and adding back smelting and refining charges to arrive at the gross reportable revenue for the period. Gross revenues are divided into payable silver equivalent ounces sold to calculate the average realized price per ounce of silver equivalents sold. The streaming and royalty agreements in place between the Company and Sandstorm as well as Wheaton, impacts the total revenues reported on the financial statements given the reduced prices provided to these vendors in line with the terms of the agreements. Therefore, management adjusts revenue to exclude smelting and refining charges as well as revenues earned through agreements with these vendors. This provides management with a better picture regarding its ability to convert ounces produced to ounces sold and provides the investor with a clear picture of the price that the Company can currently sell the inventory for, excluding pre-arranged agreements. Revenues as reported Add back: smelting and refining charges Gross revenues Less: Sandstorm gold revenues Less: Wheaton gold revenues Three Months Ended December 31, Year Ended December 31, 2021 2020 2021 2020 $204,876 $117,076 $584,117 $363,876 1,179 819 3,108 2,800 206,055 117,895 587,225 366,676 (461) (9,385) (579) (7,057) (2,489) (29,612) (2,636) (23,541) Gross revenues, excluding Sandstorm, Wheaton (A) $196,208 $110,259 $555,124 $340,499 Payable silver equivalent ounces sold 9,378,637 5,319,935 25,954,222 19,614,393 Less: Payable silver equivalent ounces sold to Sandstorm (74,554) (81,319) (382,659) (499,931) Less: Payable silver equivalent ounces sold to Wheaton (1,189,362) (807,046) (3,511,128) (3,016,658) Payable silver equivalent ounces sold, excluding Sandstorm and Wheaton (B) 8,114,720 4,431,570 22,060,436 16,097,804 Average realized silver price per ounce (A/B) Average market price per ounce of silver per COMEX $24.18 $23.35 $24.88 $24.44 $25.16 $25.15 $21.15 $21.72 Free Cash Flow Free cash flow is a non-GAAP liquidity measure which is determined based on operating cash flows less sustaining capital expenditures. Management uses free cash flow as a critical measure in the evaluation of liquidity in conjunction with related GAAP amounts. It also uses the measure when considering available cash, including for decision-making purposes related to dividends and discretionary investments. Further, it helps management, the Board of Directors and investors evaluate a Company’s ability to generate liquidity from operating activities. Operating cash flows Less: Sustaining capital expenditures Free cash flow Adjusted Earnings per Share (“Adjusted EPS”) Three Months Ended December 31, Year Ended December 31, 2021 $89,812 23,387 $66,425 2020 $43,210 17,507 $25,703 2021 $68,723 85,664 ($16,941) 2020 $79,713 49,003 $30,710 The Company uses the financial measure “Adjusted EPS” which is a non-GAAP measure, to supplement earnings per share (GAAP) information in its consolidated financial statements . The Company believes that, in addition to conventional measures prepared in accordance with IFRS, the Company and certain investors and analysts use this information to evaluate the Company’s performance. Management uses adjusted earnings per share as a critical measure operating performance in conjunction with the related GAAP amounts. The only items considered in the adjusted earnings-per-share calculation are those that management believes (1) may affect trends in underlying performance from year to year and (2) are not considered normal recurring cash operating expense. Adjusted earnings per share is used for forecasting, operational and strategic decision making, evaluating current Company and management performance, and calculating financial covenants. Management believes that excluding certain non-cash and non-recurring items from the calculation increases 113 FIRST MAJESTIC SILVER 2021 ANNUAL REPORTMANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITIONcomparability of the metric from period to period, which makes it useful for management, the audit committee and investors, to evaluate the underlying core operations. The presentation of Adjusted EPS is not meant to be a substitute for EPS presented in accordance with IFRS, but rather should be evaluated in conjunction with such IFRS measure. To calculate adjusted earnings per share, management adjusts from net earnings (GAAP), the per-share impact, net of the tax effects of adjustments, of the following: • share based payments; • realized and unrealized gains and losses from investment in derivatives and marketable securities; and • other infrequent or unusual losses and gains. The following table provides a detailed reconciliation of net earnings (losses) as reported in the Company’s consolidated financial statements to adjusted net earnings and Adjusted EPS: Net (loss) earnings as reported Adjustments for non-cash or unusual items: Deferred income tax (recovery) expense Share-based payments Loss (gain) from investment in derivatives and marketable securities Write-down on assets held-for-sale Write-down (recovery) of mineral inventory Acquisition costs Unrealized (gain) loss on foreign currency derivatives Loss on early settlement of senior convertible notes Standby costs related to COVID-19 Suspension (Gain) loss on divestiture of exploration projects Three Months Ended December 31, Year Ended December 31, 2021 2020 2021 2020 ($3,971) $34,545 ($4,923) $23,087 156 2,859 (776) — 1,164 23 — 4,642 — — (11,187) 2,227 2,445 — — — (3,880) — — — (19,110) 12,290 1,522 2,081 7,479 1,973 — 4,642 — — (3,324) 8,255 (1,973) — (443) — 982 — 7,162 3,685 Adjusted net earnings $4,097 $24,150 $5,954 $37,431 Weighted average number of shares on issue - basic 256,805,023 221,463,289 244,749,772 213,879,622 Adjusted EPS $0.02 $0.11 $0.02 $0.18 Working Capital and Available Liquidity Working capital is determined based on current assets and current liabilities as reported in the Company’s consolidated financial statements. The Company uses working capital as a measure of the Company’s short-term financial health and operating efficiency. Available liquidity includes the Company’s working capital and undrawn revolving credit facility. Current Assets Less: Current Liabilities Working Capital Available Undrawn Revolving Credit Facility Available Liquidity December 31, 2021 December 31, 2020 $397,207 (172,822) $224,385 50,000 $274,385 $356,046 (101,626) $254,420 65,000 $319,420 Management’s Report on Internal Control Over Financial Reporting Disclosure Controls and Procedures The Company’s management, with the participation of its President and Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), has evaluated the effectiveness of the Company’s disclosure controls and procedures. Based upon the results of that evaluation, the Company’s CEO and CFO have concluded that, as of December  31, 2021, the Company’s disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed by the Company in reports it files is recorded, processed, summarized and reported, within the appropriate time periods and is accumulated and communicated to management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure. 114 MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITIONInternal Control over Financial Reporting The Company’s management, with the participation of its CEO and interim CFO, is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in the rules of the United States Securities and Exchange Commission and the Canadian Securities Administrators. The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS as issued by the IASB. The Company’s internal control over financial reporting includes policies and procedures that: • maintain records that accurately and fairly reflect, in reasonable detail, the transactions and dispositions of assets of the Company; • provide reasonable assurance that transactions are recorded as necessary for preparation of financial statements in accordance with IFRS as issued by IASB; • provide reasonable assurance that the Company’s receipts and expenditures are made only in accordance with authorizations of management and the Company’s Directors; and • provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the Company’s consolidated financial statements. The Company’s internal control over financial reporting may not prevent or detect all misstatements because of inherent limitations. Additionally, projections of any evaluation of effectiveness for future periods are subject to the risk that controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with the Company’s policies and procedures. Management excluded from its assessment the internal controls, policies and procedures of Jerritt Canyon, which the Company acquired control on April 30, 2021. Jerritt Canyon’s total assets, net assets, total revenues and net profit/loss on a combined basis constitute approximately 34%, 35%, 21% and 653%, respectively, of these Consolidated Annual Financial statement amounts as of December 31, 2021. This limitation of scope is in accordance with section 3.3(1)(b) of NI 52-109, which allows for an issuer to limit the design of DC&P or ICFR to exclude a business that the issuer acquired not more than 365 days before the end of the financial period to which the CEO’s and CFO’s certification of annual filings relates. With the exception of the internal controls of Jerritt Canyon, there have been no significant changes in our internal controls during the quarter ended December 31, 2021 that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting. The Company’s management evaluated the effectiveness of our internal controls over financial reporting based upon the criteria set forth in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on management’s evaluation, our CEO and interim CFO concluded that our internal controls over financial reporting were effective as of December 31, 2021. The Company’s independent registered public accounting firm, Deloitte LLP, have audited these Consolidated Annual Financial Statements and have issued an attestation report dated March 9, 2022 on the Company’s internal control over financial reporting based on the criteria set forth in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of Treadway Commission. During the year ended December 31, 2021, the Company implemented social distancing protocols to have majority of its corporate office and site administrative staff to work remotely from home. This change has required certain processes and controls that were previously done or documented manually to be completed and retained in electronic form. Despite the changes required by the current environment, there have been no significant changes in our internal controls during the year ended December 31, 2021 that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting. Limitations of Controls and Procedures The Company’s management, including the President and Chief Executive Officer and Chief Financial Officer, believes that any disclosure controls and procedures or internal control over financial reporting, no matter how well conceived and operated, may not prevent or detect all misstatements because of inherent limitations. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, they cannot provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been prevented or detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by unauthorized override of the control. The design of any control system also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Accordingly, because of the inherent limitations in a cost effective control system, misstatements due to error or fraud may occur and not be detected. Cautionary Statements Cautionary Note regarding Forward-Looking Statements Certain information contained herein this MD&A constitutes forward-looking statements under applicable securities laws (collectively, “forward- looking statements”). These statements relate to future events or the Company’s future performance, business prospects or opportunities. Forward- looking statements include, but are not limited to: commercial mining operations; anticipated mineral recoveries; projected quantities of future mineral production; statements with respect to the Company’s business strategy; future planning processes; anticipated development, expansion, exploration activities and production rates; the estimated cost and timing of plant improvements at the Company’s operating mines and development of the Company’s development projects; the timing of completion of exploration programs and drilling programs; the repayment of the Debentures; statements with respect to the Company’s future financial position including operating efficiencies, cash flow, capital budgets, costs and expenditures; the preparation of technical reports and completion of preliminary economic assessments; the repurchase of the Company’s shares; viability of the Company’s projects; potential metal recovery rates; the conversion of the Company’s securities. All statements other than statements of historical fact may be forward- looking statements. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always, using words or phrases such as “seek”, “anticipate”, “plan”, “continue”, “estimate”, “expect”, “may”, “will”, “project”, “predict”, “forecast”, “potential”, “targeting”, “intend”, “could”, “might”, “should”, “believe” and similar expressions) are not statements of historical fact and may be “forward-looking statements”. Forward-looking statements are based on the opinions and estimates of management at the dates the statements are made, and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. These factors include, without limitation: the inherent risks involved in the mining, exploration and development of mineral properties, the uncertainties involved in interpreting drilling results and other geological data, fluctuating metal prices, the possibility of project delays or cost overruns or unanticipated excessive operating costs and expenses, uncertainties related to the necessity of financing, the availability of and costs of financing needed in the future, and other factors described in the Company’s Annual Information Form under the heading “Risk Factors”. The Company believes that the expectations reflected in any such forward-looking statements are reasonable, but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included herein this MD&A should not be unduly relied upon. These statements speak only as of the date of this MD&A. The Company does not intend, and does not assume any obligation, to update these forward-looking statements, except as required by applicable laws. Actual results may differ materially from those expressed or implied by such forward-looking statements. Cautionary Note regarding Reserves and Resources National Instrument 43-101 (“NI 43-101”), issued by the Canadian Securities Administrators, lays out the standards of disclosure for mineral projects. This includes a requirement that a certified Qualified Person (“QP”) (as defined under the NI 43-101) supervises the preparation of the mineral reserves and mineral resources. Ramon Mendoza, P. Eng., Vice President of Technical Services is a certified QP for the Company and has reviewed this MD&A for QP technical disclosures. All NI 43-101 technical reports can be found on the Company’s website at www.firstmajestic.com or on SEDAR at www.sedar.com. Cautionary Note to United States Investors Concerning Estimates of Mineral Reserves and Resources This Management’s Discussion and Analysis has been prepared in accordance with the requirements of the securities laws in effect in Canada, which differ in certain material respects from the disclosure requirements of United States securities laws. The terms “mineral reserve”, “proven mineral reserve” and “probable mineral reserve” are Canadian mining terms as defined in accordance with Canadian NI 43-101 Standards of Disclosure for Mineral Projects and the Canadian Institute of Mining, Metallurgy and Petroleum (the “CIM”) - CIM Definition Standards on Mineral Resources and Mineral Reserves, adopted by the CIM Council, as amended. These definitions differ from the definitions in the disclosure requirements promulgated by the Securities and Exchange Commission (the “Commission”) and contained in Industry Guide 7 (“Industry Guide 7”). Under Industry Guide 7 standards, a “final” or “bankable” feasibility study is required to report mineral reserves, the three-year historical average price is used in any mineral reserve or cash flow analysis to designate mineral reserves and the primary environmental analysis or report must be filed with the appropriate governmental authority. In addition, the terms “mineral resource”, “measured mineral resource”, “indicated mineral resource” and “inferred mineral resource” are defined in and required to be disclosed by NI 43-101. However, these terms are not defined terms under Industry Guide 7 and are not permitted to be used in reports and registration statements of United States companies filed with the Commission. Investors are cautioned not to assume that any part or all of the mineral deposits in these categories will ever be converted into mineral reserves. “Inferred mineral resources” have a great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded to a higher category. Under Canadian rules, estimates of inferred mineral resources may not form the basis of feasibility or pre-feasibility studies, except in rare cases. Investors are cautioned not to assume that all or any part of an inferred mineral resource exists or is economically or legally mineable. Disclosure of “contained ounces” in a mineral resource is permitted disclosure under Canadian regulations. In contrast, the Commission only permits U.S. companies to report mineralization that does not constitute “mineral reserves” by Commission standards as in place tonnage and grade without reference to unit measures. Accordingly, information contained in this Management’s Discussion and Analysis may not be comparable to similar information made public by U.S. companies subject to the reporting and disclosure requirements under the United States federal securities laws and the rules and regulations of the Commission thereunder. Additional Information Additional information on the Company, including the Company’s Annual Information Form and the Company’s audited consolidated financial statements for the year ended December 31, 2021, is available on SEDAR at www.sedar.com and on the Company’s website at www.firstmajestic.com. 116 MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITIONCORPORATE INFORMATION BOARD OF DIRECTORS AND OFFICERS CORPORATE HEADQUARTERS Keith Neumeyer President, Chief Executive Officer & Director  @keith_neumeyer Steven Holmes, MBA, BSc, MNEng. Chief Operating Officer David Soares, CPA, CA Chief Financial Officer Sophie Hsia, LL.B., B.C.L., LL.M. General Counsel Connie Lillico, BA Corporate Secretary Douglas Penrose, B.COMM., CPA, CA 1 Director Marjorie Co, B.SC., LLB, MBA 1,3 Director Ana Lopez, BA Hons, LLB, CPHR, CEC 2 Director Thomas Fudge Jr., P.E., P.Eng. (ret) 2, 3 Chairman & Director Jean des Rivières, P.Geo, M.Sc.A, B.Sc. 1,2,3 Director Colette Rustad, B.Comm, CPA, CA 1 Director 1. Audit Committee 2. Compensation Committee 3. Corporate Governance and Nominating Committee ANNUAL GENERAL MEETING The Sutton Place Hotel 845 Burrard St. Vancouver, BC V6Z 2K6 Date: Thursday, May 26, 2022 Time: 10:00 am Pacific Standard Time MARKET INFORMATION TRADING SYMBOLS TSX: FR NYSE: AG FSE: FMV First Majestic Silver Corp. #1800 – 925 West Georgia Street Vancouver, B.C., Canada V6C 3L2 T: 604.688.3033 F: 604.639.8873 TF: 1.866.529.2807 info@firstmajestic.com | www.firstmajestic.com Transfer Agent Computershare Trust Company of Canada 3rd Floor - 510 Burrard Street Vancouver, B.C. Canada V6C 3B9 T: 604.661.9400 F: 604.661.9401 Legal Advisors Bennett Jones LLP 2500 Park Place 666 Burrard Street Vancouver, B.C. V6C 2X8 Independent Auditors Deloitte LLP 939 Granville Street Vancouver, British Columbia V6Z 1L3 Investor Relations Contact info@firstmajestic.com T: 604.688.3033 TF: 1.866.529.2807 (North America only) Todd Anthony, MBA Vice President Corporate Development Jill Anne Arias Vice President of Marketing & Corporate Communications  @FMSilverCorp, @JillArias instagram @firstmajesticsilver First Majestic Bullion Sales customersupport@firstmajestic.com https://store.firstmajestic.com  @FMBullion E S F V M F E S Y N G A X S T R F M O C . C I T S E J A M T S R I F 

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