First Majestic Responds to Media Reports, Provides Tax Dispute Update

PRESS RELEASE

VANCOUVER, British Columbia, March 10, 2021 (GLOBE NEWSWIRE) -- FIRST MAJESTIC SILVER CORP. (AG: NYSE; FR: TSX) (the "Company" or “First Majestic”) today responds to the several inaccurate and misleading Mexican media articles that have been recently published regarding the ongoing tax dispute with the Government of Mexico.

In order to be transparent regarding the facts surrounding the Company’s decision to file a NAFTA Request for Arbitration and for the benefit of those loyal and interested shareholders and stakeholders, the Company wishes to provide an update and a status summary of the tax dispute:

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• First Majestic is a Canadian public company that pays its taxes in accordance with domestic legislation in Canada and Mexico and to the Company’s knowledge is up to date in all its tax payments.
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• First Majestic acquired Primero Empresa Minera, S.A. de C.V. (“PEM”), the owner of the San Dimas Silver/Gold Mine in May 2018, via the acquisition of Primero Mining Corp. (“Primero”). Mr. Keith Neumeyer, President and CEO of First Majestic Silver, was not the CEO of PEM prior to its purchase in May 2018.
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• In 2010 and under prior ownership, PEM acquired the San Dimas mine and assumed all obligations under a pre-existing streaming agreement with Wheaton Precious Metals (“WPM”) dating back to 2004, whereby PEM was required to sell most of the silver production from the San Dimas mine to WPM at US$4.00 per ounce.
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• To provide certainty of tax treatment for sales under the streaming agreement, PEM entered into an Advance Pricing Agreement (“APA”), with the Mexican government in October 2012 and obtained a ruling from the Mexican tax authorities confirming the APA for the years of 2010 to 2014. The APA confirmed that taxes payable by PEM under the streaming agreement would be calculated on the basis of the actual realized revenue and not on the basis of market prices.
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• During the years in question, 2010 to 2014, taxable income for PEM was as follows:

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

Tax year	Taxable income (loss)             MXP	FX Rate	Taxable income (loss)             USD
2010	(127,062,692	)	12.64	(10,055,071	)
2011	(509,666,527	)	12.43	(41,011,871	)
2012	105,377,951		13.17	8,002,255
2013	53,214,284		12.77	4,167,960
2014	606,694,840		13.30	45,622,018
Total	128,557,856			6,725,292

Over the period in question PEM had a combined net earnings before taxes of approximately US$6.7 million. According to the Company’s constitutional law advisors, under Mexican law, taxes may not be imposed on income not received.

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• Contrary to the terms of the APA, which the Company has been advised remains valid in accordance with the Mexican Federal Tax Code unless and until it is nullified with finality by the Mexican Supreme Court, the Mexican government has issued tax assessments for PEM for the years 2010, 2011 and 2012 calculated on the basis of market prices and not the actual realized price. The total amount of these reassessments is approximately US$260 million of which approximately US$75 million is additional taxes. The balance of these reassessments constitutes penalties, interest and denied intercompany interest expenses.
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• Streaming agreements like PEM’s agreement with WPM are legally valid in Canada and Mexico and conform to international guidelines. At the present time, there are approximately seven active precious metal streaming agreements in Mexico’s mining sector. It is unknown why SAT has singled out the PEM streaming agreement.
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• In May 2018, First Majestic negotiated with WPM to cancel the original streaming agreement by paying WPM US$151 million and entered into a new stream agreement on revised terms which simplified the financing structure, and initiated the payment of taxes on spot pricing of silver and gold. First Majestic and WPM are completely independent public companies that deal at arm’s length for the interests of their respective stakeholders/shareholders.
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• Several unsuccessful attempts have been made by First Majestic to engage with the Mexican government authorities within the Ministry of Foreign Affairs, Ministry of Economy, Ministry of Finance and Servicio de Administración Tributaria (“SAT”).
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• In order to defend its rights, the Company is working with several advisors, and continues to receive the diplomatic support and assistance of the Canadian Embassy in Mexico.
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• The Mexican government has disregarded its obligations under several international treaties, Mutual Agreement Procedures, and double taxation treaties between Canada and Mexico, and OECD (“Organisation for Economic Co-operation and Development”) transfer pricing rules.
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• Therefore, without indications from the Mexican government that a mediated resolution would be possible, and as announced last week, the Company decided on March 1^st to file a NAFTA Request for Arbitration through the World Bank’s International Centre for Settlement of Investment Disputes in order to formally request to bring the Mexican government to the table for an unbiased arbitration.

As a further update to shareholders, and as expected, PEM recently received a notice of reassessment for the fiscal year 2013 from the SAT for the Mexican Peso amount of MXP1,866,655,000 (approximately US$132.1 million based on current foreign currency conversion rates) recalculating PEM’s taxable income on the basis of market prices for silver sold under the Streaming Agreement rather than actual revenue received. The components of the tax reassessment presented in US Currency can be summarized as follows:

                                                                                                                                                                                                                                                                                                                                                                                                                                               

Description of Reason for Assessment and Impact	US$ (Millions)
Revenue adjustment related to silver pricing disagreement regarding APA		18.0
Adjustment related to denied interest expense		14.3
Adjustment related to management fees		0.4
Double counting of taxes				17.3
Penalties, interest, inflation and withholdings		82.0
					$	132.1

The reassessment far exceeds PEM’s reported annual audited net income before taxes of US$4.2 million for the 2013 fiscal year in question. The majority of the tax assessment relates to inflationary adjustments and punitive discretionary penalties, interest, and surcharges, once again far exceeding the income of PEM.

In accordance with the aforementioned advice by the Company’s Mexican counsel, (i) no tax is payable under these reassessments while the Company’s appeals before the Mexican courts are in process and, ii) the Company believes that its interest expenses and management fee deductions comply with applicable OECD transfer pricing principles.

The Company will continue to vigorously challenge all tax reassessments through all domestic and international means available to it.

ABOUT THE COMPANY

First Majestic is a publicly traded mining company focused on silver production in Mexico and is aggressively pursuing the development of its existing mineral property assets. The Company presently owns and operates the San Dimas Silver/Gold Mine, the Santa Elena Silver/Gold Mine and the La Encantada Silver Mine. Production from these mines are projected to be between 12.5 to 13.9 million silver ounces or 20.6 to 22.9 million silver equivalent ounces in 2021.

FOR FURTHER INFORMATION contact info@firstmajestic.com, visit our website at www.firstmajestic.com or call our toll-free number 1.866.529.2807.

FIRST MAJESTIC SILVER CORP.

“signed”

Keith Neumeyer, President & CEO