Q1 2021 Avino Silver & Gold Mines Ltd Earnings Call
Thank you for standing by this is the conference operator.
Welcome to the Avino, silver and gold mines first quarter 2021, corporate call and webcast.
As a reminder, all participants are in listen only mode on the conference is being recorded.
After the presentation there'll be an opportunity to ask questions to.
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I would now like to turn the conference over to Jennifer North manager of Investor Relations. Please go ahead.
Okay.
Thank you operator, good morning, everyone and welcome to the Avino Silver and gold mines Limited Q1, 2021 financial results conference call and webcast on the call today, we have the Companys President and CEO, David Wilson, Our Chief Financial Officer, Nathan Harte, Our Chief operating Officer, Carlos Rodriguez, and our VP of technical.
Surfaces Peter Latta.
Before we get started please note that certain statements made today on this call by the management team May include forward looking information within the meaning of applicable securities laws forward looking statements are subject to known and unknown risks uncertainties and other factors that may cause the actual results to be materially different than those expressed by or implied by.
Such forward looking statements.
The company does not intend to and does not assume any obligation to update such forward looking statements or information other than as required by applicable law for more information. We refer you to our detailed cautionary note in the presentation accompanying this call or on our press release of yesterday's day.
I would like to remind everyone. This conference call is being recorded and will be available for replay later today.
Replay information and the presentation slides accompanying this conference call and webcast will be available on the website. Thank you.
I will now turn the call over to Avino, as President and CEO, David Wilson David.
Thanks, Jim Good morning, everyone and welcome to Avino Q1, 2021 financial results conference call and webcast. Thanks for joining us.
Before we begin please note that the full financial statements and the MD&A are now available on our website.
On today's call, we will cover the highlights of our first quarter 2021 financial and operating performance and our plans for Q2 2021, and then we will open it up for questions.
Please note that all figures are stated in U S dollars unless otherwise noted.
It's hard to believe that it's been more than a year. Since we were first phase with the pandemic and the force operational shutdowns.
As I mentioned during our previous quarter and year end call I would like to say a special thank you to the management team in Mexico led by Carlos Rodriguez.
We adapted quickly and carried out critical tasks at the mine to ensure the safety of our employees and surrounding communities.
In addition, I would like to extend my appreciation to our shareholders for their support and patience during last year, while we experienced a temporary shutdowns due to COVID-19 in the recent past due to the strike at the mine.
The 12 week strike lasted from July to October 2020.
As the Labor Authority office in Mexico City remains closed due to COVID-19 protocols. The company is working diligently with its partners to ratify the agreement.
Company is committed towards restarting production in mining operations as soon as possible.
Mining in Mexico in General was significantly interrupted last year as a result of COVID-19, with most lines on projects suspended on a number of months before resuming operations under strict health guidelines.
Global production of silver declined in 2020 by five 9% to hit 784 million ounces.
As reported by metals focus however, global production is expected to rebound strongly in 2021 with a net increase estimated at eight 2% to 848 million ounces.
According to the chamber.
Mexico sector wide investment fell 50% compared to pre COVID-19 at Smiths dropping from 5 billion to $2 5 billion.
However, the industry is set for a rebound in 2021 with many companies announcing increased investment in projects across Mexico. This also goes for avino as we announced during the first quarter, an increase in our capital expenditures and exploration budget from $6 million to $8 million up two between.
Nine and $11 million. Additionally, hiring has begun our experienced mine workers at site.
We are definitely moving closer to recommence.
Operational activities.
Our goal is to ensure that we reopened properly with all guidelines, including labor and health in place.
During the quarter.
The 2021 drill program remains a top focus with the objectives of locating new mineralized zones within the property and to confirm continuity of mineralization in the current avino EG production area at the end of Q1.
1800, 70 meters were drilled in Santiago and El Chapo veins.
Also in the quarter, we continued moving forward with the gross dry stack tailing storage facility that number too.
Which is on privately owned Avino land is permanent and is currently in the final stage prior to commencing construction. We expect this project will now be completed during Q4 2021, and it should add an additional eight to 10 years of tailing capacity based on the current mill throughput rate.
We chose dry stack tailings for its environmental safety and economic advantages.
It's high solids content.
This significantly improves safety and stability and reduces the need to extract water from local sources by recycling the water removed from the tailings. In addition, it requires less land, which in turn results on a small and smaller environmental footprint.
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Over the years, we have been proactive in developing a partnership between avino and the people of Durango.
And the four communities surrounding the mine site.
Pleased to announce the Avino has just recently hired an ESG manager in Durango to help drive ESG initiatives forward and contribute to the operational continuity.
The business under the principle of sustaining and social responsibility.
During the quarter, we have helped in many ways, including supported the town on San Jose J Avino by loaning, our cat dozer paying for the fuel and operator time to help expand the town cemetery.
We provided multiple bags, it's meant to fix access roads in the town.
Provided information to the communities on the safety of dry stack tailings and we'll follow up again with the new ESG manager.
Even though we still have not recommenced operations the communities surrounding the mine site mellow that avino will lend to support a path when needed. In addition, we have received PPE and hundreds of rapid tests.
To ensure the safety and good health of our workforce.
Avino is the only source of employment in the area and once we are fully operational again, we will provide steady employment to the people of the Durango and nearby communities. Many people on the communities are keen to get back to work at the mine and Avino has the full support of the local and state.
Governments.
Restarted production activities is expected to provide significant direct economic benefits and stimulus for the local communities.
During the first quarter silver was a bit slow to move with an eight 2% decrease compared to the full year 2020.
The price range from a low of $24 67 on March 25 to a high of $29 59 on the first of February Coincidentally. This once the day of the Red It propelled silver squeeze.
Gold prices range from a low of 16 83 on March 30th to a high of $19 43 on January 4th.
The metal prices that continued to be volatile with silver currently in the low 27% range and gold staying slightly above 800 level.
With rapid transition to.
Two clean technology being legislated in the USA.
<unk> gold will be in demand and we expect both will shine.
Not to be overlooked is the price of copper.
Has been on a tear and will play a key role in the new Green economy. This is definitely worth mentioning for avino as copper makes up at least a third of our revenue contribution went in production.
Last quarter copper was sitting around $3 50 per pound and now it's close closing in on $4 75 per pad.
Copper prices steadily moving upward on a low inventories and anticipated rebound of the global economy.
Growth of industrial activity strong demand by China, clean energy drive global vaccination rollout and a weaker U S dollar.
We believe that the push towards a green economy, and the fact that.
That we mine metals needed, we certainly benefit will certainly benefited our shareholders going forward.
I wanted to touch briefly on February 1st Silver squeeze propels avino share price to a high of $2 82 U S. On a volume of $130 million on that day one day.
We all saw how the power of the Red at traders and the social media drove up the price of silver and silver mining stocks that day and created a trading frenzy, we look forward to growing demand from these new investors and increasing the diversity of our shareholder base.
We encourage our shareholders, new and long term to check out our website.
Austin for news releases presentations on all public information.
I will now ask Nathan Harte, <unk>, Chief Financial Officer to present financial results for Q1 2021.
Thank you David it's my pleasure to be on the call and I would like to welcome everyone, who has joined US and is viewing our presentation today.
As you can imagine avino operating results were impacted by a lack of production at the Avino mine having.
Having said that we are now in the strongest financial position and Avino has 53 year existence.
Our cash position at the end of the quarter was 27 million, which represents a 125% increase compared to $12 million at the beginning of the year.
Working capital at quarter end was $31 million compared to $15 million at the beginning of the year, which represents an increase of over 100%.
We continue with our plans to reduce debt during Q1 have been lowered debt liabilities by a further 800000 during the first quarter.
This brings total debt reduction since the beginning of 2020 up to $8 million.
We're happy to report that we expect to be debt free other than payables on equipment leases by the end of Q3 of 2021, which allows us to maintain significant financial flexibility moving forward.
During Q1 minimal revenues regenerated any revenue generated were a result of settlement of final invoices from 2020 as there are no concentrate shipments during Q1 2021 and as such no silver equivalent ounces sold.
Xena reported mine operating losses of 700000 for the first quarter, which is made up of 200000 in standby a care and maintenance costs and 500000 in depreciation and depletion.
Losses before interest taxes, depreciation and amortization were $1 7 million compared to earnings of <unk> 4 million in Q1 of 2020.
Adjusted losses for Q1 2021 nine.
900000, compared to adjusted earnings of 400000 in Q1 of 2020.
Avino reported net losses after taxes from continuing operations of $1 8 million or <unk> <unk> per share for the first quarter, which includes non cash losses of $1 million relating to the exercise of warrants and which avino received proceeds of over 700000 during the quarter.
Capital expenditures for the first quarter were 400000.
With the strike action the company took specific measures to limit any unnecessary capital expenditures during the quarter, except for exploration activities, which have continued to ramp up.
Any necessary projects have continued on its plans and include the new dry stack tailings storage facility equipment, we expect that capital and exploration expenditures will increase over the coming quarters as we ramp up exploration and move forward with the tailings upgrades.
Finally, I want to reiterate the strength of on Avino financial position.
As David previously mentioned February 1st had quite an impact on our financial position and I want to thank all of our corporate partners and stakeholders, who are working diligently alongside us and ensuring that we are well prepared to take advantage of the increased valuation on this day.
It is because of everyone's hard work and preparation that we were in a position to bolster our treasury by an additional $17 million and evaluation over 50% higher than today's current share price.
We believe this is the sign of things to come and Avino continues to remain undervalued with a significant resource base in a balance sheet that would allow avino to create future shareholder value.
We continue with our plans to reducing debt and at the end of the quarter, we maintained over $30 million on liquidity, including our investment holdings.
With cash representing over seven times, our debt liabilities at the end of the quarter. We are moving forward with increased exploration activities and continuing with our plans to add value for our shareholders and stakeholders throughout the rest of 2021.
I will now hand, it back over to David for a discussion on exploration and what Avino has planned for Q2.
Thank you Nathan.
Our original plans for the year called for 12000 meter drill program, which was increased in March to a total of 30600 meters of drilling.
The increased drilling program was fully funded.
We will continue in Q2 target several areas of the avino property, including the avino vein Santiago vein and the L Trump away.
To date 3700 63 meters have been drilled we are currently waiting for assays to be received another potential high grade target that has been tested it's called the Lama lent JV.
Which is which will be tested in phase II.
It is similar style to the San Gonzalo vein low sulfur <unk> epithem, albeit.
More exploration work is needed to confirm our understanding of that.
System.
It is said that this vein was named hundreds of years ago.
And the Avino mine was discovered and $15 58 by Captain Niobrara Cortez as army, it's quite possible that vein was named a bad time by the miners in honor of Marion low.
<unk>, who is the mother of Cortez has chosen.
Future exploration targets may not be limited to these three areas and during the year, our priority targets may change of geological interpretation on other areas present enhanced opportunity.
Preparations in Q2 on ongoing to recommence operations, the dry stack tailings project is going well and the completion will be pushed to Q Q.
Q4.
Improvements to the circuit for our ongoing that will improve gold and silver recoveries through the use of new equipment.
<unk> main focus for the next quarter is to recommence operating activities at the mine and carry on with the exploration program focused on locating new mineralized zones within the property and confirming continuity of mineralization in the current avino production area.
Finally, it has always been on our intention to ensure the health and safety of our employees and communities and we continue to analyze situations and the Vancouver, and Mexico and collaborate together to make best decisions that are most beneficial to the wireless group, including all stakeholders.
We look forward to a productive second quarter and remainder of 2021.
Dissipated a brighter rest of the year, including successful Vaccinee vaccine rollouts worldwide unrestricted travel and hopefully our Canadian borders will open up.
We'd now like to move the call to the question and answer portion operator.
We will now begin the question and answer session.
Doing the question queue you May Press Star then one on your telephone keypad.
Youll Haircolor acknowledging a request.
If youre using a speakerphone please pick up your handset before pressing any teams.
To withdraw your question. Please press Star then two.
We will pause for a moment as quota has joined the queue.
The first question comes from Jake Sokolowski from Alliance Global Partners. Please go ahead.
Yes.
Hey, David Nathan and team Thanks for taking my questions.
Good morning, Jack.
Starting with exploration.
You mentioned that Youre waiting for assays to come in any color on the timeline here and are you seeing any delays in turnaround times due to COVID-19.
Yeah.
It has been slow in getting them.
So some have trickled in but we're waiting for we want to complete the program and.
And on a particular vein before we release results. So.
It's hard to say, but in the next few weeks, we should have some news.
Got it Okay and then just on the back of that are the phase one and phase two.
Programs are they sequential or concurrent.
Hi, Jeff This is Peter here.
Regarding the program there are some areas like for example below E. T that we have to wait until Theres underground access. So we're kind of jumping back and forth just depending on drill availability and relative location. So.
To answer your question I guess, there would be more concurrent.
Okay. That's helpful. And then just lastly on the tailings project.
You mentioned that you might move forward with the PFS later this year.
Assuming you do that in the PFS is positive are you comfortable making a production decision on the back of the PFS or do you think you can move forward with a full case.
Uh huh.
Saying, we'll have the PFS. This year is probably a little aggressive from and where we're drilling.
And it takes time to do that so it really depends on the results of the PFS before we make a construction decision.
Okay, but you'd be comfortable making a construction decision off the PFS not necessarily moving to full feasibility.
Jacob Peter here once again I think it just depends on the risk that we're looking at in terms of that particular project I think there is theres limited geological risk given that the tailings are equally disseminated.
And that depends on the day metallurgical work on the variability at that point in time. So I think it's too early to say at this point in time, but certainly pending the results of the PFS.
We will evaluate and then make a decision at that point.
Fair enough that's all from me Thanks again.
Thank you.
The next question comes from Paco <unk> from H C. Wainwright. Please go ahead.
Hey, guys. This is Tyler bisset on for Heiko. Thank you for taking our questions.
All right Tyler.
Hey, you talk about your drilling program in the release and it's nice to see the increase in holes drilled that was initially announced on March eight.
You mentioned that you're waiting for some of the sales results in the recent released but from what you can see thus far can you sort of guide us through the potential continuity you think you might see at Avino E T.
Sure I can I can jump in there so with respect to E. T. A lot of those holes are drilled from underground.
Well all of those holes are drilled from underground I should take that back. So we haven't started that drilling.
There as we have to do a bit of work in the underground and then we have to.
Blast adrift.
Crosscut actually.
So we can drill back on across the deposit so are the drilling for this quarter Q1 was really focused on Trump bow and Santiago.
With Trump will being that offshoot of the of the avino vein and Santiago being that cross cutting the structure across San Gonzalo van.
Okay.
So to answer your question, we haven't yet tested the continuity of avino both.
Down dip and on strike.
Cash at any expectation on when you guys may start that drilling.
We have people in there now.
Servicing the pumps on the electrical.
On system down there, so we're bringing back people zone.
Yes.
It's hard to say because.
You know, we want to get the drilling and the blasting in the mining going first and then we're going to look.
Look it drifting away from the vein and then setting up the drill stations. So.
It's going to be in the second half of this year.
Okay I appreciate that.
What do you think we will see in total expenses for the ramp up in Q2, and how much have you incurred as of today, given we're halfway through the quarter and maybe if possible give us some guidance for spend during Q3 as well.
Sure Tyler Nathan here, so you're referring to ramping up getting closer to production are you talking about exploration spend.
Exploration spend.
Sure.
Yes, I'm not sure you can talk on production.
No I'll talk about exploration spend on.
So we're expecting that to increase obviously, we announced up to 30000 meters and were ramping up April was a lot obviously heavier than March was as far as Meterage and we're continuing on that path in March or in May June and further into the second half. We've got all three drills, turning right now which is great.
So we kind of.
We're expecting that if we continue on the same meterage about you know.
Anywhere from half a million to close to three quarters of million maybe on a on a monthly basis. So we're expecting a couple of million dollars.
For quarter on amount out of the maximum and that depends obviously on how how quick we're able to move the drills around too.
Okay, Great I appreciate it thanks guys.
Thank you.
Once again, if you have a question. Please press Star then one.
The next question comes from Matthew O'keefe from Cantor Fitzgerald. Please go ahead.
Thanks.
Good afternoon or good morning, a question just a question added pretty busy.
Busy quarter on the on the finance side, so you've got $27 million in cash year now $11 million.
I actually $30 million on working capital and $9 million to $11 million budget. So that's still a pretty healthy cushion.
Assuming youre going to get it back into production.
Between now and the end of the year. So what are your plans for that additional cash.
Nathan here, Matt that's a good question. Obviously, we are looking forward to kind of getting back to production activities first.
But I mean this is because it's kind of a historic quarter for avino and it's the first time, we've really been a comfortable very comfortable cash position and we're looking forward to kind of to reinvesting in the mine and we're just we're evaluating.
Opportunities as they come in right.
Theres a lot of activity in Mexico, and a lot of projects that we always have our eye on but at the same time. We are we don't want to make any hasty decisions. So we're.
Yes.
And improving recovery rates that are automation, yeah. We've got a lot of capital improvements we want to make first and then will kind of sit back and take kind of a 10000 foot view of what's best for avino and for our shareholders.
Okay, and then so so you're not looking at other but while Youre always like I guess looking at other projects that might be in and around but would your first choice to be something that has some synergies with with avino or something.
A little bit different and would it be more on the cash flow side.
The development side.
That's a tough question to answer I think we're pretty agnostic as far as what we're looking at we like exploration stories, we like past producing sorry, like there's a lot of stuff that we like but at the same time.
Very very cautious with our funds and we want now.
We are still focused on Mexico, and we plan at the very least we plan to remain that way, we want to find higher grade material on a property, we want to lower our all in sustaining cost back to where it was when we were mining San Gonzalo which was around $10. So that's our goal.
That's a big focus is to get everything.
We have a large mill circuit and if we can find higher grade.
Running some of that material through our malware, we're pretty confident that cost will come down and and will be on a much better positioning for the future.
Right. Okay now that's great. It sounds like it's where most of its earmarked for current.
Unlocking the current potential.
Thanks, very much that's it from me.
Thanks, Matt.
Okay.
This concludes the question and answer session.
I'd like to turn the conference back over to David Wilson for any closing remarks.
Thank you everyone for taking the time to listen today, we appreciate the patience of all our stakeholders and look forward to resuming normal operations. Soon we look forward to a productive second quarter and remainder of 2021. Thanks again for listening and have a great day.
Okay.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
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