Q4 2021 Avino Silver & Gold Mines Ltd Earnings Call

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Thank you for standing by this is the conference operator.

Welcome to the Avino, silver and gold mines fourth quarter and year end 2021 financial results Conference call.

As a reminder, all participants are in a listen only mode and the conference is being recorded.

After the presentation there'll be an opportunity to ask a question.

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I would now like to turn the conference over to Jennifer North manager of Investor Relations.

Go ahead.

Thank you operator, good morning, everyone and welcome to the Avino Silver <unk> Gold mine from into Q4 and year end 2021 financial results conference call and webcast on the call today, we have the company's president and CEO , David Wilson, Our Chief Financial Officer, Nathan Harte, Our Chief operating Officer Carlos Rodriguez.

And our VP of technical services 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 law.

Like a whole lot for more information, we refer you to our detailed cautionary note in the presentation accompanying this call on our press release of yesterday's date I would like to remind everyone that 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 <unk>, President and CEO , David Wilson David.

Thanks, Jen good morning, everyone and welcome to <unk> Q4, and year end 2021 financial results conference call and webcast. Thanks for joining us before we begin. Please note that the full financial statements and MD&A are now available on our website on today's call. We will cover the highlights of our fourth quarter and year.

Our end 2021 financial and operating performance and our plans for 2022, and then we'll open it up for questions.

Please note that all figures are stated in U S dollars unless otherwise noted.

Overall 2021 was a year highlighted by many positives.

We ended the year with fourth quarter production numbers that exceeded our expectations. We resumed operations at the Avino mine in August we planned and executed on a comprehensive drill program and the conversion to dry stack tailings is on track for completion in 2022.

Filter building nearing completion.

In October we announced that we'll be acquiring the neighboring <unk> development property. When this transaction closes it has the potential to be transformational for Avino. The addition of La Presse. You also substantially increases our 43 101 compliant mineral resource to 290 million ounces.

Of silver equivalent.

I'm also pleased to announce that we have received kofi approval for the acquisition in Mexico, which was the final regulatory approval required before completing the acquisition. The acquisition is still anticipated to occur before the end of Q1 2022.

In addition, the company made its final payment of the term facility in September which is a significant milestone for avino cash and working capital at the end of 2021 had doubled over the year at the end of the year. The exploration campaign for 2021 had completed 15500 meters of drilling and focused on.

Several targets.

Additional areas for exploration include the main avino vein below current mining activities and the <unk> vein. The initial results from lab photo sooner were recently announced and we are excited to continue exploring lap what has seen a as it factors in prominently as one of our high grade near surface targets, we believe.

<unk> seen it has the potential to supplement our current mill feed from avino in the near to medium term on the oxide tailings resource area 124 holes have been drilled 110 of the holes have reported assays and are currently under review by our technical team in the fourth quarter production came in from the Avino mine only.

Compared to Q3, 2021, which was the most recent quarter of production.

Silver equivalent production increased by 101% to 541000 ounces silver production increased by 139% to 164000 ounces copper production increased by 68% to $1 1 million pounds and gold production increased by 92% to 20.

100 ounces.

Full year production highlights are as follows 842000, silver equivalent ounces consisting of just over 245000 ounces of silver 3400 ounces of gold and $1 9 million pounds of copper.

Also in the quarter as I mentioned earlier, we continued with our plans to convert to dry stack tailings are safer form of tailings management than the conventional wet tailings management process.

The team in Durango made significant progress during Q4 on the facility, which includes the infrastructure associated with transporting the dry stack tailings. The project is expected to be fully operational in the second half of this year and brings the company towards achieving the guidelines with the global industry standard on <unk>.

<unk> management.

We have posted a great time lapse video on our website that shows the construction of the tailings filter plant. So I encourage you to go to the video section on the website under the Investor Tab and watch it.

On October 27th 2021, we announced the acquisition of La <unk> also as I touched on it during the Q3 call I have always believed the avino in La Presse Yosef belonged under a common ownership given the clear synergies and common infrastructure lapped proceeds also isn't an X.

<unk> strategic fit within <unk> existing operations and further strengthens our presence in Durango, but by adding not only a large high quality silver development.

With near term production potential to our portfolio, but also increasing our mineral exploration concessions by more than seven fold to over 7000 hectares.

We expect a large portion of the existing leopard seals, the resorts could be mined via underground to potentially improve avino production and organic growth profile. We expect the transaction to close in the current quarter looking at other junior comparable companies. This acquisition should elevate avino within the silk.

Of our sector.

Our ESG initiatives continue to move forward. It was we incorporate principles of sustainability and social responsibility during the fourth quarter. The company continued its training of local workforce at the mine additional ESG initiatives completed during the fourth quarter were as follows.

Assisted the local schools are their Christmas parties and supplied food and entertainment continued to support the communities of Zara, Gosa, Palooka, Coronado and San Jose do avino in their waste dump cleanup efforts maintenance for local roads in town streets for zero goes Oh.

San Jose de Avino.

Road maintenance within the communities, which include painting speed bumps maintenance of Caddo Guards and general cleanup.

Current ESG initiatives include the <unk>.

Supporting the community of Palooka, the Coronado with their project to extend the community cemetery supporting the community of <unk> to extend the water line two areas that currently do not have this resource available 600 meters of excavation taking approximately 25 hours.

Taking a look at the metals and mining outlook for the year, it's clear that their recent invasion of Ukraine by Russia has been the main focus during the last couple of weeks and has made for a jittery market.

We have seen the price of gold and silver climb in fall with daily volatility being the norm. We continue to believe that the outlook for silver is positive. According to the World Silver Institute the silver demand should see solid growth for 2022 onward, and they have also predicted the global supply demand will it.

Could rise by 8% from 2021 to a record $1 1 billion ounces. This year. The rise is expected to be driven by record silver industrial fabrication, which is forecast to rise by 5% as consumption increases in traditional and green technologies.

Yeah.

Investment demand for physical silver bars in bullion coins is expected to jumped 13% this year to a seven year high demand for silver to be used in jewelry is expected to rise by 11% demand for silver, whereas forecast declined by 21% all of this bodes well for the silver.

Miners and their shareholders the best leverage to silver is owning producers such as avino.

I will now ask Nathan Harte, <unk>, Chief financial Officer to present, the financial results for Q4, 2021 .

Thank you David.

Pleasure to be on the call and I would like to welcome everyone, who has joined US today and is viewing our presentation.

We are extremely pleased with the progress made in Q4 following the restart of mining operations at the Avino mine in August and we feel that our Q4 financial results reflect a turning point for me now.

Not only that we are looking forward as we move close to closing the strategic acquisition of the neighboring lot Patio set development stage project from core mining.

The company remains well funded with $24 8 million in cash and $31 6 million and working capital available at the end of 2021.

This represents a significant increase to the $11 seven and $14 7 million available at the beginning of the year.

With concentrate sales having resumed during the third quarter free cash flow generation in Q4 was $2 5 million and the term facility with our long term partners at Samsung CMT has now been repaid and avino has the financial flexibility and capacity to move forward, our new and existing projects.

During Q4, we reported net revenues of $9 3 million with 418000 silver equivalent payable ounces sold for the full year $11 2 million on 525000 ounces sold.

Avino reported mine operating income of $4 4 million for the fourth quarter and $3 5 million for the full year of 2021.

Which includes noncash depreciation and depletion.

On a cash basis mine operating income was $5 1 million for Q4, and $5 5 million for the full year 2021.

Earnings before interest taxes, depreciation and amortization or EBITDA was $4 8 million in Q4 and 400000 for the full year.

Adjusted earnings was $4 7 million for the quarter or <unk> <unk> per share for the full year 2020 . One it was $2 3 million or two cents per share.

And rounding out our financial results, we reported net income after taxes from continuing operations of $2 6 million or <unk> <unk> per share for the fourth quarter.

For the full year period, we reported a loss of $2 1 million or <unk> <unk> per share.

As you can see Q4 was a significant quarter for avino as we demonstrated strong operating margins, while keeping and maintaining our existing cost structures, both on site and at the corporate level.

Further we generated net earnings for the first quarter 2019, and we generated $2 5 million in free cash flow net of any capital expenditures.

Capex for Q4, 2021 was about $1 million and for the full year was $3 2 million.

Capex for this quarter related to exploration at La <unk> and below the current mining operations at Avino and the tea area of the mine.

Also included was the recommended drilling on our oxide tailings resource as we look to move that project forward to a pre feasibility level in the near term.

Cash cost per silver equivalent payable ounce for the fourth quarter was $9 57, a decrease of 32% when compared to 14 O. One in Q4 of 2020.

All in sustaining cash costs for the quarter was $17 24, a decrease of 676% compared to $73 eight during Q4 of 2020.

As we continue to ramp up we expect the all in sustaining cash cost figures to continue to decline due to more ounces sold in the coming periods.

With Q4, marking the first quarter of uninterrupted mining operations in 2019, I am pleased to report that Avino is financial outlook is very positive.

Throughout 2020 in 2021, we have successfully executed on our plans and reducing debt and at the end we have come out with our highest working capital and <unk> 53 year history.

This financial strength allows us to ensure that the acquisition of <unk> is fully funded and aligns with our plans to add value for our shareholders and stakeholders throughout the rest of 2022.

I will now hand, it back over to David for a discussion on what Avino is planning for the rest of the year.

Thank you Nathan Q4 was a busy quarter with ongoing projects and we have continued into 2022 at the same active pace activities at the mine site. During the first quarter of 2022 include.

Continuing production ramp up at the Avino mine ongoing training with the locals dry stack conversion is ongoing as previously mentioned, we received and released drill results from the following areas friction to bajo the Bart vein below level 17, and west of current E team.

[laughter] workings, la Millenia, Northwester, Sonora, Santiago L Trumbo, San Jorge and most recently <unk> as mentioned earlier the oxide tailings drill results recently received are under review by our technical team ongoing exploration at the main avino vein below.

The.

Current mine activities and at La Porte Athena continue working on how best to integrate La Presse Yosef into Avino production operations for 2022, we are targeting production between two two and $2 6 million ounces of silver equivalent we expect to generate significant operating cash flow this year.

We plan to reinvest in exploration and further mine development.

2022 is off to a great start for Avino, we look forward to keeping the momentum going we would now like to move the call to question and answer portion operator.

Thank you Leland.

I'll now begin the question and answer session.

Join the question queue. You May Press Star then one on your telephone keypad and you will hear a tone acknowledging your request.

You were using a speakerphone please pick up your handset before pressing any keys.

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I'll pause for a moment as callers join the queue.

The first question comes from Heiko with H C Wainwright.

Please go ahead.

Hi, everyone. This is nate calling in for Heiko.

Thanks for taking our questions here.

Just regarding you kind of touched on it already but regarding the la prestige. So projects are obviously, good timing here with the commodity pricing.

But as far as approvals go you touched on coffee tea.

Being done is there anything else in the waiting here or is this just a waiting game in general.

That's my first question. Thanks.

Ah we're just closing all the documents so a real close to making a closing announcements.

Okay great.

Thank you very much and then just building on the last question any ideas that you're willing to share publicly regarding I anticipated spend at site.

And timing of such spending will.

Well, they're spending start breakouts are closing or is there more or less a ramp up period.

Hey, it's Nathan here.

We're currently reviewing our and it's kind of an ongoing process for the love for libraries, So I'm, assuming you're referring to lot press you also not the avino property correct.

That's correct yes.

Yeah. So it's an ongoing process management is going to be going down the site. Shortly to go review that with the team and then we'll be able to update the market on that as it comes out.

Okay, Great Alright. Thanks, that's all for me. Thank you.

Thanks.

Yes.

The next question comes from Jake Zukowski with Alliance Global partners.

Please go ahead.

Hey, David Nathan and team Thanks for taking my questions.

Okay.

Just starting with with the ramp up I mean, it looks like things are progressing nicely.

Can you just kind of remind us again, what what the target throughput rate is there this year and where throughput is currently isn't just trying to get a gauge on how close you are to a steady state.

Oh sure Peter Latta here I can take that.

We're looking at you know before Covid, we were about 20 or 2000, 2200, and that's kind of our target. The mill has a nameplate capacity of 2500 tonnes per day. How we're currently just debottlenecking. The mine. We're currently mine limited as opposed to being plant limited.

And that includes you know hiring are our local workforce, which is something David's mentioned over the last couple of calls.

Hiring and training I should say so that's that's kind of the ongoing process as we work towards getting back to that that 'twenty 200.

Tons per day.

Okay and is that something that you think you guys.

It should be able to achieve sometime in Q2 or is that more of a second half of the year type.

Yeah, I think it's an ongoing process I think that that's something that we're definitely going to get done in 2022.

Okay fair enough.

And then just looking at operating costs.

<unk> seen strong and the fourth quarters or is that something we should be modeling.

Moving forward in 2022 or do you think we will see some further reductions as throughput ramps as well as we were just talking about.

Hey, Jack Nathan here.

On a per ounce basis, you can kind of expect that to stay.

Fairly flat.

One of the things that we were I wouldn't say surprised us but were fortunate for was the good grades throughout most of Q4, we were just in a high grade zone as part of our mine plan and.

In Q1, the grades will come.

Come down a little bit so we will see some some increased costs on a per ounce basis, but nothing overly significant.

Then on the all inside of things you know as production gets up to kind of that 2000 2200 tonnes per day that Peter mentioned.

Obviously, we're producing more ounces and with the same amount of overhead. So we expect the all in number to either come down or.

At the worst case scenarios stay flat.

Okay. That's helpful. That's all from me Thanks again guys.

Thanks, Greg Thank you.

The next question comes from Joseph Reagor with Roth Capital Partners.

Please go ahead.

Hey, David Nathan and team Thanks for taking my questions.

Good morning, Joe.

So you mentioned commodity price volatility in.

Got it.

Made me Wonder if we could kind of get a reminder, on how your sales get treated.

There are like a three day rolling average on your price realizations or.

Is it over a period of time, where it resets backwards just.

Any color there so that we can maybe.

And you know more accurately.

Your expectations as far as price realization so this quarter.

Hey, Joe Nathan here, so all of our cockpit sales are done on a spot basis and then it's N plus one for the Finalization as we sell concentrate on a provisional basis and then there is like I said next month's settlement, but that's all spot pricing.

Okay. So given that is it is it a bit difficult for you guys.

To take advantage of any of these spikes or.

Maybe in another way as a positive because.

It smooths things out a bit.

Ah, Yes, and no I mean, obviously when you're settling the next the following month.

Your final sales.

Based on the future.

A little bit, but from a cash flow perspective, sure we could we could.

Try and so fairly quickly and take care take advantage of some prices on the professional side.

Just to make sure that we get the cash upfront and then can put that towards reinvestment in the mine.

But for the most part yes, it's fairly smooth.

Okay Alright. Thanks, My other questions were answered already.

Thanks, Joe.

Once again, if you have a question. Please press Star then one.

The next question comes from Matthew O'keefe with Cantor Fitzgerald.

Please go ahead.

Hi, good morning. Thanks.

It looks like things are going well so.

Just a question I know, David you talked about it a little bit on the exploration.

Could we could you just go over that again, reminding us sort of what the sort of budget is for this year and what the main targets are and what kind of goals, we have set for them.

For the year with respect to exploration.

Sure.

Yes, the budget is $2 million for drilling.

We're putting in I think is it 40 holes into a hotel zena to develop a resource.

And Bridget Bajo.

So yeah, I mean, there's lots of great targets are but we're focusing in on the ones that we can develop a ton of John .

Yeah.

So is there any sense so.

There's still a good target in <unk>.

Oh, yeah, because we've never really.

Working so.

Alright, Yeah, we haven't drilled below the current working so we're doing that now and.

Extending the mineralization at depth and.

We're excited about that.

Because the results are coming in and then it looks like it continues.

Yeah, Okay, and so and just again back to parts as you know.

Some pretty impressive results earlier this month.

It's a little bit further away from the mill, but not that far is that what you said.

It's relatively close to surface and you could you know if things hold together you could be developing that rather quickly.

Absolutely and it probably though once we decided to go ahead with my.

Mining it would take about a year.

You got to put it in a ramp in <unk> and <unk>.

Decline in our prepared for mining so, but it's near surface. So it's very similar to San Gonzalo most authorization.

Near surface or horizontal.

Okay, and it's easy access and then trucking trucking distances in that parts about four or five K ofer.

Copper.

No that was that was the other questions were answered, but that's no that's.

Great. Thanks.

Thank you thanks, Matt.

This concludes our question and answer session.

I would like to turn the conference back over to David Wilson, President and CEO for any closing remarks.

Thank you operator, and thank you everyone for your time today.

As I said earlier, we had many positive to talk about in 2021 and look forward to maintaining the momentum.

Growth is paramount for success in Avino has been laying the groundwork for future growth.

Given priority to most important projects and initiatives to achieve that growth unlocking the value of the avino property in the region.

It has been a priority and we are looking forward to the next steps in our growth objectives.

In turn maximizing value for shareholders and stakeholders have a great day, everyone and goodbye.

Okay.

This concludes today's conference call you may disconnect your lines.

Thank you for participating and have a pleasant day.

Yeah.

Okay.

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