Q3 2023 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 Q3, 2023 conference call and webcast. As a reminder, all participants are in listen only mode and the conference is being recorded.
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I would now like to turn the conference over to Jennifer North head of Investor Relations. Please go ahead.
Please standby.
Yeah.
Yeah.
Gee I believe we have the persona is back on the line.
Jennifer Please proceed.
Yeah.
Sorry, please standby.
Alright, let's try this again Jennifer please proceed.
Thank you operator, good morning, everyone and welcome to the Avino Silver and gold mines Limited third quarter 2023 financial results conference call and webcast to join US webcast and conference call. There is a link in our news release dated November the first and in our news release of yesterday's date, which can be found on our website under news <unk> 2020 three.
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 Technical services, Peter Latta beef.
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 our implied by such forward.
These 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 related to this call on our press release of yesterday's date.
Please note that the full financial statements and MD&A are now available on the website under the investors tab and click on financial statements as well the full statements are available on our venous profile on SEDAR and on Edgar 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 for this conference call and webcast will be available on the website.
Also note that all figures stated are in U S dollars unless otherwise noted. Thank you I will now hand over the call to <unk>, President and CEO, David Wolfe David.
Yeah.
Thanks, Jen good morning, everyone and welcome to <unk> Q3, 2023 financial results conference call and webcast.
Please note that the full financial statements and M. DNA are now available on our website.
On today's call, we will cover the highlights of the third quarter financial and operating performance.
I'll go over the work that we are currently performing and then we will open it up for questions.
I will begin with a discussion on operations for Q3, and then I'll turn it over to Nathan Harte <unk> CFO to discuss the financial performance for the third quarter and Jennifer North our head of Investor Relations for an overview of Q3 ESG initiatives.
Please turn to slide five where I have outlined the operational highlights.
Yes.
Our Q3 production results were released in mid October and we achieved production results of over 591000, silver equivalent ounces, which brings the 12 month trailing total to 2.63 million silver equivalent ounces.
We are currently pleased with the drill results released in July and September from a total of seven drill holes that included the best intercept in the company's history.
In September we reported four drill holes below level 17 at the E. T area that included substantial with grades above our current cutoff grades.
In July we reported the best drill intercepts in the history that showed 57 meters of true width of mineralization drill hole E. T. 20, 309 had exceptionally widened very high silver gold and copper grades which is very encouraging for continued exploration.
Of the avino vein.
Okay.
I will expand further on the exploration program results later in the call.
We have now completed our planned and budgeted drilling program for the year and drilled 70, 545 meters and 13 holes there.
The pre feasibility study on the oxide tailings project is currently underway and is expected to be completed early in Q1 'twenty 'twenty four.
Yeah.
The dry stack facility is fully operational with the conveyor system installed and we are now transporting depressed tailings to the avino open pit area.
At the La Presse Yosef property communication with the Hito group is ongoing and we are fully committed to moving the project forward as it factors prominently into our five year growth plan.
Yes.
Here on slide six we show our Q3 production results. The production results from the Avino mine continued to be consistent in Q3, we are mining in area areas with lower copper grades and experienced lower recovery rates.
The production results are as follows silver equivalent production was 591000 ounces.
Silver production was 237000 ounces copper production was 1.14 million pounds.
Gold production increased by 73% to just under 2000.
100 ounces.
Mill throughput was just under 155000 tons.
Based on year to date production the current timeline associated with processing material from La Presse Yosef, we've adjusted our internal production estimate for the full year to 2.4 to $2 7 million ounces of silver equivalent.
Our five year growth plan takes us from production levels of 2.4 to $2 7 million ounces of silver equivalent to between eight and 10 million ounces of silver equivalent by 2028.
Turning to slide seven I would like to touch on exploration results from the third quarter.
8000 meters of drilling was planned for the year and we have now achieved 745 meters and the 2023 program is now completed.
We released results of September 14th that included four drill holes from below level 17, and on July 5th We also released three holes.
Moving onto slide eight the information from September 14 drill results are shown.
As mentioned in previous in the previous slide we released the assays from four drill holes, we hit substantial widths and grades well above our current cutoff grade on all four holes.
For whole E. T. Twenty-three 13, there was 0.7% copper 31 grams, silver and point to one grams gold over 44 meters of true width.
In addition, we have continued to define the hanging wall breccia them, which is an offshoot of the avino main vein that originates from surface.
The access to the breccia is relatively easily through existing development works and we are currently evaluating a mine plan to incorporate these resources into our medium term plans.
We were also surprised with the intersection of stock work vein close to surface, which indicated the complex and distributed nature of the stock work system that accompanies this thick main avino vein.
The drilling completed in 'twenty two 'twenty three followed the continuity of the steeply dipping mineralization and helps it and understanding the deep source of the mineralization.
Avino has enlisted a number of world renowned consulting geologist to contribute to the geological understanding of the mineralization characteristics.
The known depth extent to date of at least 750 meters of mineralization is significant.
On this slide you will see two images, revealing the drill hole location and the cross section of whole E. T. Twenty-three 13, where you can view the substantial width of the avino vein at the drill location.
The full intercept and drill data can be viewed in the news release, which is on our website.
Moving to slide nine.
This was very exciting for us we reported the best intercept in the company's history on July 5th we released three holes from the program below level 17 at the E. T area of the Vienna mine and one of the intercepts drilled drill hole E. T. 20, 309 showed 57 meters of <unk>.
True width.
Mineralization and is a step out of 50 meters to the west of Athena is most westerly drill hole and 200 meters down dip below level 17.
The whole assay 296 grams of silver equivalent over 57 meters true width, including 407 grams.
Grams of silver equivalent over 37 meters true width.
And 20, 866 grams of silver equivalent over 3.43 meters of true width.
There are two images on this slide that the one at the top is the longitudinal view of the avino vein join the drill hole locations and the projection of the mineralization in red.
In the lower image is a cross section of the above mentioned whole E. T 23.
And the down dip extension from the current mine workings.
The exceptionally wide and very high.
Silver gold and copper grades are extremely encouraging for our continued exploration of the avino vein and associated stock work.
Breccia at depth and suggest a much more complex mineralized as Asian system, we are still open along strike and at depth.
At this time I will now hand, it over to Nathan Harte Avino CFO.
To present, a venous Q3 financial results Nathan.
Yes.
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.
Turning to slide 10 for a review of the Q3 2023 financial highlights.
Our results from this quarter showed positive increases across the board in almost all key metrics Q3 was the best performing of 2023 when it comes to revenues mine operating income EBITDA adjusted earnings and operating cash flow generated before working capital movements.
Revenues for the quarter came in at $12 3 million, an increase of over $3 million from the previous quarter as well as the comparable quarter in 2022.
Mine operating income for this quarter was $2 4 million with $5 3 million generated year to date.
Cash flows generated from operations before working capital adjustments was $1 8 million totaling $4 1 million for the full year 2023, so far.
Adjusted earnings came in at $1 6 million or one cents per share for this quarter with the year to date total sitting at $2 6 million or two cents per share.
At September 30th we did see an increase in working capital of $2 8 million or 62%, bringing our total up to $7 4 million from the $4 6 million, we had at the end of the second quarter.
Coming to slide 11, I'll walk you through some key additional financial results as well as the ones discussed in the previous slide.
As noted already revenues came in at $12 3 million well up from the $9 1 million. We showed in Q3 2022.
As we move on from some plant operational challenges that affect the second quarter and part of the third quarter. We are looking for that trend to continue into the end of the year and onto 2024.
We generated mine operating income of $2 4 million for this quarter, which includes noncash depreciation and depletion and as compared to $2 1 million in the third quarter of 2022.
The increase is a result of higher revenues, which were offset by a very strong peso to U S dollar rate when compared to the third quarter in 2022.
On a cash basis mine operating income was $3 1 million, representing a cash operating.
<unk> margin of 26%.
Avino reported a net loss after taxes of <unk> 8 million or one cents per share for the third quarter compared to a loss of $1 1 million or one cents per share in 2022.
EBITDA was <unk> 7 million for the quarter and adjusted earnings were $1 6 million, both showing significant increases for the same quarter year over year.
Cash flow from operations for Q3 was $1 8 million before working capital adjustments up from one six in Q3 of 2022.
Here on Slide 12, you can see our cash cost per silver equivalent payable in the third quarter were similar to last quarter at $6 90, with both quarters elevated over results from 2022.
All in sustaining cash cost per silver equivalent payable ounce followed a similar trend. Although we did see a decrease from the second quarter as it came in at $22 69.
The increases for both metrics are in line with our messaging on our second quarter call and as a result of lower production from no recovery challenges and lower grades arising from the planned mine sequence in the underground.
On top of this the Mexican peso appreciated up over 15% in the third quarter compared to the 2022 average.
While we've seen an improvement on this front in the third quarter when compared to the second quarter. There has been an impact on our costs as the murderer majority of all of our expenditures are incurred in Mexico with local suppliers employees and contractors on site.
We have put a number of measures in place for cost reduction, including lowering haulage rates to match the mill throughput as we have generated a large ore stockpile over the last few months as well as certain administrative and ancillary personnel reductions.
Now coming to slide 13, you can see our cash cost per ton processed for the quarter came in above the recent average as well at 50 946.
On an all in basis, we were also up from our first two quarters, but we did come in below the 2022 average.
Increases on a per ton milled basis are primarily a result of higher mining and haulage rates as we mined over 200000 tons this quarter, which is about 30% higher than our mill tons of 154000.
Well Laura ounces produced per ton contributed to the increased costs as a result of the operational items mentioned before.
So far in the fourth quarter, we have seen improvements to both grade and recovery and controlling costs remains a key priority verbena alongside our growth plans.
At this point I will now turn it over to Jennifer North head of Investor Relations for an overview of our Q3 ESG initiatives.
Thanks, Nathan now turning to slide 14, we have listed our recent ESG initiatives for the third quarter of the year is continue to build on avino efforts to incorporate the principles of sustainability and social responsibility.
We have added members to the CSR team in Durango, and the department is working to ensure that we continue meaningful conversations with the communities that are close to the mine.
The activities carried out during the third quarter under the new CSR management team, we're focused on improving relationships between each of the communities and strengthening the social bond, while establishing a new social link between company and community.
The activities carried out whereas follows.
In all of our communities parents were offered summer courses for children age six to 12. This summer program was developed to encourage and promote healthy ways to manage children's summer free time.
Courses and workshops were offered in a number of different activities, including soccer Arts and crafts drying taekwondo and others.
In total of 220 children from the communities of Conoco to Coronado, Zaragoza, and San Jose Delfino participated.
In August arenas Medical Department conducted its annual first aid training for a period of six days or two sessions. A day. There were 119 employees from the mine coming from different departments to learn and improve the first aid skills.
As the high percentage of our employees come from the nearby communities. This training also benefits everyone in the adjacent areas. The goal is to ensure that all of our employees have the knowledge and skills necessary to be first responders in the event of an emergency.
Also the team put together several educational pieces to show our management of tailings, how we safely manage the tailings what dry tailings means as well as the testing process.
Educational Flyers and videos in Spanish and English have been posted to the website and shared in the communities.
For environmental compliance and for educational purposes water samples were taken at the Junior High School in September together with the residents of the Panera code to Coronado community alongside company Representatives to shell Avino sampling process.
In addition, the company continues with its ongoing community road works and delivery of garbage drums, and generally supporting and beneficial ways.
In September the company showed its commitment to the mental health of employees by commemorating World suicide Prevention day, where talks and sport or offered.
In addition, we are so pleased with the efforts of the CSR team in Durango as they were recognized for the second year in a row for the ESR distinction as being a socially responsible company.
This designation is a reflection of the passion and dedication of the company and shows that not only do we extract minerals, but we so knowledge to build a brighter future for generations to come.
Every day every action brings us closer to a brighter and sustainable future. The mine is more than a workplace is an example of responsibility and commitment to be in harmony with the environment.
One of the top private excuse me one of the top priorities for Avino is to provide jobs to those in the surrounding communities with the goal of fostering generations are enthusiastic and dedicated ambassadors of avino.
We currently have 448 direct jobs, which includes the workers at the mine site and in our Durango offices. This number of jobs would typically translate to three times the number of indirect jobs for services consultants and suppliers and the surrounding communities and then triangle area.
In September I was fortunate to go with just your ankle and spend time on site in the offices talking about our strategic alignment goals that span across the company and communicating how we can work towards shared goals and vision. We have an action plan to inform educate and support all of our employees and community members to become ambassadors of Athene.
Now and that we will all benefit when community and company are aligned. This success of Avino is dependent on its people profitable operations community support and a strong and sustainable P. A chair.
I will now turn it back over to David to continue on with the presentation, providing our plans for the coming quarter David.
Thanks, Jan moving to Slide 15, you can see our plans for the remainder of 2023, we are now well into the final quarter and the pre feasibility study on the oxide tailings project is well underway, we expect to present the results to the market in Q1 'twenty 'twenty four.
We were also focused on our plans for that.
The Gloria in Abadan, Sia veins at La Z OTA with community engagement ongoing as we ready ourselves to begin development work equipment is being sourced in the environmental permit application has been prepared and we are finalizing it for submission.
As we have mentioned previously we are in talks for the social blessing with the <unk> group and this is something that takes time and patience.
We will let the market know when this is finalized and in the meantime, we continue to negotiate in good faith. So we may move forward with this with our plans.
As mentioned earlier, our drilling program for 2020 three is complete and we will.
Be reviewing the results to determine next steps for 'twenty 'twenty. Four lastly, the main goal is to replenish the treasury from cash flow generation from the Avino mine as we look forward to the future development at La Presse user and that.
Oxide tailings projects.
On slide 16, we want to reemphasize the company's plans for growth, we have three assets within 20 kilometer footprint totaling hundreds of millions of silver equivalent ounces.
On the same area, we are operating a mill complex.
Which is currently producing from the Avino mine.
Additional access to water power and tailing storage all ingredients to grow organically without the major capital investment required that would be that would expect if you were starting from scratch.
As you can see on this slide our goal is to scale up by 2028 through the production from these three assets.
Lastly, please move to slide 17, where we present, our continued initiatives for growth which are.
Development production and optimization of La Presse user.
The tailings project pre feasibility study and eventual construction decisions.
Developing next steps for exploration and drilling evaluating recommendations made by renowned structural geologist.
We would now like to move the call to the question and answer portion operator.
Thank you we will now begin the question and answer session.
She joined the question queue you May Press Star then one on your telephone keypad.
Hear a tone acknowledging your request if youre using a speakerphone. Please pick up your handset before pressing any key to withdraw your question. Please press Star then two.
Our first question is from Heiko.
With H C. Wainwright. Please go ahead.
Hello, Hello, Hello, Yeah.
Good morning.
Thanks, Good morning Heiko.
Well of course also called <unk>.
You bet.
It really well.
And then also the wallet.
Given commodity price.
And just a general one.
Oh how alone.
Sure.
Over the past few months and interest capital y.
Yes.
All of them.
Sorry, Heiko youre not coming in very clear I don't think can you repeat the question.
Okay.
That's better.
That way thank you.
Yeah.
Okay perfect.
What I'll say is let's talk about the pressure also for a bit and all of you the asset should really help grow the firm in the intermediate and also the longer term.
Given current commodity pricing the Mexico Mexican political climate in just general market sentiment.
Your April timeline for the apps it shifted in any way over the past few months and building on that question just capital wise, how much cash flow do you anticipate using for the flight in calendar 'twenty four.
Well first of all the grade that we're gonna be mining there is much higher than what we're mining now so we're excited about that the timeline.
Basically hasnt started until we get the blessing of the heaters, which where we think we're in the 11th inning, we've gone back and forth.
I've been discussing.
Discussing at their assemblies, so we think possibly before the end of the year, we could have an agreement in place and there's above ground stockpiles that we can start processing right away.
Yeah on the <unk>.
Side of things, obviously as David mentioned, we expect to generate a lot of cash flow from leprosy Asa.
But as far as the development and paying for that.
One of the nice things is we will be developing an ore as we start to lap S. U S. As we follow our mine plan, but as well with the with Avino, We do project to generate cash flow in Q4 and continue into 2024.
Some cash flow to invest in the emission initial my plan is on the Gloria vein, which is really close to the surface is aren't going to be very expensive and the above ground stockpiles will pay for a lot of it.
Fair enough.
The on the oxide tailings project seems to be moving along quite well I'm not sure. If you can disclose any of us really but have there been any impact positive or negative anything compared to what you had previously anticipated for the asset.
I mean anything that you've seen as the study is getting together.
Ah Yes, Tycho. Thank you for the question a couple of things to note actually you know we have a lot of construction experience that's something that we've done well with the expansion in circuit for with the dry stack tailings and that experience directly translates to.
Accurate predictions and pricing for this plant and that's going to be lower cost than and typically what are what are an engineering company with spec for this so we feel that we'll be aggregate with our construction costs based on our experience and the big changes, where we went from looking at a heap leach to dynamic leaching, which is contained.
So I mean, if I just wanted maybe.
Summarize the changes that we've seen you know when we did that drilling. We also found a lot more material you know we increased our resource significantly and that was updated in the resource and certainly you know we'll have have reserves that come out of this pre feasibility study and and that's that will be forthcoming I can't say too much on that.
But that would be a big big change as David mentioned the change in process from heap Leach to dynamic leaching and and then finally, our construction experienced.
To really dial in accurate costs that are lower than industry average.
Fair enough.
The oldest bulk of my questions related to things in the future that's by design and not a coincidence because I think the future potential is quite large and with that I'll go back in queue. Thank you very much.
Thank you Heiko.
Yeah.
The next question is from Jake Zukowski with Alliance Global Partners. Please go ahead.
Hey, David.
Thanks for taking my questions.
Hi.
Jay.
Just starting from from a high level I mean, the strength of the peso is something thats negatively impacted producers across the board in Mexico This quarter.
I was just wondering if you can touch on that impact.
The costs and maybe on any hedging programs you have or you plan to to engage on going forward.
Yes Jack.
Jack Nathan here.
So obviously you can see across all the producers in Mexico. The impact this has had even that developers or anyone really.
So it is not something that we did see this in the second quarter as well probably worse in the second quarter actually but then there's a there seemed a little bit of an improvement in the third quarter.
So where we're actively managing kind of our foreign exchange rates.
Especially because.
Now, where we pride ourselves in spending a lot of money in pesos, because we're with local contractors and suppliers and in the end you know we have a 100% Mexican labor force down at site.
So that obviously is something that does have a direct impact on us.
As far as hedging Grumman programs that we do monitor and we are continuing to to tracking our projections for the peso a lot of sentiment is that it will back off.
Having said that when we're going through our budget process for next year will be we'll be looking at some some alternatives for managing the peso hedging being one of them.
Yeah.
Oh boy.
That's helpful.
And then just more of a housekeeping item Capex was just under 2 million in Q3 is that sort of a baseline level you should expect going forward heading into next year or do you have any larger sustaining capital items are that you see popping up over the next year.
For again Nathan here, so for Q4, probably fairly light.
Dailies daily a bit lower we do have some larger capital maintenance items, we have to do some with some overhauls of some equipment that will be likely in 2024, but also looking towards la Presse, Yasser, which as you noted is an exactly sustaining capital that's growth capital for us.
We have acquired some equipment for that but we will need more and as well obviously some of the cash flow generated from avino is earmarked for development. We got the most important piece of equipment or new jumbo.
Yes, we are we driving the ramp.
So we have gotten equipment ahead of ahead of time stuff that can be used at avino in the meantime, but can be transferred over to leprosy also as soon as we get the green light.
Yeah.
Okay that makes sense, that's all for me thanks again.
Thanks Jake.
Okay.
The next question is from Matthew O'keefe with Cantor Fitzgerald. Please go ahead.
Thanks, operator, and good morning, Thanks for taking my call just a couple of operational questions for you first up on the you mentioned you hold out.
Whoops.
207000 times 207000 times, the surface about 3% more than you milled.
What's the nature of those kinds of things like low grade going through a low grade stockpile or you're building out a stockpile is it reflecting increased efficiency.
From the mining side could you talk about that a little bit.
Yeah. Thanks, so much Matt that's a great question, we have and so if you remember last quarter, we improved our wrap conditions and that has dramatically improved the ability to haul from underground.
So we have been hauling the mine has been outperforming the mill so to speak and that's building a stockpile and that would be actually high grade stockpiles are the issue with some of this mature I shouldn't say the issue or the challenge with it is some of those builders are quite large so we needed a rock breaker that is now on site to break some of that material. So in Q4, we look to be slowing hall.
A little bit to it to draw down on those stockpiles, which will help improve our cost certainly as well as see some some very good grade that go through the mail as well, where we're looking right now.
Okay. Okay. That's good and then just another question on the on the mill itself.
I know you've made some modifications, but we've now last couple of quarters, we've seen recovery as trend down book for silver and copper can you discuss that a little bit on can we expect to see that.
Yeah, those recoveries move back up.
Yeah, I think the.
The simple answer is yes, I think we can expect those recoveries and grades to move backup and the reasoning for the decrease in grade as we didn't have a piece of equipment that rock breaker on site to break some of the larger on oxidized material and as a result, we had a higher percentage of the defined material was was oxidize.
So that has a twofold effect one the grades a little bit lower and then the recovery rates are a little bit lower in Europe, when youre, starting with the lower grade even if you have the same tailings grade your recovery ends up getting hit a little bit. So it's kind of the double whammy are the nice the nice.
Are the fact is that we are now through that material. We have the rock breaker. We're now breaking those larger builders that are that have the higher grade material and we're already seeing the higher recovery in grades at <unk> and the automation has worked well. It's just a few key pieces of equipment were delayed in horizon that affected certain circuits.
Okay and is that oversize material.
Colin that you've had or is that a function of different different or you need to work a bit more on some of your your.
Some of your blast.
I met him.
Yeah.
That's a fair question no as far as blasting.
Have a lot of rock rock mechanics consultants come in and we've kind of optimized the blasting it's kind of the nature of the E. T ore body is that sometimes you get some some relatively large boulders in different sections.
And so you just you know you need you need a rock breaker on surface to defend some of that through the stock work systems. When they blasted the shock goes down where the fractures are in and it just happens we've had experts onsite as you said and we've optimize it as best we can.
So we just get some slabs to David's point.
Okay, great. That's it for me. Thanks, Thanks for filling in those gaps I appreciate it.
Thank you.
Yeah.
Once again, if you have a question. Please press Star then one.
The next question is from Richard Mango, a private Investor. Please go ahead.
Please go ahead. Good morning, gentlemen, thank you for taking my call I have a quick question in reference to wanting more color on the third little hidden group and what happens if they choose not to sign does it go to arbitration or what actually happens.
Well, we're in the final stages.
Steve.
Negotiations with them.
Pardon me Mr. Yang.
Thank God, you get your phone or getting a feedback.
Okay.
Is that better.
Alright.
Yeah. So we're in the latter stages of negotiation they want the agreement in place. So it's just fine tuning it so it's it's eminent.
But I guess my point is if they choose not to assign what happens.
They want to sign they want the economic benefit so what's happening is moving forward.
Okay alright, thank you.
Okay.
This concludes our question and answer session I would like to turn the conference back over to David Waldman for any closing remarks.
Well. Thank you everyone for joining us on this call today, we're looking forward to a better a healthy Q4, so stay tuned for some moves so news from US we will have the pre feasibility study completed in Q4, so hopefully we can get that.
News out to you before year end, if not it'll be early in January so thanks, again and have a great day.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
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Okay.
Yes.
Okay.
Yeah.
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