Q3 2024 Avino Silver & Gold Mines Ltd Earnings Call
Speaker Change: Welcome to the Aveno Silver and Gold Mines third quarter 2024 financial results conference call and webcast.
Speaker Change: As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star, then 1 on your telephone keypad.
Speaker Change: Should you need assistance during the conference call, you may signal an operator by pressing star and zero. I would now like to turn the conference over to Jennifer North, Head of Investor Relations. Please go ahead.
Jennifer North: Thank you, Operator. Good morning, everyone, and welcome to the Aveeno Silver and Gold Mines Limited 3rd Quarter 2024 Financial Results Conference Call and Webcast. To join this webcast and conference call, there is a link in our news release dated October 17, 2024, and in our news release of yesterday's date, which can be found on our website under News 2024. In addition, a link can be found on the homepage of the Aveeno website.
Jennifer North: On the call today, we have the company's President and CEO, David Wolfin, our Chief Financial Officer, Nathan Harte, our Chief Operating Officer, Carlos Rodriguez, and our VP, Technical Services, Peter Latta.
Jennifer North: 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.
Jennifer North: 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.
Jennifer North: The company does not intend to and does not assume any obligation to update such forward-looking statements or information other than is required by applicable law. For more information, we refer you to our detailed cautionary note in the presentation related to this call or on our press release of yesterday's date.
Jennifer North: Please note that full financial statements in MD&A are now available on our website under Investors tab and then click on Financial Statements, as well as the full statements are available on Aveeno's profile on CDERplus and on EDGAR.
Jennifer North: Just a reminder that this conference call is being recorded and will be available for replay later today.
Jennifer North: Replay information and the presentation slides from this conference call and webcast will be available on our website. Also, please note that all figures stated are in U.S. dollars unless otherwise noted. Thank you. I will now hand over the call to Inveno's President and CEO, David Wolfin. David?
David Wolfin: Thanks, Jen. Good morning, everyone, and welcome to Aveeno's Q3 2024 Financial Results Conference call and webcast.
David Wolfin: We will cover the highlights of our financial and operating performance, and then we will go over the work that we are currently performing followed by a Q&A
Speaker Change: I will start with a discussion on operations, and then I will turn it over to Nathan Harte, Aveno CFO, to discuss the financial performance for the period, and then Jennifer North, Head of Investor Relations, will present an overview of Q3 ESG initiatives.
Speaker Change: Please turn to slide 5 as we go through the production results.
Speaker Change: Our team delivered a strong third quarter with total equivalent production results increasing by an impressive 13% over the third quarter of last year.
Speaker Change: The full Q3 production results were released in mid-October and are as follows. Silver equivalent production was 671,000 oz. Silver production was 282,000 oz. A 19% increase compared to Q3 2023.
Speaker Change: Copper production was 1.8 million pounds. Gold production was just over 1,600 ounces. Mill throughput was 157,000 tons.
Speaker Change: Moving on to slide 6, we will review our Q3 updates beginning with the Aveeno mine.
Speaker Change: It was a strong quarter from an operational standpoint, with higher realized metal prices from all three metals and improved unit operating costs.
Speaker Change: Next, mill availability together with higher grades and recoveries in silver and copper put us back on track for a production guidance of 2.5 to 2.8 million ounces of silver equivalent.
Speaker Change: for 2024. In addition, we resolved ore-crushing challenges that were experienced in June and July.
Now moving on to La Preciosa.
Speaker Change: continue to process La Preciosa historical stockpile material as part of the sampling program to prepare for fresh mill feed.
Speaker Change: The initial recoveries from the lower grade material were better than expected and provide potential upside as the project moves forward.
Speaker Change: The operations teams are in the last phases of securing approvals to move ahead with underground development at La Preciosa.
Speaker Change: As the next phase of our growth strategy, La Preciosa is an important component of our transformational growth plan. Our five-year strategy aims to increase production, targeting between 8 and 10 million ounces of silver equivalent by 2029.
Speaker Change: At this time, I will now hand it over to Nathan Harte, Avenos CFO, to present Avenos Q3 2024 financial results. Nathan?
Nathan Harte: 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.
Nathan Harte: Turning to slide 7 now for a summary of the key financial highlights for the third quarter.
Nathan Harte: The third quarter built off Q2 with another quarter of improved financial performance.
Nathan Harte: We generated $14.6 million in revenues and a quarterly record of $5.7 million in gross profit.
Nathan Harte: On a cash basis, mine operating cash flows before taxes was $6.7 million, representing a 45% margin and is our highest in recent history.
Nathan Harte: As highlighted in our last call, balance sheet strength will be key over the coming months as La Preciosa development gets underway.
Nathan Harte: Turning to slide 8, I'll walk you through some of the details of our financial results, some of which I did touch on the previous slide.
Nathan Harte: Again, highlighting gross profit of 5.7 million and mine operating cash flows before taxes of 6.7 million. We saw further improvements in all financial metrics for the third quarter when compared to Q2 and Q3 of 2023.
Nathan Harte: Our gross profit margin was 45% on a cash basis. This further exceeded our prior record of 40% margin from last quarter, taking the crown as our highest since operating the Aveno mine as a full-scale underground production operation.
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Nathan Harte: Other figures for Q3 not previously discussed are CapEx and Free Cash Flow at the bottom of the table, with CapEx being flat period over period and we saw a meaningful positive swing in Free Cash Flow of over $4 million as we generated $2.3 million in Free Cash Flow in Q3.
Nathan Harte: This is compared to $1.9 million in cash flow used in Q3 of 2023.
Nathan Harte: Moving over to the year-to-date columns, again we saw increases across all metrics with revenues up 33% and gross profit up 142% compared to the first nine months of 2023.
Nathan Harte: Net income was three million or two cents per share with EBITDA coming in just shy of nine million.
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Nathan Harte: Adjusted earnings paint a similar picture with improvements compared to 2023 with 11.4 million or 8 cents per share generated so far this year.
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Nathan Harte: On a per share basis, this year has generated $0.07, with the comparable 2023 period being $0.03 generated.
Nathan Harte: After working capital adjustments, cash flow from operations generated was $7.6 million, compared to just under $1 million in the first nine months of 2023.
Speaker Change: For 2024, we have been free cash flow positive, with $2.6 million generated. This is a meaningful swing from the $6.5 million used in 2023 and is a testament to Aveeno's operational performance in Q2 and Q3 of this year.
Speaker Change: Here on slide 9 you can see our cost per ounce figures for the third quarter improved from Q2 and back to our expected trend line.
even with lower ounces sold than expected.
Speaker Change: We highlighted our expectations for a reduction in costs on our Q2 earnings call, and we are pleased with the improvement.
Speaker Change: Our cash cost per ounce number for Q3 came in at $14.94. As you can see on the chart, this has improved from last quarter and from Q3 of last year, and below the 2024 average to date.
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Speaker Change: All in sustaining cash costs per ounce came in at $22.06, decreasing from last quarter. This was also impacted by lower ounces sold, as we do expect further reductions.
Speaker Change: The lower ounces sold in the period were primarily a reflection of mill availability in late June up until mid-July.
Speaker Change: We rebounded in August and September, however, and our strong September production did remain in concentrate inventory at September 30th.
Speaker Change: Ansys sold subsequent to September 30th have been higher than previous months and we look forward to reviewing our fourth quarter figures.
Speaker Change: Coming to slide 10, you can see our cost per tons process for the quarter was materially improved from last quarter.
Speaker Change: We see more improvement compared to Q2 on this slide versus the cost per ounce slide as there was no production to sales time gap.
Speaker Change: On a cash cost basis, we came in under $50 per ton, a decrease of 27% from last quarter, which demonstrates the operational strength of our team.
Speaker Change: Running an underground mine at these cost levels is a tremendous achievement. This quarter's operational results brought our average for the year down to 55.68 and is more in line with our lofty expectations of the Aveeno mine.
Speaker Change: All in Sustaining Cash Cost Per Ton Process tells a similar story for the quarter at $72.15, below recent quarters and in line with Q1 2024.
Speaker Change: The average for the year so far is 78.46 and this is where we expect to be rounding out the year.
Speaker Change: With the Mexican peso weakening since the election, the pressure on our cost structure has eased. We are taking measures to protect our cost structure for the rest of the year and into 2025, especially with the recent strength of the US dollar.
Speaker Change: With metal prices remaining elevated and the anticipation of La Preciosa, we are looking forward as our focus shifts to the growth side throughout the rest of 2024 and into 2025.
Speaker Change: At this point, I will now turn it over to Jennifer North, Head of Investor Relations, for an overview of our Q3 ESG and CSR initiatives.
Jennifer North: Thank you, Nathan. Moving on to slide 11, we have listed the ESG CSR initiatives that were completed in the third quarter of 2024. AVENO follows the ESG standards and the United Nations Sustainable Development Goals, or the SDGs, that work together to address the most pressing challenges facing the world.
Jennifer North: Third quarter activities were focused on SDG number four, quality education.
Jennifer North: SDG No. 6, Environment, Clean Water and Sanitation, and SDG No. 9, Industry, Innovation and Infrastructure, to build resilient infrastructure, promote inclusive and sustainable industrialization, and foster innovation.
Jennifer North: In the communities, the following support was provided. In San Jose de Avino, bridge work to prevent overflows during rainy season, road maintenance, installation of a new bell in the Avino church, landfill maintenance, and delivery of school supplies.
Jennifer North: In Ignacio Zaragoza, there was water irrigation work done for a special celebration, landfill rehabilitation, and a social perception study focused on how to motivate future generations in the communities.
Jennifer North: and Penuca de Coronado, we are looking to assist the community in coordinating better health systems.
Jennifer North: Currently we have 471 direct jobs. This number of jobs will typically translate to three times the number of indirect jobs for services consultants and suppliers in the surrounding communities in the Durango area.
Speaker Change: I will now turn it back over to David to continue on with the presentation providing our plans for the coming quarter.
Thanks, Jen. Moving to slide 12.
David Wolfin: We are thrilled to see the metal prices continue their rally in the third quarter and continue to remain strong. Our solid production results position us favorably as we prepare to achieve our transformational growth objectives through the advancement of La Preciosa.
David Wolfin: I would like to thank our operations teams for doing a tremendous job in Q3 by keeping costs down while increasing production.
David Wolfin: We have seen higher grade material continue well through October and for the first part of November.
David Wolfin: We continue to prioritize our plans for La Gloria and Abundancia veins at La Preciosa. In addition, we are currently mining at level 14 at Elena Tolosa.
David Wolfin: and we expect to move up to level 12.5 later in the quarter where we expect higher silver grades.
David Wolfin: As outlined in slide 13, we want to reemphasize the company's growth plans. We have three assets within a 20-kilometer footprint, totaling hundreds of millions of silver-equivalent mineral resources.
David Wolfin: In the same area, we have an operating mill complex, which is currently producing from the Aveeno mine. Additionally, access to water, power, tailings storage, all the ingredients to grow organically, without the major capital investments required that would...
expect if we were starting from scratch.
David Wolfin: As you can see on this slide, our goal is to scale up by 2029 through production from these three assets.
David Wolfin: By capitalizing on our existing assets and resources, we can execute our growth plans efficiently and effectively. This approach not only mitigates risk associated with new project development, but also positions us for the long-term success and value creation.
Speaker Change: We'd now like to move the call to the question and answer portion. Operator?
certainly
Speaker Change: Thank you. We will now begin the question-and-answer session. To join the question queue, you may press star then 1 on your telephone keypad. You will hear a tone acknowledging your request.
Speaker Change: If you are using a speakerphone, please pick up your handset before pressing any keys.
Speaker Change: To withdraw your question, please press star then 2. We will pause for a moment as callers join the queue.
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Speaker Change: Your first question for today is from Heiko Ele with HC Wainwright.
Hey, David and team. Thanks for taking my questions, I.
Speaker Change: Hey, let's talk about the production increase at the Avino mine just this morning went through your October 17th production press release again
Speaker Change: May ensure you pin the strong production on mobile performance and availability.
Speaker Change: At this point, we're more than two days, we'll be halfway through Q4.
Speaker Change: Would it be fair to model the same performance, uptime, availability, etc. for Q4 as what you saw in Q3 or have there been any changes?
says.
may change these things either positively or negatively.
The End
Speaker Change: Hi Heiko, thank you very much for the question. I think that's fair at this point. December obviously is a bit slower month with the amount of holidays that we have, but I think what we've seen so far has been a continuation of that, but we're always conscious of going into the holiday season, and certainly it's a very important season to our Mexicans.
David Wolfin, Jennifer North, David Wolfin,
Speaker Change: This may be a question for Nate, but I'll throw it in here anyways. You had mine operating cash flow of $6.7 million in the quarter.
Speaker Change: Do you guys have a sensitivity analysis or just some guidance maybe even for the impact of a $1 change in the price of silver? Has it in your mind operating cash flow? Maybe even for the fiscal year Q4 and then if you want to take a crack at it, maybe even for 2025 given, you know, some of the cost increases that are probably especially in the longer term associated with the higher commodity pricing?
and Nathan Harte. Thank you. Thank you.
Speaker Change: It's pretty close to 100% obviously, and we have seen improvements on the cost side, but as I mentioned just with that, you know, there's a lot of other inputs that go into mine operating cash flows. So if everything remains constant, sure, you know, it's dollar for dollar, but there are a lot of other inputs that go into that.
Happy to discuss that one offline if it's easier.
Speaker Change: I think that may make more sense. I'll get back to you, thank you.
Thank you.
Speaker Change: Your next question is from Jake Sikelsky with Alliance Global Partners.
Thank you.
Hey David, Nathan, and team, thanks for taking my questions.
Morning, Jake. Morning, Jake.
Speaker Change: So, starting with the stockpiled material, Alaf Garcia, can you just remind us what's remaining on those stockpiles, just trying to get a sense of how we should be looking at that heading into 2025?
Speaker Change: Yeah, I think we've processed all that we're going to process from it. We sampled, you know, a lot of different areas to just get an idea of the grade and I think we've processed through what we want to process.
Thank you.
Sorry, okay. And staying in that vein...
Speaker Change: As we're getting near the underground at La Preciosa, can you just touch on sort of some of the development costs that you see coming in the next few quarters to reach fresh ore and maybe even the timing of that material getting to the mill?
Nathan Harte: Sure, Jake, Nathan here. I think, you know, key, obviously, is getting into the underground and getting started and that'll determine the exact timing of the capital spend and the development costs there. In our 24 guidance, we did put out CapEx estimates of about, you know, $3 to $4 million in costs associated with that initial development and we're still thinking that that's probably accurate. Having said that, with an improved balance sheet, we are looking at ways to increase.
Nathan Harte: to increase the throughput much quicker, I guess accelerate those plans. So we'll provide a bit more color to that probably early in the new year, but as of now, yeah, we still stick with the same guidance we had.
Speaker Change: Got it. Okay. And then just lastly, Nathan, you touched on the weakening peso on the back of the election. Are you getting a bit more aggressive on hedging there or is that something that you're going to be working through as you get through 2025 budgeting?
Nathan Harte: Yeah, it's a pretty topical question. Obviously, I'm sure we're not the only ones looking at it right now. We, you know, given the weakness we saw, and especially in 2023, and all the way up to essentially the Mexican election, we are taking some measures to protect ourselves, especially above this 20, 20.5 range from Peso to USD. So yeah, we are definitely taking some measures to make sure that, you know, for 2025 budgeting purposes, we have an expected Peso rate that we can use and accurately stick close to.
Nathan Harte: just it helps with with cost management and you know it has been quite volatile this past year and we want to make sure that the company's set up good for 2025.
Speaker Change: But metals remain unhedged. Yes, as David said, we do not hedge any of our metals.
Speaker Change: Okay, very good. That's all for me. Thanks again. Thank you. Thanks.
Speaker Change: Your next question for today is from Joseph Rieger with Roth Capital Partners.
Hey, David and team. Thanks for taking the questions.
Speaker Change: I guess first at La Preciosa, can you guys give us just an updated outlook on your timeline there as far as what items still need to happen and when?
Speaker Change: The final item that needs to happen is the military needs to go to site to check the building that we've built to house the explosives. That's it. We've satisfied everything else.
Speaker Change: Okay, and a timeline on that so you guys can get going with the underground development?
Speaker Change: It's up to them, but we're hoping before the end of the year.
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Okay, great. And then...
Speaker Change: I guess a question for Nathan on taxes. Your effective tax rate's been a bit elevated the last two quarters, and I've seen that with a couple other Mexican-based mining companies. Is there anything we should be reading into that, or is it just a timing thing?
Thank you.
Nathan Harte: That's a good question. I think a lot of it you can see at least from our perspective, a chunk of that is on the deferred side, which is more so reflective of people using up their tax losses they would have generated in probably 2023. I know that's the case for us.
Nathan Harte: So I would think that should stabilize a little bit. And on the current side, yeah, I mean...
Nathan Harte: Obviously Q2 and Q3 were very profitable quarters for us, so we're paying our fair share to the Mexican government. But when we get La Preciosa up and running, we have significant tax losses to carry forward that we inherited from CORE. Yeah, so there should be some relief there as we get La Preciosa moving forward.
Nathan Harte: and I'm going to be talking about the the the the the the the the the the the the the the
Okay, thanks. I'll turn it over.
Thank you.
Thank you Joe.
Your next question is from Matthew O'Keefe with Cancer Fitzgerald.
Speaker Change: Thanks, operator. Good morning, everyone. Most of my questions were answered.
Speaker Change: I just wanted to ask, just on the sustaining capital, your cost per ton, you're in a very nice range here. Just wondering on sustaining capital, when you're looking at all in sustaining,
Speaker Change: That bounces around a fair bit. What can we expect sort of going forward as a range and are there any major, out of VenoMind, are there any major items coming up or we've kind of passed most of that?
Speaker Change: So we expect probably similar to Q3, maybe a bit more, but I think, you know, a couple million a year is kind of what we've guided everyone on the sustaining side, and so we think that that will stick. And then, of course, obviously, we're going to have capital at La Preciosa, and that'll be development and then non-sustaining capital.
Speaker Change: Right, okay. And on the Peso, you addressed that. I'm just wondering, how sensitive are your costs to Peso?
It's a peaceful movement.
Speaker Change: Fairly sensitive. I think, you know, we obviously get our revenue coming in in U.S. dollars and with most of our cost in Mexico and a pretty lean team here in Vancouver, we're probably close to 75% on the peso, with, you know, some capital and operating payments being in USD.
Speaker Change: The majority is peso, hence why we're looking to protect from any further volatility in the peso. I think we suffered quite heavily in 2023, along with a lot of the other Mexican producers. So, yeah, that's it.
Speaker Change: Good, all right, that's it for me. I congratulate on a good quarter, really good.
Thanks Matt. Thanks Matt.
The End
Speaker Change: Once again, if you would like to ask a question, please press star 1.
That's it, thank you, I'm sorry.
Speaker Change: We have reached the end of the question and answer session, and I will now turn the call over to David Wolfin, President and CEO, for closing remarks.
David Wolfin: Thank you all for joining our call today. We're very excited about the company's future. We're fully capitalized to reach our goals at La Preciosa.
David Wolfin: and we're maintaining a disciplined approach with the strong margins and a clean balance sheet. Stay tuned for encouraging news to follow at La Preciosa once we get the necessary approvals. Have a great day.