Q3 2024 Andean Precious Metals Corp Earnings Call

Good morning and welcome to Andean Precious Metals third quarter 2024 results conference call.

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Speaker Change: I would now like to turn the conference over to Amanda Mallough, Director, Investor Relations. Please go ahead.

Thank you, Operator, and good morning, everyone.

Speaker Change: Before we get started, I would like to point out that during today's call, we may make forward-looking statements as defined under Canadian securities law. I ask that you view our slide presentation for cautionary language regarding forward-looking statements and the risk factors pertaining to these statements.

Speaker Change: Our press release, MD&A, and financial statements are available on both CDAR Plus and our corporate website, AndeanPM.com.

Speaker Change: With us on today's webcast is Alberto Morales, Andean's Executive Chairman and CEO, Juan Carlos Sandoval, our Chief Financial Officer, Dom Kizek, our new Vice President of Finance and Corporate Controller, and Alex Pascual, our Director of Financial Planning and Analysis.

Speaker Change: Following management's formal remarks, we will open the call to questions. And now, over to you, Alberto.

Thank you, Amanda, and welcome everyone.

Alberto Morales: We are pleased to report a solid quarter with strong financial performance.

for Q3 2024.

Alberto Morales: We generated record consolidated revenue of 68.4 million, supported by an average realized gold price of $2,413 per ounce and silver at $31.40 per ounce.

Alberto Morales: This revenue helped us close the quarter with a stronger financial position, including a record $98.1 million in cash, cash equivalents, marketable securities, and short-term investments.

Alberto Morales: Our ability to generate $17 million in free cash flow this quarter despite additional capex expenditure

Alberto Morales: Gross profits came at $21.4 million, driven primarily by lower underlying cost of production.

Alberto Morales: On the production side, we deliver consolidated Q3 output of 29,284 gold equivalent ounces, which is equivalent to 2.3 million silver ounces.

Alberto Morales: Golden Queen produced 14,025 gold equivalent ounces while San Bartolome contributed with 1.2 million silver equivalent ounces supported by improved recovery.

Alberto Morales: We'll discuss the doctrine in greater detail later in the call.

Alberto Morales: But now, I'd like to reaffirm our 2024 production guideline, which we expect to achieve at the lower end.

Alberto Morales: We also anticipate a reduction in operating cash costs and oil and sustaining costs per call down sold in Q4, thanks to increased production levers and lower capex.

Alberto Morales: I'd also like to welcome Dominic Isaac to our management team as Vice President Finance and Corporate Controller.

Alberto Morales: Dominic is here with us on the call today and brings a wealth of experience from his time at New Gold, Battle North Gold, and Agnico Eagle.

Alberto Morales: Lastly, on health and safety, we recorded one lost time injury at San Bartolome in Q3, while Golden Queen achieved 403 consecutive days without a lost time injury.

Alberto Morales: We look forward to sharing further details on these results and answering your questions. With that, I will hand this over to Juan Carlos who will walk through our financials in greater detail.

This impressive growth you say, we sold of gold and Queens contribution and higher silver prices at San Bartolome.

Speaker Change: I felt that already mentioned the company ended Q3 with a robust balance sheet holding $98 1 million in cash cash equivalents marketable securities and short term investments.

Speaker Change: This balance sheet position enables us to fund our key initiatives, while maintaining financial flexibility.

On the cost side.

Total cost of sales rose to $41 6 million for the quarter.

Speaker Change: Selecting the additional production expenses associated with the cold and Queen.

Speaker Change: However, at San Bartolome, we saw lower Bill lithium pollyanna the nominated the operating expenses, helping us to partially offset the increase.

Speaker Change: Depreciation and depletion also rose to $5 3 million this quarter driven by the inclusion of calls in Queens passive.

Speaker Change: General and administrative expenses were $6 3 million in Q3 with a portion of this increase is also due to cold and Queens acquisition and associated corporate costs.

Speaker Change: EBITDA was 20.1 million and $48 1 million for the three months and nine months ended respectively.

Speaker Change: Adjusted EBITDA was $19 2 million for the quarter, reflecting strong revenue growth from both clothing, Queen and San Bartolome.

Speaker Change: For the nine months ended September 30, adjusted EBITDA reached $43 9 million showing the positive impact of lower operating costs and higher realized prices for both EBITDA and adjusted EBITDA.

Speaker Change: Capital expenditures for this quarter totaled $15 9 million.

Speaker Change: Supporting ongoing projects at Golden Queen and Dr. F D a facility at San Bartolome.

Speaker Change: On the topic of Capex, we had inquiries start 'twenty 'twenty four Capex program and now anticipate total capex spend of $36 million.

The increase is primarily driven by higher investments at our Golden Queen mine, which we will discuss in more detail in a couple of slides.

Speaker Change: In summary, Q3 was another strong quarter financially.

Speaker Change: Mark Martin marked by record revenues robust cash flows and a healthy cash balance.

Speaker Change: These results position us well to pursue growth opportunities, while maintaining financial stability.

Speaker Change: Moving onto slide eight sound bars are some bartholomeusz operating financial performance.

Speaker Change: In Q3.

Speaker Change: Somebody told them, they're purchased 220000 tons of material, marking a 6% increase over the last year as we continue sourcing third party oxide material to support our processing capacity.

Speaker Change: Total throughput was lower year over year at a 0.3 million tons.

Speaker Change: Primarily due to the planned sensational for mining activities by Jaquess.

Speaker Change: However, we maintained robust processing levels by bringing in materials from Parker another local sources, ensuring steady output.

Speaker Change: Silver equivalent production was 1.2 million ounces down slightly from last year due to changes in throughput.

Speaker Change: Revenue for Q3 was 35 4, million% to 7% decrease compared to last year, largely driven by lower sales volumes. Despite the favorable favorable impact of higher average silver prices.

Speaker Change: At San Bartolome recoveries were 83% that tier three versus 76% for the same period of two in 2023.

We have had a steady increasing recoveries during 2024.

Speaker Change: The optimizing operation process.

Speaker Change: On the cost side total cost of sales decreased significantly.

Speaker Change: 18th 19 million.

Speaker Change: Selecting our improved cost controls and favorable foreign exchange.

Speaker Change: The cash gross operating margin per silver equivalent ounce saw soy strong increased to 12.3 dollars.

Speaker Change: In dollars up from 2.5 of last year well.

Speaker Change: Oh gosh a margin ratio.

Speaker Change: Showing improved to 46, 6%.

Speaker Change: Both metrics benefiting from higher silver prices are lower operating costs in.

Speaker Change: In terms of capital expenditures Q3, spending was $1 4 million down from last year as we wrapped up work on or after the F project.

Speaker Change: This facility is expected to reach before end of Q4 of this year deeper higher grade sections, and we've been steadily increasing mill throughput position us well for upcoming quarters.

Speaker Change: In summary, somebody told me is delivering steady performance with strength in margins and disciplined cost management were optimistic about the continued benefits from our new operational focus I look forward to building on this foundation.

Speaker Change: Moving on to Golden Queen.

Speaker Change: I'll provide an update on this operation.

Speaker Change: Which we acquired in late 2023.

Speaker Change: We don't have comparable Q3 data from last year I'll share performance highlights from Q3 relative to Q through Q2 of this year.

Speaker Change: Three Golden Queen produced 14025 gold equivalent ounces down from 16986 ounces in Q2.

Speaker Change: This decline was largely due to the temporary suspension of our crusher circuit due to maintenance, which extended beyond our planned schedule as well as certain equipment upgrades.

Speaker Change: Unfortunately, we faced extended lead times for certain parts, which impacted ore stacking and leaching schedules.

Speaker Change: To address these challenges we've implemented a comprehensive capex on equipment overhaul program aiming to improve reliability in late 'twenty 'twenty four and beyond.

Speaker Change: Revenue for the quarter was 33 million comparative 40 million in Q2.

Speaker Change: The lower revenue aligns with the reduced production as we saw 13007.

Speaker Change: 714 gold equivalent ounces at an average realized price of 2000 and 474.

Speaker Change: So 17348 ounces.

Speaker Change: 2000, and 305 in the prior quarter.

Speaker Change: On costs total cost of sales decreased to 22.8 million from $25 2 million in Q2.

Speaker Change: With the reduction primarily attributable to lower production and inventory adjustments.

Speaker Change: However, due to the decrease in ounces sold operating cash cost per ounce rose to 15.

Speaker Change: 15, 57% from 13 50 in Q2.

Speaker Change: All in sustaining cost and all in cost per ounce were also higher this quarter at 20, 302928, respectively, reflecting the impact of production delays on our commitment to upgrade our fleet, which included adding six new haul trucks.

Speaker Change: And refurbishing existing equipment.

Speaker Change: As well as additional exploration intended to increase the life of mine.

Speaker Change: Looking ahead, we expect the ongoing capex investments to strengthen gold production capacity and operational stability driving down costs and enhancing reliability in the quarters to come.

Speaker Change: With respect to our guidance.

As we review our updated guidance for 2024.

Speaker Change: I wanted to highlight that despite some operational challenges we are reaffirming our full year production guidance.

We expect production to land at the low end of our previously announced ranges.

Speaker Change: Specifically for Golden Queen, we're targeting 60000 ounces gold equivalent five plus or minus.

Speaker Change: 5%.

Or somebody soloman, our target remains at 5 million silver equivalent ounces plus or minus 5%.

Speaker Change: On a consolidated basis that brings us to an estimated 115000 gold equivalent ounces or 14.4 million silver equivalent ounces for the year plus or minus 5%.

Speaker Change: Turning to our cost guidance we've.

Speaker Change: We've made a few adjustments.

Speaker Change: Somebody told me, we'd been able to sustain lower operating expenses and as a result, we're now forecasting a cash gross operating margin of $7 per silver equivalent ounce with a gross margin ratio of 30%.

Speaker Change: This revised figures reflect the cost efficiencies, we have achieved throughout the year.

Speaker Change: For Golden Queen.

Speaker Change: Adjusting our all in sustaining cost guidance to 1950 per ounce.

Speaker Change: This increase is largely due to the significant capital expenditures, we've invested in equipment overhauls and replacements and exploration aimed at ensuring greater operational reliability and longer life of mine moving forward.

Speaker Change: On the Capex guidance as mentioned earlier, we have increased our total 'twenty 'twenty four targets spend for both sustaining and growth capex to $36 million.

The primary increases are for growth.

Speaker Change: Growth Capex of Golden Queen, including new haul truck.

Speaker Change: Loaders as well as additional exploration, which we anticipate to increase our overall throughput of your future production and no longer life of mine.

Speaker Change: This update reflects our disciplined approach and meeting production targets, while also positioning our operations for long term stability and growth.

Speaker Change: We just steps we're setting the stage for improved cost management into 2025.

Speaker Change: Beyond.

Alberto Morales: Now I'll turn the call back to Alberto for final remarks.

Alberto Morales: Sure.

Alberto Morales: Thank you Juan Carlos.

Speaker Change: Looking back over the past year, it's remarkable to see how far would come.

Speaker Change: In September 2023.

Speaker Change: A single asset single company.

With a single product.

Speaker Change: Without production concentrated in our higher risk jurisdictions, and a limited life of mine over around two years.

Speaker Change: We generated 76 million in revenue over the first nine months of 2023.

Speaker Change: And while we were profitable we recognize that in order to truly thrive.

We needed to grow and diversify our portfolio in a way that minimize risks and.

Speaker Change: And maximize value for the shareholders.

Speaker Change: Fast forward to today and.

Speaker Change: And thanks to a transformative acquisition.

Speaker Change: We are now a multi asset multi product company operating across two jurisdiction, including the United States.

Speaker Change: This has not only diversified our asset base, but also expanded our production capacity significantly.

Speaker Change: And the first nine months of 'twenty 'twenty, four we generated $181 million in revenue.

Speaker Change: And nearly triple our EV.

Speaker Change: EBITDA.

Speaker Change: Reaching 28 1 million.

We now have a stronger cash position and even after our significant growth investment our balance sheet remains strong.

Speaker Change: Most importantly.

Speaker Change: We've extended our production outlook to over six years, providing a much more stable foundation for the future.

Speaker Change: Looking ahead to 2025.

Speaker Change: We're committed to continuing this momentum.

Our objective is to once again double desires to work company, while maintaining a strong cash balance.

Speaker Change: We will do this by focusing on responsible growth.

Speaker Change: Disciplined financial management, and operational excellence always with a focus on delivering value to our shareholders.

Speaker Change: I am excited about the journey, we're on and we thank you for your continued support.

Speaker Change: We look forward to sharing more updates on our progress in the coming quarters.

Speaker Change: With that I will hand back the call over to the operator for Q&A.

Speaker Change: Thank you.

Speaker Change: Join the question queue. You May Press Star then one on your telephone keypad now here at tone acknowledging your request if youre using a speakerphone. Please pick up your handset before pressing any key.

Speaker Change: Your question please.

Speaker Change: More than two.

Speaker Change: Our first question is from Justin Chan with S. C. P resort finance. Please go ahead.

Speaker Change:

Speaker Change: Alberto Juan Carlos Amanda Congratulations on a good quarter, it's good to speak to you guys again.

Speaker Change: My first one is just on Capex I saw that you had.

Speaker Change: India on the MDA MD&A summary.

Speaker Change: You quoted a number of close to a $16 million for Capex, but just.

Speaker Change: Looking at the cash flow statement for the first three months I think it was about 15.1 billion total for the first three months in.

Speaker Change: With that I calculated six and a half million cash for Capex, just based on the cash flow statement.

Speaker Change: So that was quite a big difference between you know 16 million for Q3, and six and a half I was just.

Speaker Change: Wondering if I'm missing something or if most of that 16 million tonnes of crude or yeah, just how how to model that.

Speaker Change: Yeah, just you know the difference and where to put it in the bottle.

Speaker Change: No hi, yeah. Thank you Justin it's a gatekeeper I'm I'm I'm happy to run the numbers with you, but I think the difference is for example on the whole truck fleet. They work wired through a vendor's financing.

Speaker Change: So I think that's where it comes.

So I'm happy to walk through your kind of your calculations, but you have to take into account that some of that capex was done through the vendors financing.

Speaker Change: Understood. So I guess from a cash perspective Capex has just changed.

Speaker Change: But yeah, just just noting that you know cash taxes, and 15 million up to now this year.

Speaker Change: Roughly what are you expecting for the full year.

Speaker Change: How much of that Capex in your guidance is is cash versus noncash.

Speaker Change: Out of the total 36.

Speaker Change: 6 million that we have announced.

Speaker Change: The whole truck fleet is being financed.

Speaker Change: Or two loaders are being financed as well so out of the $36 million 20, I would say 25 million will be in cash Justin.

Speaker Change: Okay. So 25 of our cash and the others are.

Speaker Change: Accrued on the balance sheet.

Speaker Change: Lisa or something like that.

Speaker Change: That's correct, yes, it'll be reflected also available yes.

Speaker Change: Okay. Thanks, that's very helpful.

Speaker Change: Hum.

Speaker Change: My second one is on San Bartolome that was clearly a much improved quarter.

Speaker Change: There I was wondering a couple of questions. One is on the margin increase was that purely down to you mentioned efficiencies I guess, how much of that was efficiencies and how much of that was maybe timing of our purchases versus versus subsequent price movements, because silver was was up quite significantly over the.

Period.

Speaker Change: Yeah, maybe answer that and then I just had a question on guidance given that guidance is for $7 I think year to date, you're at $8 margin now.

Speaker Change: So just wondering it in Q4 does that you know.

Speaker Change: I guess that would imply quite a bit.

Speaker Change: Quite a lower margin than it was in Q3.

Alberto Morales: Yes, Hi, Hi, Justin this is Alberto.

Alberto Morales: That is a good question, what we're trying to be on the on the guidance as we've seen volatility on the silver prices were just trying to be conservative you know that we will always steered towards the biggest possible margin says we can get but the volatility has been there.

Inquiries are we have increased recoveries and somewhat golar most significantly we're looking for Q4 two actually.

Alberto Morales: B in similar ranges as the one in Q3 with respect to recovery, which is so significant.

Alberto Morales: Uplift from last years, and the and the niche and in the initial quarters of this year.

Alberto Morales: So it is a combination of lower operating costs that we're trying to achieve locally as well and as well as our increasing efficiencies and primarily focus on trying to win as recoveries as much as possible.

I understood all that stuff. So so if I look at if I look at that margin.

Alberto Morales:

Alberto Morales: Year to date your margin is now $8.

Alberto Morales: That was mostly because Q3 was 14.

Alberto Morales: $14 $6 per ounce.

Alberto Morales: So.

Alberto Morales: Your guidance is.

Your guidance is $7, so if nothing changes.

Alberto Morales: It sounds like you'll be you'll be well above that seven number but.

Alberto Morales: But it's just sort of a conservative.

Speaker Change: Volatility is that is that right. Yes. Its just that we were trying to be conservative on volatility, especially what you've seen just in the last.

B a week two weeks, if I may say.

Speaker Change: Mhm.

Speaker Change: Understood.

Okay. Thanks, and then maybe one more on all three of the line I'm sure.

Speaker Change: Sure just on on the STS what are what are your current thoughts on timing there for.

Speaker Change: Well, we see a meaningful amount of tons come through in Q4.

Speaker Change: Great are you expecting.

Speaker Change: Yes, let me just say about the F D F. As you know.

Speaker Change: When we started the project and the FDA, we were still mining, but by yeah, with which is the lowest grade section of it while continuing mining, but yeah cause until about a year ago. When we were having Q3 call that we announced the suspension of the operation. So spring our agreement with Gourmet pool, we had.

Speaker Change: Cumulated as significant amount in the of a lower grade.

Speaker Change: The bus at some fines into the F D F.

Speaker Change: What we're doing now is we are basically moving that Oprah layer. We began yeah, we'd began processing that but there is and we have now expanded this door to go to the deeper areas and we are expecting that the FDA will be providing.

Speaker Change: Now, reaching the higher grade areas within the fifties grams range for for Dawn.

Speaker Change: That works in theory that would basically be increasing.

Speaker Change: Our.

Speaker Change: Ounces are rising from the FDA, which at current prices should bear is a good margin as well.

Speaker Change: Okay.

Speaker Change: Understood.

Speaker Change:

Speaker Change: Okay. Thanks, Thanks, very much guys all are free up the likes of other people thanks very much.

Speaker Change: Youre welcome Justin.

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

Speaker Change: Pause for a moment to see if any other callers join the queue.

Speaker Change: This concludes the question and answer session I'd like to turn the conference back over to Albert on morale is for any closing remarks.

Albert: Thank you operator.

Alberto Morales: Thank you all for joining us today and for your continued support we remain committed to driving our business forward and look forward to sharing our progress in the quarters ahead.

Alberto Morales: Thanks, again and have a great day.

Speaker Change: This brings to a close today's conference call. You may disconnect. Your lines. Thank you for participating and have a pleasant day.