ANPMF Q2 2025 Earnings Call
Operator: Good morning, and welcome to Andean Precious Metals Second Quarter 2025 Results Conference Call. As a remainder, all participants are in the listen-only-mode. And the conference is being recorded. [Operator Instructions] I would now like to turn the conference over to Amanda Mallough, Director, Investor Relations. Please go ahead.
Amanda Mallough: Thank you, operator, and good morning, everyone. Before we get started, I would like to point out that during today's call, we may make forward-looking statements as defined under the 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. Our press release, MD&A and financial statements are available on both SEDAR+ and on our corporate website, andeanpm.com. With us on today's webcast is Alberto Morales, Andean's Executive Chairman and CEO; and Yohann Bouchard, Andean's President; Juan Carlos Sandoval, our Chief Financial Officer; and Dom Kizek, our VP of Finance. Following management's formal remarks, we will open the call to questions. And with that, I'll turn the call over to Alberto.
Alberto Morales: Thank you, Amanda, and good morning, everyone. I am pleased to report that Andean delivered another strong quarter operationally and financially. We delivered record quarterly revenues of $73.7 million, supported by stronger realized metal prices and steady performance at both of our operations. Adjusted EBITDA rose to $28.9 million, the highest in the company's history, while net income essentially doubled year-over-year to $17.4 million or $0.12 per share. Our balance sheet strengthened significantly during the quarter. Leveraging on our strong cash position, we made the strategic decision to fully repay all outstanding amounts under our revolving credit facility, reducing total debt and ending the quarter with $87.3 million in liquid assets. The $25 million revolving line of credit remains fully available, giving us significant additional financial flexibility. Operationally, San Bartolome delivered solid results with improved margins. On the back of strong silver prices, continued favorable foreign exchange rates and steady plant recoveries, we have revised our 2025 margin metrics upward for cash gross operating margin and gross margin ratio. San Bartolome remains on track to meet full year guidance. Golden Queen also remains on track to meet full year guidance with production expected to ramp up in the second half, supported by key capital projects completed during the quarter. We continue to advance our organic growth strategy. Exploration drilling at Golden Queen still ongoing, following the encouraging results released in May, and we see strong potential to extend mine life through near mine and regional targets. We expect to provide an update on results to the market in Q4. It was a strong first half of the year, and we believe the momentum we have built sets up well for the remainder of the year 2025. With that, I will now turn it over to Yohann to walk you through the operational results in more detail.
Yohann Bouchard: Well, thank you, Alberto. So let me start with consolidated production, which totaled 24,341 gold equivalent ounces in Q2. As previously guided, production will be weighted toward the second half of the year, and we remain on track to meet full year targets. At San Bartolome, we produced 12,128 gold equivalent ounces during the quarter. Our cash gross operating margin improved to $13.89 per ounces, benefiting from higher silver price, stable recoveries and foreign exchange rate. The gross margin ratio improved to 45.9%, up to 20% in Q2 last year. The processing rate averaged 110,000 tonnes per month in Q2 with a steady recovery of 83%. As a result, we're pleased to have increased our cash gross operating margin and gross margin ratio full year guidance, reflecting the operation's solid cost control performance, the more favorable foreign exchange rate and metal prices than initially anticipated. We expect this trend to continue for the remaining of the year. Following the exclusive long-term purchase agreement of 7 million tonne announcement, the company is collaborating with COMIBOL to obtain the required environmental permit and social licenses and to prepare the respective mines to begin operations. The company anticipates first ore in the second half of 2026. The agreement provides the company with additional prospective oxide deposits that will increase our sourcing for the year to come and ultimately leverage processing capacity, which is currently underutilized. Switching over to Golden Queen. We produced 12,213 gold equivalent ounces in Q2, while lower year-over-year, this was expected due to the mine sequencing and the ore leaching schedule. During Q2, gold in inventory on the leach pad increased due to the improved stacking performance. Gold in inventory is anticipated to decrease in the upcoming quarters when the extra tonnes stacked will commence reporting to the Merrill-Crowe process. Key capital projects were completed during the quarter. Improvement to the main haul road was completed early June, reducing hauling distances and cycle time and is expected to improve the fleet productivity, resulting in lower unit costs going forward. The heap leach pad stacker was replaced with 158-foot telescopic superior stacker with automated capacity. Two additional 115-foot superior grasshopper and 160-foot superior indexing conveyor were purchased in Q2. Costs at Golden Queen are trending well with a cash cost of $1,717 per ounce, which is in the range of the guidance and an all-in sustaining cost of $2,245 per ounce, slightly above guidance due to the timing of capital investments. We expect higher production and lower unit costs in the second half of the year with Q3 and Q4 reflecting better stacking rate and a decrease in gold inventory on the leach pad. We continue to reaffirm our production and cost guidance for the year. Exploration drilling is underway, and we remain encouraged by the results released in May. Our goal is to convert near-pit targets to mineral resources and evaluate the upside across our 3,000 hectare land package. Before handing it over to JC, I'd like to reiterate our 2025 guidance. As planned, production remained weighted approximately 40% in the first half and 60% in the second half of the year. We are expecting production to ramp up quarter-over-quarter in the second half of the year with our best quarter being in Q4. At San Bartolome, based on a strong Q2 performance, we're probably revising our full year margin metrics. Cash gross operating margin is now expected to be in the range of $8 to $13 per ounce and gross margin ratio is now expected to be in the range of 35% to 45% for the full year 2025. At Golden Queen, we are reaffirming our previously disclosed guidance. Full year production of 52,200 to 60,600 gold equivalent ounces. Cash cost of $1,500 to $1,800 per ounce and all-in sustaining costs of $1,950 to $2,150 per ounce. Consolidated capital expenditure remains in the range of $28 million to $32 million for the full year. Now I will pass it over to JC to take you through the financials.
Juan Carlos Sandoval: Thank you, Yohann. As noted, revenue for Q2 was $73.7 million, a 5.5% increase over Q2 2024. This was driven by higher realized silver prices, which averaged $34.36 per ounce. Gold prices averaged $3,316 per ounce and steady and operational performance at both assets. Gross profit increased 151% year-over-year to $29.4 million, driven by stronger commodity prices and margin expansion at San Bartolome. Net income practically doubled year-over-year to $17.4 million or $0.12 per share. Adjusted EBITDA of $28.9 million was up 68% from Q2 last year, and our free cash flow for the quarter was $12.3 million. Turning to the balance sheet. During the quarter, as previously mentioned, we repaid all amounts outstanding under our revolving credit facilities and ended the quarter with $87.3 million in liquid assets. The $25 million revolver remains fully available, providing additional strategic flexibility. Total liabilities declined to $139 million, while total assets increased to $321 million. Capital expenditures totaled $8.2 million in Q2, focused primarily on Golden Queen infrastructure. With commodity prices remaining strong and our disciplined approach to capital and operating costs, we are well positioned to sustain financial strength while continuing to advance our growth strategy. Now I'll turn it back over to Alberto for closing remarks.
Alberto Morales: Thank you, J.C. To wrap up, Q2 was another milestone quarter for Andean. We achieved record revenues, continued to generate strong free cash flow and significantly enhance our financial position. Both of our operations are performing as planned and well positioned for a stronger second half. We remain committed to developing on our 2025 guidance and executing our long-term strategy to drive sustained value for our shareholders. With a solid balance sheet, cash-generating assets and an active exploration program, we are excited about the opportunities ahead. Thank you for your continued support. And with that, I will open the line for Q&A.
Operator: We will now begin the question-and-answer session. [Operator Instructions] First question comes from Justin Chan with SCP Resource Finance.
Justin Chan: Can you hear me? Just making sure I'm not muted.
Alberto Morales: We do, Justin. Hello.
Justin Chan: Alberto, congratulations on a good quarter and for all the progress, especially a nice tick up in the share price this quarter. My first question is just -- so my first question is just on Golden Queen. There's a fairly big swing in grade and I guess, the strip ratio also in Q2. I'm just curious, you mentioned higher stacking in the second half. In terms of grade, could you give us a sense of what you're expecting in the second half? Is it more like this quarter or kind of somewhere in between Q1 and Q2?
Yohann Bouchard: Yes. Justin, it's Yohann here. Thanks for the question. I mean the grade is very, very stable at Golden Queen. So we finished the mine the pit 1, and we're mining now the total pit. So we have all the equipment, I would say, centralized with improving productivities. But overall, regarding tonne mine, it's going to be very consistent. We're having, I would say, a lower stripping ratio than what we thought in our -- compared to the budget because basically, we found a little bit more ore than what we thought, which is a good news. So -- but overall, basically, I mean, we don't see like a major drastic changes with grade quarter-over-quarter.
Justin Chan: Okay. Got you. So around that kind of, let's call it, 0.75, is that where you see it in the second half?
Yohann Bouchard: Yes, pretty much, yes.
Justin Chan: Okay. That's really helpful. Okay. That's that on Golden Queen onset at St. Bart, the updated guidance is definitely helpful. I think it's definitely more in line with what you've been reporting. I'm just curious if -- I ask this question every quarter, but if prices and, let's say, FX stay where they are, would your margins be similar to how they -- what they were in Q2? Or would you expect them to revert more to the middle of guidance?
Juan Carlos Sandoval: I think they would remain the same, Justin. Obviously, it depends on where silver prices end up, but I mean, it's fair to say that they would end up more or less the same...
Justin Chan: I think we reflected approximately -- the tax payments for H2 were reflected in our Q2 P&L. But it was just timing on payments that's Yohann, here. So basically, what we did is based on the -- I would say on the kinetic, I mean, we did have a lower recovery in Q2, but we did increase as well our stacking in the same period. So as you know, leaching is not occurring the week after. So I mean, based on that additional tonnes, I mean, we believe that the extra tonne that's been put on the pad going to leach in Q3 and Q4 and the following quarters. So I think we're in good shape. I mean if we look at the mining, I mean, we put much more, I would say, ounces on the leach Okay. Great. That's really helpful. And then maybe just the last one. Do you have anything to note in regards to, I guess, working capital or tax payable timing to be aware of in the second half of the year?
Juan Carlos Sandoval: Tax payments.
Dom Kizek: significant working capital disbursements for each for the second half.
Justin Chan: Okay. So maybe just slight -- you could say slightly more tax paid than maybe income tax on the income statement. Is that just because of timing on payments? Is that -- am I understanding that correctly?
Dom Kizek: going out. But it's going to be approximately less than our income statement.
Justin Chan: Okay. So a little bit less cash tax than income statement tax.
Dom Kizek: Absolutely.
Justin Chan: Okay. And then presumably, you'll pay the second half income tax in the first half of next year. Is that right?
Dom Kizek: That is correct.
Operator: The next question is from the line of Allison Carson with Desjardins.
Allison Carson: My first question is just about Golden Queen. As you mentioned, we're seeing lower leaching recoveries compared to last year. Are these expected to last? And how should we think about this going forward?
Yohann Bouchard: pad than what we leach. And with the strategy in place, we strongly believe that, that goal is going to come out in the second half of the year.
Allison Carson: So should we just expect higher stacking rates going forward and then we'll start to see those leaching rates sort of stabilize over time?
Yohann Bouchard: Absolutely, yes. So that's the goal. I mean, with the new equipment that we bought, I mean, we saw a massive increase with our stacking. So -- and we also -- I mean, from the tip, what we do, we have the opportunities now, I mean, to -- we have -- we're mining a little bit more ore. So we increased our stockpile as well, and we have the ability to segregate lower grade and higher grade and sending the higher grade to the leach pad. And I mean, leaching is not a process. It's a bit more tricky than conventional processing plant. But I would say that the gold will come out, but it can take some time is a little bit tricky. And we also have to consider that the pad is getting higher. And so to reach aligner and to go to the [indiscernible], I mean, the timing increased by about, let's say, about 10 to 15 days per bench. So it takes some more time. So -- and maybe we missed that a little bit during our planning, but I'm very confident that the gold will come. Recover will increase, yes.
Allison Carson: Perfect. And then just within Bartolome, can you give us a little bit more guidance on how the new agreement with COMIBOL affect production in 2026? And maybe how we should think about grade and grade variability with the new agreement?
Yohann Bouchard: I mean, I would say, I mean, we started the work -- I mean, just to go back on that a little bit. I mean, we signed the agreement, I mean, that was quite good. And right away, I mean, we collaborate with COMIBOL the next week to take actions to put those in production as soon as possible. I think that we have good intelligence on those places. We know where to look with COMIBOL. And I mean, we're reviewing that schedule on a monthly basis with the team, and we're advancing on all front. So basically, based on what we see, I'm really -- I mean, it seems like we're on the right track. I mean, to deliver first ore sometime, I would say, beginning of the second half of next year. Maybe a little bit, I would say, before that, but I would say for a meaningful quantity, I think that's going to be more in the second half of next year.
Allison Carson: Okay. Great. And then just one final question on M&A. We've seen both strong silver and gold prices this year. When you're looking at potential acquisitions, do you have a preference on whether you'd want a silver primary or gold primary asset?
Juan Carlos Sandoval: As we have always said, I mean, we're looking at everything. We -- whether it's gold and silver, I think we're -- that's what I can say right now. So we're looking at everything.
Allison Carson: Congratulations on a strong quarter.
Operator: The next question comes from Ben Pirie with Atrium Research.
Ben Pirie: Congrats on another great quarter, good start to the year and obviously, gold prices and silver is helping accelerate this. So diving into a couple of things here. Just in terms of production weighting, you mentioned it's ramping through Q2, Q3 and then into Q4. What can we expect in Q1? And can you just explain the sort of reason for this production ramp throughout the year?
Alberto Morales: You mean Q1 of 2026, right?
Ben Pirie: Yes. Yes, sorry.
Yohann Bouchard: I would say that the -- what we're going on, I mean, we're going to start our budgeting process in a couple of weeks. So I would say I would be a bit reluctant to answer that question for now. But I think that we -- overall, we see a stable production year-over-year and with some improvements. And I would say -- I mean, we may see some improvement in that, I would say, in the production profile based on perhaps throughput, a better recovery. But I guess we're going to close that bridge when we get there. But at this moment in time, it's a bit, I would say, early to talk about that. We're going to have -- we don't have that information right away. I mean, so it's going to be in a few weeks, in few months from now.
Ben Pirie: Okay. Okay. No problem. And then at Golden Queen, obviously, a lot of the infrastructure upgrades you've made over the last year or so have taken place. what can we expect from a CapEx standpoint for the back half of the year and then into -- and I know that's in guidance, but are we going to see CapEx start to drop down into 2026?
Juan Carlos Sandoval: Thank you, Ben. Over the next few weeks, we will be working on our next year CapEx plan. What I can say, I mean, it should be probably lower. Yes, this last year and this year have been -- is the bulk of our main CapEx plan. There are some investments that still need to be made. We need to expand on the leach pad, for example. So I guess over the next few weeks, we'll come up with a new plan for next year's CapEx, but I believe it should be a bit lower at least than what we have done for this year.
Ben Pirie: Okay. And then at St. Bart, we've spoken a lot about this COMIBOL ore coming online in the back half of next year. You mentioned the plant capacity is currently underutilized. Is there anything that you guys can do over the next year, more near-term initiatives to bring online and sort of meet that capacity?
Yohann Bouchard: I think that -- I mean, the actions that we're taking now, I mean, they are -- I mean, the main focus for sure is going to be to increase that -- I mean to utilize that full capacity. I don't think there's nothing much we can do. I mean we need to be, I would say, a little bit more efficient. I mean we're also operating and helping with 5 different projects. So we are, I would say, unlocking, I would say, all the transportation logistics and improving, I would say, mining in some of the projects. And in addition, I would say, by adding more, I would say, zones or those COMIBOL project is going to also help, I would say, to get to that target. But I'm glad that you recognize that, I mean, there is a low-hanging fruit there that can be -- that we can leverage. And you can be sure that our objective is really to increase and reach that full processing capacity and hopefully, at one point, be in position to build a stockpile neighbor processing plant.
Ben Pirie: Right, right. Understood. Okay. Yes, I had a couple more as well. But again, we'll turn it back to you guys to see if there's anyone else in the queue.
Operator: This concludes the question-and-answer session. I would like to turn the conference back over to Alberto Morales for any closing remarks.
Alberto Morales: Thank you, operator. We want to thank everybody for its continued support. Q2 was a strong quarter. We are pleased by the results and look forward to the next second half of the year as we have stated in our documents and throughout the call. So thank you very much. And with that, we'll conclude our earnings call for today.
Operator: Thank you. This brings to a close for today's conference call. You may now disconnect your lines. Thank you for participating, and have a pleasant day.