Avino Silver & Gold Mines (TSX:ASM) Q3 2026 Earnings Call

0:00 My name is Nathan Harte. I'm the CFO with the Venus Silver & Gold Mines. I'm here to tell you our recent updates and what we're looking forward to. I will be making forward-looking statements. As I always say, not as many as the geologists. Silver & Gold Mines Ltd. But the fun story is La Preciosa.

0:59 So this is one of the largest permitted silver assets in Mexico and around the world to be fair. We are processing right now at 400 to 500 tons per day at our vino mill about 20 kilometers away. And we are doing some fun and exciting things there as we move forward to doing a pre-feasibility study. As well, rounding that out, we do have the Oxide Tailings Project, which we're kind of, you know, it's sitting there. We did a pre-feasibility study in 2024 with great results, but our focus on the future is on La Preciosa. And so we have a large silver equivalent resource base, 300 million ounces in the M&I category, another 87 million in inferred, and over 70% of that is pure silver.

1:48 So current production is about 2.5 million ounces silver equivalent. We're on track to get over to 3 next year. And then long term we're looking at getting above 8 and long term even further to 10 plus million ounces. And so how we're going to do that is by developing La Preciosa. So when we bought La Preciosa back in 2022 from Coor Mining, they had initially paid about $350 million acquiring Orco Silver, did a feasibility study, for an open pit mine, and then put it on the shelf when the Mexican government kind of had a negative view towards open pit projects. Obviously some of that sentiment has changed now. But what we did is we bought it from CORE for about $20 million cash, $12 million in share consideration, and a package of royalties.

2:39 So essentially about 10 cents on the dollar from what they paid back in 2013. And we thought, you know, we can put this in production using our own milling operation and an underground plan. Now what we've done is we've pivoted and we're going to plan to do a pre-feasibility study on the asset, which should come out in the middle of next year. We are also one of the only true pure silver producers out there. You can see the goal long term is to be well above at 75% silver and about 90% precious metals. One thing that does set us apart as a junior producer or mid-cap producer, we have a very long reserve life. At Aveeno, we have over 11 years of reserves, and at La Preciosa, with a maiden reserve out earlier this year, we have about the same 12 years. And so if you look at the industry average, you see about an average of about 8 years with some outliers there.

3:35 But also we have over 44 million tons of measured, indicated, and inferred resources at La Preciosa and even further at Aveeno. So one of the things we think, you know, everyone thinks, you know, we're a silver company, we moved along with the price of silver and the re-rate. We actually moved ahead of silver. Back in 2022, after we acquired La Preciosa, we also had them sell out of their position in 2023. There was a bit of an overhang on our stock. This was in October 2023. Once they crossed that out at about essentially close to an all-time low, you could see we started to re-rate. One of the big things there is we were one of the only companies in Mexico to get an underground mining permit in early 2025. So when we came out with that news, it really started to see a growth trajectory in our stock.

4:25 And you can see compared to the curve there with Silver Price, we actually outperformed and moved ahead of that. Some financial results over recent quarters. We generate an average of about $30 million in revenue. 54% of that has been in silver, with over 90% precious metals, and at about a 54% cash margin. We are a junior producer that generates free cash flow and earnings per share, which we do think sets us apart. But really the key piece here is our balance sheet. We talk about doing a pre-feasibility study and a plant build at La Preciosa. We have $145 million in cash on the balance sheet and no debt. So as you can see here, Aveeno has been built up over five centuries. It goes back to the 1500s. It was discovered by the Spanish.

5:13 So what everyone thinks is, is there anything left to mine? Well, as we transition to underground, we found there's a lot more left, both copper, silver, and gold. We have a 2,500 ton per day flotation plant that's been operating there since 2015. And we're doing about 2 to 3 million ounces a year with plans to keep growing that mineral reserve. And so it's open on strike and at depth. It's over a kilometer to a kilometer and a half long strike. And we've defined the mineralization down about 650-700 meters, and we have not found the bottom of the mine. It's actually getting richer in copper as we go deeper. And so we are keen to continue exploring that. But as you can see with the table there, we have significant amount of resources to get well ahead of the mill.

6:02 And now the fun stuff. La Preciosa is really the exciting story that we have moving forward. I mentioned earlier it's one of the largest permitted silver assets in Mexico, and we've already completed about 3,000 meters to date since we got the permit last year. So one of the things we have and why we bought this is we have all the infrastructure next door, we have water, we have tailing storage, we have a paved road to the doorstep of the mine. It's 45 minutes from the city of Durango. A million-person city and an international airport. Durango was one of the safest states in Mexico. We've been operating there since 1968 without any significant challenges. And now the reserves and resources at La Preciosa. Obviously, this has been well defined by Coor, Pan American Silver, and Orco Silver, who drilled over 1,500 drill holes, spending $90 million defining the resource and reserve.

6:55 Coor had a feasibility study on this out in 2014 for an open pit project. Obviously, we've refined that and have now decided to go with an underground plan. But those reserves are current and were put out earlier this year where we've got 11 million tonnes of 2P. And then again, if you go down to the measured and indicated, there's about 33 million tonnes and 11 million tonnes of inferred. So lots of plans for extension and extending the mine life while also building a good standalone plant. So what we've done to date, again I mentioned just shy of 3,000 meters of development, so we're putting real data into this study. We're processing at our mill about 19 kilometers away right now, an average of 400 to 500 tons per day, and getting real data that we can put into a study. And really what we've learned in that development work, as well as recent drilling, is that the vein structures are quite a bit wider at the Gloria and Abundancia veins, which you can see there on the left. So when we bought the asset, those were the two we were targeting. We bought this in a silver price environment where it was around $20 silver, and our plan was smaller scale, hub and spoke operation at Aveeno, and now that we're in a bit of a different silver price environment, and obviously we have a much stronger and cleaner balance sheet, we've re-evaluated that plan and we're looking to go bigger.

8:08 Here are some of the drill results. None of these drill results have not actually made it into our reserve update that was put out earlier this year. We've got 7.9 meters of almost 2 kg silver equivalent, 90% of that being silver, 6.5 meters of 544 and half a gram of gold, and the list goes on. 14 of these holes that were drilled in 2025, 13 of them were higher than the reserve grade, which is about 235 silver equivalent. Here's the consolidated resource and reserve table. 27 million tonnes of 2P between our three assets and 67.7 million tonnes of M&I. As well, you've got about 25 million tonnes of inferred. We currently have a plant of 2,500 tonnes per day, so call it 800,850,000 tonnes a year. That represents a century of production.

8:55 Obviously, we're not going to wait around to process it in year 99 and year 100. Cap structure is very simple, 170 million shares fully diluted, 175 fully diluted, apologies, and you can see the 52-week highs and lows there. Obviously in January we did peak at about $12 a share, and we've since come back off, and what we look at is a good re-entry point. We have also been buying back shares. We bought back about 500,000 shares in Q2 and shrunk the float to just sub-170. And our average daily volume mainly comes from the NYC American, about 46 million shares a day, and about 750,000 shares traded on the TSX daily. Management owns 6%. David Wolfin, the CEO, is the largest shareholder. Alongside that, it's mainly ETF and passive funds. And then there's about 65%, which are retail.

9:44 We're a disciplined producer with scale, growth, and financial strength. We've got one of the cleanest balance sheets in the business, we think. As we look to build out La Preciosa long-term, we're trying to avoid equity dilution as much as possible and look at other alternatives. We think we'll be able to achieve that for our shareholders. Silver & Gold Mines Ltd. Thank you very much, Nathan. Do we have any, I see a gentleman, can you just wait for the microphone to arrive?

10:34 Right in front here, the gentleman in the green jacket. When are you going to start getting into your tailings? So we've shifted the focus to La Preciosa, given that the scale we can do there is much larger, and again, primary silver. With limited investment, we think we can get 7-8 million ounces of silver coming out annually from La Preciosa, and so we're doing the pre-feasibility study work right now, and that should come out mid-next year. But we haven't forgot about the tailings. The tailings project caps out at about 2 million ounces a year, whereas La Preciosa can be a lot bigger. And what was the problem with your latest quarter? The problem with our latest quarter? I wouldn't say, okay, problem is a fair word. We ran into some lower grade material. You can look at our cost per ton.

11:20 It actually didn't fluctuate very much quarter over quarter, but our cost per ounce was up a little bit as we were into some lower grade zones. We have another question up here. A question for the La Preciosa. Is there some changes in Mexican politics? Do you think there's a chance for an open pit? Or do you plan to do a new facility around Milford? That's a good question, Chen. We are planning for an underground operation. Obviously, there has been some leniency, I'll say, with open pit operations in Mexico. Having said that, we think underground is the best way to go, and we are experienced underground miners. We've been mining at about 2,500 tons per day at Avino for the last 12 years, and we have a lot of experience both narrow vein and underground.

12:10 with larger veins or larger width veins, both at Abino and San Gonzalo previously. So we're sticking with the underground plan, but looking at a standalone. Any other questions? Could I just ask you again to clarify, please? I think you said that you're looking to produce 8 million ounces per year from La Preciosa. Did I understand that correctly? We're looking to get some of the details of the PFS will be out with Xact. We're targeting between Avino and La Preciosa together, at least above 8 and hopefully close to 10, even as high as 12 million ounces.

13:05 So it could be in that range, you just haven't done the work yet. We're doing the work now, yeah. We don't want to over-promise anything, but we're looking at... The standalone plant that would combine between having the two plants, close to 10 million ounces. And just reminding, what's the capacity of the current plant? And do you have some sense of the scale of the new plant? Yeah, the current plant capacity is 2,500 tons per day. It is unique and it's been laddered up over the years. That's why we're able to process the preciosa material in development at the same time. So we're doing about 400-500 tons a day there, and then 2,000 from Aveeno, and then doing these two separate concentrates.

13:54 As we look to size the plant at La Prociosa, we know we can handle 2,500 tons per day, so that's obviously in our back pocket, but there's talk of going bigger as well too, as well as a multi-phase approach, given the tonnage that's there. Okay, and then, sorry, we have a question over here. Just wait for the mic, please. Just while you're talking about the plants, is the flow sheet any different, or will recoveries change much between the two plants? That's a good point. So the flow sheet is changing significantly. That's part of why we're doing this, is it's a flotation plant at Levita Vino, You can kind of cap out on silver recoveries in the mid-70s, maybe as high as the 80s, you're lucky. Whereas if you switch to a leach plant, you can get back in the mid-90s and you're not leaving $100 of these prices in the tailings, which obviously has a huge impact on the economics and the margins for the company.

15:06 and maybe just, do we have any other questions from the audience? Maybe just in less than a minute, maybe talk a bit about, you mentioned this as part of the strategy of the exploration. Could you maybe just spend 52 seconds on that? Yeah, I will say we shortened the presentation to fit in here. So we're doing 30,000 meters of exploration this year. We've got 5 drills turning now, 3 at La Preciosa and 2 at Avino. The first half of the year was on infill drilling and proving up that reserve. But now we're targeting step-out drilling, especially at La Preciosa. When CORE and ORCA did all their drilling, they really concentrated on defining that feasibility study level drilling, and not a lot of focus was on the area outside on the extremities, and so we're spending some money to explore those.

16:10 Excellent. With 14 minutes, sorry, seconds to spare, thank you very much, Nathan. Appreciate it. Please join me in thanking Nathan.