Release Date: August 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue increased significantly to $7.7 million from $5.5 million in the comparable period last year.
- The company raised a net $8.8 million, which was used to refurbish cash reserves and fund aggressive drilling activities.
- Over 20,000 meters of drilling were completed in the first six months, indicating a strong commitment to exploration.
- The average zinc grade was 14%, lead was 8.7%, and silver was 43.7%, among the highest for zinc mines.
- The company maintains excellent working capital with no long-term debt, indicating a prudent balance sheet.
Negative Points
- The net loss was $2.6 million, influenced by deferred income taxes and foreign exchange expenses.
- Production at the Zacualpan mine was lighter due to necessary shaft repairs, impacting output.
- There was a 70% increase in direct costs per ton, partly due to a union settlement and strong Mexican peso.
- The Plomosas mine is running 6-8 months behind in development due to challenging ground conditions.
- Gold and lead production dropped significantly, with gold down 70% and lead down 34% this quarter.
Q & A Highlights
Q: What is the realistic run rate at the new mill on top of the Guadalupe?
A: Frederick Davidson, President and CEO, explained that they are currently operating at 100 tons a day, generating about $1.5 million to $2 million in revenue. They aim to increase to 200 tons a day, which could potentially bring in $2.5 million per quarter, translating to an additional $10 million annually, depending on market conditions.
Q: Why have production costs increased significantly, and are these costs one-time startup expenses?
A: Frederick Davidson noted that some costs are indeed startup-related, including union settlements. Plomosas is currently in a phase where 50% of operations involve underground development and site rehabilitation. As production increases from 100 to 200 tons a day, costs are expected to stabilize, leveraging increased efficiency.
Q: How is the investment in exploration progressing, and is it mostly complete for Plomosas?
A: Davidson highlighted that they have drilled over 20,000 meters between Plomosas and Zacualpan in the first half of the year. The focus is on both sustaining and discovery exploration, with ongoing capital expenditures aimed at reducing operating costs and resolving inherited site issues.
Q: Why did gold and lead production drop significantly this quarter?
A: The drop in gold production was due to low recovery rates at the Alacran mine, which led to a temporary halt for metallurgical improvements. These have now been addressed, and production has resumed with better recovery rates. Lead production fluctuates based on the mining area, with current operations focusing more on silver-rich zones.
Q: With increased direct costs per ton, can we expect this trend to continue, or will inflation ease?
A: Davidson attributed the increased costs to a significant union settlement and the strong Mexican peso. Despite these challenges, revenue increases have helped maintain margins. Future cost trends will depend on currency fluctuations and operational efficiencies.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
