Guanajuato Silver

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OK, I guess we'll start our next session. my name is Uvay Sabib. I'm a pressure metals analyst with the Scotiabank. thanks everyone for joining in our last day of the, the Mining, Forum Europe. our first, company presenting, would be Guanajuatu Silver, and presenting Guanajuatu is gonna be James Anderson, Chairman and CEO James. Thank you so much. thank you very much. Thanks to the, Denver Gold Group as well for, hosting the, the, not, not only the presentation, but the, the whole conference. I think they've done, again, a marvelous job. my name is James Anderson, and I am the, chairman and CEO of Guanajuato Silver. I'm gonna take this opportunity, we've got about 20 minutes to go through the story, so Only just time to give you an overview of what Guanajuato silver is, why we think the price of silver might be generally supportive in the next little while, just to give those people in the audience an overview of where the company's come from in the last 5 years or so. I took control of a Toronto venture exchange listed shell company 5 years ago. That company was halted. It had a $3 million market cap. It had about $-300000 in the treasury. but it had one asset which is a development asset, something that we still own in Guanajuato, Mexico, so I went to Guanajuato for the first time and I realized that this was one of the great silver mining camps on planet Earth and had been for about 500 years and what I saw there at that time was a mining camp that was owned by a bunch of different companies. And so everything had been chopped up into different ownership structure and I thought to myself, you know, this is a recipe for success for consolidation in the mining business, and that's what we began doing and why did we want to do that? Well, we wanted a. Precious metals Mining company, and we say right off the bat here we produce silver, we produce gold, not to denigrate any of the fine development and exploration companies that are represented at the conference, but we didn't want to go that route. We wanted to get into mining right away. Some would say perhaps a little too early, but nonetheless, we wanted to be in the mining production business right off the bat. And why would if you're going to build a silver mining company, where do you want to go? You can go to Peru. It's got its own problems. You can go to China. That's not really for me. Mexico continues to produce about 25% of the world's silver. If you want to build a silver mining company, certainly Mexico has to be on your short list. Why do we want to do that? This is the 5th year in a row that silver has a supply deficit. We believe these numbers and we believe this is one of the reasons why the price of silver right now is overtaking gold on a percentage basis as they move up together. and why is there a big deficit? Because of the solar industry. Fully 17% of all of the silver ounces that get mined in the world today goes into the photovoltaic industry. That number is well known. It's, it's easy to calculate. if we were talking about 1 dozen years ago here in this room, that number would be 0. Today it's 17%. So when you talk about the growth in the silver market, the growth for demand, all of the marginal demand comes from the solar industry. I don't think that that's going to change anytime soon. I know that our American friends don't really see the benefit of renewables. My response to that is, so what? Everybody else on the planet wants to support it, and I mean every government in the world wants to support it. And now with the military crisis that's going on in the Middle East, I think that the term energy security. For nations, for companies all over the world, that notion changes in a manner that we haven't seen before. So that's all great and important. The laser thing doesn't work, but I have brought a pointer stick, which is very, very, very fun. So right here we have the state of Guanajuato, Mexico, and that is the capital city of Guanajuato. It's a beautiful place, and I'll show you a picture of that in a minute. Most of our producing assets are in and around the city of Guanajuato, Mexico. We'll talk about Cubo, Valencia, San Ignacio, and Bolonitos. Bolonitos is a mine that we purchased only in January, so about two months ago, so it'll be a bit of a focus for the discussion. We also own one mine further north, about 1000 kilometers to the north in Durango, Mexico called Topia. It's a smaller operation but very high grade. And of course grade helps. So this is the beautiful city of Guanajuato, Mexico, and just to make this conversation and this talk a little bit more two-way, my friend Jaime Barretta, who I haven't seen in many, many months, Jaime came to visit Guanajuato two years ago. Jaime, give the crowd 30 seconds' worth of your impressions, will you? but happy. Here we're wealthy and miserable. Lovely place to visit. That'll do. So I, I usually I spend about 40% of my time there. certainly that was true last year. So the, the city, the food's good, the people are friendly, as, as Jaime points out, the climate's excellent. You're at about 2200 m above sea level, so it never gets to that, you know, sort of terrible stinky hot that other places in southern Mexico can get to from time to time. More importantly, perhaps this center. Has close to a 500 year mine history. I was born in Timmins, Ontario, one of the great Canadian mining centers. We're very proud of our mine history there, but soaking wet, it goes back 120 years. Guanajuato, you can count almost 5 centuries of silver and gold mining. So this is our latest acquisition, Bolonitos. Bolonitos, which we bought from Endeavor Silver, Bolonitos is immediately adjacent to one of our other mines. We see lots of M&A in the mining business that really doesn't make a whole bunch of sense, things that you know are being purchased in different continents from where people are are focused. This is not that. This is a very focused purchase of a mining asset that we find accretive immediately in the next few slides. I'll show you why that is. We paid $50 million for it. We did that with $30 million in cash, $10 million worth of our shares, and then about $10 million in contingent payments that we'll pay over the next two years or so. The important, I think one of the important things about the quantum of that figure that was negotiated about six months before we closed the transaction in January. So let's let's call it 8 months from. Ago from today, well, that's about $1500 ago for gold and 30 or $35 ago for silver. So did we get a good deal? Yes, I think it's unequivocal. We got a very good deal. This is production numbers from 2025 at Bolonitos. You'll see the current mill utilization rate at 73%. I'll come back to that in a moment. That's an important part of the story. This slide here shows all of the mining assets in Guanajuato. The dolphin looking structure in gray, that's the city. All of the green claims, that's what we owned prior to the Bolonitos transaction, and all the blue claims are what we purchased with Bolonitos. You can see 123 production facilities. What we did is in December, about a month anticipating the closing of the Bolonitos transaction in January, we put this plant at Valencia on care and maintenance. All of the plants have been running at about 70% capacity, so what we will hope to do by the end of this year is run only just the two plants, Cubo and Bolonitos. They're a little bit bigger than the other one. They are newer and they are east and west, so we think that this is going to be a much more advantageous way to process mineral in Guanajuato. This is a It's a leapfrog computer model showing the vein systems at Bolonitos and at San Ignacio, and it's just a point that we're trying to make. The San Ignacio veins go right into the Bolonitos ones. These two mines should have been being mined together for two decades. They were not, but we have the opportunity to do that now. I was underground here with the geologists and engineers about 2 months ago. And there was a genuine excitement from both sides, from both camps, if you will, about being able to drill from one side and into the other and being able to tunnel from one place to the next without having to worry about claim boundaries. So we're already processing material from San Ignacio at the Bolonitos plant, and that'll be very helpful. Sort of one last look at this for those of you that still need convincing, the waste pile in the foreground. That is the San Ignacio waste pile, the waste pile in the background, that is one of the waste piles at Bolonitos. So I used to joke with Dan Dixon, who's the CEO of Endeavor Silver. I said, Well, Dan, this is like a 7 iron golf shot from one side to the next. We should really be mining these things together and I guess just to square that circle, Endeavor Silver has been building a very large silver mine in western Mexico in Nayarit called Terrenera. That's where they've spent about $300 million. They pretty much finished that mid last year, and that's why they decided that this was non. Core the Bolonitos asset, and why would we, why we would get a chance to purchase it for us, of course, further consolidating the the Bolonitos, or the, Guanajuato area made a lot of sense. So I, I think it's a, it's genuinely a good transaction for both parties, Valencia. So Valencia is in the middle of the district. You can see that here on this inset map. Valencia has been producing silver and gold on and off, but mostly on for 450 years. If you ask a Mexican geologist, what do you think about Valencia, he will know the story of Valencia. He or she will have been there, looked at it, studied it. This is one of the great storied mines in Mexico. We are about to commence a pretty significant drilling program here to find more material, and that will be part of an announced 75,000 m drill program that we're doing at all of our operations. During the downturn, and when I say the downturn, I mean those two or three years where silver was kind of stuck at $22.23 $24. We didn't, we certainly didn't make very much money and finding the capital necessary to be able to put these older underground mines back into production to 21st century standards, that was very difficult, but we've done that now and this company was built with a surge in silver and gold mining prices in mind. This is the time for Guanajuato silver. There's Cubo. Just speaking about the swing in prices between the top of the market and the bottom of the market in the, in the mining business. The previous owner paid $200 million for this asset. They put it on Care and maintenance in 2019 because silver had reached about $17. We bought it in 2021 for $15 million. They spent $35 million building this plant. We spent about $7 million refurbishing it. So I think, again, I think it's without question that we have bought all of these assets for pennies on the dollar at a really good time in the market. Now we can begin to prove to people that we can make a lot of money in the mining business. That may take another couple of quarters for everybody to get it, but I can tell you that that is happening. To. So Toa is a little bit different for us. It's not in Guanajuato. It's in the state of Durango. It's about 1000 kilometers to the north of our other operations. it is small but very high grade. You can see the resource down here. It's about 1 kg of silver equivalent per ton. So routinely in the plant we're processing 750, 800 silver equivalent. So very helpful indeed. This is consolidated production for 2025. This includes the Bolonitos asset. What you see here is silver, gold, and 2.7 and 3.3 million pounds of lead and zinc. Like many of the other companies we have in the past talked about silver equivalents. The problem with that now, last year's silver equivalent numbers were calculated at 85 to 1. This year right now it's about 62 to 1. So it gets very difficult to try and compare last year's production and this year's production. What you will see from Guanajuato silver going forward is much less talk about equivalents and much more talk about how much silver we produced, how much gold we produced, and how much base metals we produced. The base metals, and this is a very important distinction for Guanajuato silver to other mid to small cap Mexican producers. Many of them produce a lot of base metals lead and zinc and copper along with their silver. We are very much a precious metals producing company. These numbers are from the 3rd quarter. Once we factor in bolonitos and the higher metal prices for silver and gold, what you'll end up seeing is about a 60% revenue from silver, about 37% for gold, and only 3% for lead and zinc. The lead and zinc comes from Toa. All the concentrates that we produce in the Guanajuato area are gold and silver only. So we're quite proud of this slide. In an industry that often measures success in decades, we've managed to put this company together with 5 producing mines, 4 processing plants, although only 3 of them are actually working right now, but we've done that in a 5-year period. Expect more. We're not done yet. Our company certainly isn't big enough yet, so opportunistically when we can acquire things that are truly accretive. To shareholder value, you will see us make moves like that. We are not timid about doing that sort of thing. This is a one year chart of our shares. And maybe I'll just jump to major shareholders for a minute. So Fidelity, that's the Fidelity Gold and Silver Select Fund out of Boston, it is a very big fund. Usually they don't come downmarket to something the size of Guanajuato silver. I managed to convince them to buy some shares a couple of years ago. that wasn't a very good idea for the first year, so they were a little bit underwater. However, they're doing very well now and, and happy about it. Ocean Partners. Is the group that we sell about 90% of our concentrates to. Ocean Partners has been a terrific partner all the way along. They have provided debt capital and equity capital to the growth of this company every step of the way. Endeavor Silver, by virtue of the fact that we gave them some shares for Bolonitos, this is, we put in the, the Sprat logo, but it's really Eric Spratt. Eric has written a couple of big checks to the company on a couple of different occasions as we've, expanded the company and pardon me, Mermin Capital. is a Connecticut-based fund. Dan Oliver is the fund manager. He's also on our board of directors. Merminin invests strictly in microcap, gold and silver companies, so they've got a pretty good idea of our potential success. Let me just make one more comment before we go on. This is a 12 month chart. If you went back 24 months, the 12 months prior to what you're seeing here right now, the stock just kind of bounces along the bottom, and I think the market correctly. I was curious about whether we could ever make some money with these assets. as we get into 2025 and then into 2026, the market decides, yeah, this is going to work at these progressively higher prices. What kind of, what kind of company do you want to buy when you have rapidly increasing prices? Well, you want to buy the marginal producer. We are that company. This is the team. I, I won't bore you or bother you. I probably just devoted of time anyway, with everybody on this list. what I will say is that the strength of the team is that we all come from, very different backgrounds and different parts of the industry. We've got geologists, engineers, finance people, administrators, all contributing to the, to the growth and the success of the company. I'll, Do this here. because of the nature of how we've acquired all of the mines, over the last several years, all of the resources are kind of in a different state. Over the last couple of years we've had a program to do new 43101 resource calculations at all of the, assets. So we started with San Ignacio, then we went on to Cubo, Valencia. The next one you will see is Bolonitos. there are, there are regulatory considerations. We've got to publish one of those within about 45 days from now, so you'll see that you'll see a new Toia, 43101 compliant resource estimate towards the end of this year as well. So, that is all that I have to say. You want to entertain questions for a moment or two? We have one question, yeah. Management owns about 8% of the company and if If we back up, oh sorry, there we, there we go, the, the really, I mean control of the, of the company is in the marketplace. Our shares trade really well. it's a, it's a retail story that really resonates with people. we were given an award about a month ago. We were the number one volume leader on the venture exchange last year. So routinely our stock trades 345 million shares a day. so all of these groups, although they're large shareholders, Fidelity might only own 8% of the company. Another question there, if I'm correct, you've been drilling a lot and maybe about 75,000 m of drilling. Is most of this, infill drilling for existing production, or is it to look for a completely new, opportunities for the future? Yeah, great question. So of the 75,000 m, expect about 40% of that will be infill, 30% will be extensional drilling, and about 30% will be real, you know, what you and I would consider exploration drill holes. I'll, I'll make this point too. During the downturn, we really didn't have the money to do very much development work or not nearly as much as we should have been doing or exploration work. Today is vastly different, so we've got big programs like that, which we're executing on right now. We've got 6 drills turning as we speak, and we will continue to do that, you know, through the through the year and play catch up just a little bit for the last couple of years. If I can make one more point here just regarding exploration, so we do have one. asset, which doesn't usually get into the presentation slide or talked about too much, this is called El Orcon. Orcon is about 85 kilometers in a straight line northwest of Guanajuato. It is a past producer. Seems like every square inch of Mexico is a past producer. but it was a pretty important producer about 100 years ago. There's still about 5 kilometers worth of underground drifting that you can get in. We did 1100 channel samples last year at Orcon. It's really good gold grades and in fact like the, the system itself, there's about 12 on echelon vans, and then there's crosscutting features. There's vertical features that are really high grade gold. So for the first time we will start a comprehensive drill program in June and you know, as, as an explorationist at heart, I'm quite excited about seeing some results from that. The, the 40,000 m that you mentioned as infill drilling, is that giving you enough of a view and insight into production and how much production do you think you could, you can be comfortable with next in For next year and this year, how many ounces, right, so silver, just, just to be, just to clarify that, 40% of the 75,000 m, that, that's what would be, you know, infill drilling. Yes, we've been doing that. I mean that really commenced about 6 weeks ago, so, you know, it'll be ongoing from now till Christmas time. What would be your estimated production for 2026 and 20202007 and millions or or whatever ounces, 1000 thousands of ounces, yeah, yeah, so I'm not gonna give you a 2027 number. I don't know, and we don't have, you know, anything regarding guidance like that. what I will say, these are your 2025 numbers. This is, this includes bolonitos. That's your baseline. Imagine a number that's, that's 10 to 15% higher than this. Those are our targeted production values for 2026. James, thank you very much. We're out of time, but I'm sure James is going to be around if there are any additional questions. Thank you very much. Cheers. Thank you very much for your attention.