Andean Precious Metals Corp. (APM) Earnings Call Transcript & Summary

Good morning, everyone. Welcome to Andean Precious Metals 2022 First Quarter Earnings Call. After management's remarks, this call will include a question-and-answer session for analysts and institutional investors. [Operator Instructions] I would like to remind everyone that this conference call is being recorded. Today's presenter is Simon Griffiths, Andean's President and Chief Executive Officer. Joining Simon for the Q&A portion of the call is Jeff Chan, Chief Financial Officer, and Fraser Buchan, Investor Relations. Please note that comments made on today's call may contain forward-looking information, and this information, by its nature, is subject to risks and uncertainties. Actual results may differ materially from the views expressed today. For further information on these risks and uncertainties, please consult the company's relevant filings on SEDAR. These documents are also available on Andean's website at andeanpm.com. And now I'll pass the call over to Simon Griffiths. Please go ahead.

Thank you, Arielle, and good morning, everyone. Thank you for joining us this morning. And as usual, before we get started, please note that all the dollar amounts expressed in this presentation will be in U.S. dollars unless otherwise indicated. So earlier this morning, we announced our quarterly results by way of news release. And as planned, our first quarter production was 1.2 million silver ounces equivalent. Processing through the plant remained consistent with quarter 1 of last year, which was 0.4 million tonnes. The remaining quarters do have higher silver production than we projected and achieved in this past quarter, quarter 1. The average silver head grade realized during the quarter was 117 grams per tonne, which is similar to the prior year. Metallurgical recoveries for silver was 78% during the quarter, which compares to 87% during quarter 1 in 2021, with the difference mostly attributable to the composition of the mill feed. In the first quarter, we had revenues of $29.9 million from sales of 1.2 million silver equivalent ounces at an average realized price of $24.40 against the LBMA spot average of $24.01. Our all-in sustaining cost per silver ounce sold was $18.86, which compares to $17.28 in quarter 1 of last year and compared to our full year 2022 guidance, which is $17.25 and $18.75 per ounce. Unitary costs in the first quarter expected to be higher than the remaining quarters as we increase our silver production. G&A expenses were significantly lower than past quarter, coming in at $2.9 million against $5.7 million last year. The delta is driven by the onetime transaction costs we had last year. We spent $3.5 million included during the reverse takeover when we brought the company to the capital markets. On the top of costs, which I know has been a key topic for most companies during this earnings season, North America and other parts of the world are currently witnessing extreme inflation, higher than seen for many decades. That doesn't appear to be the case in Bolivia at the moment, which has the lowest inflation in the Americas, [ 0.09 ] during 2021. This level of inflation environment in Bolivia is sustained by a fixed exchange rate of the dollar and high subsidies for fuel and basic food goods, which the government provides. So back to the financial results for the quarter. We had adjusted earnings before interest, tax, depreciation and amortization of $5.4 million, driving income from mine operations of $6.4 million. Free cash flow generated was $2.2 million and ended the quarter well positioned for growth with an ending cash balance of $89.5 million and with no debt or warrants. In our news release this morning, we also reaffirmed our guidance for the year as we continue to expect that production for this financial year will result in silver equivalent production of between 5.3 million and 5.8 million ounces at an all-in sustaining cost of $17.25 to $18.70 per silver ounce sold. I mentioned we're well positioned for growth a moment ago. Drilling completed our dry-stack tailings facility during the quarter to assess the potential for mineral resources. The addition of tin production at San Bartolomé remains an organic opportunity for us and the initial results from this drill program reaffirm the potential process in both stockpiles and tailings. The extended drill program at San Pablo gold exploration program is ongoing. We completed 2,200 meters targeting altered porphyry intrusions as a source of gold-hosted mineralization. Our result today with our recent core logging informs us that the geological models and the assays are expected to be received next month. So I'm also looking forward to receiving the assays. Beyond our current footprint, we're actively in pursuit of M&A transactions. We have a number of live files as we continue to assess accretive opportunities in Bolivia and the nearby countries. Thank you for your time today. I will now open the line to questions. Arielle?

[Operator Instructions] Our first question comes from Jon Egilo of Desjardins.

What about the mill feed this quarter drove some of the lower recoveries? And I guess how do you expect that very good trend over the remaining quarters?

So this is the mine plan. So quarter 1 did have lower throughput projected compared to remaining 3 quarters of the year. So we -- at the moment, we fully expect to achieve guidance. So quarters 2, 3 and 4 do have higher mill throughput plus higher grade.

And I know you mentioned inflation in Bolivia is very low, but are you seeing -- what kind of impact are you seeing to your cost base on higher fuel prices or pricing on some imported consumables? I guess, what do you -- what kind of inflation are you guys seeing there?

Look, I suppose we're drawing comparisons to other operations. We don't have a large diesel-hungry mining fleet. We have a small contractor fleet. Diesel and gasoline is subsidized in Bolivia through the cooperatives and the contractors that work for us. They have their sale subsidized. So it's not a direct impact to us. So the inflation is much lower than other countries around the world. We are seeing supply cost increases on other items. Cyanide, for example, we are starting to see increase on impact.

And I guess one last one for me. On the dry-stack facility, it seems like the grades are stacking up pretty well. It seems like it's going to be proving economic at least from a grade standpoint. I guess what's the time line there for when you guys will be looking at the network?

Yes. We're going to conclude the FDF network first, that will give us the best indicator. We run some internal network on the dry stack before deciding the next steps. The key here was to establish whether the dry stack was, in fact, carrying tin and silver, which we now know do. Next step is to do some preliminary internal metallurgical test work.

This concludes the question-and-answer session. I would like to turn the conference back over to Simon Griffiths for any closing remarks.

Thank you, everybody. Thanks for joining us. Thank you for your ongoing support. We look forward to continuing the good performance into quarter 2. Thank you very much.

This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.