IMPACT Silver Corp. ($IPT)

Good day, ladies and gentlemen. Welcome to IMPACT Silver's Q1 2026 period ending March 31, 2026, Financial and Production Results Conference Call. Before we begin, we would like to go over our disclosure statements, followed by Mr. Fred Davidson's comments on the quarter results and the Q&A period. Certain statements in the following conference call regarding IMPACT Silver's core business operations may constitute forward-looking statements. Such statements are not historical facts, but are predictions about the future, which inherently involves risks, uncertainties and could cause actual results to differ materially from those in the forward-looking statements. I would like to now turn it over to the President and CEO of IMPACT Silver, Mr. Fred Davidson.

Thank you, Jerry. It's certainly a pleasant experience to be able to report this particular quarter. It's probably the most successful quarter we've had in the 20-year history of the mine. Basically, revenue increased to over $31 million. It's just about 3x what the comparable quarter was, and it was driven by a number of issues, and it was silver prices, we had higher grades, and we had increased throughput at the Zacualpan silver operation. Gross profit grew almost again, 10x to $20 million compared to $2.2 million in the comparable quarter. Net income was $11.3 million or $0.03 a share, basically following a loss of about $0.1 million in Q1 2025. And at the end of the quarter, the company had $45 million in cash, $4 million in guaranteed investment certificates and working capital of $48 million with no outstanding long-term debt. It's the kind of quarter we've been looking for, for a long time, and it's only the start of where we are right at the moment. It's -- probably the easiest way to do is to summarize that the operation did have a unique set of circumstances. Silver prices were way up for a period of time. And as I said, the grade is primarily responsible to the Kena vein, which we originally disclosed in June, I think, last year, where we intersected at 8.5 meters, 534 grams per tonne on one of our drill holes. This was something that we identified, say, over 6 months ago -- 9 months ago now, and it takes time to start developing this structure. We haven't even fully outlined it yet. The original drill hole was on the 140 level and we have a belief that the vein itself is actually a number of veins, we're calling it the Kena vein, extends right to surface, which is actually vertical, it's about 150 meters above us. It's probably 170, 180 because it's on an angle. So it's a very exciting vein. It enhances the overall production that we've got at the mine. And as we go by quarter-by-quarter, we're going to see an input up and down depending on where we are on the development, how much we're taking from the Kena versus one of the other -- or a number of the other veins. So looking forward, it's going to be at least a very positive year going forward with current prices of silver being maintained, I think that's probably our most positive year. Now we've been here 20 years, and I think a lot of the investors and shareholders understand epithermal veins vary dramatically, almost meter by meter, both in grade and width. And as we explore Kena and a couple of the other veins we're working on right now, Carlos Pacheco, San Ramon, we're going to see dramatic changes up and down, grade and tonnes throughput as we go forward over the next year or 2. So in any event, the prime driver for the revenue has been the Zacualpan mine. We've been shutting down as we announced at the end of the quarter, the Plomosas, and at Plomosas, although we're getting some spectacular lead, zinc grades, silver grades coming out of our drilling, we haven't been able to put it together in terms of a cohesive mine plan. And the end result was we were incurring more expenses doing the development than we were generating revenue, and the idea is we're sitting back on it. We're going to review and do further development plans and see where the mine planning can put Plomosas ultimately back into production. In the interim, we're negotiating with a couple of other mines in the district looking to actually process their feed. And as we go forward on that, we think it could be with success on those negotiations, a cash generator and certainly not in the level of Capire -- or rather Zacualpan, but certainly attractive. And the final one Capire, we're working on it as well. The numbers change dramatically depending on the price of metal. It's more marginal. And again, we hope to have some more definitive understanding of what we're going to do with Capire once we establish the final cost and production costs at Capire going forward. Altogether, it's going to be a very busy year, and I think unless something changes dramatically on the price of silver, a profitable year for the company. After 20 years, and by the way, next year will be the 500-year history of the Zacualpan mining district, and we're going to be celebrating that along with the community going forward. Jerry, any questions for this?

Yes. Sounds good. Thanks for the overview, Fred. Here are some of the questions we compiled from investors this quarter and just really the last 2 days. Please feel free to send questions to [email protected] or call us direct at (778) 867-7909. Question one, great team -- sorry, great quarter, team. Finally, we've seen the net income as long promised. At these $80-plus silver prices, Fred, are we -- expect this revenue and margin range to continue?

The answer would probably be yes, but it's going to be highly variable. And again, because these are epithermal veins, the amount we draw down from the Kena, et cetera. And we -- as anybody who understands epithermal veins knows that development sometimes interferes with production, production sometimes interferes with development, so it's going to be going up and down quarter-by-quarter for the balance of the year. I'm not sure -- I think we'll probably see that grade be the variable, if anything. Tonnage is gradually going to increase, subject to any [ ups ] that you normally experience in mining underground. And what we also face is the price of silver, obviously. We are seeing some inflation pressure, but I don't think that's going to impact the revenue itself. The margins will, again, hopefully be maintained as we eliminate the extra cost we're incurring at Plomosas. So it's going to be an interesting year. I wish I could say with assurance that we're going to maintain that revenue and costs and everything else, but I think we are going to be looking at a positive quarter-by-quarter going forward. I doubt very much whether we'll hit $11 million net after taxes each quarter, but there's certainly the potential.

Okay. Got it. Question 2, in regards to the Plomosas update, the Q2 start and discussion with the other potential vendors in the area, to operations. What kind of range of size and setup would that work for IMPACT?

Well, for IMPACT itself, the idea is we would process ore from, let's say, we're really successful in both the people we're talking to produce their -- produce and fill -- they will fill the mill. And that means that we'll be operating at 200 tonnes, probably a little less because each time you bring ore in from one group, you have to clean the mill and process the other ore. But it will be -- we're looking at sort of between 150 to 200 tonnes. The capacity of the mill at Plomosas is about 200 tonnes a day because you'll be mining -- sourcing ore from 2 separate situations, we'll probably be only getting about 175 because you have to flush the mill out when you get different ore. In both cases, we'll be looking at a tolling situation, but with the potential taking an equity position in those mines as well. Again, we're in negotiation. There's no assurance that we're going to get both. We may get one. In any case, it would be probably more than enough even with one to sustain the operation at Plomosas. And two, it could generate fairly positive cash flow.

Okay. Sounds good. Question 3 talks about the cash on hand. So with the cash on hand over 50% plus of the current market cap, if this continues for the next quarters, will IMPACT just keep it in GIC, guarantee investment certificates, or in the bank, or consider other initiatives like maybe a buyback or a special dividend?

Yes. That's a valid question. And I've got to admit it's a pleasant surprise to have as much we have on hand. We've got a number of situations we're looking at. One, as I mentioned, we may be taking a position in one or both of these companies that are -- mines that will be providing us with ore because we believe we can upgrade that production, and then we have to upgrade the size of the mill, but that's not impossible to do either, so there's that one. And we're also looking at the Capire, which to put it back into operation at a higher throughput will also be -- there's a bit of CapEx. And every time we talk CapEx, when you're doing start-up, there's also the cost of financing, the inventory, et cetera, as it goes forward. So a number of these things are still outstanding. And at the same time, we're looking at some capital expenditures at the mine itself, Zacualpan. As you know, we've been working on the shaft. The shaft is almost -- it's over 70 years old, and every bit of steel is being replaced in it while we maintain production. So that's one of the other reasons I'm hesitant to say how much we're going to be putting through at Zacualpan. It's a shaft that goes down to the 190 level. It's -- virtually every piece of steel is being replaced there. Meanwhile, we're still mining, so the idea of being is we have to shut down almost a day a week to bring the steel in, replace the steel and keep on mining. So there's a number of things happening. But yes, it's one of those things that we're certainly looking at it. We've got a team looking at it, because financing has suddenly disappeared for the juniors. There are some opportunities that have become apparent at the same time. So it's going to be a very busy year for us, as you can appreciate. And if the opportunity is there, there may be -- we certainly had a suggestion of a buyback or a dividend. And again, we're not sitting on the cash just to sit on the cash. But at this point in time, liquidity is an incredibly valuable animal to have for a company in the mining industry. And going forward, I think we intend to use it for good purpose.

Got it. Question for Fred and team. 270,000-plus ounces of silver this year, and at that run rate, it will be over 1 million ounces finally for IMPACT. Is this expected as a new run rate for investors?

Well, as I alluded to, the -- a lot of it is going to depend on the grade of the material we're running through, one. And that's going to vary literally meter by meter as we go forward on our development. And the other part of that, of course, is being able to keep the tonnage up because of what we're doing with the shaft and actually the track system underground. We're going to be busy drilling, which doesn't interfere with mining. But certainly, the development does take some time. And as I say, the Kena is, at this point in time, looks like it extends all from the 140 level all the way to surface or near surface, and every time you want to develop access into that, there's a delay, so it's -- I would say that I don't know if it's going to be -- that's going to be the new run rate for a quarter. But easily, we can have repetition of this type of quarter with a little bit of generosity with the silver market.

Yes. Got it. Question 5 refers to the exploration drilling. Over $1 million was expended in Q1. Are we expecting more regular drill results from the Plomosas as well?

Yes, we are -- I'd say we've had -- the issue with Plomosas, and that is trying to put the sort of mine plan together because we were using the mine plan from our predecessors, and quite frankly, it was based on information which never sort of came out the right way. And that means some of this is going to be underground mining or drilling, which we don't normally disclose because it's -- first of all, it's not 43-101, so we can't. But we will be doing surface drilling on a number of other targets in the area, and that -- those when we develop a sort of understanding or package, yes, we'll be going forward with news releases. We're doing some geophysics on the project as well. And up north -- in the northern section of the Plomosas, we're looking at, again, early stage, the copper-gold exposures in that area, and we're currently trenching in that area. There was information which is 43-101 releasable, and two, which is relevant to explaining what we're doing, we'll be releasing that as we go.

Okay. sounds good. Question 6 refers to the higher operational costs. This quarter, it jumped a bit to $6.7 million, and there's commentary on inflationary pressures and cost increases. Is this also a new level of expectation for expenses?

Well, the operational costs for Zacualpan were a little higher than prior years, but not significantly. The thing that impacted the financials for the year more than anything else was, of course, some of the costs related to shutting down Plomosas. But yes, we're seeing sort of an inflationary effect combined with FX of about 8%, 9% a year -- and the peso got a little stronger and the Canadian dollar got a little weaker. So it comes through by the time you translate it through U.S. dollars, et cetera, impacts us as well. So it was negative. It's very much a function of -- there is going to be inflation, no question. And there is going to be FX, which could easily change the relationship between the Mexican peso, U.S. dollar and Canadian dollar.

Sounds good. Question 7, at these prices, Capire seems to make more and more sense with higher silver prices. The potential restart, is that still within 2026? Or is that going to be later?

Even if we press the button go right now, we're still waiting for some outstanding information and some technical information, it probably wouldn't be available until 2027, realistically. That's just how these things take because the model we're looking at, at this point in time, it's a mill that does 200 tonnes a day on conventional mill with a float con and what have you. What we'd be doing is, I think we mentioned it before, is XRT or X-ray sorting, and that would allow us to put higher tonnage in the front end through the XRT unit. And the XRT unit would sort high grade from low grade and allow us to still operate the mill at 200 tonnes a day, but we'd be processing material from the open pit at about 300, 350 tonnes a day thereabouts. So all of that takes time. And part of that is the machine that we even want to install there. Once we've worked out the final specs on it, it's probably delivery time of 8 to 12 months. So yes, we're not going to start it unless we have the XRT. And then the second part of it is it produces multiple amounts of material coming through in terms of lead, zinc, copper, gold and silver. And again, we have to -- in negotiations with the ultimate buyers, do they want a mixed concentrate? Or they want us to break that up and concentrate perhaps the copper separately, for instance. And all of that is being spec right now as we're talking to potential buyers of the concentrate, so that's going hand-in-hand with the technical studies, which is also going to go and push the button for the delivery of the equipment because we'll need a larger crusher and again, some surface equipment to do the mining.

Sounds good. The last question, question 8, Fred, any other potential M&A ideas? Or is it more going to be organic growth expected with IMPACT in the large area we have?

Well, as you know, the area is so large. We've taken 2 areas that are remotely accessible by us, that you basically have to go to Taxco to get to. And we're having juniors that can option in on some of those properties just to be -- to move the exploration forward on those after 10, 15 years where we've done very little in that district. At the same time, with the Plomosas, we are looking at the potential of -- if we do, do tolling with some of these guys, the potential making an acquisition. So those are sort of not huge steps in each case, but there are steps that can move us forward. The other side of it is we think that the market is sort of a little tight right now for fundraising for juniors. And one of the reasons we did do our financings when we did, granted maybe 3 months a little earlier than the market was to get us in a position where we could do that. And we've actually just constituting a small team that are actually going out and doing some evaluations of other projects that may be of interest to us. So we're doing all of that. But the idea is incremental at this point in time, unless we see something that really knocks the socks off of anything. So I think we're going to be sort of very active. The idea is not so much how many ounces you produce, but how many profitable ounces you produce, and I think that's going to be our prime focus, and we are going to still focus on obviously, silver. If something is a byproduct, then that's fine, too. But we are -- as we've said before, we're silver driven, and I think we're somewhat unique in the industry as being probably the highest percentage of revenue related to silver, so there's that leverage that the shareholders get. When the silver price does move up, it goes virtually to the bottom line, which is fairly nice.

Definitely. That's all the questions we have for this quarter. Thank you, everyone, investors, for the questions and interest in IMPACT Silver. Please submit your future questions and inquiries to us at [email protected]. We look forward to hearing from you on our next quarterly conference call, Q2 2026. For more information, please visit www.impactsilver.com or follow us on Twitter and various social channels at impact_silver.